Force Account Labor & Equipment Costs, Direct Administrative Costs & Management Costs

Appeal Brief

Summary Paragraph

From October 27, 2012, to November 8, 2012, storm surge from Hurricane Sandy flooded Pan Am Road (Facility) damaging several catch basins. FEMA prepared Project Worksheet (PW) 3309 to capture the repair work and direct administrative costs (DAC) claimed. The Port Authority of New York & New Jersey (Applicant) requested to consolidate PW 3309 and PW 3405 into a 428 Public Assistance Alternative Project grant. FEMA approved the Applicant’s request and revised PW 3309 by removing the by removing the work to be completed costs from the project. PW 3309 (Version 1) included only work completed and associated DAC. The New York State Division of Homeland Security and Emergency Services (Recipient) submitted a Closeout Final Inspection Report for PW 3309 (Version 1), noting the Applicant supported only the DAC claimed, not the work, and recommending FEMA approve final payment of PW 3309 (Version 1) in the amount of the DAC. FEMA told the Applicant it did not agree with the recommendation and denied funding. FEMA found there were no eligible repair costs in the project, therefore the DAC claimed were not eligible. The Applicant submitted the first appeal asserting force account labor performed the work completed and since the work completed was eligible, the DAC were eligible. The FEMA Region 2 Regional Administrator denied the appeal finding the Applicant had not demonstrated the labor costs claimed, therefore, the DAC were not eligible. The Applicant submits the second appeal with supporting documentation and reiterates its first appeal arguments. 

Authorities

• 44 C.F.R. §§ 13.22, 206.206(a).
• DAP 9525.9, at 1, 3,6; Memorandum on DAP 9525.9, at 2.
• PA Guide, at 40, 42, 107, 313.
• Comm. Programs of Westchester Jewish Comm. Serv. Inc., FEMA-4480-DR- NY, at 2; City of Cedar Rapids, FEMA-1763-DR-IA, at 3, 8; Central Bradford Progress Authority, FEMA-4030-DR-PA, at 4, 5.

Headnotes

• Generally, costs that can be directly tied to the performance of eligible work are eligible. Such costs must be necessary and reasonable to accomplish the work.
  • The Work Order Report describes work order 1041018 as repair of collapsing catch basins on Pan Am Road and a “plate” which aligns with Hill’s damage assessment. Also, the labor summary shows the repair work was performed prior to Hill’s site visit.
  • The Applicant has not demonstrated the contracted rates and mix of skill levels for administrative services are reasonable, nor has it substantiated that the administrative tasks performed were necessary and appropriate.

Conclusion

FEMA finds the $2,729.66 in force account labor costs claimed are eligible. However, the $21,700.84 in claimed DAC is not reasonable, necessary, or appropriate. Therefore, this appeal is partially granted.

Appeal Letter

Appeal Analysis

Background

From October 27, 2012, to November 8, 2012, storm surge from Hurricane Sandy flooded the Port Authority of New York & New Jersey’s (Applicant) Pan Am Road (Facility) damaging catch basins (#1 – #8) along the road.^[1] The Applicant contracted with Hill International (Hill) to inspect the Facility. Hill submitted a damage assessment to FEMA in September 2013.^[2] The damage assessment noted that: (1) the Applicant had temporarily placed steel roadway plates over the collapsing catch basins to prevent accidents; (2) at the time of its inspection the Applicant had repaired catch basin #1; (3) work to restore catch basins #4, #6, #7, and #8 had yet to be completed; and (4) catch basins #2, #3, and #5 did not require work. Hill estimated the work completed on catch basin #1 totaled $22,118.00.^[3]

FEMA used the Cost Estimating Format (CEF) to estimate the cost to restore the catch basins. In the CEF Fact Sheet, FEMA noted the Applicant was unable to provide the actual cost to repair catch basin #1 so FEMA estimated the cost in consultation with Hill.^[4] FEMA also noted that the work completed cost estimate for catch basin #1 was the basis for the work to be completed estimate.^[5] FEMA estimated the work completed totaled $13,692.95 and the work to be completed totaled $68,464.75.^[6] FEMA prepared project worksheet (PW) 3309 to capture the claimed damage, noting the PW damage description and dimensions (DDD) and scope of work (SOW) were based on Hill’s damage assessment and that the work to restore catch basins #4 and #6 – #8 was identical.^[7] FEMA stated the Applicant had requested direct administrative costs (DAC) for the work completed ($7,261.82) and work to be completed ($785.76).^[8] The total project cost approved for PW 3309 was $87,381.58.[9] 

