Scope of Work

Appeal Brief

Appeal Letter

Appeal Analysis

Background

From June 5 to July 25, 2008, storms and heavy rain caused scouring on the northern fifteen acres of the ski and sledding hill known as Crystal Ridge, in Franklin, Wisconsin.  The site upon which Crystal Ridge is located was formerly a landfill, which was closed in 1981[1] and did not accept waste after October 1991.[2]  On August 28, 2008, Project Worksheet (PW) 934, Version 0 was prepared for $105,026.00 to repair damaged elements of the facility and to fund a hazard mitigation proposal (HMP) to construct a diversion dike on the slope to redirect runoff to the existing drainage channel.

In a letter dated July 29, 2009, the Milwaukee County Department of Transportation and Public Works (Applicant) submitted, through Wisconsin Emergency Management (Grantee), a request to modify the scope of work (SOW) for PW 934.  The request was based on a determination by the Applicant’s engineering firm that modifications were needed to the SOW to ensure that the originally proposed HMP operated properly, including the addition of a second diversionary channel on the slope and the addition of two channels at the bottom of the hill.  FEMA reviewed this request and determined that the modifications requested were related to the HMP only, not the repair work in Version 0 of PW 934.  As a result, a Benefit Cost Analysis (BCA) was conducted to determine the eligibility of the HMP as modified by this request.  The modified HMP was found not cost effective based on the resulting Benefit Cost Ratio (BCR) of 0.32.[3]  FEMA prepared Version 1 of PW 934 to include the Applicant’s request to modify the SOW as well as FEMA’s determination that the proposed additional HMP work was not cost effective.  The SOW in PW 934 was left unchanged and included the original repair work and original HMP.

In a letter dated November 19, 2012, the Grantee requested closeout of PW 934 and reimbursement for a cost overrun of $84,034.56 from FEMA.  FEMA sent an email dated January 8, 2013, to the Grantee to inquire whether the Applicant had exceeded the approved SOW or made improvements.[4]  The Grantee replied in an email dated February 21, 2013, to request an improved project on behalf of the Applicant for PW 934 for work already completed.  In an email dated February 25, 2013, FEMA requested that the Applicant provide a summary of the improved project, clarification of time extensions (if any) granted for this project, and documentation of permits secured for the work.[5]  In an email dated March 5, 2013, the Applicant provided FEMA with a brief summary of the work completed and necessary permits.[6] 

On May 15, 2013, a FEMA Regional Environmental Officer completed a review of the improved project request for environmental and historic preservation (EHP) considerations.  The reviewer found that the work completed exceeded the work approved in the original SOW and that the additional work was “non-compliant with EHP laws and executive orders because they were not reviewed prior to project completion.”[7]  As a result, FEMA determined that only work approved in the original SOW for PW 934 met EHP requirements and was eligible for Public Assistance (PA) grant funding.  FEMA prepared Version 2 of PW 934, deobligating $63,176.51 from the original project amount.  In total, the Applicant received $41,849.49 in PA funding for the actual costs of work performed that was consistent with the originally approved SOW.  FEMA determined the eligible actual costs by comparing the line items in the contractor’s final pay application[8] to the originally approved SOW.[9]  FEMA also referred to site drawings submitted by the Applicant’s engineer in making this determination.[10]     

First Appeal

The Applicant appealed FEMA’s determination in a letter dated January 31, 2014.  The Applicant argued that reimbursement for the amount awarded for work in the original SOW was justified because the basic SOW was unchanged, the Grantee was informed of the SOW prior to issuing payment to the Applicant and provided correspondence indicating acceptance of the scope, and that incremental costs of the work were borne by the Applicant.  In support of its argument, the Applicant provided a table relating the actual costs incurred to the line items in the original SOW.  The Applicant’s appeal did not specify a dollar amount. 

