Repair vs. Replacement

Appeal Brief

Summary Paragraph

From October 3, through October 19, 2016, Hurricane Mathew impacted the City of Jacksonville. The City of Jacksonville (Applicant) requested $3,955,671.91 in funding under FEMA’s Public Assistance program to restore the Facility. In January 2018, FEMA prepared Project Worksheet (PW) 1024 to document the Applicant’s claimed damages and approved a Scope of Work (SOW) to replace the Facility. On February 16, 2018, the Applicant emailed FEMA to update the replacement project to include a mitigation proposal. On December 17, 2018, the Applicant submitted another SOW change and improved project request. The Applicant’s revised costs of $4,699,761.91 included inflation and construction contingencies but did not include the mitigation and improved project costs. FEMA issued a Determination Memorandum denying the request for a replacement project. FEMA determined the Applicant did not provide documentation to allow FEMA to validate the cost information. FEMA approved the improved project request, but capped the project at the estimated total to repair the Facility and denied the balance of funding in the amount of $2,050,395.11. The Applicant appealed, claiming that it provided the appropriate documentation to support the replacement request. The FEMA Region 4 Regional Administrator denied the appeal. FEMA stated that the Engineer’s Updated Estimate was based on lump sums and did not include sufficient details of each component in the replacement estimate to verify the lump sums used to calculate the total replacement cost. The Applicant submits a second appeal reiterating its first appeal arguments. 

Authorities

• Stafford Act § 406(a)(1)(A).
• 44 C.F.R. §§ 206.203(d)(1), 206.226(f)(2).
• PAPPG, at 96, 97, 132.

Headnotes

• If the estimated repair cost exceeds 50 percent of the estimated replacement cost, the actual replacement cost is eligible. 
• The Applicant has demonstrated that the cost to repair the Facility exceeds 50 percent of the replacement cost.

Conclusion

FEMA finds the Applicant has provided documentation demonstrating the replacement of the Facility and associated revised replacement costs are eligible. Therefore, total eligible project costs for this improved project are increased to reflect the revised replacement cost and will be capped at $4,699,761.91. Accordingly, the appeal is granted.

Appeal Letter

Appeal Analysis

Background

From October 3, through October 19, 2016, Hurricane Matthew impacted the City of Jacksonville (Applicant).[1] The Applicant requested reimbursement under FEMA’s Public Assistance (PA) program to restore the Northbank Riverwalk Landing (Facility), which was damaged by hurricane force winds and stormwater surge. The Facility consisted of three floating docks that extended along the riverfront and followed the alignment of an existing bulkhead.[2] Due to the extent of visible damages, the Applicant determined further inspection of the surface and subsurface areas was necessary to identify the full extent of damages and develop the subsequent scope of work to restore the Facility. The Applicant procured a contract with Taylor Engineering (Engineer) to complete the inspections.

The Engineer produced a report (Engineer’s Report) for the damages and included an estimate (Engineer’s Original Estimate) of $1,799,000.00 for repair (excluding soft costs), which included removing and replacing 7,080 square feet of float modules, repairing 51 float modules, repairing 62 concrete guide piles, repairing two gangway connections, and replacing one gangway connection. The Engineer’s Original Estimate also provided an estimate of $3,205,000.00 (excluding soft costs) for replacement, which included removing 15,000 square feet of existing floating docks, removing all guide piles, installing 5,760 linear feet of concrete guide piles (72 piles), and installing 15,000 square feet of floating docks.[3] The Engineer’s Report for the disaster-related damages indicated significant issues with Floating Docks 1 and 3, where many of the float modules exhibited moderate to major defects and were in serious condition. Additionally, the Engineer’s Report showed that Floating Dock 2 was in critical condition, noting all float modules and associated gangways were missing and needed to be replaced. 

In January 2018, FEMA obligated Project Worksheet (PW) 1024 with an approved scope of work (SOW) to replace the Facility based on the Engineer’s Original Estimate. FEMA approved replacement because the estimated cost to repair the Facility exceeded more than 50 percent of the replacement cost.[4] 

Following this, the Applicant emailed FEMA to update the replacement project to include a mitigation proposal that would lengthen the existing floating dock piles by five feet and replace the concrete piles with steel pipe piles. Later, on December 7, 2018, the Applicant submitted a SOW change request with an increased repair versus replacement cost estimate prepared by its Engineer (Engineer’s Updated Estimate) as well as an improved project request. The updated repair and replacement costs reflected increases in unit prices from the time of the Engineer’s Original Estimate. Specifically, the Engineer’s Updated Estimate included a revised repair cost of $2,159,000.00 (excluding soft costs) and a replacement cost of $3,846,000.00 (excluding soft cost). The Applicant noted that when accounting for the revised replacement cost, engineering fees, direct administrative costs (DAC), contingency fees, and soft costs, the total revised requested estimated project cost for replacement of the Facility totaled $4,699,761.91. Regarding the improved project request, the Applicant’s letter stated that since 406 mitigation funds cannot be applied to a replacement project unless the Facility is part of an Alternative Procedures Project,[5] it requested FEMA approve the project as an improved project. The Applicant confirmed its revised requested costs did not include costs for mitigation or improvements.[6] 