The Applicant requested to consolidate PW 3309 and PW 3405 (to restore a separate building) into one 428 Public Assistance Alternative Project (PAAP) grant. FEMA approved the Applicant’s PAAP request but noted that sites where construction had begun were not eligible for the PAAP pilot program.^[10] FEMA removed the $65,426.76 associated with work to be completed from PW 3309 to include them in PW 3405. FEMA revised PW 3309, approving Version 1, to include only work completed on catch basin #1 ($13,693.00) plus DAC claimed ($19,808.95), for a revised total project cost of 33,501.95.^[11]

Later, the Recipient completed a Closeout Final Inspection Report (FIR) for PW 3309 (Version 1) and on April 10, 2023, submitted the FIR to FEMA recommending final payment of $21,700.84. The Recipient noted the Applicant was unable to support the work completed, however, it had provided activity logs and invoices from two contractors to support the DAC contract costs claimed.^[12] The activity log for the first DAC contract showed 84.68 hours of work, billed at hourly rates ranging from $65.00 to $350.00 per hour, for a total of $16,988.92.^[13] The activity log noted general tasks with comments detailing some tasks, but not all.^[14] The activity log for the second DAC contract showed 32.80 hours claimed, billed at hourly rates ranging from $129.00 to $159.88 per hour, for a total of $4,711.92.^[15] The activity log noted general tasks and provided descriptions of the work performed.^[16] In a Determination Memorandum received by the Applicant on November 27, 2023, FEMA informed the Applicant it did not concur with the final accounting and denied funding. FEMA found there were no eligible repair costs in the project, therefore, the DAC claimed was not eligible. FEMA amended PW 3309, approving Version 2, which deobligated the previously approved costs of $33,501.95.

First Appeal

In a letter dated January 26, 2024, the Applicant submitted the first appeal stating the amount in dispute was $24,430.50. The Applicant stated it used 70 man-hours of force account labor straight-time, totaling $2,729.66, to perform the work completed on catch basin #1, but PW 3309 (Version 0) did not include the cost. The Applicant asserted the labor costs claimed were eligible, therefore, the DAC claimed ($21,700.84) was eligible. The Applicant also asserted that FEMA must have considered the work completed costs as necessary and reasonable since FEMA used the work completed as the basis for the PW 3309 (Version 0) SOW and then removed the work to be completed costs from PW 3309 (Version 0) for inclusion in PW 3405.^[17] The Applicant asked FEMA to amend PW 3309 (Version 1) to include the labor costs claimed and associated DAC, for a total project cost of $24,430.50. The Applicant submitted PW 3309, PW 3405, and the PAAP request to support the appeal. In a letter dated March 26, 2024, the Recipient transmitted the first appeal to FEMA expressing its support. 

In a letter dated August 5, 2024, the FEMA Region 2 Regional Administrator denied the appeal. FEMA stated that the Applicant did not submit documentation to support the work completed on catch basin #1 and costs claimed. As such, the DAC claimed were neither necessary nor reasonable to further the performance of a Public Assistance (PA) award.

Second Appeal

In a letter dated September 27, 2024, the Applicant submits the second appeal reiterating its first appeal arguments. In support of the second appeal, the Applicant submits a Work Order Report from its engineering system at the time the work was performed, a labor summary and timecards, and post-disaster satellite images showing catch basin #1 restored. In a letter dated November 26, 2024, the Recipient transmitted the second appeal to FEMA expressing its support. 

