Buildings, Scope of Work

Appeal Brief

Summary Paragraph

On September 13, 2008, Hurricane Ike damaged numerous interior fixtures in the Applicant’s Athletic Center (Facility).  FEMA prepared Project Worksheet (PW) 5800 to document eligible Category E (buildings/equipment) work to repair damages, and obligated $198,995.00 in estimated funding.  Following closeout, the Texas Division of Emergency Management (Grantee) audited the project and identified an underrun of $45,672.44, in part due to ineligible work not included on the approved SOW.  FEMA concurred with the audit findings and deobligated the underrun amount.  The Applicant appealed for $60,982.18 and stated that its actual costs resulted in a project overrun.  Among other items on appeal were work to repair wall panels, a fence, and rubber flooring.  The Applicant argued the wall panels expense was an actual cost overrun for approved work, but acknowledged the fence repair and rubber flooring were not part of the SOW.  In its response to FEMA’s final request for information, the Applicant revised the appeal, retaining the wall panels and fence repair but claiming an overrun for the combined cost of all of its items of flooring repair.  The Regional Administrator partially granted the appeal, approving some funding, but determining that the wall panels, fence, and flooring repairs exceeded, or were additions to, the approved SOW and that the Applicant failed to demonstrate the work was required as a direct result of the disaster.  On second appeal, the Applicant reiterates its arguments for eligibility of the wall panels, fence, and flooring repairs, and requests reimbursement of $19,130.00.

Authorities and Second Appeals

• Stafford Act § 406.
• 44 C.F.R. § 13.30(d)(1).
• Public Assistance Guide, at 33, 140.
• Lawrence County Engineer, FEMA-4002-DR-OH, at 6.

   

  Headnotes

• Per 44 C.F.R. § 13.30(d)(1), an applicant must obtain FEMA’s approval prior to revising the SOW.
  • All items of work on appeal exceeded, or were additions to, what was listed in the approved SOW on PW 5800.
  • The Applicant did not demonstrate that it received approval from the Grantee or FEMA for the work, prior to completing it.

Appeal Letter

Appeal Analysis

Background

On September 13, 2008, high winds and heavy rainfall from Hurricane Ike damaged the Athletic Center (Facility) on the main campus of the University of Houston (Applicant).  Rain water entered the Facility and damaged interior fixtures, including 2,400 square feet (sq. ft.) of acoustic wall panels and 2,800 square yards of carpeting in two areas of the Facility.[1]

FEMA prepared Project Worksheet (PW) 5800 to document eligible Category E (buildings/equipment) work to repair damages to the Facility, and obligated $198,995.00 in estimated project funding.  This funding amount was lower than initially estimated.[2]  In a November 25, 2009 letter discussing this discrepancy, the Texas Division of Emergency Management (Grantee) informed the Applicant that FEMA would adjust funding for PW 5800 upon project completion, following an audit of the work and costs incurred.[3]

On July 29, 2015, the Grantee notified FEMA of the completion of the project and a subsequent audit.  The Grantee stated that its audit identified just $153,322.56 in eligible costs, resulting in a project underrun, in part due to ineligible work the Applicant performed in excess of the approved scope of work (SOW).  The Grantee recommended deobligation of $45,672.44 in project funding.  FEMA concurred with the Grantee’s audit findings, and prepared an amendment to PW 5800 that deobligated the underrun amount.[4]  FEMA acknowledged the Grantee’s audit in a letter dated October 20, 2015; the Grantee notified the Applicant of the cost underrun and the deobligation in a letter dated November 17, 2015.

First Appeal

The Applicant submitted its first appeal on December 18, 2015 for $60,982.18, and stated its actual costs resulted in a net project overrun.  The amount on appeal included actual costs of $1,375.00 in Direct Administrative Costs (DAC), $1,216.18 in force account labor expenses, and $58,391.00 for items of contracted repair work.  The latter amount included actual costs of $3,756.00 for repairs to an athletic field, $34,132.00 for the wall panels repair, $3,743.00 for repair of a baseball outfield fence associated with the Facility, and a $16,760.00 expense for work to replace rubber flooring in the Facility’s baseball locker rooms.[5]  Regarding appealed items of work, the Applicant argued: (1) the expense for the wall panels repair was an eligible cost overrun for approved work done under a contract procured from a fair and reputable source; and (2) the fence and rubber flooring repairs were additions to the approved SOW that were nonetheless eligible as damages directly resulting from the disaster.[6]  

On June 16, 2016, FEMA sent the Final Request for Information (RFI), notifying the Grantee that documentation for the project did not demonstrate the Applicant had completed the approved SOW.  FEMA requested a detailed description of the work performed by each contractor hired by the Applicant, with a corresponding itemized cost listing, and, for each item of work not in the approved SOW, a narrative explaining why the Applicant did not request a SOW change.  FEMA also asked for documentation demonstrating the work was required as a direct result of the disaster.[7]

In its response to the Final RFI, the Applicant submitted a “revised claim” for PW 5800 that lowered the amount of the cost overrun.[8]  The Applicant provided documentation for each item of work not in the approved SOW, which included invoices, procurement documents, contract proposals, contracts, and payment information.  Regarding the items of work pertinent to this appeal, the Applicant claimed the cost of the wall panel repairs was an overrun of $11,122.00 for previously approved work.  Although the fence repair was an addition to the approved SOW, the Applicant also believed it would be reconciled at project closeout.[9]  The Applicant also claimed flooring repair costs totaling $4,265.00, which it stated was an overrun resulting from the difference between actual and estimated costs for all approved flooring repair work, including the rubber flooring.[10]^,[11] 

