Private Nonprofit – Appeal Procedures – Immediate Threat – Procurement – Reasonable Costs – DAC

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	FEMA-1994
Applicant	Roman Catholic Bishop of Springfield
Appeal Type	Second
PA ID#	013-U9414-00
PW ID#	(PW) 249
Date Signed	2019-04-04T00:00:00

Summary Paragraph

Severe storms and tornados on June 1, 2011 damaged the Applicant’s St. Michael’s Pre-Kindergarten education facility (Facility).  The Applicant contracted a security provider to monitor and patrol the Facility following the disaster.  Initially, the Applicant contracted several guards per shift.  Following the construction of a chain link fence to surround the Facility, security was reduced to three guards per shift.  FEMA subsequently determined that only one guard per shift was necessary following construction of the fence, and also found that the Applicant failed to properly procure the security services, reducing the guards’ hourly rate.  The Applicant appealed and argued the amount of security it procured was proper, both during the time FEMA found eligible and later when FEMA disallowed security costs, and claimed the rates charged were reasonable.  The Applicant also contended its project management company’s (Witt) DAC travel expenses were eligible, and FEMA’s reduction of Witt’s fees procured under HGAC-Buy procurement was improper.  The FEMA Region I Regional Administrator (RA) denied the appeal, determining that the Applicant’s costs for security at the Facility were eligible prior to construction of the chain link fence, but reduced costs to reflect a 53 percent proration for a mixed-use facility.  Furthermore, the RA found all security costs after the construction of the fence were ineligible.  In addition, the RA reduced DAC provided by Witt due to noncompliance with federal procurement regulations when procuring the services of Witt, as well as denying travel expenses claimed as DAC, but found not to be directly associated with this specific project.  On second appeal, the Applicant reiterates its prior arguments, and claims the RA made a new determination in violation of FEMA policy regarding his finding pertaining to the amount of security he found eligible on first appeal.

 

Authorities and Second Appeals

• Stafford Act §§ 324(a), 403.
• 44 C.F.R. §§ 206.32, 206.201(b), 206.223; 2 C.F.R. §§ 215.43-46, 215.61-62, Pt. 230, App. A.
• PA Guide, at 40-41, 51-52; PA Policy Digest, at 99.
• DAP 9525.9, at 2-5; DAP 9525.9 Guidance Memo, at 2-3.
• Appeals Manual, Version 4, at 13-15.
• FEMA Second Appeal Analyses: Miami-Dade County, FEMA-1345-DR-FL, at 2; Town of Bennington, FEMA-4022-DR-VT, at 8; Louisiana State University Health Care Services Division Medical Center of Louisiana at New Orleans, FEMA-1603-DR-LA, at 3-4; City of Nome, FEMA-4050-DR-AK, at 5.

 

Headnotes

•  The Appeals Manual states that on first appeal, if FEMA identifies a new eligibility issue, it must issue a Request for Information (RFI) and in it, must inform the applicant that a new eligibility issue was identified, frame the new issue and inform the applicant that it has 60 days from receipt to respond. 
  • FEMA issued an RFI, informed the Applicant that new eligibility issues were identified, and framed the new issues in an RFI, thereby rendering a determination, and provided the Applicant time to respond.  It was a harmless error that the RFI only provided the Applicant with 30 days to respond, as the Applicant filed its response within that timeframe, stating it believed the administrative record was complete and had nothing further to add. 
• The Stafford Act and 44 C.F.R. authorize FEMA to provide funding for emergency work to meet immediate threats, but only for the minimal level of effort necessary to address the threat, and for a PNP only to protect its facility and contents. 
  • The constructed fence provided security to the Facility and therefore additional security was not required.

• Per 2 C.F.R. § 215.43, a PNP must conduct procurement in a manner that allows for full and open competition.  FEMA may award reasonable costs to remedy noncompliance. 
  • The Applicant’s procurement of Witt’s services did not comply with 2 C.F.R. § 215.43 and FEMA properly awarded reasonable costs.
• Per FEMA policy, DAC must be tracked, charged, and accounted for directly to a specific project.
  • Witt’s travel expenses were not directly tied to this project and therefore are not eligible for funding.

 

Conclusion

The RA’s finding that the Applicant’s costs for security after construction of the fence are ineligible, and his decision to prorate security costs prior to construction, were appropriate.  In addition, the Applicant did not properly procure Witt’s services and FEMA correctly took an enforcement action and determined reasonable costs.  Last, the travel expenses claimed by Witt are not eligible DAC. 