Discussion

Force Account Labor & Equipment Costs

Force account labor is defined as labor performed by the applicant’s employees, rather than by a contractor.^[18] For eligible permanent work performed by an applicant’s employees, both straight-time and overtime are eligible.^[19] Applicants must provide labor summaries for use in review, including identification of persons whose wages are included in the cost summary by date, position, and hours worked.^[20] Generally, costs that can be directly tied to the performance of eligible work are eligible.^[21]

Here, the Applicant requests $2,729.66 in PA funding for the use of force account labor straight-time to restore catch basin #1. FEMA approved the costs associated with work completed to restore catch basin #1 in PW 3309 (Version 1) SOW. On second appeal, the Applicant submits a Work Order Report which describes work order 1041018 as repair of collapsing catch basins on Pan Am Road. The work order description also references “plate 3,” which aligns with the notation in Hill’s damage assessment stating that the Applicant had placed steel roadway plates over the damaged catch basins post-disaster to avoid accidents. In addition, the labor summary and timecards show the repair work associated with work order M1041018 was performed in February 2013, six months prior to Hill’s site visit. As such, the Applicant has demonstrated that the force account labor costs claimed are associated with work to restore catch basin #1, therefore, Applicant’s request for $2,729.66 in PA funding is approved.^[22]

Direct Administrative Costs and Management Costs

Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, describes grant management and administrative costs that are eligible under the PA Program.^[23] DAC include costs that can be tracked, charged, and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW.^[24] Eligible DAC must be in compliance with 44 C.F.R. § 13.22,^[25] and by extension, OMB Circular A-87,[26] and the costs must be reasonable and properly documented in order to qualify for reimbursement.^[27] Such costs cannot be assumed to be eligible if the costs are not tracked and documented in a manner that enables FEMA to determine if they are reasonable, necessary, and appropriate.^[28] When an applicant utilizes contractors to perform grant management functions, FEMA must consider, among other things, the skill level of persons performing activities.^[29] For most PA projects, a junior or mid-level technical or program specialist (or equivalent) is appropriate for the effort.^[30] For complex projects, staff with a higher level of technical proficiency and/or experience may be appropriate.^[31] PA staff must ensure that the applicant contracted for the appropriate mix of skill levels for the type of permanent repair project that is eligible for FEMA funding.^[32]

Here, the Applicant is requesting $21,700.84 in DAC for contract administrative services associated with the work completed in PW 3309 (Version 1). Notably, the DAC claimed are almost eight times the labor costs associated with the work to restore catch basin #1 ($2,729.66). Even when compared to the previous contract repair estimates of $22,118.00 from Hill and $13,693.00 from FEMA, the DAC claimed appear unreasonable.

Neither the submitted invoices nor the activity logs provide the position titles of the contractors who performed tasks. However, the activity log for the first DAC contractor shows staff members whose hourly rates range from $255.00 to $350.00 formulated the project (scope, cost estimate, and damage development), while a staff member whose hourly rate is $65.00 prepared a PW version and developed an improved project. The administrative record indicates this is not a complex project: the work is limited to one access road, repair of catch basin #1 was complete at the time of Hill’s inspection, and the work to be completed was identical to, and based upon, the work completed. Given the tasks assigned to a staff member whose hourly rate is $65.00 and the project’s lack of complexity, it is questionable whether the skills or experience of staff compensated at $255.00 per hour or more was required.^[33] In addition, the disparity between the contracted hourly rates with the first DAC contractor (ranging from $65.00 to $350.00 per hour) and the second DAC contractor (ranging from $129.00 to $159.88 per hour) raises additional concern regarding the reasonableness of the Applicant’s contracted rates and mix of skill levels. 

Further, the submitted activity logs do not demonstrate the necessity and appropriateness of claimed tasks. For example, the Applicant’s activity log for the first DAC contractor shows a significant portion of the costs claimed are duplicative of Hill’s work (e.g., multiple site visits, project formulation and development, and coordination and finalization of the estimate), otherwise unnecessary (e.g., a site visit to collect Applicant data and multiple SOW review meetings) or inappropriate (e.g., tasks unrelated to PW 3309 (Version 1), such as, improved project and mitigation related work, data collection and dissemination related to requests for information, payroll reporting, and meeting with an aviation team).^[34] Similarly, the activity log for the second DAC contractor shows the Applicant claimed hours for personnel management, working sessions between contractors, project administration, and tasks unrelated to PW 3309 (Version 1).^[35] As such, FEMA finds that the Applicant has not demonstrated that the DAC claimed are reasonable, necessary, and appropriate; therefore the Applicant’s request for $21,700.84 in PA funding is denied.

Conclusion

FEMA finds the $2,729.66 in force account labor costs claimed are eligible. However, the $21,700.84 in claimed DAC is not reasonable, necessary, or appropriate. Therefore, this appeal is partially granted.