In response to a final request for information, the Applicant provided additional supporting documents.  In addition, the Applicant asserted that FEMA had improperly conducted the BCA on the HMP work, that the work completed was required by state law and backed by federal law to protect public health and safety, and that FEMA had failed to comply with its own guidance that states “PA program staff should communicate openly and collaborate closely with applicants and grantees in order to resolve eligibility issues.”[11]

The FEMA Region V Regional Administrator (RA) denied the first appeal in a letter dated October 9, 2014.  The RA cited three reasons for the denial.  First, the Applicant had failed to submit an appeal relating to the originally approved SOW in Version 0 of PW 934.  Second, that the Applicant completed construction of HMP improvements, that had been denied based on an unfavorable BCA, without EHP reviews.  Third, that the Applicant had failed to appeal FEMA’s determination in the preparation of Version 1 of PW 934 that the changes to the HMP work were ineligible and only the original SOW items remained eligible.  In addition to the reasons for denial, the RA included citations to relevant policy pertaining to the HMP work and improvements made to the HMP by the Applicant, as well as to Environmental Protection Agency (EPA) financial assurance requirements in Title 40 Code of Federal Regulations (C.F.R.) § 258.74.   

Second Appeal

The Applicant submitted a second appeal in a letter dated December 4, 2014.  The Applicant asserts it has not completed work outside of the original SOW and should be reimbursed for all but $3,168.51 of the amount of the original SOW in PW 934, for a total of $88,729.24 (state and federal share).[12]  Specifically, the Applicant responds to FEMA’s reasons for denying the first appeal arguing that:

• It was not notified of FEMA’s denial of request for additional HMP funding and their right to appeal this decision, and thus did not appeal this denial.  Further, the Grantee gave them the impression that if the project proceeded under the original SOW, funding would not be significantly impacted.
• It complied with applicable regulations for obtaining approval for budget revisions which would result in the need for additional funds, pursuant to 44 C.F.R. § 13.30.  It also asserted that any additional work was paid for by the County, the Grantee and FEMA were aware of and approved it, and they relied on the Grantee’s representative to guide them through the project, per 44 C.F.R. § 13.37.
• It withdrew its request for additions to the HMP and incurred all additional costs related to the work that was completed.
• All work completed falls within the original SOW in PW 934 and does not change the location, footprint, function, or size of the project and all applicable EHP reviews were completed with the original SOW.
• Pursuant to applicable regulations in 44 C.F.R. § 206.203(d), it submitted an improved project request to the Grantee on February 13, 2013.  With its second appeal letter, it withdrew this request.
• FEMA’s denial makes reference to documents that are not contained in the Administrative Record.
• The landfill has not accepted waste after October 9, 1991, so the EPA financial assurance requirements do not apply.[13]

The Grantee transmitted the second appeal to FEMA Region V in a letter dated February 4, 2015.  The Grantee states that the revised HMP that was submitted by the county and denied by FEMA “was also completed by Milwaukee County [Applicant], and it is not seeking reimbursement for the work.”  The Grantee requests that the original SOW line items be reconsidered for eligibility and the final eligible total be written for $88,729.24 (state and federal share).[14]

Discussion

Appeal Rights

On first appeal, the RA cited timeliness as two of three reasons for denial, concluding that the Applicant’s appeal was untimely because it did not appeal determinations made by FEMA in the preparation of Versions 0 or 1 of PW 934.  However, the Applicant states on first and second appeal that it is appealing the determination made in Version 2 of the PW.  Pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) and its implementing regulations, 44 C.F.R. § 206.206, the Applicant may appeal any decision “previously made related to an application for or the provision of Federal Assistance” according to the procedures in that section.[15]  This includes FEMA’s decision to deobligate funding in Version 2 of PW 934, which was prepared on December 3, 2013 and appealed by the Applicant on January 31, 2014 – 59 days.  The Applicant is within the time limits for their first appeal of Version 2.  

Scope of Work

The Applicant on second appeal asserts that work done was in accordance with the original SOW of the project.  The Applicant goes on to state that “any additional work was paid for by the County, and [the Grantee] and FEMA were aware of this additional work and approved of it…”[16], contradicting their claim that work was in accordance with the original SOW.  FEMA completed a review of project documentation on second appeal, reviewing the final contractor payment application, project bid documents, and site photographs and finds that work had been completed outside of the original SOW.  Pursuant to 44 C.F.R. § 206.203, “[i]f a subgrantee desires to make improvements, but still restore the predisaster function of a damaged facility, the Grantee’s approval must be obtained.”[17]  The Applicant did consistently inform the Grantee of changes to the project that might have been classified as improvements, as it claims on second appeal.  If these improvements had not changed the location, footprint, function or size of the project, the arguments associated with the Grantee’s awareness might be more persuasive.  However, that is not the case in this instance as the work performed represents a significant change from the pre-disaster configuration that must be approved by FEMA prior to construction to ensure completion of the appropriate environmental and/or historic preservation review.[18] 