On December 7, 2016, the FEMA Region VI Regional Administrator (RA) partially granted the appeal and approved some funding.[12]  The RA found that items of work with costs totaling $32,841.18 were in excess of the approved SOW.[13]  The RA determined the Applicant failed to provide documentation demonstrating the work was required as a direct result of the disaster.[14]

Second Appeal

The Applicant submitted the second appeal on February 9, 2017, claiming costs for items of work totaling $19,130.00.[15]  The Applicant appeals part of the $32,841.18 found ineligible on first appeal, comprised of 3 items of work: (1) the wall panels repair ($11,122.00), which the Applicant states is an actual cost overrun of repairs approved in the SOW; (2) the fence repair ($3,743.00), which the Applicant states was an addition to the SOW it believed would be accounted for at project closeout; and (3) a cost overrun of $4,265.00 for flooring repairs approved in the SOW.[16]  In a February 16, 2017 transmittal letter, the Grantee expressed support for the Applicant’s appeal.

Discussion

The Robert T. Stafford Disaster Relief and Emergency Assistance Act § 406 authorizes FEMA to provide funding to a State or local government for the repair, restoration, reconstruction, or replacement of a public facility damaged or destroyed by a major disaster.[17]  Per Title 44 of the Code of Federal Regulations (44 C.F.R.) § 13.30(d)(1), an applicant must obtain FEMA’s approval prior to revising the scope or objectives of the project.[18]  FEMA policy advises an applicant that it must notify the grantee as soon as a change of scope or need for additional funding is discovered.[19]  Moreover, an applicant should not assume that it can report scope change costs at the end of the project and FEMA will automatically fund the new costs.[20]

The requirement to obtain approval for SOW revisions is relevant to determine the eligibility of all items of work raised on second appeal, as follows:

Wall Panel Repair

The Applicant claims an $11,122.00 actual cost overrun for work approved in the SOW to repair its acoustic wall panels.  However, PW 5800’s SOW approves repairs for wall panels covering an area of 2,400 sq. ft.  Documentation provided in the administrative record shows: (1) the Applicant completed repairs to 2,400 sq. ft. of wall panels for a total cost of $23,010.00; (2) FEMA approved $23,010.00 in funding for this repair work on first appeal;[21] and (3) the Applicant incurred the cost of $11,122.00 (on second appeal) for work to repair a “test area” of wall paneling covering 600 sq. ft.[22]  The approved SOW did not include repairs to a “test area,” or any area beyond the 2,400 sq. ft. damaged area listed on PW 5800.  Therefore, the work exceeded the approved SOW and is ineligible.

Fence Repair

The damage description for PW 5800 did not list damages to the fence.  Thus, the SOW did not approve any corresponding repair.  The Applicant acknowledges the work was an addition to the approved SOW and justifies its claim by stating its belief that small-cost “scope overruns” would be reconciled at project closeout.[23]  It bases this understanding on guidance received from the Grantee in the November 2009 letter.  However, the Grantee’s letter addressed reconciling differences in estimated and actual total project costs, not individual items of work.  In the letter, the Grantee clearly recommended the Applicant “complete the project within the specified scope or work [sic].”[24]  The Grantee’s guidance with regard to project cost adjustments, from the November 2009 letter, does not apply to the fence repair.  As the fence repair is an addition to what was approved in the SOW, it is ineligible.

Flooring Repair Items

The Applicant claims a $4,265.00 actual cost overrun for all flooring repair work approved in the SOW.  However, the documentation provided by the Applicant with its response to the Final RFI attributes the cost to two distinct items of work: (1) a cost of $1,015.00 for flooring repair in a softball batting cage; and (2) a cost of $3,250.00 for carpeting in a first floor hallway.  The SOW did not approve repairs to flooring in a softball batting cage, nor does FEMA’s Contract Summary Record list the contract number (11933) for this repair.  Thus, the Applicant’s statement that this amount was a cost overrun for approved work is incorrect.  Additionally, the document package provided with the response to the Final RFI shows that the Applicant incurred the actual cost for hallway carpeting repair under contract number W940216.  Although carpeting replacement is listed on the approved SOW, first floor hallway carpeting is not specified, and contract number W940216 is not among those approved for flooring repairs (carpeting or otherwise) on the Contract Summary Record.[25]  Accordingly, the work is an addition to what was approved in the SOW and is ineligible.

There is nothing in the administrative record showing the Applicant requested approval from the Grantee or FEMA for the items of work on appeal, prior to completing them.  The Applicant therefore chose to complete work that was not in the SOW, without the prior approval required by 44 C.F.R. § 13.30(d)(1).  The items of work and their associated costs (totaling $19,130.00) are ineligible for Public Assistance (PA) funding.[26]

Conclusion

All items of work on second appeal exceeded, or were additions to, the approved SOW, which the Applicant completed without the prior approval from FEMA required by 44 C.F.R. § 13.30(d)(1).  Accordingly, the work remains ineligible and funding for it is denied.