 

 

 

Appeal Letter

Appeal Analysis

Background

 

Severe storms and tornados on June 1, 2011 damaged the Roman Catholic Bishop of Springfield’s (Applicant) St. Michael’s Pre-Kindergarten education facility (Facility), which is part of a 35 acre campus owned by the Applicant, a private nonprofit (PNP).  FEMA determined 53 percent of the Facility was eligible for FEMA funding, as the school provided critical educational services.  The Facility is comprised of the pre-kindergarten school, a chapel, convent, priest residence, and basement area totaling 55,506 square feet.  The pre-kindergarten school is comprised of 25,471 square feet, including 14,459 square feet of operating space and 11,012 square feet of basement space.  In addition, 3,900 square feet of the basement of the convent was used as an educational storage facility, equating to 29,371 of space used for eligible services, out of a total of 55,506 square feet.  FEMA prepared Project Worksheet (PW) 249 to document the Applicant’s request for site security services for the damaged Facility.  The Applicant contracted a security provider, Appleton Security Corporation (Appleton), to monitor and patrol the Facility following the disaster.  The security services originally were contracted from June 2, 2011 through the week of March 8, 2012.  The Applicant initially procured an average of four guards per shift from June 2-21, 2011.  After construction of a chain link fence surrounding the Facility on June 22, 2011, the Applicant reduced security to three guards per shift from June 22, 2011 through March 8, 2012.  FEMA subsequently determined that the requested cost for three guards was unreasonable and only one guard per shift was necessary after construction of the fence.  In addition, FEMA found the Applicant did not comply with federal regulations when it procured Appleton’s services.  Accordingly, FEMA took an enforcement action and made a reasonable cost determination, which reduced the hourly rate for security from $24.00 to $18.00 per hour.  In total, FEMA awarded $143,856.00 for security services from June 2, 2011 to March 8, 2012.

 

The Applicant also hired Witt O’Brien’s (Witt) to provide direct administrative services for all of the Applicant’s emergency and permanent work projects resulting from the disaster.  The Applicant utilized the Houston Galveston Area Council of Government (HGAC) to obtain Witt’s services, by executing a purchase order with Witt under a preexisting contract with HGAC, under HGAC’s cooperative purchasing program known as HGAC-Buy.  The contract was available to the Applicant as an end-user of HGAC-Buy.  FEMA initially awarded direct administrative costs (DAC) of $6,628.32. 

 

Several years later, after working through insurance reductions and other eligibility questions, the Applicant requested additional costs for security and DAC from March 9, 2012 until October 2, 2014.  In reviewing the request, the Agency determined the Applicant failed to comply with certain federal procurement regulations, and also that some of the security costs were ineligible for funding.  In a determination dated January 19, 2017, FEMA found that the Applicant had not demonstrated that any threat to life, public health and safety, or additional damage to the Facility as a result of the disaster remained after March 8, 2012.  FEMA also prorated the amount previously awarded for security services because the Facility was mixed-use, with only 53 percent of it being used for eligible purposes, and therefore reduced funding to $76,243.68.  FEMA also found that the travel costs incurred by Witt were not eligible DAC because the Applicant failed to provide documentation demonstrating how the travel cost was directly attributable to PW 249.  In addition, because the Applicant did not comply with federal procurement regulations under Title 2 of the Code of Federal Regulations (2 C.F.R.) part 215 when procuring Witt’s services, FEMA took an enforcement action and reduced the hourly labor rates charged by Witt by using rates charged by Witt to the State of Vermont in a similar 2011 contract.

 

First Appeal

 

The Applicant appealed FEMA’s determination in a March 16, 2017 letter, requesting $610,943.89, and arguing: (1) the continuing need for security at the Facility required the amount of security personnel it contracted both during the time FEMA found eligible and later when FEMA disallowed the security costs; (2) the rates charged by Appleton were reasonable; (3) FEMA’s application of 53 percent mixed-use reduction was incorrect; (4) Witt’s DAC travel expenses were eligible; and, (5) FEMA’s reduction of Witt’s fees due to noncompliance with federal procurement regulations through HGAC-Buy was improper. 

 

Regarding security personnel from June 2 to 21, 2011, the Applicant noted it had an immediate need to protect the public from harm resulting from disaster-related debris surrounding the Facility (and the rest of the campus) as well as the potential for fire and the release of toxic chemicals from the damaged Facility.  Likewise, from June 21 to July 29, 2011, the Applicant argued utilization of three guards after constructing the temporary chain link fence was necessary because two guards patrolled the grounds to ensure the safety of each other, and one manned the entrance gate.  According to the Applicant, FEMA’s finding that only one guard per shift was eligible during this time demonstrated that the Agency did not understand normal security practice.  Additionally, from July 30, 2011 to March 8, 2012, the Applicant also claimed that FEMA failed to determine whether security services were readily available in the area, from a licensed and insured security company for $18.00 per hour.  In addition, when the Applicant sent a Request for Proposal to four providers in November 2011, two advised they could not respond or provide the services, one quoted a rate of $23.00 per hour, and Appleton reduced its rate from $24.00 to $22.00 per hour.  In the Applicant’s opinion, based on its experience, it would have been unlikely to procure security services at the $18.00 per hour rate from a firm with the same qualifications and insurance protections as Appleton. 

 

The Applicant further argued that from March 9, 2012 to October 2, 2014, continued security protections at the Facility were required because: the interference with demolition and debris removal caused by ongoing negotiations, discussions, and inspections by FEMA and the Applicant’s insurance carrier to facilitate the Agency’s alternative procedures delayed restoration; and the need to protect the public, equipment, and contents within the Facility until demolition and debris removal could be completed.   In addition, the Applicant claimed that FEMA’s definition of “immediate threat” only referred to construction/repair of a facility and was not tied to a disaster which would be expected to occur within a five year period.

