U. S. Dcpa1tment of Homeland Seem ity 500 Street, SW Washington, DC 20472 SEPI 42018 Ernie Rhodes, Director State Emergency Management Agency Missouri Department of Public Safety 2302 Militia Drive PO. Box 1 16 Jefferson City, MO 65102 Re: Second Appeal? Joplin Schools (Applicant) PA ID: 00, FEMA- 1980? P1oj ect Worksheet (PW) 1980? Improved Project Procurement Direct Adm1n1st1at1ve Costs Insurance Dear Mr. Rhodes: This is in response to a January 24, 2018 letter from your of?ce, transmitting the referenced second appeal on behalf of the Applicant. The Applicant is appealing denial of $29,779,340.58, including a change to the scope of its improved project, an increase in estimated costs, Direct Administrative Costs (DAC) above those previously awarded, $1,000,000.00 in insurance proceeds for Law and Ordinance, which it argues should have been allocated to a different PW, and $299, 732. 61 asserted to be a mathematical error in implementing the ?rst appeal determination 1n Version 3 of PW 1980 As explained in the enclosed analysis, I have determined that the Applicant failed to seek funding for additional work 1n a timely manne1, and failed to justify its request for adjustments to the cost estimate. Regarding DAC, the RA took approp1iate action in awa1 ding costs capped at $155 per hour, as a remedy fer the Applicant 5 noncompliance with procurement 1egulations. It was also proper, in accordance with federal regulation, not to award travel costs or costs incurred during a period when no contract was in place. Additionally, the $1,000,000.00 in insurance proceeds for Law and Ordinance were appropriately applied to PW 1980. However, there was an inadvertent mistake in implementing the ?rst appeal decision, and the insurance p1 oceeds allocated in Ve1sion 3 of PW 1980 was greater than the RA determined 1n the ?r st appeal. Accordingly, I am partially granting this second appeal so the total Insurance proceeds can be corrected. Please inform the Applicant of my decision. This determination 1s the ?nal decision on this matter pursuant to 44 C. F. R. 206. 206, Appeals. -nathan Hoyes Director Public Assistance Division Enclosure cc: Paul Taylor Regional Administrator FEMA Region VII SECOND APPEAL ANALYSIS Joplin Schools, PA ID 097-U4T46-00 Project Worksheet 1980 Improved Project -?Procurement - Direct Administrative Costs Insurance Background On May 22, 2011, a catastrophic EF-S tornado struck Joplin, Missouri. The accompanying high winds and ?ying debris damaged Joplin High School and Franklin Technical Center, which are owned and operated by Oplin Schools (Applicant). Joplin High School suffered severe damage and Franklin Technical Center was completely destroyed. Following a site visit and analysis conducted 'by registered architects, EMA determined that both schools were more than 50 percent damaged and warranted replacement. The model used to establish replacement was an RS Means square foot model supplemented with a detailed take-off1 and the architects? observation Of the site. For Joplin High School, FEMA used a model based on a footprint of 244,300 square feet, which matched the Applicant?s description of the size of the school. A cost estimate format (CEF) was prepared based on this analysis. Version 0 of the PWs provided that eligible Direct Administrative Costs (DAC) would be captured in a subsequent amendment. . During the ongoing process of formulating the project, the Applicant requested that the size of Joplin High School be increased due to codes and standards requiring increased square footage per student. FEMA denied this request, finding that the requirement was not a code or standard within de?nition of those terms. The Applicant also requested that the school be relocated because its current site was within the ?oodplain. FEMA determined that the school could be rebuilt at a different site on the same property, but that the Applicant would need to request an improved project if it wanted to relocate the school to a new property. On September 24, 2012, the Applicant requested an improved project through the Missouri Emergency Management Agency (Grantee), seeking to rebuild Joplin High School and Franklin Technical Center as a combined school at a new site.2 On October 3, 2012, FEMA approved the request.3 Accordingly, on November 7, 2012, FEMA obligated PW 1980 Version 1 with a - combined CEF for all of the construction projects, which did not include a reference to DAC or a DAC estimate. Based on the approved scope of work (SOW) describing the eligible project and the cost estimating format (CEF) factors, the capped project cost was $61,320,776.00, less insurance proceeds of $49,168,111.54, for a total project cap of $12,152,664.46. - On June 30, 2014, the Applicant submitted a request to the Grantee seeking additional funding for what it called errors and omissions.4 It stated that it hired an architectural ?lm to compare drawings of Joplin High School and Franklin Technical Center to the FEMA CEF estimate. First, for certain building components,5 it stated that its architectural ?rm?s ?estimated cost using consistent RSMeans costing with approved CEF add?on factors?? was higher than the estimate in the PW. The Applicant attached a spreadsheet, which compared the CEF estimate with its own 1 A ?take-off? is a list of materials and quantities required to build a structure. 