Allowable & Reasonable Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster4542
ApplicantCity of Seneca
Appeal TypeSecond
PA ID#073-65095-00
PW ID#GMP 144472/PW 73
Date Signed2023-11-01T16:00:00

Summary Paragraph

During the incident period of April 12 to 13, 2020, severe storms, tornadoes, and straight-line winds impacted South Carolina. The Applicant requested $494,068.23 in PA funding for emergency protective measures the Applicant performed during the disaster, including search and rescue, security, and road clearance. On November 18, 2021, FEMA issued a Determination Memorandum finding that $268,905.98 in contract costs were ineligible. FEMA explained that the Applicant did not provide documentation to support the work and costs claimed and had not met procurement requirements. The Applicant submitted a first appeal dated January 14, 2022, asserting that it properly procured the contractors, and that FEMA should at least award reasonable costs. On September 29, 2022, FEMA sent the Applicant a Request for Information, requesting contracts and documentation to support the claimed work and costs. On 
December 7, 2022, the Applicant replied, providing pictures of debris clearance and referring to previously provided invoices. On May 2, 2023, the FEMA Region 4 Regional Administrator denied the appeal, finding that the Applicant did not provide documentation to verify the claimed damage or work, and did not properly procure contractors. On June 30, 2023, the Applicant submitted a second appeal, stating that it agrees to accept a reasonable cost determined by FEMA.

Authorities and Second Appeals

  • Stafford Act § 403.
  • 2 C.F.R. §§ 200.318(a) and (i), 200.338, 200.403(g).
  • 44 C.F.R. §§ 206.223(a)(1), 206.225(a)(1), (3)(i).
  • PAPPG, at 19, 21-22, 30-32, 57, 133.

Headnotes

  • To be eligible, costs must be directly tied to the performance of eligible work, adequately documented, and necessary and reasonable to accomplish the work properly and efficiently.
    • The Applicant did not provide documentation to substantiate that the claimed contract costs are directly tied to eligible work and reasonable.

Conclusion

The Applicant has not demonstrated that the claimed costs are directly tied to eligible emergency protective measures and reasonable.


 

Appeal Letter

SENT VIA EMAIL

Kim Stenson                                                                                   Josh Riches

Director                                                                                          Finance Director 

South Carolina Emergency Management Division                 City of Seneca

2779 Fish Hatchery Road                                                            P.O. Box 4773

West Columbia, SC 29172                                                          221 East North First Street

Seneca, SC 29678   

                                                            

Re:      Second Appeal – City of Seneca, PA ID: 073-65095-00, FEMA-4542-DR-SC, Grants Manager Project 144472/Project Worksheet 73 – Allowable & Reasonable Costs

 

Dear Kim Stenson and Josh Riches:

This is in response to the South Carolina Emergency Management Division’s (Recipient) letter dated August 24, 2023, which transmitted the referenced second appeal on behalf of the City of Seneca (Applicant). The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s denial of $268,905.98 in Public Assistance for emergency protective measures.

As explained in the enclosed analysis, I have determined that the Applicant has not demonstrated that the claimed costs are directly tied to eligible emergency protective measures and reasonable. Therefore, this appeal is denied.

This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

 

                                                                                            Sincerely, 

                                                                                               /S/

                                                                                            Robert Pesapane

                                                                                            Division Director

                                                                                            Public Assistance Division

Enclosure                                                        

cc:  Robert D. Samaan  

Acting Regional Administrator 

FEMA Region 4


 

Appeal Analysis

Background

During the incident period of April 12 to 13, 2020, severe storms, tornadoes, and straight-line winds impacted South Carolina.[1]The City of Seneca (Applicant) requested $494,068.23 in Public Assistance (PA) funding for emergency protective measures the Applicant performed during the disaster, including search and rescue, security, and road clearance. FEMA prepared Grants Manager Project 144472/Project Worksheet 73 to document the project, delineating the costs as force account labor ($58,211.22), force account equipment ($114,556.66), materials ($47,862.35), rental equipment ($4,532.02), and contractors ($268,905.98). The Applicant stated it contracted with W.D. Wright Contracting, Inc. (Wright), Greenstone Construction (Greenstone), and Forest Edge. Wright performed traffic control, Greenstone cleared rights of way and pumped out a power station due to a power outage, and Forest Edge cleared rights of way.[2] On February 25, 2021, FEMA requested contract documentation for Wright and Greenstone. On March 17, 2021, the Applicant’s representative responded, stating that it had no formal contracts in place, but that it had a previous relationship with both contractors.