 

The Applicant further argued that FEMA did not have a regulation or policy which limited emergency work costs to be apportioned based on a PNP’s eligible service use within a facility.  Instead, the limitation of reimbursement to the percentage of a PNP’s eligible service space within a facility related only to permanent work.  Thus, the Applicant believed FEMA should not have reduced funding to allow only 53 percent of the eligible costs.

 

The Applicant also contended that the use of HGAC-Buy was an appropriate tool to facilitate a proper procurement of the services at issue, and HGAC-Buy met federal procurement regulations by obtaining a reasonable number of sealed bids on a national basis.  The Applicant noted that FEMA did not understand the HGAC-Buy process, the breadth of its solicitations, and the fact that those solicitations yielded competing proposals from which the Applicant made its selection of services and costs.  In addition, the Applicant noted the HGAC-Buy rates were fair when compared to other providers because they were discounted below Witt’s General Services Administration rates and the Office of Inspector General (OIG) found in a separate instance that the use of HGAC-Buy was proper for procurement.  Though the Applicant believed its procurement of Witt’s services was compliant, it also asserted that FEMA’s analysis of reasonable costs was flawed and unnecessary for the following reasons:  the rates adopted by Vermont were not available at the time of the disaster in Massachusetts, the two states have different costs of living, the two disasters were of very different magnitudes, and finally the Witt contract with Vermont was of a very different nature and duration than the contract with the Applicant.  Finally, the Applicant argued that Witt’s travel related costs were proper and federal law allowed for apportionment of travel expenses relative to federal grants.  The Massachusetts Emergency Management Agency (Grantee) transmitted the Applicant’s appeal in an April 25, 2017 letter, concurring with the Applicant.

 

FEMA sent the Applicant a Final Request for Information (RFI) on July 28, 2017.  In it, the Agency noted that the current administrative record was insufficient to support eligibility for Appleton’s costs for security and Witt’s direct administrative services.  FEMA requested the Applicant provide additional information: specifying the provisions in federal law, regulation, or policy in which FEMA’s decision to prorate financial assistance for security services was inconsistent; demonstrating the eligibility of the security services performed from March 9, 2012 to October 2, 2014; documenting/supporting that the Applicant complied with federal regulations pursuant to 2 C.F.R. pt. 215 when procuring the services of Witt; and demonstrating that the travel costs of Witt employees were directly related to PW 249 and eligible as DAC.

 

The Applicant responded on September 21, 2017.  In its response, the Applicant argued that FEMA Disaster Assistance Policy DAP9521.3, Private Nonprofit (PNP) Facility Eligibility, restricts proration of assistance for mixed-use facilities to permanent work.  The Applicant claimed FEMA’s Public Assistance Guide (PA Guide) also only referred to permanent work when discussing proration.  The Applicant further noted it was not unusual for the length of emergency protective measures to be extensive such as those in prior disasters.  The Applicant also pointed to an email from FEMA stating that work after September 1, 2012 until the date of project completion would be included in permanent work and that email confirmed the Agency believed ongoing security was eligible work.  The Applicant also pointed out that FEMA extended the time to finalize the project due to time expended to resolve insurance disputes and to complete the alternative procedures pilot program, and agreed to the delay to finalize project formulation.  In addition, the Applicant stated it had an obligation to the surrounding community to provide security and also saved money by storing the contents of the Facility on site.  Moreover, the Applicant claimed that Witt’s services could not be accomplished without incurring travel related expenses.  As further support, the Applicant cited 2 C.F.R. § 200.405(d), which advised that if a cost benefitted two or more projects in proportions that cannot be determined because of the interrelations of the work, then the costs must be allocated or transferred to benefitted projects on any reasonable documented basis.  Finally, the Applicant contended that even absent proper procurement, the HGAC rates, not the Vermont rates, constitute the reasonable cost for DAC.  In contrast, FEMA selected the lowest rate possible, and did not account for other factors that affect the cost.

 

FEMA issued a second Final RFI on December 21, 2017 to communicate new, additional concerns that FEMA identified after reviewing the Applicant’s response to the Agency’s prior Final RFI.  These concerns included: (1) the Applicant had not provided documentation demonstrating the eligibility of all security services provided from June 2 – 21, 2011; (2) eligibility of any of the security services from June 22, 2011 to March 8, 2012; and (3) whether the Applicant failed to comply with additional procurement standards under 2 C.F.R. pt. 215 when procuring the services of Appleton that were not previously considered by FEMA.  The Applicant responded on January 17, 2018 and stated that it believed the administrative record was complete and had nothing further to add.