2 Letter from Chief, Planning Disaster Recovery Branch, Mo. State Emergency Mgmt. Agency, to Dir., Disaster Assistance Div., FEMA Region VII (Sept. 24, 2012). '3 Letter from Dir, Recovery Div., FEMA Region VII to Dir., Mo. State Emergency Mgmt. Agency (Oct. 3, 2012). 4 Letter from Chief Fin. Of?cer, Joplin Sch. Dist. to M0. State Emergency Mgmt. Agency, at 1-4 (June 30, 2014). 5 These items speci?cally were: concrete footings and foundation, concrete slab on grade, Division 5 Metals, retaining walls, utilities, block walls, and?eaves. . Second Appeal Analysis, PA 1D Page i of 20 Joplin Schools, PW 1980 - revised estimate for each of these line items. This spreadsheet showed that in various places the Applicant utilized different cost codes, unit prices, and unit quantities, as well as a higher adjustment factor for soft costs. Second, the Applicant asserted that there were a number of abandoned mine shafts that would need to be excavated and ?lled in the rebuilding project. Third, the Applicant argued that the CEF for Joplin High School should have used 256,521 square feet, rather than the 244,300 it previously submitted. Fourth, it argued thatadditional square feet should have been added to both Joplin High School and Franklin Technical Center estimates to account for additional water closets, lavatories, and elevators to ensure compliance with the American?s With Disabilities Act (ADA). Fifth, it argued that the CEF for Franklin Technical Center omitted a copper electrical bus system, several items of ?xed equipment, and a number of HVAC units. Sixth, the Applicant argued that its construction management ?rm had recently completed two Kansas City schools, whose ?nal construction costs were 24 percent lower than estimates for comparable Joplin schools.6 Accordingly, it noted that RSMeans allows for cost increases based on adverse economic conditions, shortage of sub~contractors, and shortage of labor, and it requested a cost increase of 17 percent. Finally, it requested funding for the pro- rated cost of its architectural firm?s review. Altogether, the Applicant requested an increase of $27,862,323.12. On August 7, 2014, FBMA denied the Applicant?s request as untimely, stating that the Applicant had 60 days from November 7, 2012, the date on which PW 1980 version 1 was obligated, to appeal the amount of the grant.7 Rather than appeal determination, the Applicant renewed its request for additional funding above the approved improved prOj ect cap at closeout. Its request came in two letters, both dated January 8, 2016, which were substantially similar to the 2014 request.8 The Applicant?s line item calculations were different, and it added a request for a higher adjustment for soft costs throughout the scope of work (SOW), which resulted in an increase of estimated costs for each CEF item. In total, it requested an increase to the project cap of $28,359,743.10. To this request, the Applicant attached an email exchange in which it asked a FEMA employee the following: I understood you to say a project could be declared an Improved Project and a subsequent Request for Version Change could be approved for any error or omissions or single line item within that PW, including approval of this scenario: a 6 The Applicant?s request stated that these costs were higher, but in context it is clear that it meant to say that the Kansas City project costs were loWer than the equivalent projects in Joplin. 7 Letter from Recovery Div. Dir, FEMA Region VII to Dir., Mo. State Emergency Mgmt. Agency (Aug. 7, 2014). The Applicant has argued that this letter did not actually deny its full request because it referenced CEF factors but not the alleged errors and omissions. Thisassertion is without merit. The letter speci?cally denies the applicant?s request for a change in the SOW. Accordingly, it fully addressed the Applicant?s request. 