Reasonable Costs

Conclusion: The Applicant’s repair of its pier tip is an improved project, as defined by FEMA policy.  In addition, the Region I Acting Regional Administrator’s method for calculating eligible cost is reasonable and in accordance FEMA regulations and policy. 

Summary Paragraph
 
In March and April 2010, storm surges and waves damaged sections of the Applicant’s granite pier tip.  The original scope of work, under Project Worksheet (PW) 891, included replacing 325.92 CY of stone base and resetting and replacing 423.7 CY of armor stone.  PW 891 was initially obligated for $117,002.  In July 2010, the Applicant hired Vine Associates as consulting engineers to prepare design repair plans.  Vine Associates identified a significantly longer area of damage to the pier tip than was identified by FEMA in PW 891.  A contractor completed the repair work in September 2011.  During the close out process, FEMA determined that the Applicant repaired a greater linear distance of the pier tip; accordingly, FEMA classified the repair work as an improved project and reduced the eligible cost of the project to $31,069.43.  In the first appeal, the Applicant asserted that the work completed was not an improved project and that its final project costs were well below the original FEMA estimate.  The Acting Regional Administrator (RA) determined that the repair completed on the pier tip was an improved project, the actual volume of the damaged area was far less than FEMA’s estimate, and thereby reduced the eligible costs.  The Acting RA also identified issues with the procurement process that the Applicant used in the administration of the repairs.  Notwithstanding its improper procurement methods, the Acting RA reimbursed the Applicant for the federal cost share.  In its second appeal, the Applicant, again, asserts that the repairs to its pier tip do not constitute an improved project.  In addition, the Applicant provides an alternative method for calculating reasonable cost associated with the repair of its pier tip. 

Authorities Discussed

• Stafford Act § 406(e) Eligible Cost.
• 44 C.F.R. § 206.201(j) Definitions- Permanent Work.       
• 44 C.F.R. § 206.203(d)(1) Improved Projects.
• 44 C.F.R. § 206.223 General Work Eligibility.
• 44 C.F.R. § 206.226 Restoration of damaged facilities.

Headnotes

• Pursuant to 44 C.F.R. § 206.203(d)(1), an improved project occurs when an applicant makes additional improvements to a damaged facility while still restoring it to its pre-disaster function and capacity.

o In the original PW, FEMA estimated the total area of damage to be 100 feet (length) x 22 feet (width), with damage to 65 feet of armor stone within that 100 feet, and damage to the base stone for the entire 100 feet. FEMA staff estimated a depth of 8 feet for the damaged armor and 4 feet for the base stone. However, a subsequent engineering report determined that the depth for the base stone and armor was the same, 4 feet. The Applicant repaired 170 feet (length) of the pier.  This constitutes an improved project because the repair work is outside of the original scope of PW 891.

• Stafford Act § 406(e) limits permanent work reimbursement to the restoration of a damaged facility to its pre-disaster design, function, and capacity.  The costs must be reasonable and necessary to accomplish the eligible work. 

o The Region I Acting RA calculated eligible cost by dividing the total construction costs incurred by the Applicant by the volume of the pier repaired.  This provided a unit cost.  The RA multiplied the unit cost by the eligible volume of the pier tip repair work.

o The Acting RA’s method for calculating eligible costs is reasonable.

Background

Between March and April 2010, strong surge tides and waves that were part of severe storms damaged the inlet side of the tip (pier tip) of the Town of Rockport’s (Applicant) granite stone pier.  The pier measured 400 feet long by 50 feet wide and protected a public parking area and boat anchorage.  On June 17, 2010, FEMA conducted a site inspection of the pier tip and determined the damage dimensions to be 100 feet long x 22 feet wide, with damage to 65 feet of armor stone within that 100 feet and damage to base stone for the entire 100 feet. FEMA staff estimated a depth of 8 feet for the damaged armor stone and 4 feet for the base stone.  On September 28, 2010, FEMA obligated $117,002 in Project Worksheet (PW) 891 to fund repairs to the pier tip which included replacing 325.92 cubic yards (CY) of stone base, resetting 423.7 CY of large armor stones, and replacing 423.7 CY of large armor stones. 

In July 2010, the Applicant hired Vine Associates (consulting engineer) to prepare design repair plans.  The consulting engineer surveyed the pier tip and prepared design plans that identified a length of 170 feet, area of 3020 square feet, depth of 4 feet, and volume of 450 CY of damage regarding the pier tip.  The length of damage in the consulting engineer’s plans exceeded FEMA’s measurement by 70 feet.  In addition, the consulting engineer measured the depth of damaged armor at 4 feet, well below the 8 feet estimated by FEMA.  The Applicant contracted Miller Golf to repair the pier tip, as part of a larger project, which was completed in September 2011.  