 

The FEMA Region I Acting Regional Administrator (RA) denied the appeal in a letter dated April 2, 2018.  The RA determined ineligible all security costs claimed after installation of the fence (beginning June 22, 2011), and deobligated those costs.  Of the security services provided from June 2-21, 2011, the RA found FEMA’s proration of 53 percent of the eligible costs was permissible and provided other examples of mixed-use facilities or examples where one component of a facility was damaged and so FEMA apportioned the costs accordingly.  Additionally, FEMA DAP9521.3 did not make a distinction between permanent work and emergency protective measures.  Accordingly, there was no restriction on applying the reduction for emergency work. 

 

The RA also noted that the reasons provided by the Applicant that security was required after construction of the fence on June 21, 2011 were unpersuasive in proving an immediate threat remained, in that: (1) protecting the public from potential fires or possible release of toxic chemicals was not work necessitated as a result of the disaster, but would be caused by a potential fire; (2) the fence provided adequate protection against the hazards (like dangerous equipment) present at the Facility and any actions of persons climbing over or breaking through the fence and engaging in criminal trespassing would not be the result of the disaster; and (3) the threat of vandalism or theft were not a direct result of the disaster, but the ordinary risk of crime.  

 

In addition, the RA determined only $265.80 in Witt’s DAC was eligible due to the underlying reduction of eligible security costs.  The RA also found that: none of the travel costs associated with Witt’s employees were eligible; DAC is separate and distinct from management or indirect costs; and travel costs are treated as DAC only if an applicant has tracked them separately and shows them to be directly related to one specific project. 

 

In addition, the RA found that neither the Applicant nor its agent, HGAC, met federal procurement regulations requiring free and open competition, and that FEMA’s enforcement action to reduce the hourly labor rates charged by Witt was appropriate and within its range of discretion.  Finally, the RA determined the Applicant did not comply with 2 C.F.R. pt. 215 when procuring services from Appleton because it failed to complete a contract, nor did it conduct a cost/price analysis at the time of the action. 

 

Second Appeal

 

The Applicant appeals the RA’s decision in a letter dated May 30, 2018, requesting $1,904,787.64 in costs.  The Applicant reiterates its prior claims and continues to dispute the original issues outlined in the determination and first appeal decision.  The Applicant contests FEMA’s finding that security services were not eligible from June 22, 2011 through March 8, 2012, asserting that the work was reviewed by FEMA and obligated a year after its completion.  The Applicant also disputes FEMA’s use of the term “immediate threat” and argues that the continuing need for security was due to an immediate threat resulting from the disaster.  With regard to HGAC-Buy, the Applicant also emphasizes that not only is the procurement of Witt compliant with regulatory requirements, as it obtained a reasonable number of bids and HGAC solicits Historically Underutilized Businesses, but additionally it was approved by the OIG. The Applicant also notes the RA reduced DAC without an explanation as to how FEMA reached the amount awarded and argues 2 C.F.R. Part 230 allows travel expenses to be prorated among multiple projects and asserts that it tracked travel expenses on an hourly basis using a methodology that meets the requirements of the Uniform Administrative Requirements for Federal Awards at 2 C.F.R. Part 200.[1] 

 

In addition, the Applicant asserts that the RA made a fundamentally new determination in his decision that the security costs from June 22, 2011 through March 8, 2012 were ineligible.  Accordingly, the Applicant requests FEMA remand the appeal because the RA violated FEMA policy and regulations and denied the Applicant due process.  The Applicant notes that FEMA’s Recovery Directorate Manual, Public Assistance Program Appeal Procedures (Appeals Manual) requires a region to send a Basic RFI when it identifies a new issue and to send it via email with read receipt or certified mail, and there was no evidence that was done here.  Moreover, FEMA erred because the Applicant was only provided with 30 days to respond instead of 60 days in accordance with the Appeals Manual.  Finally, the Applicant argues that the RFI failed to provide a new determination as per the Appeals Manual requirements, and rather the new determination was not made until the first appeal decision was issued.  The Grantee transmitted the Applicant’s second appeal to FEMA in a June 27, 2018 letter.

 

Discussion

 

Appeal Procedures

 

When an RA is considering denying a first appeal in whole or in part, he or she issues a Final RFI to the applicant noting all information in the administrative record the RA is considering in deciding the appeal, and requesting the Applicant provide any additional information to support the appeal.[2]  As the administrative record contains all documents and materials directly or indirectly considered by the RA in making the first appeal decision,[3] the Final RFI will explain the administrative record does not appear to contain enough evidence with regard to the key issue(s) the RA is considering in deciding the appeal.[4]  In addition, FEMA’s Appeals Manual states that when reviewing and analyzing a first appeal, if FEMA identifies a new eligibility issue, it issues a Basic RFI by certified mail receipt or by email with read receipt acknowledgment.[5]  For purposes of the new eligibility issue, the RFI essentially serves as a PA eligibility determination.[6]  Accordingly, it informs the applicant that a new eligibility issue was identified, frames the new issue and informs the applicant that it has 60 days from receipt to respond.  Following receipt of the applicant’s response to the RFI or expiration of the 60 day timeframe, the first appeal proceeds and is adjudicated on both the original and new eligibility issues.

