Allowable and Reasonable Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4562
Applicant	Oregon Department of Human Services
Appeal Type	Second
PA ID#	000-UO5WX-00
PW ID#	GMP 166889
Date Signed	2023-03-14T16:00:00

Summary Paragraph

Oregon endured severe wildfires from September 7 through November 3, 2020. The wildfires created an immediate threat to life, public health and safety. In response, the Applicant sheltered displaced disaster survivors. At the time of the disaster, due to concerns of an increased risk of exposure to the coronavirus (COVID-19) pandemic, FEMA provided flexibility to applicants to conduct non-congregate sheltering (NCS) activities. The Applicant contracted with the American Red Cross (Red Cross) to arrange NCS in hotels across Oregon. FEMA approved $2,429,173.50 for NCS costs in Grants Manager Project 166889 and denied $61,583.70 for hotel rooms procured but not used by disaster survivors, because the Applicant did not demonstrate those costs were reasonable and necessary to address an immediate threat. The Applicant appealed, contending that shelter space was reserved based on forecasts and the need to ensure available rooms at all times for survivors who could arrive unexpectedly and without notice, that it needed to reserve blocks of hotel rooms to ensure enough revenue for hotels to justify re-opening and rehiring staff, and that there were no other sheltering options available. FEMA denied the appeal due to insufficient documentation supporting reasonableness of costs. In its second appeal, the Applicant restates and expands upon first appeal arguments and provides additional documentation including the Red Cross contract with the Applicant.

Authorities and Second Appeals

• Stafford Act § 403(a).
• 44 C.F.R. § 206.225(a)(1).
• 2 C.F.R. §§ 200.403, 200.404.
• PAPPG, at 65.
• FEMA Policy 104-009-18, Version 2, at 1-4.

Headnotes

• FEMA may provide PA funding for eligible work, but the costs must be necessary and reasonable to accomplish the work.
• The Applicant’s costs were reasonable and necessary, given the number of potential disaster survivors it may have had to shelter based on forecasts, the lack of available alternatives, and the need for enough rooms to be available at all times to ensure survivors who arrived unexpectedly and without notice could be sheltered. 

Conclusion

FEMA finds that the Applicant established that its procurement of NCS was reasonable to address the needs of the incident, and that costs for those rooms were necessary and reasonable. The appeal is granted.

 

Appeal Letter

Appeal Analysis

Background

Oregon endured severe wildfires from September 7 through November 3, 2020.[1] The wildfires created an immediate threat to life, public health, and safety. In response, the Oregon Department of Human Services (Applicant) sheltered displaced disaster survivors. At the time of the disaster, due to concerns of an increased risk of exposure to the coronavirus (COVID-19) pandemic, FEMA provided flexibility to applicants to conduct non-congregate sheltering (NCS) activities.[2] The Applicant contracted with the American Red Cross (Red Cross) to arrange NCS in hotels across Oregon. FEMA approved $2,429,173.50 for NCS costs in Grants Manager Project (GMP) 166889 and denied $61,583.70 for hotel rooms procured but not used by disaster survivors, because the Applicant did not demonstrate those costs were reasonable and necessary to address an immediate threat.  

First Appeal

The Applicant filed an appeal dated November 22, 2021, contending that shelter space was reserved based on forecasts and the need to ensure available rooms for survivors who could arrive unexpectedly and without notice. The Applicant also stated it needed to reserve blocks of hotel rooms to ensure enough revenue for hotels to justify reopening and rehiring staff in a hospitality environment that COVID-19 made unstable. The Applicant stated there were no other sheltering options available, as: (1) Oregon was experiencing shortages of housing options before the wildfires; and (2) the disaster caused utility disruption and the need for hazardous materials mitigation, resulting in a shortage of Recreational Vehicle (RV) group sites. The Oregon Office of Emergency Management (Recipient) supported the appeal by letter dated January 11, 2022, and noted over 500,000 Oregonians were under an evacuation notice and over 40,000 were required to evacuate.

On March 9, 2022, FEMA requested information regarding alternatives the Applicant used or considered before agreeing to reserve blocks of hotel rooms and plans to minimize costs associated with unused rooms. In a response letter, the Applicant noted that the Red Cross and local and state officials used or considered RV parks, schools, fairgrounds, and parks, among other options, but realized the safest way to protect survivors from COVID-19 was with hotel rooms.[3] It also used congregate shelters to accommodate NCS overflow, but this option was more costly than NCS due to social distancing recommendations. To illustrate this, the Applicant presented a cost comparison between one congregate shelter and all vacant NCS rooms for a given period, indicating the latter was the less costly option.[4] The Red Cross worked closely with state and local officials to gauge the number of evacuees and book discounted hotel blocks as needed. It determined that option was better than booking rooms as survivors arrived, due to a lack of rooms in key locations, a lack of Red Cross personnel to facilitate booking individual rooms, hotel hesitancy to accept survivors during COVID-19 without a payment guarantee, and the desire to lock-in economical rates. The Red Cross determined that a 2 to 5 percent cushion of vacant rooms was reasonable and necessary to ensure shelter availability for new survivors, and new blocks of rooms were occasionally needed to assist with consolidations, which helped keep costs down.