In 2012, the Grantee requested the close-out of PW 891.  During the close-out process, FEMA discovered that the Applicant repaired a significantly greater linear distance of pier tip (170 feet) than what was included in the original scope of work in PW 891 (100 feet).  FEMA determined that the excess feet of work completed constituted an “improved project,” for which the Applicant had not sought or obtained approval from FEMA.  Accordingly, FEMA drafted a version to PW 891 with a new funding level.  The new funding level was calculated by adding the revised construction cost of $25,321.29, engineering cost of $4,436.14, and direct administrative cost of $1,312.00.  FEMA calculated the revised construction cost by apportioning the construction costs of the entire improved project to that attributable to the original FEMA-approved scope of work.  The new total cost for Version 1 of PW 891 was $31,069.43. 

First Appeal

The Applicant submitted its first appeal on December 10, 2012.  With the appeal, the Applicant asserted that FEMA’s determinations in Version 1 of PW 891 were erroneous and were based on a misunderstanding of the approved project scope and incurred costs.  The Applicant asserted that the work completed to repair the pier tip was not an improved project because the purpose of the project was to restore the pier to its pre-damage condition and the work undertaken by the Applicant was consistent with the project description that was approved by FEMA in the original version of PW 891.  The Applicant asserted that the additional repair work on the pier tip was minimal and that the Applicant considered this to be within the scope of the project.  In addition, the Applicant contested FEMA’s calculation of eligible costs in Version 1 of PW 891.  The Applicant claimed that the total cost of the project was $43,499.69, of which $37,623 was for construction costs, $4,564.69 for engineering and $1,312 for direct administrative costs (DAC).

In a letter, dated June 19, 2013, the Region I Acting Regional Administrator (RA) denied the appeal regarding FEMA’s assertion that the work completed to repair the pier tip constituted an improved project and updated the eligible project costs.  The Acting RA determined that the length of the damaged pier tip was 100 feet, the depth was 4 feet and the volume was 264.7 CY.  The Acting RA calculated the eligible volume of damaged armor and base stone by multiplying 450 CY (the total volume repaired by the Applicant) by the ratio of 100 feet (the length of eligible damage), then dividing by 170 feet (the length actually repaired by the Applicant).     

The Acting RA determined that the most reasonable and accurate manner to calculate the eligible cost for “the FEMA eligible scope of work” was to apportion the total cost of the repair to the granite pier tip under the improved project, to the repair of the original 100 linear feet and 264.7 CY of damage.  The Acting RA divided $37,623 (the total construction costs incurred by the Applicant) by 450 CY (total volume of the work, combining both armor and base stone, completed by the Applicant).  This provided a unit price of $83.61 per CY.  The Acting RA, then, multiplied this unit price by the total eligible volume (264.7 CY) to get the eligible construction costs ($22,131.57).  The Acting RA added $4,564.69 (the eligible engineering costs) and $1,312.00 (DAC) to $22,131.57, which equals $28,008.26—the total eligible cost.  Finally, the Acting RA determined that the federal share of the total eligible cost was $21,006.20. 

Second Appeal

In its second appeal, dated August 26, 2013, the Applicant contends that the work completed to repair its pier tip is not an improved project and that all costs should be considered as eligible for reimbursement.  In addition, the Applicant asserts that the project was subject to review by Massachusetts Emergency Management Agency (MEMA) and FEMA personnel during its design and construction stages, and the Applicant was never advised that the project exceeded the scope of what FEMA approved, or that the project would be characterized as an “improved project” that required further approvals.  The Applicant states that the cost of the additional length of repair is minimal because it did not involve the acquisition and transport of off-site stone, nor did it require labor costs.  Finally, the Applicant asserts that, if only a portion of the project is eligible for Public Assistance funding, calculating reimbursable costs by using a ratio of the tonnage of stone approved for the project in the PW, to the tonnage actually purchased and installed by the Applicant, would more accurately allocate the project costs than the method that the Acting RA used in his determination.   

Discussion

Work Eligibility

Pursuant to Section 406 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), FEMA Public Assistance funding may be available to a state or local government for the repair, restoration, and replacement of damaged or destroyed facilities under a major disaster.[1]  However, the facility must be restored to its pre-disaster design, function, and capacity.[2]  Further, repair work must be the direct result of a major event or disaster, meaning work performed to repair damage caused by other circumstances is ineligible for Public Assistance funding.[3]