 

Here, FEMA Region I sent the Applicant a Final RFI, in which the Applicant’s response to it identified new eligibility issues.  As such, FEMA Region I sent a second Final RFI, stating that the purpose of the letter was to communicate new, additional concerns that FEMA identified and that could lead to further cost reductions.[7]  FEMA provided the Applicant with 30 days to respond upon receipt of the RFI.  The Applicant argues that FEMA did not comply with its Appeals Manual when it sent the RFI without proof of a read receipt or certified mail return receipt.  However, not only did the Applicant respond, thus confirming receipt, but FEMA has on file a United Parcel Service delivery receipt verifying delivery.[8]  In the Applicant’s response, it advised FEMA that it believed the Administrative Record was complete and had nothing further to add.[9]  Though the Applicant correctly states that according to the Appeals Manual FEMA should have provided it with 60 days to respond, this was a harmless error, as the Applicant responded and noted it had nothing to add to the record, nor has it argued that if it had more time, it would have responded differently.  Finally, the Applicant argues the RFI should have provided a determination per the Appeals Manual, and contends that the RFI failed to do so, and instead the first appeal decision was a new determination.  However, the RFI did serve as a new determination, and stated, in part, that “the Applicant has not provided adequate  documentation to demonstrate the eligibility of all the security services provided from June 2-21, 2011… [and] eligibility of any of the security services from June 22, 2011, to March 8, 2012.”[10]  FEMA informed the Applicant that new eligibility issues were identified, framed the new issues, made a determination, and provided the Applicant time to respond.  Therefore, FEMA finds no basis to remand the appeal.

 

Private Nonprofit / Mixed-Use Facility Eligibility / Immediate Threat

 

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) authorizes FEMA to provide federal grant assistance for emergency work and restorative work for disaster-damaged facilities of eligible applicants.[11]  For a PNP to be an eligible applicant, it must own or operate an eligible facility.[12]  Eligible PNP facilities include those that provide essential governmental type services to the public, such as educational facilities.[13]  DAP 9521.3 provides that “[e]ven when an organization that owns the facility is an eligible PNP, the facility itself must be primarily used for eligible services.  Space is the primary consideration in determining if a facility is eligible.”[14]  The facility must have over 50 [percent] of its space dedicated to eligible services for any of the facility to be eligible.[15]  Common space (lobbies, restrooms, utility closets, janitorial closets, elevators, stairs, parking, etc.) is not included in calculating the proportion of eligible use; rather a facility is assessed as an entire structure and not its individual parts.[16] 

 

For emergency work specifically, FEMA is authorized to provide assistance essential to meet immediate threats to life and property resulting from a major disaster, including work that “reduce[s] immediate threats to life, property, and public health and safety.”[17]  This work is categorized as emergency work, which is work performed to clear and remove debris and wreckage and temporarily restore essential public facilities and services.[18]  Emergency work is defined as work which must be done immediately to save lives and to protect improved property and public health and safety, or to avert or lessen the threat of a major disaster.[19]  For a PNP, this means that emergency protective measures to prevent damage to the facility or its contents and for debris removal from its property may be eligible.[20]   However, no Federal assistance for emergency protective measures or other work shall be approved unless the damage or hardship to be alleviated resulted from the disaster.[21]  Thus, an item of work must be required as a result of the disaster.[22]  Furthermore, when providing financial assistance for emergency protective measures, FEMA will only authorize funding for the minimal level of effort necessary to address immediate threats.[23]

 

When a facility is used for both eligible and ineligible purposes (i.e., a multi- or mixed-use facility), FEMA determines eligibility by looking at the time the facility is used for eligible and ineligible services.[24]  When calculating damages to an eligible mixed-use facility, FEMA considers damages to the entire facility, not just to the portion occupied by the eligible services, however, FEMA limits assistance in direct proportion to the percentage of space dedicated to eligible services.[25]  The balance of costs will not be funded by FEMA.[26]  FEMA’s PA Guide does not exempt emergency work from FEMA’s mixed-use policy.  In addition, although DAP 9521.3 cites only to the Stafford Act provision dealing with Permanent Work (Section 406), the policy refers to both permanent and emergency work.[27]

 

FEMA calculated that 53 percent of the Facility was used for eligible purposes and all funding would be reduced as such.  In response, the Applicant contends that it is illogical to protect public life and health based upon the percentage of eligible use related to a damaged facility.  However, the Applicant is conflating the need for providing security with what FEMA is authorized to fund.  While a portion of the Facility in excess of 53 percent may have, in the Applicant’s opinion, required security, this does not in turn mean FEMA is responsible for funding that security.  While the Applicant argues that FEMA’s policy of mixed-use only applies to permanent work, FEMA’s policy and PA Guide make no such distinction.  Work must be the legal responsibility of the eligible applicant.  A PNP does not usually have legal responsibility to protect the general public, instead it is responsible for preventing damage to its facility and contents and for debris removal from its property.  In this instance, only 53 percent of the Facility is eligible.  As the emergency work (security services) was not limited to protecting only 53 percent of the Facility, FEMA has determined that pro-rating the cost of the security services based on the direct proportion of the percentage of space dedicated to eligible services is reasonable. 