On November 18, 2021, FEMA issued a Determination Memorandum finding that $268,905.98 in claimed contract costs for Wright, Greenstone, and Forest Edge were ineligible.[3] FEMA explained that the Applicant did not provide documentation to support the work and costs claimed and had not met procurement requirements. FEMA added that the Applicant provided a narrative and spreadsheets of work orders but neither gave enough information to determine what work was done or whether the costs incurred were reasonable. FEMA stated that it could not determine reasonable costs, as it typically would in cases of non-compliance with procurement requirements, because the documentation the Applicant provided was not detailed.

 

First Appeal

The Applicant submitted a first appeal dated January 14, 2022, asserting that it properly procured services and that FEMA should at least award reasonable costs. In a letter dated March 9, 2022, the South Carolina Emergency Management Division (Recipient) transmitted the first appeal to FEMA, expressing its support.

On September 29, 2022, FEMA sent the Applicant a Request for Information (RFI), requesting contracts outlining a clear scope of work (SOW). FEMA also requested work orders or logs, and equipment specifications to support the claimed work and costs. Finally, FEMA requested documentation and pictures demonstrating that the debris removed posed an immediate threat as a result of the declared incident and verifying that the debris was cut or chipped along rights of way. On December 7, 2022, the Applicant replied, providing pictures from a separate debris removal project and referring to previously provided invoices.

On May 2, 2023, the FEMA Region 4 Regional Administrator denied the appeal, finding that the Applicant did not provide documentation or clarifying information to verify if the work completed by Wright, Greenstone, and Forest Edge was eligible for PA funding. FEMA also found that the Applicant did not justify its decision to forgo formal procurement methods in hiring Wright and Forest Edge, nor its use of time and materials and/or cost-plus-percentage payment structures.[4] FEMA explained that the Applicant did not provide any contracts clarifying the SOW for each company and instead relied on nondescript invoices, which did not show if the work completed by the companies was eligible for PA funding and did not show why the work was necessary or disaster-related. FEMA added that the Applicant did not provide any daily activity logs or monitoring reports to clarify the invoiced costs. Further, FEMA stated that the debris pictures did not specify exact damage locations or support the claimed work.

Second Appeal

On June 30, 2023, the Applicant submitted a second appeal, stating that it agrees to accept reasonable costs determined by FEMA. The Applicant reiterates first appeal arguments, stating that FEMA has discretionary authority to resolve issues of procurement noncompliance. In support, the Applicant cites to a recent first appeal decision for a different project. In that case, FEMA found that the Applicant demonstrated emergency and exigent circumstances justifying the use of noncompetitive procurement procedures and awarded reasonable costs.[5] The Applicant argues that FEMA must do the same here. The Applicant also cites to a second appeal decision, where FEMA awarded reasonable costs despite that applicant’s procurement violations.[6] The Applicant asserts that it did not violate Federal regulations to the degree that the applicant did in the prior second appeal decision, and thus FEMA should be able to award reasonable costs for this project. On August 24, 2023, the Recipient transmitted the appeal to FEMA, expressing its support.

 

Discussion

FEMA is authorized to provide assistance for emergency protective measures to save lives or to protect public health and safety.[7] For emergency protective measures to be eligible, the applicant is responsible for showing the work is required due to an immediate threat resulting from the declared incident.[8] FEMA provides PA funding for contract costs based on the terms of the contract if the applicant meets Federal procurement and contracting requirements.[9] Applicants must comply with Federal procurement standards as a condition of receiving PA funding for contract costs for eligible work.[10]In the case of non-compliance with Federal procurement requirements, FEMA determines a reasonable cost for the eligible work completed based on all available information and documentation.[11] To be eligible, costs must be directly tied to the performance of eligible work, adequately documented, and necessary and reasonable to accomplish the work properly and efficiently.[12] Documentation should provide the “who, what, when, where, why, and how much” for each item claimed.[13] It is the applicant’s responsibility to substantiate its claim as eligible.[14] If the applicant does not provide sufficient documentation to support its claim as eligible, FEMA cannot provide PA funding for the work.[15]

