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Net Small Project Overrun

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster1664-DR-HI
ApplicantCounty of Hawaii Department of Parks and Recreation
Appeal TypeSecond
PA ID#001-UXAHV-00,
PW ID#693
Date Signed2013-10-28T00:00:00

Citation:  FEMA-1664-DR-HI, County of Hawaii, Department of Parks and Recreation, Net Small Project Overrun (NSPO)

Cross-Reference:  Net Small Project Overrun; General Eligibility

Summary:  The earthquake on October 15, 2006, damaged the County of Hawaii, Department of Parks and Recreation’s (Applicant) facilities island-wide.  FEMA prepared twenty-eight small Project Worksheets (PW) totaling $140,977 for the repair of disaster-related damage.  The Applicant submitted a first appeal for a Net Small Project Overrun (NSPO) of $506,541.  The Applicant attributed the overrun to an increase in material and labor costs between when FEMA prepared the PWs and when the Applicant completed the work, which was over three and a half years for most projects.  The FEMA Deputy Regional Administrator denied the Applicant’s first appeal, because the Applicant combined all work under one lump sum contract that also included non-disaster related restoration work and did not accurately track the actual costs associated with each PW.  Further, the Applicant apportioned lump sum costs for engineering and design services to all projects, including those that do not typically require those types of services.  In its second appeal, the Applicant concedes that it incorrectly included the costs for engineering and design services performed under a lump sum contract in its initial NSPO claim and has revised its NSPO claim to $367,043.  In its appeal, the Applicant states that, at the time FEMA prepared the PWs and cost estimates, it expressed its concern that the cost estimates were low considering the wage rates and division of work by license classification mandated by Hawaii law and the geographic isolation and access issues at some of the sites.  The Applicant followed all applicable procurement requirements, competitively bid the contract, and awarded the contract to the lowest bidder.  The Applicant acknowledges that at some sites the scope of completed work included non-disaster related repair, but asserts that based on the site specific Schedules of Values (SOV), the costs associated with non-disaster related work can be identified.

Issues:  1. Does the documentation submitted by the Applicant allow for isolation of the eligible costs for disaster related repairs from costs associated with ineligible non-disaster related work?

               2. Are all costs claimed by the Applicant associated with disaster related repairs?

Findings:  1.  Yes

                  2.  No

Rationale:  44 CFR §206.223 General Work Eligibility; OMB Circular A-87

Appeal Letter

October 28, 2013

Doug Mayne
Vice Director
Hawaii State Civil Defense
3949 Diamond Head Road
Honolulu, Hawaii  96816-4495

Re: Second Appeal–County of Hawaii Department of Parks and Recreation, PA ID 001-UXAHV-00, Net Small Project Overrun, FEMA-1664-DR-HI

Dear Mr. Mayne:

This is in response to letters from your office dated October 2 and 12, 2012, which transmitted the referenced second appeal on behalf of the County of Hawaii, Department of Parks of Recreation (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of the Applicant’s request for an additional $367,042.89 in funding as the result of a Net Small Project Overrun (NSPO).

As explained in the attached analysis, I have determined that the Applicant’s appeal should be partially granted.  The total eligible portion of the NSPO is $196,663.  Only those costs associated with the repair of disaster related damage as documented in the PWs are eligible.  By this letter, I am requesting that the Regional Administrator take appropriate action to implement my decision.  This action should include a review of the actual insurance proceeds received by the Applicant.  If the review results in a determination that the actual insurance proceeds exceed what was documented in the second appeal, the Regional Administrator should reduce the eligible funding accordingly.

Based on the documentation submitted with the second appeal, Project Worksheet (PW) 693 is a large project.  I am requesting that the Regional Administrator perform a review of the actual costs claimed by the Applicant for PW 693 and adjust eligible funding accordingly to close out the PW.  Please note that the work was not performed under the same contract as the remaining PWs at issue under this appeal; therefore, any eligibility determinations in the attached analysis relative to the procurement and contracting procedures do not apply to PW 693. The Applicant did not submit procurement or contract documents relative to PW 693 with the appeal.

