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Buccaneer State Park Reconstruction

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Desastre1604-DR-MS
ApplicantMississippi Department of Wildlife, Fisheries, and Parks
Appeal TypeSecond
PA ID#000-UC1AO-00
PW ID#5878, 6056, 6101, 6149, 6157, and 10983
Date Signed2014-01-03T00:00:00

Citation:  FEMA-1604-DR-MS, Mississippi Department of Wildlife, Fisheries, & Parks, Phase I Facility Reconstruction Costs

Cross-Reference:  Pre-Disaster Condition; Reasonable Cost; General Eligibility

Summary:   Hurricane Katrina’s heavy rains, strong winds, and flooding completely destroyed the buildings and contents of Buccaneer State Park, a facility of the Mississippi Department of Wildlife, Fisheries, and Parks (Applicant).  FEMA prepared Project Worksheets (PW) 5878, 6056, 6101, 6149, 6157, and 10983 for reconstruction of the damaged structures.  Before closeout, the Applicant submitted change orders for additional work, much of which FEMA denied.  The Applicant submitted five first appeals, contending that additional costs in the amount of $215,381.07 represented by the change orders were eligible for reimbursement.  The FEMA Regional Administrator denied the first appeals because (1) the documentation did not demonstrate the additional work was necessary to return the facility to pre-disaster condition or was necessary to comply with applicable codes and standards, (2) a portion of the additional work appeared to improve the facility beyond its pre-disaster condition, and (3) FEMA considered overhead and profit to be incentives for identifying cost savings and not eligible costs.  The Applicant included as-built plans with its four second appeals to demonstrate that much of the work in question was necessary to return the facility to its pre-disaster conditions.  The Applicant also included documentation of the construction contract conditions and further information detailing the need for other additional funding.  Due to the overlapping issues in the five appeals, FEMA combined the decisions for the five appeals into a single response.

Issues:  1.  Does the Applicant’s documentation demonstrate the costs are eligible because the additional work is necessary to return the facility to its pre-disaster condition and/or are reasonable, necessary, and directly tied to accomplishing eligible work ?

              2.  Are the requested overhead and profit costs related to cost savings eligible for reimbursement?

Findings:  1. Yes                   

                   2.  Partially, only costs that relate to cost savings for eligible work are eligible.

Rationale:  44 CFR §206.223, General work eligibility; 44 CFR §206.226, Restoration of damaged facilities; Stafford Act §406 (e)(1), 42 U.S.C. § 5172 (e)(1) Repair, Restoration, and Replacement of Damaged Facilities; PA Guide, FEMA 322, page 40 (June 2007); 44 CFR §13.22, Allowable costs; American Institute of Architects (AIA) Document A201: General Conditions of the Contract for Construction (1997), § 7.3.7.

Appeal Letter

January 3, 2014

Mr. Robert Latham, Jr.
Executive Director
Mississippi Emergency Management Agency
220 Popps Ferry Road
Biloxi, Mississippi  39531

Re:    Second Appeal—Mississippi Department of Wildlife, Fisheries, and Parks, PA ID 000-UC1AO-00, Buccaneer State Park Reconstruction, FEMA-1604-DR-MS,Project Worksheets (PWs) 5878, 6056, 6101, 6149, 6157, and 10983

Dear Mr. Latham:

This letter is in response to letters from your office dated April 24, May 14, and May 15, 2013, which transmitted the referenced second appeals on behalf of the Mississippi Department of Wildlife, Fisheries, and Parks (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $215,381.07 in funding associated with the reconstruction of the facilities at the Buccaneer State Park.

Given the overlapping issues between the Applicant’s five second appeals, I have combined my decisions for all matters into one response.  As explained in the attached analysis, I have determined that the Applicant’s appeals should be partially granted.  Accordingly, I am approving an additional $211,608.87 in eligible costs.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

Sincerely,

/s/

Deborah Ingram
Assistant Administrator
Recovery Directorate

Enclosure

cc:  Major P. May
      Regional Administrator
      FEMA Region IV

Appeal Analysis

Background

On August 29, 2005, Hurricane Katrina’s heavy rains, strong winds, and flooding completely destroyed the buildings and contents of Buccaneer State Park, a facility of the Mississippi Department of Wildlife, Fisheries, and Parks (Applicant).  The damaged buildings within the park included Gatehouse 5; Bathhouses 6, 7, and 9; Overflow Gatehouse; Pavilions 1, 2, 3, and 4; and Maintenance Building.  The extent of the disaster-related damage to these buildings justified FEMA’s approval of their replacement.  As a result, FEMA prepared Project Worksheets (PWs) 5878, 6056, 6101, 6149, 6157, and 10983 to reimburse the cost of reconstruction.  As of these second appeals, FEMA has awarded a total of $3,849,350.10 for the cost of reconstruction of the structures as documented on the five PWs.  During the final phase of construction, the Applicant requested reimbursement for additional costs based on nine change orders to the construction contract.  Prior to closeout, FEMA reviewed the change orders and denied several work items contained therein.  FEMA determined the nine change orders constituted ineligible work that exceeded the approved scope of work or represented unallowable costs.