The size and footprint of the project changed with the addition of two new drainage channels, both with road crossings outside the original SOW work area (necessitating clearing and grubbing of land) as well as the addition of a second diversion dike in the slope.  Therefore, the Applicant was required to obtain approval from FEMA, rather than the Grantee, for this additional work before it was completed and the Applicant failed to do so.[19]  As a result, FEMA was unable to complete appropriate environmental and/or historic preservation review.  The fact that the work was paid for by the Applicant and funding for it is not requested is not relevant to this finding.  The Applicant claims generally on second appeal that FEMA was aware of the additional work and approved of it, but does not provide documentation to support its assertion.[20]  While the Applicant has provided documentation showing its communication with FEMA regarding its approval of work in the originally approved (Version 0) SOW for PW 934, it has not sufficiently demonstrated the work completed by the Applicant outside of the original SOW was approved.  Rather, FEMA discovered these changes upon closeout, which triggered the deobligation of funding.[21]  

FEMA will reimburse the Applicant for work done in accordance with the originally approved SOW (Version 0).  FEMA reviewed the determination of actual costs found eligible in Version 2 of PW 934 as well as the project documents, including the final contractor payment application,[22] project bid documents, and site photographs.  The work found ineligible with the preparation of Version 2 of PW 934, denied on first appeal and claimed on second appeal is ineligible for the following reasons: Task A1 claimed by the Applicant for cutting grass/weeds/brush[23] is ineligible because it is not consistent with the original SOW item one of grading and shaping the clay cap, which does not include activity to cut grass, weeds or brush.  Tasks 6 and 8 claimed by the Applicant for geotextile and 6-9 inch riprap, respectively,[24] are ineligible because the Applicant, as confirmed by relevant documentation listed above, modified the original SOW as it applies to this work by changing the location and footprint of the channels.  Task 3 claimed by the Applicant for earthwork cut channels[25] is ineligible because the work completed for this task cannot be separated, using the documentation submitted by the Applicant showing actual costs, from work that was outside the original SOW. 

Work found eligible in Version 2 of PW 934 was confirmed to be eligible.  An additional $10,468.93 of work performed by the Applicant was also found to be consistent with the original SOW and is eligible for public assistance.  The additional work consists of “Extra Seedbed Prep” for $1,200.00[26] and design fees in the amount of $9,268.93.[27]

Administrative Procedures

The Applicant asserts that documents not in the Administrative Record Index (ARI) are referenced in the first appeal decision.  The Administrative Record should include “all documents and materials directly or indirectly considered by FEMA in making a Public Assistance eligibility determination and subsequent first appeal decision.”[28]  The documents referenced in the first appeal but not found in the ARI were two project drawings[29] reviewed by FEMA in the preparation of Version 2 of PW 934.  The Applicant is correct that both drawings were not included in the ARI; however, they were created by the Applicant’s engineer and the Applicant should be in possession of or have access to these documents.  As such, this procedural oversight, while an error, is found to be harmless.

Other Federal Agency Responsibility

The first appeal decision suggested that the work completed by the Applicant was the responsibility of another federal agency, citing the requirements of 40 C.F.R. § 258.74.    Pursuant to 40 C.F.R. § 258.1, the requirements of that section, which include the requirements at issue in 40 C.F.R. § 258.74 “do not apply to municipal solid waste landfill units that do not receive waste after October 9, 1991”.[30]   The Applicant has stated that the landfill at the site in question did not accept waste after October 9, 1991.[31]  Furthermore, 40 C.F.R. § 258.74 itself states that “the mechanisms used to demonstrate financial assurance under this section must ensure that the funds necessary to meet the costs of closure, post-closure care, and corrective action for known releases will be available whenever they are needed.”  The regulations list mechanisms that an owner or operator of a landfill can choose from to demonstrate financial assurance.[32]  This section of the regulation is intended to ensure that the funds necessary to meet the costs associated with closing and caring for a landfill after closure, are available from the owner or operator of said landfill.  The regulations do not transfer responsibility for post-closure care of a landfill to the EPA or any other federal agency.  Therefore, the work completed by the Applicant does not fall under the responsibility of another federal agency. 

Conclusion

Only work consistent with the original SOW is eligible for PA funding.  Accordingly, based on an analysis of documentation provided, an additional $10,468.93 is eligible for PA funding.