3 Letter from Chief Fin. Of?cer, Joplin Sch. Dist. to MO. State Emergency Mgmt. Agency, at 1?3 (Jan. 8, 2016) (requesting additional funding for increased line item costs, additional work and square footage, and architectural . ?rm review); Letter from Chief Fin. Of?cer, Joplin Sch. Dist. to M0. State Emergency Mgmt. Agency, at 1-2 (Jan. 8, 2016) (requesting additional funding for CEF factors and cost escalation). Second Appeal Analysis, PA ID Page 2 of 20 Joplin Schools, PW 1980 version change to the PW line item estimate of cost/sq ft, if competitive bid costs come in highei than the estimate listed in the PW Is this co11ect??9 The EMA employee responded, ?1f the cost perrsquare foot is related to approved FEMA scope and in line with appropriate codes and standards, your statement is correct.??0 At closeout the Applicant also sought 1eimbur sement for DAC, including force account labo1 in the amount of $46,135.52, and se1v1ces contracted f1 om Witt Associates (Witt) 1n the amount of $508165 21. 11 The Applicant contracted with Witt to p1 ov1de professional se1vices f01 a term to run from June 9, 2011 ,thiough June 8, 2014. Prior to its expiiation, the Applicant signed a Cooperative Purchasing Agreement with the Houston?Galveston Area Cooperative (HGAC) which authorized the purchasing of services from certain designated contractors, including Witt. The Applicant then signed a second agreement with Witt, designated Task Oider No 1, with a term beginning January 1, 2012, and continuing through May 31, 201 3, and with minor changes from the original agieement. Also included in the record was the Applicant?s ?nal settlement with its insurer. Relevant to this second appeal, this settlement showed insurance receipts of $44,818,891.35 for Joplin High School, $9,865,000.00 for Franklin Technology Center, $1,000,000.00 for Law and Ordinance upgrades, and $276,000.00 for demolition at Joplin High School. In response to these requests, EMA sent a determination memorandum on December 7, 2016 stating that the Applicant had 60 days from the obligation of PW 1980 Version 1 to appeal the amount obligated. It also noted that the improved project was capped at the amount associated with restoring the facility to its predisaster design, but that the Applicant was requesting an amount which equaled the entire actual cost of the improved pro} ect. Finally, it stated that the Applicant had not separated the actual cost of completing the original SOW from the cost to complete the improved project, and that these costs could not be tracked separately because of the alterations to the facility?s predisaster design. Accordingly, these costs were determined to be ineligible. FEMA also noted that the Applicant had previously requested an increase to the size of the high school, this iequest was denied, and the Applicant did not challenge that decision within 60 days either. With respect to DAC, FEMA concluded that the there was no documentation supporting the selection of Witt or that it was the least cost alternative available. It determined, however, that FEMA could award reasonable costs, which it ?xed at $155 per hour, except where actual costs were lower than that ?gure. It disallowed any DAC claimed for a period not covered by one of the contracts with Witt, as well as those not directly related to a speci?c project, which referenced Witt employee travel expenses that had been allocated across various The 9 Email from Chief Fin. Of?cer, Joplin Sch. to FEMA, at 1 (Apr. 20, 2012, 6:05 PM). 10 Email from FEMA to Chief Fin. Of?cer, Joplin Sch, at 1 (April 21, 2012, 9:55 AM). 11 The Applicant also claimed 867,25 0.97 in DAC for contract work performed by National Fire Adjustment Co., Inc. incurred in makingits insurance claim. FEMA denied reimbursement for these costs, and the Applicant did not challenge this denial on appeal. 12 While the determination memorandum did not explicitly reference travel expenses, it disaltowed the difference between the claimed hourly rate for a Witt employee and the contract hourly rate for that employee. That difference was comprised of the employee?s travel expenses that the Applicant had allocated to PW 1980 by' incorporating them in the hourly rate for each Witt employee. Second Appeal Analysis, FEMA- 1980- PA ID 097 U4T46- 00 Page 3 of 20 Joplin Schools, PW 1980 determination memorandum found that all claimed force account DAC was eligible, except for minor calculation corrections supplied by the Grantee. Accordingly, it awarded an additional $432,901.34 in DAC. Finally, FEMA determined that the Applicant?s insurance proceeds needed to be increased by an additional $5,264,522.81. In accordance with the determination rnem01andum, FEMA prepai ed PW 1980 Version 2, which included the additional DAC found to be eligible and deducted total 1nsu1 ance receipts of $54, 432, 634. 