First Appeal

On September 21, 2011, the Applicant submitted the first appeals of 6056 and 6149 and subsequently submitted the first appeals of PWs 5878, 6101, 6157, and 10983 on October 11, 2011.  The first appeals requested reimbursement for additional facility reconstruction costs totaling $215,381.07.  The Mississippi Emergency Management Agency’s (Grantee) letter transmitting the first appeals to FEMA supported all of the Applicant’s requests.  Within the appeals, the Applicant claimed that (1) certain disputed items were needed to return the facility to its pre-disaster condition and/or to restore necessary pre-storm functions, (2) certain disputed items were required by code and standards and/or were reasonable and necessary construction costs tied directly to FEMA’s approved scope of work, and (3) GM&R Construction, Inc. (Contractor) was entitled to overhead and profit, as submitted, in accordance with the standard American Institute of Architects (AIA) Document A201: General Conditions of the Contract for Construction (1997).

On January 7 and January 10, 2013, the FEMA Region IV Regional Administrator responded with five separate decisions, denying the Applicant’s first appeals because (1) the Applicant did not provide documentation that demonstrated the additional work was either necessary to return the facility to its pre-disaster condition or necessary for the Applicant to comply with current codes and standards, (2) it seemed that some of the additions constituted improvements to the project that were beyond the approved scope of work, and (3) FEMA considered the overhead and profit costs to be “incentives” for identifying cost savings, not eligible costs.

Second Appeal

On March 12 and March 19, 2013, the Applicant submitted five separate second appeals to the Grantee.  Enclosed with the respective appeals, were relevant pre-storm Buccaneer Mississippi Parks Commission architectural plans and Buccaneer 1981 As-Built Plans to illustrate the pre-disaster condition of the facility.  The Applicant also included the AIA Document A201: General Conditions of the Contract for Construction (1997), § 7.3.7—the document that governed overhead and profit allowances in relation to cost savings for the contract in question.  Finally, the Applicant provided further explanation and clarification in consideration of the applicable law and policy guidance as to why it is entitled to the costs in question.  The Grantee transmitted the Applicant’s second appeals to FEMA on April 24, May 14, and May 15, 2013, and supported all of the Applicant’s requests for reimbursement.

The total amount in dispute is $215,381.07.  The breakdown of the disputed costs, listed by PW and related structure, is as follows:

PW 6157 ($34,423.47 in Disputed Cost Items for Office - Gatehouse 5)

  • $929.60 for contractor’s overhead and profit for removal of gutters & downspouts
  • $542.88 for overhead and profit for replacement of cast iron pipe with PVC pipe
  • $8,390.40 for change in foundation pilings
  • $240.00 for addition of wire glass in metal doors
  • $420.00 for addition of hollow metal door with wire glass
  • $7,779.60 for addition of security, door lighting, phone and security system outlets
  • $1,569.80 for addition of exterior lighting
  • $14,551.19 for additions to heating, ventilation, and air conditioning (HVAC) system

PW 6101 ($103,399.71 in Disputed Cost Items for Bathhouses 6, 7, 9)

  • $4,199.60 in contractor overhead and profit for pipe replacement and gutters and downspout removal
  • $11,632.00 for mirror shelves and hand dryers
  • $11,293.00 for additional water heaters
  • $76,275.11 for additional heaters, electrical occupancy sensors, and ventilation

PW 10983 ($4,369.14 in Disputed Cost Items for Overflow Gatehouse)

  • $73.04 for contractor’s overhead and profit for PVC pipe in lieu of cast iron pipe
  • $2,817.40 for overhead and profit for deletion of impact resistant windows
  • $1,065.60 for addition of security lighting and data phone jacks
  • $413.10 for relocation of a wall and use of wood studs

PW 6056 and PW 6149 ($34,868.10 in Disputed Cost Items for Pavilions 1, 2, 3, 4)

  • $634.50 in additional roof vents and a soffit material modification
  • $34,233.60 in ventilation, exhaust fans, supporting electrical components, and lighting controls

PW 5878 ($38,257.65 in Disputed Cost Items for Maintenance Building)

  • $563.75 for contractor’s overhead and profit for PVC pipe in lieu of cast iron pipe
  • $3,492.00 for addition of a hose bib and sink
  • $3,210.00 for a double gate and chain link fence
  • $8,872.00 for exterior lighting
  • $22,119.90 for heating system additions

Discussion

This section is broken down by issue and, accordingly, is divided into three parts:  (1) Returning Facility to Pre-disaster Condition and Function, (2) General Eligibility and Complying with Applicable Construction Practices, and (3) Overhead and Profit.  Also, a Table of Disputed and Approved Costs (Table), broken down by PW and issue, is located at the end of the Discussion section.

