Sand Replacement

Appeal Brief

Appeal Letter

Appeal Analysis

Background

In 2001, Tropical Storm Gabrielle hit Collier County (Applicant) causing severe loss of sand along its shoreline.  In 2005, the Applicant was devastated by Hurricanes Katrina and Wilma which again resulted in sand erosion.  Between 2001 and 2005, the Applicant began a shoreline improvement project.  This project was expanded after Hurricanes Katrina and Wilma hit.  For all three disasters, FEMA drafted various Project Worksheets (PWs) to replenish sand to the Applicant’s engineered beaches.  Throughout the duration of the project, the Applicant’s consultant, Coastal Planning and Engineering (CPE),^[1] prepared several engineering reports examining pre- and post-disaster sand levels with varying results.  The reports that are relevant to this appeal are the November 2005 Survey Report,^[2]  January 2010 Report[3] and January 2015 Atkins-CPE Report.[4] 

Originally, FEMA prepared PW 2700 to address sand replacement at Naples Beach following Hurricane Wilma, only.  FEMA subsequently revised PW 2700 to reimburse for costs associated with replenishing Naples Beach, Vanderbilt Beach, and Park Shores following Hurricanes Katrina and Wilma.  FEMA based the total eligible amount of sand replenishment on the January 2010 Report prepared by the Applicant’s FEMA obligated PW 2700, Version 3, for $12,868,475.94. 

In 2012, FEMA issued a second appeal decision of a Tropical Storm Gabrielle PW.[5]   In it, FEMA instructed Region IV to reexamine PWs from Hurricanes Katrina and Wilma for proper funding for shoreline projects.[6]  Adhering to the Gabrielle second appeal determination, FEMA Region IV reviewed PWs, including PW 2700, from Hurricanes Katrina and Wilma for eligible sand replacement costs.  As a result, on June 21, 2012, FEMA deobligated $11,095,283.52 from PW 2700 in Version 6.  The deobligation was based on FEMA’s conclusion that the total eligible amount of sand replacement was 58,641 cubic yards (CY).  FEMA derived the eligible amount of sand replacement from the November 2005 Survey Report.

First Appeal

In a first appeal letter, forwarded by the Grantee on October 23, 2012, the Applicant asserted that FEMA did not notify it prior to deobligating $11,095,283.52 from PW 2700.  In addition, the Applicant provided six reasons justifying its appeal request, including: the Applicant worked closely with the Florida Division of Emergency Management (FDEM) to determine eligibility, scope documentation, and authorization and approval for Hurricane Wilma; expenditures and payment were reviewed, approved, and authorized by FEMA; all approaches were backed up with hard costs, hard documentation, proper authorizations, proper closeouts, and correct closeout documentation; FEMA approved scope increases in each Version of PW 2700; there were no conditions placed on FEMA’s reimbursements; there was no technical basis for deobligating the funds; and the deobligation was not based on established FEMA policies and procedures.  In a supplement to the first appeal dated October 15, 2012, the Applicant argues that FEMA’s deobligation was precluded by the Stafford Act § 705(c)^[7] because all three prongs of the section had been met.

The FEMA Region IV Regional Administrator (RA) partially approved the first appeal determining that $1,853,755.68 in funding would be reinstated because it represented eligible costs for dune repair, mobilization and demobilization, engineering, and survey costs that were erroneously deobligated from PW 2700 in an August 1, 2014 letter.  However, the RA concluded that the Applicant’s survey of losses,^[8] prepared by CPE, included pre- and post-disaster sand erosion was not eligible for PA funding as it was not disaster-related.  As such, the survey was not more accurate than the estimates prepared for and included in the PWs.  In addition, the RA determined that the Stafford Act § 705(c) was not applicable because the increased scope of work was not eligible; therefore, the associated costs were inherently not reasonable.