 

FEMA also determined that security services were not eligible after construction of the fence on June 21, 2011, because they were not necessary to address an immediate threat.  Though the Applicant claims that such security was necessary, the reasons provided by the Applicant demonstrate the claimed threats were not direct results of the disaster, nor was the requested security personnel the minimal level of effort necessary to address those claimed threats, and protect the Facility and its contents.  FEMA provided funding to install a chain link fence, which secured the Facility.  Though understandable that the Applicant may need to protect the campus against theft and vandalism, and ensure public safety against potential exposure to toxins and dangerous equipment, these are not direct results of the disaster.[28]  Moreover, any persons unlawfully entering the Facility would be trespassing, would need to traverse the fence, and would be committing a crime.  Security services provided to ensure public safety against potential threats from a criminal act are not required as a direct result of the disaster and are therefore ineligible for PA.[29] 

 

Procurement Noncompliance, Direct Administrative Costs, and Reasonable Costs

 

Applicants must comply with Federal procurement regulations and an applicant’s own procurement standards, both when soliciting services, and when choosing a vendor to provide administrative services.[30]  PNPs must conduct procurement transactions in a manner that complies with the following Federal standards: (1) provide free and open competition;[31] (2) conduct all necessary affirmative steps to ensure the use of minority businesses, women’s business enterprises, and labor surplus area firms when possible;[32] and (3) maintain records sufficient to detail the history of the procurement to show some form of cost or price analysis.[33]  These records will include, but are not limited to: rationale for the method of procurement; basis for contractor; justification for lack of competition when competitive bids or offers are not obtained; and the basis for the contract price.[34]  PNPs must perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications, and the method and degree of analysis depends on the facts surrounding the particular procurement situation.[35]  In addition, an applicant must avoid purchasing unnecessary items and accordingly, solicitations for services must have a clear and accurate description of the technical requirements of the service, and such descriptions must not contain features which will unduly restrict competition.[36]

 

Though an applicant is required to comply with federal competitive procurement requirements,[37] in the event of noncompliance, FEMA may award reasonable costs that are necessary for eligible work.[38]  Where an applicant fails to comply with any term of an award such as procurement requirements, FEMA’s range of authorized actions includes disallowing all or part of the cost of the activity or action not in compliance.[39]  In exercising this discretionary authority, the selected action must be appropriate to the circumstances and, to the extent that FEMA allows funding, FEMA must consider the reasonableness of the costs.[40]  A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances.[41]

 

Funding under the PA program is available for management costs, which are administrative expenses and any other expenses not directly chargeable to a specific project under a major disaster.[42]  In addition to these management costs, FEMA will reimburse DAC incurred by applicants that are properly documented and can be tracked, charged, and accounted for directly to a specific project.[43]  Such costs must be reasonable for the work performed and accounted for in accordance with applicable federal regulations.[44]  Costs that are not tracked to a specific project, but are instead indirect costs are not DAC and may be reimbursed as management expenses.[45]  Where an applicant uses a contractor to perform administrative services, FEMA will consider certain factors when evaluating the reasonableness of requested DAC, such as the method for contracting the services, the skill level of the people performing the activities, and the amount of time to perform an activity.[46]  Travel and per diem costs for contractor employees are eligible as direct costs only if such costs can be attributed to individual projects.[47]  Travel expenses not tied to one specific project are indirect expenses, and may be potentially reimbursable as management costs, not DAC.[48]   

 

Here, the Applicant’s contract award to Witt was a noncompetitive procurement.  The Applicant executed a contract with Witt through the HGAC-Buy program.  HGAC received 13 proposals and the Applicant claims it selected Witt after reviewing the pricing, capability to effectively perform the work, and ability to timely provide the services needed.[49]  The Applicant/HGAC did not base the procurement of Witt’s services on the Applicant’s specific needs.[50]  Rather, the HGAC advertisement was for an infinite quantity of services, the SOW was broad and exceeded the services ordered and received by the Applicant, and was done before the Applicant procured HGAC’s services.[51]  This is because the advertisement was not specific to the Applicant; it was instead based on services that could be provided to users nationwide, which unduly restricted competition.  As noted above, the requirements for free and open competition prohibited the Applicant, or its agent, from entering into a sole sourced contract, which the HGAC contract with Witt amounted to.

 

Though the Applicant argues it complied with free and open competition regulations by receiving sealed bids and competitive proposals from a number of vendors following a public solicitation (as required), the method of procurement performed by HGAC did not publically solicit the specific requirements needed by the Applicant and permit all responsible sources to compete.  Had the solicitation been limited to the specific needs required by the Applicant and allowed all contractors to compete for that, it would have met the free and open competition requirement.  As such, the pricing submitted was not restrictive to the Applicant’s specific SOW.  Moreover, the Applicant has not submitted any documentation showing it performed a cost/price analysis for its specific needs.  In addition, the Applicant did not demonstrate it took the necessary steps to utilize small businesses, minority-owned firms, and women’s business enterprises when possible.  Accordingly, the RA correctly determined that the Applicant’s contract with Witt was noncompliant.