General Eligibility and Returning Facility to Pre-disaster Condition and Function

According to Title 44 of the Code of Federal Regulations (44 CFR) §206.223 General Work Eligibility, to be eligible, work must be required as the result of the disaster.  44 CFR §206.223 Restoration of damaged facilities builds on this requirement, stating that “work to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster…is eligible.” 

In the Applicant’s second appeals, it included pre-storm Buccaneer Mississippi Parks Commission architectural plans and Buccaneer 1981 As-Built Plans to illustrate the pre-disaster condition of the following disputed components of the Park buildings:

  • Security, door lighting, phone and security system outlets for the Office (PW 6157)
  • Wire glass in metal doors for the Office (PW 6157)
  • Hollow metal door with wire glass for the Office (PW 6157)
  • Exterior lighting for the Office (PW 6157)
  • Mirror shelves and hand dryers for Bathhouses (PW 6101)
  • Water heaters for Bathhouses (PW 6101)
  • Heaters, electrical occupancy sensors, and ventilation for Bathhouses (PW 6101)
  • Ventilation, exhaust fans, supporting electrical components, and lighting controls for Pavilions (PW 6149)
  • Exterior lighting for Maintenance Building (PW 5878)
  • Heating system additions for Maintenance Building (PW 5878)
  • Double gate in chain link fence for Maintenance Building (PW 5878)

(The above requests are noted with a “*3” in the Table.) 

The pre-storm architectural plans and As-Built plans demonstrate that each item listed above existed prior to the disaster and/or is necessary to return the facility to its pre-disaster condition.  Therefore, the disputed costs related to these items are eligible.

In addition, the Public Assistance Guide, FEMA 322, states that, in general, “costs that can be directly tied to the performance of eligible work are eligible.”  (FEMA 322, June 2007, page 40).  Such costs must be “reasonable and necessary to accomplish the work.”  (FEMA 322, June 2007, page 40). 

In its second appeals, the Applicant made requested correction of construction design omissions and errors directly tied to and necessary for the proper functioning of structures.  These requests include:

  • Additions to heating, ventilation and air conditioning (HVAC) for the Office (PW 6157)
  • Security lighting and data phone jacks for the Overflow Gatehouse (PW 10983)
  • Relocation of wall/use of wood studs (PW 10983)
  • Changes to foundation pilings (PW 6157)
  • Roof vents and soffit material modification for the Pavilions (PW 6056)
  • Hose bib and sink for Maintenance Building (PW 5878)

(The above requests are noted with a “*2” in the Table.)

The HVAC additions are reasonable and necessary for the proper functioning of the elevator and communication systems, both of which are within the FEMA approved scope of work.  Specifically, the HVAC additions are necessary to keep the FEMA approved elevator and communication systems from overheating, which is a clear safety issue.  Likewise, the data phone jacks are directly tied to and necessary for the proper functioning of the FEMA approved communication system in the Overflow Gatehouse.  Without the phone jacks, the communication system simply will not operate.  Additionally, the security lighting for the Overflow Gatehouse, which is the first stop for anyone entering the park, is reasonable and a necessary addition for both security and public safety reasons.  The roof vents and soffit material modifications on the Pavilions are also eligible modifications.  FEMA approved a change in materials from Rulon to hardi-board on the fascia because the material was less costly, provided ventilation, and was easier to maintain.  It is reasonable to also change the material on the soffit to match the fascia, since the two together form a building unit and FEMA approved the reconstruction of the entire building.  Similarly, the relocation of a wall and the use of wood studs in the Overflow Gatehouse are necessary adjustments that are directly tied to the reconstruction of the Overflow Gatehouse.  Finally, during construction and after the contractor had installed a portion of the piles required, the contractor found that the length of the piles as designed was insufficient.    The costs associated with changing the foundation design are reasonable, common costs associated with this type of construction work and are directly tied to the performance of eligible work. The hose bib and sink in the Maintenance Building are needed to adhere to Occupational Safety and Health Administration (OSHA) safety requirements geared toward quick flushing or drenching of the eyes and body.

Each of the costs discussed above is eligible because those costs can be directly tied to the performance of eligible work and are reasonable and necessary to accomplish that work. 