35, for a ?nal project cap of $7,321,0.42 99. irsr Appeal I First Appeal Letter The Applicant appealed determination in a letter dated February 7, 2016. First, the Applicant clari?ed that the requested increase in funding related only to the original eligible project, and not the improved project. This included the adjustments to the OFF soft cost factors A and the requested 17 percent increase for cost escalation. The Applicant then argued that it was not required to appeal the obligated PW if it disagreed with the obligated amount, but rather all it needed to do was request a new PW version at some point when changes were identi?ed. It argued that it could not have made the request until its architectural firm had completed its review. Regarding the square footage of Joplin High School, the Applicant explained that its current request was different from its earlier request for an increase in size. The prior request was for an increase based on codes and standards, whereas the present request was for a correction to the original size of the school. It acknOwledged that it had provided the size of 244,300 square feet, but argued that this was an error that FEMA should correct. With respect to DAC, the Applicant explained that on May 26, 2011, Witt submitted a proposal to provide disaster recovery administrative services, and the Applicant entered into a three-year agreement with Witt on June 1, 2011. On December 22, 2011, the Applicant joined HGAC, and replaced the existing agreement with Witt with Task Order No. 1, re?ecting its selection of Witt through HGAC but leaving the rate schedule and reimbursable expenses at the same or lower rates. In January 2016, the Applicant agreed to Task Order No. 1, Modi?cation No. 1, which extended the agreement to May 31, 2016, and left the rate schedule and reimbursable expenses unchanged from Task Order No. l. The Applicant argued that there was no requirement that it contract with the lowest cost provider. It stated that it entered into the original agreement with Witt under its authority to quickly contract in an emergency situation without having to compare competing proposals. It argued that this was reasonable because the rate that Witt gave them was the same or lower as that given to other clients, including the US. General Services Administration (GSA). The Applicant stated that the reasonableness of its decision to contract with Witt was con?rmed when it later joined HGAC and received the lowest rate, regardless of whether it was on the HGAC schedule or in the original contract. It argued that HGAC was an appropriate tool to con?rm that its original contract with Witt was properly procured Next, the Applicant argued that, apart from the procurement issue, Witt?s contract rates were reasonable and that FEMA should not have set $155 per hour as the reasonable rate. It argued that Witt?s contract rates for the Applicant were the same as those provided forother HGAC members and for other government entities. It stated that it determined that Witt?s proposed Second Appeal Analysis, PA ID Page 4 of 20 Joplin Schools, PW 1980 prices and services more closely met its needs compared to alternatives, although it did not specify what alternatives were considered or what criteria it used in its evaluation. Regarding travel costs, the Applicant explained that these costs were for travel activities that allowed Witt?s employees to provide services under the contract. It argued that it was reasonable to take these costs and apportion them among the various projects that the particular Witt employee worked on, distributed according to the time utilized for each project. It argued that the 2014 regulations in 2 C.F.R. Part 200 clari?ed the older regulations that were in effect at the time of the disaster, and that the later regulation stated that if a cost bene?tted two or more projects or activities in proportions that can be determined without undue effort, the cost should be allocated to the projects based on proportional bene?t. If the proportional bene?t could not i be determined, then the costs could be allocated or transferred between the projects on any reasonable documented basis. The Applicant also argued that contracts were in place for the entire duration of the period during which Witt charged the Applicant for disaster recovery servrces. Finally, with respect to insurance, the Applicant argued that the insurance reductions applied to PW 1980 were incorrect. It argued that the additional $5,264,522.81 reduction applied at closeout did not take into consideration inSurance reductions that had already been applied to other PWs. It argued that either the insurance proceeds allocated to PW 1980 needed to be reduced, or else the proceeds allocated to other PWs should be altered to avoid duplication. Initial RF I On May 10, 2017, FEMA issued a request for information (RF I), stating that it had identi?ed additional issues regarding insurance proceeds. FEMA noted that the Applicant?s insurance settlement amounted to $55,959,891.35. It requested an?allocation of proceeds for Joplin High School and Franklin Technical Center from the Applicant?s insurance carrier. FEMA