50 Percent Rule

 

In September 2005, Hurricane Rita destroyed South Cameron High School.  In February 2012 the Applicant requested PA funding to merge and rebuild the field house dressing rooms, storage building #3, and utility building.  In December 2012 FEMA approved the request.  At its conclusion, the Applicant submitted a version request in the amount of $1,416,535.58 in costs.  On September 21, 2015, FEMA obligated Project Worksheet (PW) 4795 Version 1 for $1,374,830.32, and denied funding in the amount of $41,705.26 for “enhancements” exceeding the approved scope of work, and for proportional “soft costs.”  On October 8, 2015, the Applicant appealed.  On September 28, 2016, FEMA denied the appeal for additional improvements which did not exist prior to the disaster, and failure to show the improvements met the eligibility requirements for any standards that changed the predisaster construction.  In its second appeal, the Applicant and the Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) (Grantee) argue that the consolidation created a cost savings, and items deemed “enhancements” are required to facilitate fundamental facility functions.

 

In September 2005, Hurricane Rita destroyed South Cameron High School.  Through 12 Project Worksheets (PWs), FEMA awarded $50.9 million to restore the facilities of the school, including the field house dressing rooms, storage building #3, and a utility building.  In February 2012 the Cameron Parish School Board (Applicant) requested approval from the State of Louisiana Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) (Grantee) and FEMA to relocate the Field House approximately 600 feet northwest from its original location and to consolidate it with storage building #3 and the utility building.[1]  The Applicant provided a new site plan, floor plans and proposed elevations with its request.  The consolidated facility would consist of two buildings constructed on a single platform; one roof would cover the two buildings and the unoccupied space in between them.  The Applicant identified cost savings resulting from reducing the number of access ramps and/or stairs needed and one foundation platform instead of two, and noted a reduction in the threat posed by floods.  The Grantee supported the request, described it as a viable option not subject to reduced funding by virtue of being classified as an improved or alternate project, and eligible for actual costs provided the work was eligible at the original location.[2]

 

In December 2012, FEMA approved the request for a consolidated project.  FEMA’s approval letter identified “enhancements” in the bid set of plans that FEMA would not fund because they exceeded predisaster design.  The enhancements included solid polymer lockers, ceramic tile flooring and all interior walls constructed of “pre-faced” concrete masonry units.^[3] 

 

At the conclusion of the project, the Applicant submitted a version request for $1,416,535.58 in costs.  On September 21, 2015, FEMA obligated $1,374,830.32 in funding for PW 4795.  FEMA did not approve costs for underground water supply ($17,693.49), sanitary sewer force main ($4,889.12), sanitary sewer line ($2,698.98), irrigation line ($4,959.81), and communications system wiring and conduit ($6,503.65), as it considered them ineligible enhancement work that exceeded the approved SOW and resulted from the Applicant’s decision to relocate.  FEMA also proportionally reduced funding for general conditions ($564.04), project supervision ($1,466.49), profit ($1,435.63), and overhead costs ($1,494.05).^[4]

 

On October 8, 2015, the Applicant appealed FEMA’s determination and subsequent decision to reduce costs.  The Applicant argued that it was a cost saving consolidation project. The Grantee supported the Applicant with a letter dated December 10, 2015.  The Grantee stated the Applicant requested and received approval from FEMA for an at-cost, consolidated project.  The Grantee noted that at-cost, consolidated projects are similar to improved projects, but, unlike improved projects, they are not automatically capped at estimated costs.^[5]  Both the Applicant and Grantee argued the underground water supply, the sanitary sewer force main, the sanitary sewer line, and the communications line were fundamental requirements to facilitate the basic functions of the consolidated facility and not enhancements, and that the irrigation line allowed the consolidated facility to properly function at its new location.  The Applicant and Grantee both asserted that the components were the least cost alternative.  Finally, they argued that “soft costs” (i.e. general conditions, overhead, project supervision, and profit) that were reduced as a result of FEMA’s determinations of ineligibility, should be funded.

 

In a May 6, 2016 final request for information (RFI), FEMA expressed concern that the current administrative record did not support the Applicant’s assertions of eligibility for the items of work at issue, and for the “soft costs.”  FEMA requested documentation demonstrating that each item of work existed for the pre-disaster facilities and required replacement, and that the SOW for the new facility is equal to the SOW that would have been required for the pre-disaster facilities in their original footprint.  For items that did not exist in the pre-disaster facilities, FEMA requested documentation demonstrating the work was specifically required for the replacement facilities in their original footprint by an applicable code or standard that meets the criteria listed at 44 CFR 206.226(d), Standards.  The final RFI advised the Applicant that the administrative record would close at issuance of the first appeal.^[6]  The Applicant did not respond to the final RFI.

 

On September 28, 2016, FEMA denied the appeal.  FEMA found the cost of the work under appeal was not required as a direct result of the disaster. FEMA also found the Applicant did not specify any codes or standards that met the eligibility requirements that change predisaster construction, and the Applicant completed the SOW with improvements which did not exist prior to the disaster.^[7] 

 

In its second appeal, the Applicant states that the consolidated facility saved costs and that they previously demonstrated that the items of work on appeal were the least cost alternative.  The Applicant notes, while the footprint for the consolidated facility does not match the original footprint location, the facility is still on the same property with other FEMA-funded projects.^[8]  The Grantee’s forwarding letter reiterates its earlier arguments in support of the first appeal.^[9]

 

The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988 (Stafford Act) § 406(e) authorizes FEMA to reimburse the costs to repair, restore, or replace a damaged facility to its pre-disaster design, function, and capacity in accordance with applicable codes and standards.^[10]  Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.226 allows for work to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster.  If a facility is eligible for replacement, eligible costs include all work necessary to provide a new facility of the same size or design capacity and function as the damaged facility in accordance with current codes or standards.[11] 

 

FEMA determined that the field house dressing rooms, storage building #3, and utility building were extensively damaged and qualified for replacement.  The Applicant’s plans and specifications to consolidate the buildings would restore their original functions.  In this instance, even though the consolidated facility was shifted 600 feet northwest of the original field house, the consolidated facility is located on and services the same property as the original facilities.  However, without communication lines, water supply, and sanitary sewer, the consolidated facility does not restore predisaster functions.  For the field house, storage building #3, and utility building to properly function prior to the disaster, the facilities would necessarily require water supply, sanitary sewer, and communication lines.  The PW also mentions that irrigation lines were damaged, demonstrating the existence of this predisaster function.  Because these functions existed prior to the disaster, they do not constitute improvements or enhancements.  Thus, costs to install these utilities are eligible for PA funding.  The proportional costs for general conditions, project supervision, profit, and overhead costs are likewise eligible for funding.

 

Costs to install communication lines, water supply, irrigation lines, and sanitary sewer at the consolidated facility are necessary to fully restore the functions served by the field house dressing rooms, storage building #3, and utility building, and are therefore eligible costs.  Additionally, the previously reduced proportional costs for general conditions, project supervision, profit, and overhead costs are also eligible.  Accordingly, the Applicant’s second appeal is approved.