In a letter dated March 10, 2023, FEMA issued a Determination Memorandum (DM) denying the request for the total revised replacement costs of $4,699,761.91. First, FEMA found that the request to change the SOW to include the revised replacement costs was not timely because the Applicant submitted it two years after the major disaster declaration.[7] Second, FEMA determined the Applicant did not provide documentation to allow FEMA to validate the cost information for the replacement SOW. FEMA stated the language used in the Engineer’s Report left doubt about the accuracy of the 50 percent calculation.[8] FEMA approved the improved project request, but capped the project at the estimated total to repair the Facility. Based on the Engineer’s Updated Estimate for repair in-kind costs, FEMA approved $2,649,366.80, which represented the $2,159,000.00 repair estimate, along with inspection costs and DAC. FEMA denied the balance of funding in the amount of $2,050,395.11, which represented the difference between the requested revised total replacement costs and the approved revised total repair costs.

First Appeal

The Applicant submitted a first appeal to the Florida Division of Emergency Management (Recipient), requesting the $2,050,395.11 in costs denied by FEMA in the DM, which, if granted, would equal the total revised replacement costs of $4,699,761.91. With its appeal, the Applicant claimed it provided the appropriate documentation to support the eligibility of the replacement of the Facility. It claimed that statements of probable cost (as contained in the Engineer’s Report) are standard language for reports issued by engineering firms who will not complete the construction work. The Applicant asserted that in the Engineer’s Report, the Engineer accurately reported the damaged elements for the repair and replacement of in-kind quantities using linear feet, square feet, and per unit costs, as applicable. The Recipient then transmitted to FEMA the Applicant’s appeal along with a letter in support for the appeal.

On January 22, 2024, the Region 4 Regional Administrator denied the appeal. FEMA stated that the Engineer’s Updated Estimate (i.e., the revised replacement cost estimate), was based on lump sums and did not include sufficient details (i.e., quantity, height, length, width, material, or location) of each component in the replacement estimate to verify the lump sums used to calculate the total replacement cost.[9] Therefore, FEMA found the Applicant did not provide documentation to support its assertion that replacement of the Facility was eligible under the 50 Percent Rule. 

Second Appeal

In a letter dated February 21, 2024, the Applicant submits a second appeal reiterating its first appeal arguments and requesting the additional $2,050,395.11 denied in the DM and on first appeal. The Applicant reiterates its request for replacement of the Facility and revised replacement costs totaling $4,699,761.91. In a letter dated April 19, 2024, the Recipient submits the second appeal along with a letter in support of the Applicant.

Discussion

FEMA may provide PA funding to eligible applicants for the repair, restoration, reconstruction, or replacement of facilities damaged or destroyed by a major disaster.^[10] A facility is considered repairable when disaster damage does not exceed 50 percent of the cost of replacing a facility to its predisaster condition, and it is feasible to repair the facility so that it can perform the function for which it was being used as well as it did immediately prior to the disaster.^[11] The applicant’s request for replacement should include both repair and replacement cost estimates with supporting documentation, prepared according to FEMA’s policy requirements.^[12] FEMA uses the Applicant’s cost estimate if the estimate is prepared by a licensed professional engineer or other estimating professional, such as a licensed architect or certified professional cost estimator who certifies that the estimate was prepared in accordance with industry standards; includes certification that the estimated cost directly corresponds to the repair of the agreed upon damage; is based on unit costs for each component of the SOW and not a lump sum amount; contains a level of detail sufficient for FEMA to validate that all components correspond with the agreed-upon SOW; and is reasonable.[13]

Here, FEMA approved the SOW to replace the facility in January 2018. Subsequently, the Applicant provided an Engineer’s Updated Estimate that reflected revised replacement costs of $3,846,000.00 (excluding soft costs).[14] The Applicant’s revised replacement costs were derived by a licensed professional engineer who provided the estimates in accordance with industry standards. Further, the Applicant and its engineer provided the dimensions and quantity of the replacement structures—including removing 15,000 square feet of existing floating docks, removing all guide piles, installing 5,760 linear feet of concrete guide piles (72 piles), and installing 15,000 square feet of floating docks. This documentation provided for the individual components, going beyond a lump sum estimate. Accordingly, the requested replacement work and associated revised estimated replacement costs (including engineering fees, DAC, contingency fees, and soft costs) totaling $4,699,761.91 are eligible for PA funding.[15]

Conclusion

The Applicant has provided documentation demonstrating the replacement of the Facility and associated revised replacement costs are eligible. Therefore, total eligible project costs for this improved project are increased to reflect the revised replacement cost and will be capped at $4,699,761.91. Accordingly, the appeal is granted.[16]