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: Nancy Ward
     Regional Administrator
     FEMA Region IX

Appeal Analysis

Background

The earthquake on October 15, 2006, damaged the County of Hawaii, Department of Parks and Recreation’s (Applicant) facilities island-wide.  FEMA prepared twenty-eight small Project Worksheets (PW) totaling $140,977 for the costs to repair the disaster-related damage.

First Appeal

The Applicant submitted a first appeal to request reimbursement of a Net Small Project Overrun (NSPO) of $506,541 on December 10, 2010.  Hawaii State Civil Defense (Grantee) transmitted the first appeal to FEMA on February 10, 2011, supporting the Applicant’s request.  The Grantee submitted a Small Project Closeout report with the appeal stating that the majority of the cost overruns were attributable to an increase in material and labor costs between the time FEMA prepared the PWs and when the Applicant completed the work, which was over three and a half years for most projects.

On June 13, 2012, the FEMA Deputy Regional Administrator denied the Applicant’s first appeal because the Applicant combined all work under one lump sum contract that included non-disaster related restoration work and did not accurately track actual costs associated with each PW.  Further, the Applicant apportioned lump sum costs for engineering and design services to all projects, including those that do not typically require those types of services.

Second Appeal

On August 24, 2012, the Applicant submitted a second appeal of FEMA’s denial of its request for funding of its NSPO.  The Applicant concedes that it incorrectly included costs for engineering and design services performed under a lump sum contract in its initial NSPO claim and, as a result, revised its NSPO claim to $367,043.  In its appeal, the Applicant states that at the time FEMA prepared the PWs and cost estimates, it expressed its concern that the cost estimates were low considering the wage rates and division of work by license classification mandated by Hawaii law, the geographic isolation, and access issues at some of the sites.  The Applicant followed all applicable procurement requirements, competitively bid the contract, and awarded the contract to the lowest bidder.  The Applicant acknowledges that at some sites the repair scope included non-disaster related repair, but asserts that based on the site specific Schedules of Values (SOV), the costs associated with non-disaster related work can be identified.  The Applicant provided an SOV with its appeal for each PW that identifies what work, if any, is outside of the approved scope of work. The Grantee transmitted the appeal to FEMA on October 2, 2012, and supported the request for reimbursement of the Applicant’s NSPO.

Discussion

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.  The Applicant procured a contract for the repair work funded with all of its small PWs.  The scope of work of the contract also included non-disaster related repair work at some sites; however, the supporting documentation submitted with its second appeal distinguishes the portion of the total costs incurred by the Applicant in completing the approved scopes of work on the PWs.  Table 1 summarizes FEMA’s review of the SOVs for each PW and determination of eligible costs.

For some sites, the Applicant claims that the PW does not document all disaster related damage and requests that FEMA approve funding for the repair of the additional damage.  However, the Applicant did not submit sufficient documentation to support its claim that the additional damage identified by its consultant or insurance agent was disaster related and did not exist prior to the event.  In those cases,  all work performed to repair damage other than what FEMA documented in the PWs is not eligible for funding.  Table 1 includes a notation for each PW with actual costs claimed by the Applicant that include funding for ineligible work associated with damage that is not documented in the PW.

In general, reasonable and necessary costs to accomplish eligible work are eligible for reimbursement.  In this case, eligible costs include those associated with “general work” performed by the Applicant’s contractor as documented in the site specific SOVs.  However, at some sites addressed in the Applicant’s small PWs, the cost of the non-disaster repairs and the repairs of damage not documented in a PW are a significant portion or even the majority of the total repair cost.  The “general work” includes, among other tasks, mobilization, demobilization, general requirements, record drawings, erosion and sediment control, barricades, and clean-up.  While the costs associated with these tasks are reasonable and necessary, if the Applicant has not shown that they are directly associated with eligible work, the costs are not eligible for reimbursement.  Table 1 includes a notation for each PW with “general work” costs for which the Applicant did not provide sufficient documentation attributing the costs to eligible work versus ineligible work.  In those cases, FEMA estimated the eligible costs for general work based on the percentage of the total cost associated with eligible repair work as shown in Table 1.