noted that there appeared to be $276,000.00 in insurance proceeds that were not yet allocated toward any PW. FEMA also noted that the Applicant had received $1,000,000.00 in insurance proceeds for ?Law and Ordinances? coverage, and requested an explanation of how those proceeds were allocated, including the code and standard upgrade that this payment was applied toward. Finally, FEMA noted that the Applicant had received a $3,000,000.00 grant for the Franklin Technical Center that had not previously been disclosed to FEMA, and which appeared to also represent a duplication of bene?ts. EMA requested documentation showing how that grant money was spent. In light of the newly identi?ed issues, FEMA prepared another determination memorandum. Eligible costs remained the same, but EMA applied additional reductions of $1,527,257.00 in insurance reductions, and $3,000,000.00 for the Franklin Technical Center grant. This resulted in a new ?nal approved project cap of $2,793,785.99. However, no adjustment was made to the obligated amount of PW 1980 at this time. The Applicant responded to the RFI in a letter dated July 10, 2017. It ?rst explained that the $3,000,000.00 grant that it received was expressly for the purchase of new equipment that the school did not have before the disaster. With respect to insurance proceeds, the Applicant stated that the $1,000,000.00 for Law and Ordinance was allocated to Emerson Elementary School. In Second Appeal Analysis, PA ID Page 50f 20 Joplin Schools, PW 1980 support of this, the Applicant provided a letter from its insurance adjuster, dated June 6, 2017, which stated that the cost estimate to b1ing Eme1 son Elementary School up to current building codes was greater than $1,000,000.00. It also provided a copy of this estimate, p1epared 111 conjunction with an a1 chitect The Applicant also explained that the $276,000.00 that appeared unallocated were actually allocated to a demolition PW for Joplin High School. An additional $106,761.00 was for demolition of the Franklin Technical Center. Finally, it again noted that, when FEMA increased the insurance allocated to PW 1980, it did not decrease the allocation to another related PW. Final RFI After receiving the Applicant?s response to the initial RF 1, FEMA issued a Final RF 1 on September 2017. FEMA ?rst noted that the Applicant had submitted over 32,000 pages of documents that were unindexed, spanning multiple dates and pages. The Final RF 1 stated that it was unclear which, if any, of the documents supported the Applicant?s claims. Accordingly, it stated that FEMA was returning the exhibits so that they could be identi?ed and their relevance could be explained. It noted that this ?rst appeal involved issues similar to the appeals of PWs 575, 1336, 488, 1438, 1684, and 1799, and stated that the administrative records of these various PWs had also been examined and were incorporated by reference. Next, with respect to the claimed additional errors and omissions, the Final RF I questioned why the Applicant did not appeal these issues earlier in the process, noting that the Applicant had acknowledged that it knew it intended to seek modi?cations to the SOW as early as 2012. FEMA also stated that it was unable to ascertain how the Applicant arrived at the total project cost, and stated that the Applicant appeared to be utilizing the actual cost of the school that was ultimately built, rather than the estimates for rebuilding the schools as they were that established the project cap. FEMA requested the total actual costs of the improved project, and the I sepa1 ately tracked expenses associated only with the eligible original pl?OJ ect. FEMA asked that these be itemized for all matteis that were at issue in the appeal. FEMA also requested a speci?c explanation of why the CEF factor for soft costs used in PW 1980 was incorrect, which speci?c costs were understated and why, and documentation supporting the CEF factor that the Applicant sought on appeal. 7 With respect to DAC, FEMA noted that the arguments and issues were substantially the same as had been addressed in the ?r st appeals for PWs 575 and 1438, and requested that the Applicant provide any a1 guments or documentation that were substantially different f1 om those prior decisions. Speci?cally, FEMA 1equested documentation showing that the Applicant? 