Overhead and Profit

44 CFR §13.22 Allowable Costs outlines limitations on the use of funds, stating that funds may be used for “Reasonable fees or profit to cost-type contractors.”  The AIA Document A201: General Conditions of the Contract for Construction (1997), § 7.3.7 provides additional guidance on overhead and profit allowances in relation to cost savings that applies to the particular lump-sum contract in question.  According to the AIA Document A201, “the amount of credit to be allowed by the Contractor to the Owner for a deletion or change which results in a net decrease in the Contract Sum shall be actual net cost as confirmed by the Architect.”

In its second appeals, the Applicant claimed that its Contractor is entitled to overhead and profit related to the following cost saving credits:

  • Use of PVC piping instead of cast iron piping for Overflow Gatehouse (PW 10983)
  • Window deletion for Overflow Gatehouse (PW 10983)
  • Use of PVC piping instead of cast iron piping and removal of gutters and downspouts for Bathhouses (PW 6101)
  • Use of PVC piping instead of cast iron piping for Bathhouses (PW 6101)
  • Removal of gutters and downspouts for the Office (PW 6157)
  • Use of PVC piping instead of cast iron piping for Maintenance Facility (PW 5878)

(The above costs are noted with a “*1” in the Table.)

As per 44 CFR § 13.22 and standard AIA conditions of the contract for construction, the Contractor is entitled to overhead and profit, as submitted, in all instances where the Contractor saved money by using less expensive material or deleting an item that was used or would have been used for eligible work.  In this case, all of the above listed changes or deletions were for eligible work except for the removal of the gutters and downspouts.  According to Change Order Number 001, Project Number GS 631-029, the gutters and downspouts “did not exist on the buildings prior to the storm.”  It follows that costs related to the gutters and downspouts are not eligible because these items were not necessary to restore the facility back to its pre-disaster condition.  Because the gutters and downspouts were not eligible in the first place, overhead and profit for cost savings related to the removal of the gutters and downspouts are also ineligible. 

Table of Disputed and Approved Costs

PW

Applicant Claimed

2nd Appeal

FEMA Approved

2nd Appeal

Issue/Comments

10983

$73.04

$73.04

O&P for PVC pipe *1

10983

$2,817.40

$2,817.40

O&P for window deletion *1

10983

$1,065.60

$1,065.60

Security lighting/data phone jacks *2

10983

$413.10

$413.10

Relocation of wall/wood studs *2

6056

$634.50

$634.50

Roof vents/soffit material modification *2

6149

$34,233.60

$34,233.60

Ventilation, exhaust fans, supporting electrical components, and lighting *3

6101

$4,199.60

$1,420.00

O&P for PVC piping and removal of gutters and downspouts *1

6101

$11,632.00

$11,632.00

Mirror shelves and hand dryers *3

6101

$11,293.00

$11,293.00

Additional water heaters *3

6101

$76,275.11

$76,275.11

Additional heaters, electrical occupancy sensors, and ventilation *3

6157

$929.60

$0.00

O&P for removal of gutters and downspouts*1

6157

$542.88

$542.88

O&P for pipe*1

6157

$8,390.40

$8,390.40

Change in Foundation Pilings *2

6157

$240.00

$240.00

Addition of wire glass in metal doors *3

6157

$420.00

$420.00

Addition of hollow metal door with wire glass *3

6157

$7,779.60

$7,779.60

Addition of security, door lighting, phone and security system outlets *3

6157

$1,569.80

$1,569.80

Addition of exterior lighting *3

6157

$14,551.19

$14,551.19

Additions to heating, ventilation and air conditioning *2

5878

$563.75

$563.75

O&P for PVC pipe *1

5878

$3,492.00

$3,492.00

Addition of hose bib and sink *2

5878

$3,210.00

$3,210.00

Double gate and chain link fence *3

5878

$8,872.00

$8,872.00

Exterior lighting *3

5878

$22,119.90

$22,119.90

Heating system additions *3

TOTAL

$215,318.07

    $211,608.87

 

*1 – Applicant claims overhead and profit related to various credits

         *2 – Applicant claims cost is necessary to comply with applicable codes and standards

         *3 – Applicant claims cost is necessary to return facility to its pre-disaster condition

Conclusion

In support of its second appeals, the Applicant sufficiently documented that certain costs were necessary to return the facility to its pre-disaster condition or were directly tied to and necessary to complete eligible work.  While FEMA has determined that a portion of the overhead and profit costs that the Applicant claimed are eligible for reimbursement, those overhead and profit costs associated with deductions for items that were not part of the pre-disaster facility are not eligible.  Therefore, $211,608.87 of the requested costs is eligible for reimbursement.