Based on the Applicant’s claim for actual costs, PW 693 may qualify as a large project; therefore, as noted in Table 1, it was not considered in FEMA’s analysis of the NSPO that forms the basis for the Applicant’s appeal.  Accordingly, the Applicant should submit a request to the Grantee for final inspection and closeout of PW 693.

                                                                                    Table 1

PW

FEMA - PW Approved

Applicant Claimed

2nd Appeal

FEMA Approved

2nd Appeal

Comments

63

$1,604

$7,000

$7,000

 

64

$1,596

$16,265

$8,538


*2 ($2140)

66

$2,302

$17,408

$13,908

*1 (concrete curb, sidewalk, doors and windows)

67

$1,642

$7,200

$7,200

 

69

$1,138

$6,922

$6,922

 *3 ($1,598)

71

$1,222

$9,477

$4,146

*1 (ceramic tile); *2($646)

72

$1,138

$19,922

$18,665

*2(2,263); *3 ($1,598)

73

$1,170

$6,376

$6,024

*2($3,168); *3 ($1,644)

74

$1,170

$11,376

$11,376

*3 ($1,644);

75

$3,494

$24,110

$24,110

 *3 ($4,910)

161

$1,502

$22,640

$20,890

A portion of work performed under change order is not required by event

163

$1,502

$22,639

$20,890

A portion of work performed under change order is not required by event

165

$0

$0

$0

 

167

$15,970

$29,392

$29,392

 

169

$4,963

$14,315

$14,315

 

181

$3,719

$13,301

$13,301

 

183

$0

$0

$0

 

184

$5,273

$6,700

$6,700

 

185

$14,943

$10,742

$10,742

*3 ($12,145)

186

$2,457

$3,489

$3,489

 

338

$1,235

$8,476

$8,476

*3 ($4,879)

356

$43,312

$91,414

$54,095

*1 (ceramic tile joints, sidewalk, door frames); *2($8,944); Applicant painted all walls ($45,350), but PW scope only included limited painting – estimated painting cost from PW included in eligible amount ($27,651)

 

PW

FEMA PW Approved

Applicant Claimed

2nd Appeal

FEMA Approved

2nd Appeal

Comments

439

$0

$0

$0

 

628

$3,161

$3,161

$3,161

 

633

$6,164

$24,000

$24,000

 

639

$0

$0

$0

 

693

n/a

n/a

n/a

Potential large project; not included in analysis

706

$1,550

$1,550

$1,550

 

Total

$122,227

$377,875

$318,890

Eligible NSPO: $196,663

 

    *1 - Applicant’s claim includes costs to repair additional damage not documented in PW (ineligible work; undocumented damage summarized in comment section)

    *2 - Applicant’s claim includes cost for “General Work” performed to complete both non-disaster and disaster related repairs (ineligible cost; eligible general costs based on the percentage of the cost of eligible work performed included in comments section)

    *3 - Applicant deducted actual insurance proceeds from claim; however, no supporting documentation provided (insurance proceed amount included in comments section).  FEMA used Applicant’s reported insurance proceeds for this analysis.

Conclusion

In support of its second appeal, the Applicant has sufficiently documented actual costs associated with eligible, disaster related repair work.  While FEMA has determined that a portion of the costs claimed by the Applicant is associated with work to repair damage not sufficiently documented as disaster-related, the Applicant has provided sufficient documentation to support cost overruns for the majority of its small projects.  The total eligible NSPO is $196,663 subject to an insurance review of actual insurance proceeds.