 

Because of the procurement noncompliance associated with Witt’s contract, FEMA had discretionary enforcement authority to award reasonable costs or to disallow all costs.  Here, the RA elected to award certain costs determined to be reasonable.  Specifically, the RA reduced DAC and found none of the travel costs eligible as DAC.  Once the RA reduced the amount of eligible security services, he accordingly found only $265.80 total DAC reasonable.  The RA found that based on the level of effort (two hours to review the PW, collect and submit cost documentation, and prepare correspondence), the skill level, and rate ($132.90), the amount awarded was appropriate.[52]  In reducing the rate to $132.90 per hour, the RA looked at several PA grants in other disaster declarations, including Witt’s contract with the State of Vermont, which is what FEMA ultimately used as a comparison to establish labor rates in this project.  This was due to the fact that the Vermont contract provided for similar services, in the same timeframe, with common staff, in FEMA Region I, and with a comparable contract size.[53]  Taking into account the Applicant’s noncompliance with federal regulations in procuring Witt’s service, FEMA properly determined reasonable costs in the amount of $265.80. 

 

In addition, the Applicant claimed DAC for travel expenses prorated across multiple PWs, but provided no documentation establishing those costs could be tied to specific projects.  Rather, the Applicant explained that the travel costs were divided by an employee’s total hours to achieve an hourly travel related cost for the services performed during a specific period of time, and was then included with the hourly rate charged for Witt employees and applied by each of Witt’s direct administrative services for a PW.[54]  Because travel expenses incurred for a single trip for the benefit of multiple PWs or “related to general support and not tied directly to one specific project,” are not eligible as DAC, those costs were properly denied.[55]  

 

Conclusion

 

The RA’s decision regarding the newly identified issues in the second Final RFI was proper.  The Applicant’s costs for security after June 21, 2011 are not eligible, as the immediate threat from the threat ceased when the Applicant constructed a chain link fence around the Facility.  Moreover, the RA’s decision to apply a 53 percent proration for costs was appropriate.  In addition, the Applicant’s procurement of Witt’s services was not compliant with federal regulations, and FEMA properly determined reasonable costs for Witt’s DAC.  However, Witt’s travel expenses are not eligible DAC.  Therefore, the second appeal is denied.

 

 

 

 

[1] Letters from Applicant’s Counsel, to Acting Assistant Adm’r, Recovery Directorate, FEMA, at 24-26 (May 30, 2018) (quoting 2 C.F.R. § 200.405 (2014)).  Even though the Uniform Rules did not come into effect until December 26, 2014, the Applicant insisted they apply retroactively for this disaster because they provide clarification of prior cost principles for Federal awards.

[2] Recovery Directorate Manual, Public Assistance Program Appeals Procedures, Version 4, at 14 (Mar. 29, 2016) [hereinafter Appeals Manual].

[3] Id. at 13.

[4] Id. at 14, App. E; FEMA Second Appeal Analysis, Miami-Dade County, FEMA-1345-DR-FL, at 2 (Oct. 20, 2017).

[5] Appeals Manual, at 15.

[6] Id.

[7] Letter from Recovery Div. Dir., FEMA Region I, to Dir., MEMA, and Fin. Officer, Roman Catholic Bishop of Springfield, at 2 (Dec. 21, 2017).

[8] See Email from UPS Quantum View, to Rep., FEMA Region I (Dec. 22, 2017 10:28 EST) (stating “[a]t the request of DHS FEMA REG I (NON) this notice alerts you that the status of the shipment listed below has changed.”  The email then confirms delivery to Kurt N. Schwartz, Director, MEMA).

[9] Letter from Attorney, Egan, Flanagan and Cohen, P.C., to Appeals Analyst, FEMA Region I, at 1 (Jan. 17, 2018).

[10] See Letter from Recovery Div. Dir., FEMA Region I, to Dir., MEMA, and Fin. Officer, Roman Catholic Bishop of Springfield, at 2 (Dec. 21, 2017) (and further stating that “the security services [from June 2-21, 2011] were provided on areas falling outside of the eligible educational facility and, as a result, it is necessary to make reductions to the previously approved projects costs for the cost of security services provided on those ineligible areas.” (see Analysis, at 8); and stating “the fence eliminated any immediate threat that a person would inadvertently enter onto the property and become injured from disaster-generated debris.  Furthermore, the other threats identified by the Applicant as necessitating the security services (such as fire, vandalism, and injuries caused by criminal trespassing) were not required as a direct result of the major disaster.  Therefore, it appears that the Applicant is ineligible for all security services provided from June 22, 2011, until March 8, 2012” (see Analysis, at 9).).

[11] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, §§ 403 and 406, 42 U.S.C. §§ 5170b and 5172 (2007) [hereinafter Stafford Act].

[12] Title 44 Code of Federal Regulations (44 C.F.R.) § 206.222(b) (2010).

[13] Id. at § 206.221(e)(1).