Second Appeal

In an appeal, dated October 17, 2014, the Applicant presents two issues.  The Applicant asserts that FEMA drastically underestimated the actual amount of damage suffered by the Applicant’s beaches as a result of Hurricane Wilma.  In addition, the Applicant challenges the amount of funding that FEMA reinstated for engineering and environmental monitoring activities in the first appeal determination.  The Applicant consulted Atkins North America, Inc. (Atkins) to analyze and reconcile previous survey reports completed by CPE.^[9] 

In January 2015, the Applicant submitted a supplement to its second appeal.  The supplement includes a joint Atkins-CPE engineering report that revises the sand loss volumes for each beach.^[10]  In it, Atkins asserts that during the initial review of previous CPE reports, it did not have enough time to fully analyze and reconcile the amount of sand loss experienced on the Applicant’s beaches.  Upon further review, Atkins readjusted the total amount of CY loss that is eligible in PW 2700.  Based on the subsequent Atkins review, the Applicant requests that FEMA reinstate $6,149,099.06 for sand restoration and $3,167,206.65 for actual engineering, survey, and environmental compliance costs.[11]  

Discussion

Eligible Sand Replacement

The Stafford Act § 406 authorizes FEMA to reimburse costs incurred by a local government for the repair, restoration, reconstruction, or replacement of a public facility damaged or destroyed by a declared disaster.[12]  Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.226(j)(2), work on an improved beach may be eligible for PA funding if the beach was constructed by the placement of sand to a designed elevation, width, and slope and the beach was maintained by periodically re-nourishing the sand through established procedures prior to the disaster.^[13]  Prior to approving permanent restoration of a beach, FEMA requests design documents and specifications, “as-built” plans, documentation of regular maintenance and nourishment, and pre- and post-storm cross sections of the beach.^[14]

While it is the Applicant’s burden to substantiate its claim for Public Assistance, the Regulations and FEMA policy guidance give FEMA discretionary authority over what documentation to accept.[15]  As stated previously, the Applicant has submitted several reports from its engineering consultant throughout the eligibility process,  In Version 3 of PW 2700, FEMA obligated funding utilizing the January 2010 Report^[16] to determine the total amount of eligible beach restoration.  The January 2010 Report erroneously stated 667,562 CY of sand was necessary to restore Naples, Vanderbilt, and Park Shore Beaches.[17]  In the first appeal determination, FEMA reverted back to a November 2005 Survey Report to find 58,641 CY of sand loss eligible for restoration.  The Applicant asserts FEMA used the wrong survey when evaluating sand loss and required sand replenishment.  The results of the November 2005 Survey Report are problematic because it is difficult to establish total disaster-related sand loss soon after a disaster, the results do not account for continued disaster-related erosion, and they only account for sand loss at Naples Beach following Hurricane Wilma.  However, PW 2700 combined sand loss at Vanderbilt, Park Shore, and Naples Beaches for Hurricanes Katrina and Wilma and obligated funding based on the total amount of sand loss.

Based on the RA’s statement regarding inconsistencies among the various survey reports, the Applicant believed FEMA was inviting it to provide additional engineering-based explanations for calculated sand loss and consulted a second engineering firm – Atkins.  For the second appeal, Atkins issued an October 2014 report, and later revised its findings in the January 2015 Atkins-CPE Report.  The Report is signed and stamped by several Professional Engineers representing concurrence between two qualified engineering firms specializing in estimating volume losses, and the supplement is the result of a peer review process.  The methodologies of the January 2015 Atkins-CPE Report and the January 2010 Report are similar.  This is important because it indicates that two independent analyses of the same data resulted in approximately the same estimation of volume losses.  Unlike the November 2005 Survey Report, the January 2015 Atkins-CPE Report compares pre-Katrina and post-Wilma surveys, accounts for annual erosion, and incorporates sand loss for all three beaches over two disasters.  FEMA agrees with the methodology used in the January 2015 Atkins-CPE Report and accepts the data used in the report and the resulting outputs.  Based on the results of the January 2015 Atkins-CPE Report, the Applicant has substantiated that an additional 203,356 CY of sand replenishment is eligible for PA funding.  In the 2012 Tropical Storm Gabrielle second appeal, FEMA determined that the unit cost per CY for this project is $30.2381 per CY.[18]  Therefore, the total amount eligible for PA reimbursement is $6,149,099.06.[19]