3 non- competitive procurement of Witt was justi?ed by an exigency under federal procurement regulations, as well as its own procurement standards. It also requested documentation showing that the Applicant had performed a cost analysis in its selection of Witt. The Applicant responded to the Final RFI in a letter dated October 5, 2017. It again argued that it was not required to ?le an appeal earlier in the process because the PW could be continually modi?ed through closeout. Next, the Applicant clari?ed the total amount it was seeking and noted that it was less than the cost of the combined school that it ultimately built. It went on to Second Appeal Analysis, PA ID Page 6 of 20 Joplin Schools, PW 1980 explain that the cost of the actually built project was irrelevant to the appeal because the project cap was based on the estimated cost for the original replacement projects. It explained that it did not separately track the improvements because the new school was built wholly apart from the estimated original project. Throughout its response, it emphasized that it was only seeking funding related to the original eligible project. Regarding the CEF factors, the Applicant argued that a higher soft cost adjustment was warranted because there were out of state contractors and subcontractors that incurred extra expenses. Additionally, there was a construction boom in Joplin due to the number of destroyed structures in the city following the tornado. Next, the Applicant again explained that the size of the school was incorrectly given as 244,300 square feet, and should actually have been 256,521, based on its architectural ?rm?s analysis of the school?s drawings. 1t argued that this and other asserted omissions were similar to the situation in PW 1438, where FEMA later issued a revised PW to add a kitchen that was omitted f1 om an earlier version. With respect to DAC, the Applicant maintained that its procurement of Witt was appropriate. 1t emphasized that it performed the simple cost analysis of con?rming that Witt?s rates were at or below those offered to othe1 clients, including the GSA and other HGAC members. The Applicant a1 gued that this con?rmed that Witt? 3 rates, and the Applicant? 3 selection of Witt as a provider, was reasonable. First Appeal Decision On November 30, 2017, the Regional Administrator (RA) denied the ?rst appeal. The ?rst appeal decision ?rst noted that the Applicant had numerous opportunities to seek revised estimates and to appeal the amount of funding throughout the process of formulating the estimate up to the obligation of PW 1980 Version 1. It determined that the Applicant should not have assumed that it could continue to seek additional money through closeout, particularly if it was aware of the need for additional funding earlier in the process and had already agreed to a SOW and funding cap in an improved proj ect.13 The ?rst appeal decision then noted that the Applicant, not FEMA, has the responsibility to identify all eligible work and submit costs for funding within 60 days from the ?rst substantive meeting. Additionally, it was the Applicant?s responsibility to request inspections or changes to the PW at the point in the grant process when such changes are anticipated. The RA determined that the Applicant should have recognized any alleged omissions when it received the PW, but here the Applicant did not submit its request until well after the facility had already been demolished. 13 In various places the ?rst appeal decision discussed whether the request for increased costs was tied to the original replacement project or the new improved project. Regardless of any confusion that previously existed, it is clear on second appeal that all of the additional costs that the Applicant is seeking are related to estimated costs for the replacement project, and are not related to actual costs for the combined school that the Applicant buiit. It is also clearly understood that the costs presently at issue are distinct from the Applicant?s previous requests for increased square footage related to codes and standards, and for permanent relocation. Second Appeal Analysis, PA ID Page 7 of 20 Joplin Schools, PW 1980 The RA explained that the items of work and costs in question were not newly discovered during the course of performing eligible work. The Applicant was aware of the need to report the extent of damage for which it was seeking funding, and it failed to identify all eligible work and submit all costs. Regarding the email exchange that the Applicant attached to its ?rst appeal, the RA stated that FEMA did not give incorrect advice because, at no time during the grant process, did the Applicant make a request for a budget revision based on a bid that came in higher than estimates. The Applicant?s inquiry to FEMA did not address requests for SOW increases late in the process.14 Additionally, the Applicant?s request for increased funding was not based on competitive bids that came in higher than estimates. The RA also determined that, for some content items within Franklin Technical Center, insurance was available to cover those losses. Regarding the CEF factors, the RA determined that FEMA had used the correct localized data for the City of Joplin. The RA also found that the Applicant