On June 29, 2022, the FEMA Region 10 Regional Administrator denied the appeal due to insufficient documentation supporting cost reasonableness. FEMA noted the Applicant did not document cost comparisons or room block requirements at various hotels or any other measures it may have taken to ensure reasonable and necessary costs. Finally, FEMA noted the Applicant provided no documentation to explain the Red Cross’s decision to maintain a 2 to 5 percent cushion of vacant rooms to ensure shelter availability for new survivors. FEMA concluded that the Applicant did not seek alternative methods to eliminate or reduce additional cost and did not explain how it determined the costs for unused rooms were reasonable.

Second Appeal

The Applicant’s July 29, 2022 second appeal restates and expands upon its first appeal contentions, including that significant discounts were given when blocks of rooms were reserved versus individual rooms, and provides additional documentation including the Red Cross Contract (Contract) with the Applicant. The Applicant notes that the Red Cross anticipates client needs by gathering event and client information, allowing it to determine the cushion of vacant rooms necessary. The Recipient’s October 3, 2022 second appeal transmittal states the Applicant made reasonable and good faith efforts and followed local and federal policy to protect survivors by reserving hotel rooms. The Recipient also cites the Contract as evidence of the Applicant’s efforts to ensure reasonable costs and states the Red Cross determined the 2 to 5 percent cushion of vacant rooms in coordination with state and local emergency management agencies.

 

Discussion

FEMA may provide Public Assistance funding for eligible emergency work, including some NCS operations during COVID-19, which required applicants to consider additional strategies to ensure that survivors were sheltered in a manner that did not increase the risk of exposure or further transmission of COVID-19.[5] Claimed costs must be necessary and reasonable to accomplish the work and respond to the declared incident.[6] A cost is considered reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.[7]

FEMA previously approved the Applicant’s use of NCS  across Oregon in this incident. The Applicant, through the Red Cross, performed this work by paying for blocks of hotel rooms in advance of disaster survivors’ arrival at the hotels. In this case, FEMA finds the Applicant’s costs reasonable and necessary in the performance of the approved eligible work to respond to the declared incident, given the large and unpredictable number of potential disaster survivors needing shelter based on forecasts, the lack of available alternatives, and the need for enough rooms to be available at all times to ensure survivors who arrived unexpectedly and without notice could be sheltered. Additionally, FEMA finds that the Applicant’s purchase of blocks of rooms in advance was the most cost-effective, practical option. This is based on the hotels’ discounted rates, the hotels’ need to guarantee sufficient demand to justify reopening during COVID-19, the favorable cost comparison with other sheltering options, and the relatively low cost and number (2.5 percent) of unoccupied rooms compared to those that were used to shelter survivors. Therefore, the costs on appeal are eligible. 

 

Conclusion

The Applicant established that its procurement of NCS was reasonable to address the needs of the incident, and that costs for those rooms were necessary and reasonable. The appeal is granted.

 

 

 

[1] The President issued a major disaster declaration on September 15, 2020.

[2] See generally, FEMA Policy (FP) 104-009-18, FEMA Emergency Non-Congregate Sheltering During the COVID-19 Public Health Emergency (Interim) (Version 2), at 1 (Aug. 29, 2020) [hereinafter FP 104-009-18]. 

[3] Letter from Dir, Office of Resilience & Emergency Mgmt., Oregon Dep’t of Human Servs., to Reg’l Adm’r, FEMA Region 10 and Dir., Oregon Office of Emergency Mgmt., at 2-3 (Apr. 8, 2022).

[4] The Oregon State Fair 208987 Congregate Shelter Invoice showed costs totaling $97,282.00 from September 8 to September 30, 2020. The Non-Congregate Sheltering Vacancy Cost Summary showed a total cost of $89,523.41 for the same time period. 

[5] Robert T. Stafford Disaster Relief and Emergency Assistance Act § 403(a), Title 42 United States Code § 5170b(a) (2018); Title 44 Code of Federal Regulations § 206.225(a) (2019); FP 104-009-18, at 1-3.

[6] Title 2 Code of Federal Regulations (2 C.F.R.) § 200.403 (2020); Public Assistance Program and Policy Guide, FP 104-009-2, at 65 (June 1, 2020); FP 104-009-18, at 4.

[7] 2 C.F.R. § 200.404.