Table 1: History of Eligible Sand Allocation

Engineering, Survey, and Environmental Costs

In order to be eligible for PA funding, costs must be directly tied to eligible work and reasonable and necessary to accomplish the eligible work.^[21]  Pursuant to 44 C.F.R. Parts 9 and 10, all projects funded under the PA program must comply with Federal, state and local environmental and historical preservation laws.^[22]  As such, the costs incurred for environmental compliance are eligible for PA reimbursement because they are necessary to accomplish the project.  In addition, FEMA reimburses costs associated with basic engineering and design services, including preliminary engineering analysis, preliminary design, final design, and construction inspection.^[23]  During project formulation, costs are estimated using FEMA engineering and design services cost curves and for large projects, actual costs are reimbursed. ^[24]  However, costs that exceed the amounts estimated using the cost curves must be reviewed by FEMA for reasonableness and funded accordingly.

In PW 2700, Version 3, FEMA obligated $12,754,162.16, of which $3,465,160.78[25] was allocated for all engineering, surveying, and environmental monitoring and permitting costs.  FEMA deobligated $11,095,283.52, including the full amount obligated for these costs, in Version 6 of PW 2700.  In the first appeal, the only issue presented by the Applicant was the deobligation of $11,095,283.52 from PW 2700.  The Region IV RA re-obligated $1,853,755.68 related to engineering, surveying, and environmental monitoring costs in the first appeal determination.

On second appeal, the Applicant requests an additional $3,167,206.65 for actual engineering, survey, and environmental compliance costs incurred for this project.[26]  It must be noted that the Assistant Administrator for Recovery only has authority to consider the RA’s decision on first appeal.[27]  While the Applicant has demonstrated that there are engineering, surveying, and environmental compliance costs associated with its beach restoration project, FEMA can only provide the difference between the original amount obligated in Version 3, $3,465,160.78 and the amount obligated following the first appeal decision, $1,853,755.68 because the issue on appeal is the deobligation of funding obligated in Version 3 of PW 2700.  As such, an additional $1,611,405.10 in PA funding will be obligated for these costs as they are reasonable and necessary to accomplish the work.  If the Applicant incurred additional costs, it should have presented the applicable documentation at closeout[28] or appealed FEMA’s determination that $3,465,160.78 was the eligible amount within 60 days of the determination.[29]

Table 2: History of Funds Obligated for Engineering, Survey, and Environmental Costs

Stafford Act § 705(c) Applicability

The Stafford Act § 705(c) provides that a state or local government is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if the payment was authorized in an approved agreement specifying the costs, the costs were reasonable, and the purpose of the grant was accomplished.   In its second appeal, the Applicant argues that Section 705(c) prohibits FEMA from deobligating funding associated with PW 2700, Version 3, because funds were obligated in an approved agreement, the costs were reasonable, and the purpose of the grant, i.e., the restoration of Naples, Vanderbilt, and Park Shore beaches following Hurricanes Katrina and Wilma, was accomplished.  For the costs that were obligated in Version 3, FEMA is granting full relief; therefore, the applicability of Section 705(c) is moot.  

Regarding the engineering, surveying, and environmental costs, the Applicant is requesting additional costs on second appeal in excess of what was initially obligated in Version 3, and subsequently de-obligated in Version 6.  These additional costs, totaling $1,555,801.55, were never obligated in any PW version.  In other words, FEMA has never made a payment for these costs for which the Applicant would ever be liable to reimburse. Therefore, Section 705(c) does not apply.

Moreover, the additional requested costs do not satisfy two of the three Section 705(c) requirements.  First, the additional costs were not authorized or specified in any PW version.  Second, the Applicant has not provided adequate documentation[30] for FEMA to determine whether the additional costs were reasonable and necessary to accomplish the work in PW 2700.  As such, the requirements of Section 705(c) were not met.

Conclusion

The Applicant has demonstrated that an additional 203,356 CY of sand is eligible for replacement.  Based on a unit cost of $30.2381 per CY, FEMA will obligate an additional $6,149,099.06 in PA funding.  In addition, the Applicant has shown that an additional $1,611,405.10 for engineering, surveying, and environmental costs is eligible for PA reimbursement.  As such, the appeal is partially granted.  FEMA Region IV will prepare a version to PW 2700 obligating $7,760,504.16 in additional PA funding.