The Applicant did not provide contracts or other documentation to support that it properly procured the services of Greenstone and Forest Edge.[16] For example, the Applicant did not demonstrate that it followed its own procurement requirements, nor did it maintain records to detail the history of procurement, such as its rationale for selecting the chosen contractors.[17] Therefore, FEMA reexamined the available documentation in an attempt to determine reasonable costs. This was done for all three companies. There are 16 invoices from Forest Edge totaling $249,565.05, which list the dates work was performed and include minimal descriptions such as “Storm Work,” “R/W clearing,” or “Sewer R/Ws.” Forest Edge provided a letter confirming it performed emergency storm work, but there is no other documentation, such as daily logs, to support the claimed costs. There are two Greenstone invoices totaling $18,629.43, again providing minimal descriptions of the work performed, specifically clearing rights of way and pumping out a pump station due to a power outage. The only other documentation to support the claimed costs are pictures the Applicant provided from a separate Category A debris removal project, but it is unclear from the pictures the scope of eligible work that was performed or where it was performed.[18] Finally, there is one Wright invoice for $709.50 for traffic control performed on May 14, 2020. This work was performed one month after the disaster, and the Applicant has not explained why this work was necessary at that time. Thus, it is unclear from the invoice that the work was an eligible emergency protective measure required as a result of the disaster. The documentation does not provide the “who, what, when, where, why, and how much” for each item claimed. Therefore, the Applicant has not substantiated with supporting documentation that the claimed costs are directly tied to eligible work and reasonable.[19]

 

Conclusion

The Applicant has not demonstrated that the claimed costs are directly tied to eligible emergency protective measures and reasonable. Therefore, this appeal is denied.
 

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

[2] Forest Edge provided a letter dated February 1, 2021, confirming that it performed emergency storm restoration work from April-December 2020, specifically clearing of rights of way in the Applicant’s utility easements.

[3] FEMA approved $225,162.25 in force account labor, equipment, and material, and rental equipment.

[4] FEMA determined this based on the contractors’ invoices. The Applicant did not provide contracts.

[5] See FEMA First Appeal Analysis, City of Seneca (GMP 144431/PW 57), FEMA-4542-DR-SC, at 4 (Dec. 8, 2022).

[6] FEMA Second Appeal Analysis, Roman Catholic Bishop of Springfield, FEMA-1994-DR-MA (Apr. 4, 2019).

[7] Robert T. Stafford Disaster Relief and Emergency Assistance Act § 403, Title 42, United States Code § 5170b (2018); Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.225(a)(1) (2019). 

[8] 44 C.F.R. §§ 206.223(a)(1), 206.225(a)(3)(i); Public Assistance Program and Policy Guide, FP 104-009-2, at 19, 57 (Apr. 1, 2018) [hereinafter PAPPG]. 

[9] PAPPG, at 30.

[10] Id.

[11] Id. at 32 (citing Title 2 of the Code of Federal Regulations (2 C.F.R.) § 200.338 (2020)).

[12] Id. at 21-22 (citing 2 C.F.R. § 403(g)).

[13] Id. at 133.

[14] Id.

[15] Id.

[16] FEMA found on first appeal that the Wright invoice was less than the federal micro-purchase threshold and did not require more than one bid.

[17] Seee.g., 2 C.F.R. §§ 318(a) and (i).

[18] Most of the pictures do not indicate the location of the work, and some of those that do are mislabeled. See, e.g., picture 305 Depot Street showing house number 603.

[19] The Applicant also asserts that FEMA should be able to award reasonable costs as it did in previous first and second appeal decisions. First, the Applicant cites to a first appeal decision where FEMA awarded reasonable costs, but in that case the Applicant submitted a cost analysis with enough information for FEMA to determine reasonable costs, which the Applicant has not done here. See City of Seneca (GMP 144431/PW 57), FEMA-4542-DR-SC at 4. The Applicant also cites to a prior second appeal decision, but in that case, FEMA was able to determine reasonable costs based on other PA grants that used the same contractor providing similar services. SeeRoman Catholic Bishop of Springfield, FEMA-1994-DR-MA, at 11. In both cases, FEMA only awarded costs that could be tied to eligible work. Here, there is no similar information available to inform a reasonable costs determination.

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