[14] Disaster Assistance Policy DAP9521.3, Private Nonprofit (PNP) Facility Eligibility, at 5 (July 18, 2007).

[15] Id.

[16] Id. at 4-5.

[17] Stafford Act § 403(a).

[18] Id. at § 403(c)(6)(B).

[19] 44 C.F.R. § 206.201(b).

[20] Public Assistance Policy Digest, FEMA 321, at 99 (Jan. 2008).

[21] 44 C.F.R. § 206.32.

[22] Id. at § 206.223.

[23] FEMA Second Appeal Analysis, Town of Bennington, FEMA-4022-DR-VT, at 8 (Sept. 15, 2015).

[24] Id.

[25] Id.; Public Assistance Guide, FEMA 322, at 19-20 (June 2007) [hereinafter PA Guide].

[26] DAP9521.3, at 5.

[27] Id. (outlining the process for critical and non-critical PNPs to apply for assistance both for emergency work and permanent work).

[28] See FEMA Second Appeal Analysis, Louisiana State University Health Care Services Division Medical Center of Louisiana at New Orleans, FEMA-1603-DR-LA, at 3-4  (Jan. 28, 2015) (stating, “the threat of such potential exposure to the general public at large was a not a direct result of the disaster.  The potential threat would have materialized only upon unlawful access and use of the biohazards and dangerous equipment.  This would be considered a direct result of a criminal act independent of the disaster.  Therefore, any security provided to ensure public safety against potential threats from a criminal act was not eligible work required as a direct result of the disaster.”).

[29] Id.

[30] PA Guide, at 51; Memorandum from Assistant Adm’r, Disaster Assistance Directorate, FEMA, to Reg’l Adm’rs, FEMA, at 2 (Sept. 8, 2009) [hereinafter DAP 9525.9 Guidance Memo].

[31] Title 2 Code of Federal Regulations (2 C.F.R.) § 215.43 (2010).

[32] Id. § 215.44(b)(1).

[33] Id. § 215.45.

[34] Id. § 215.46.

[35] Id. § 215.45.

[36] Id. § 215.44(a)(1), (3)(i).

[37] PA Guide, at 40.

[38] Id. at 40-41; FEMA Second Appeal Analysis, City of Nome, FEMA-4050-DR-AK, at 5 (Sept. 28, 2016).

[39] 2 C.F.R. §§ 215.61-62.

[40] City of Nome, FEMA-4050-DR-AK, at 5-6.

[41] 2 C.F.R. Pt. 230, App. A ¶ A.3.

[42] Stafford Act § 324(a); Disaster Assistance Policy DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 2-5 (Sept. 8, 2009).

[43] DAP 9525.9, at 2.

[44] Id.

[45] Id.

[46] DAP 9525.9 Guidance Memo, at 2.

[47] Id. at 3.

[48] Id. at attach. 1-3.

[49] Letter from Attorney, Egan, Flanagan, and Cohen, P.C. to Disaster Recovery Sec. Chief, MEMA, at 12-13 (Mar. 16, 2017).

[50] See 2 C.F.R. § 215.44(a)(1) (stating that a recipient is to avoid purchasing unnecessary items); see also 2 CFR 215. 44(a)(3)(i) (stating that when soliciting for goods and services, a clear and accurate description of the technical requirements for the material, product or service to be procured should be provided, and in competitive procurements, such a description shall not contain any features which would unduly restrict competition.)

[51] The procurement advertisement included emergency operations, emergency response, contingency, risk assessment, climate change adaptation, vulnerability, hazards identification, operability, hazard mitigation, incident response, testing, training and exercise programs, community relations, modeling, asset management, logistics and support, regional response, decontamination, business continuity planning, data management, documentation, and debris cleanup and removal.

[52] First Appeal Analysis, at 20-21 (also noting that Witt’s rate of $185.70, which included travel costs was reduced to $155.10, and further reduced as part of the RA’s enforcement remedy due to the procurement violations).

[53] State of Vermont Contract between the Vermont Agency of Administration and Witt Group Holdings, LLC (Sept. 21, 2011) (reflecting a period of performance from September 15, 2011 through January 15, 2012; stating that Witt would provide qualified personnel to offer advice and counsel related to disaster recovery and recovery program issues, including management of FEMA grants, strategy, development of policy and programs designed to support or enhance recovery efforts, development of recovery priorities and objectives, communications and coordination efforts, and evaluation of activities and progress made; also that Witt may be required to provide staff to assist with provision of technical, programmatic, and management support as requested; and provided the hourly rate of a public assistance/mitigation specialist to be $132.90 per hour).

[54] Letter from Attorney, Egan, Flanagan, and Cohen, P.C. to Appeals Analyst, FEMA Reg. I, at 7-8 (Sept. 21, 2017).

[55] DAP 9525.9, at 2; and Memorandum from Assistant Administrator, at Attachment; see id. at 3 (stating “[t]ravel and per diem costs for contractor employees that work on eligible Public Assistance projects are eligible as direct costs if such costs can be and are attributed to individual projects.”).