had not justified any increase in the soft cost estimates in the CEF. The RA explained that the overall CEF factor for soft costs could not be adjusted directly, because it was based on a number of speci?c factors that needed to be analyzed individually, which the Applicant had failed to do. Regarding the requested 17 perCent cost increase, the RA determined that the Applicant had failed to provide any documentation to support such an increase. Turning to the issue of DAC, the RA determined that the Applicant?s initial decision to contract with Witt without competition was an improper procurement, both under federal standards and the Applicant?s own guidance. It did not meet federal standards because the Applicant did not . establish that a competitive procurement was not feasible or that any public exigeney would not have permitted a delay from competitive selection. Moreover, the Applicant did not comply with its own procurement standards because it did not establish that non?competitive procurement was required to protect against loss of property or minimize a serious disruption in services, that it used as much competition as was practical under the circumstances, or that the contract was limited to a purchase necessary to alleviate the emergency. The RA noted that, even if there had been an emergency that justi?ed non-competitive procurement, this was a three-year contract and was not limited to meeting any exigency. Finally, the RA determined that the Applicant did not perform the required cost analysis for its contract with Witt. While it claimed to have reviewed the prices given from other HGAC vendors, it did not document this assertion, and, in any event, that was not a suf?cient cost analysis. With respect to Task Order No. l, the RA discussed Whether this represented an amendment to or a termination of the original contract, but ultimately concluded that was an improper proCurement either way. As a new procurement, it was not competitively procured because selecting from a list of HGAC vendors was not free and open competition. As an amendment it could not cure the original non-competitive procurement with a second non-competitive process and created the additional problem that it reduced the covered period from 2014 to 2013. Modi?cation No. was also improper because it was not accepted until after the request for closeout and well after the expiration of the prior contract. The Applicant Could not retroactively extend the prior contract in this manner and, even if it could, it still did not remedy the problems described above. 14 See email ??om Chief Fin. Of?cer, Joplin Sch. to FEMA, at 1 (Apr. 20, 2012 6:05 PM). Second Appeal Analysis, PA ID Page 8 of 20 Joplin Schools, PW 1980 In light of this procurement noncompliance, the RA determined that FEMA had acted within its . discretion to award costs that it determined to be reasonable through June 8, 2014. The RA determined that it was appropriate to use a rate of $155 per hour and require a justi?cation for a higher rate. The Applicant?s only proffered justi?cation was that Witt offered the same fee schedule to other HGAC members and through a GSA contract. The RA explained that these facts could not establish that a higher rate was reasonable for market conditions for this particular disaster and location. For any individual who billed above $155 per hour, the RA found that the Applicant had not demonstrated that such a rate was appropriate to the complexity of the work, the amount of time required to perform it, and the skill level required to perform the activities. Finally, with respect to travel-related DAC, the RA found that these were indirect costs that could not be readily attributable to speci?c PWs. Thus, they were reimbursable as project management costs that FEMA already funded, and were not reimbursable as DAC. Finally, with respect to insurance proceeds, the RA explained that FEMA examined the insurance receipts and allocations, and provided a new determination. First, FEMA acknowledged that the $276,000.00 that appeared unallocated were allocated to a demolition PW. Next, the RA determined that it was improper to allocate the $1,000,000.00 in receipts for Law and Ordinance funding to Emerson Elementary because the Applicant had not demonstrated what triggered code upgrades, and FEMA had not authorized any codes and standards for that project. By contrast, Joplin High School did have codes and standards upgrades, so these receipts were appropriately allocated to PW 1980. Accordingly, the RA determined that the total insurance proceeds for Joplin High School, Franklin Technical Center, and Law and Ordinance coverage, was $55,683,891.35. FEMA accepted the Applicant?s explanation that the $3,000,000.00 grant it received for Franklin Technical Center did not result in a duplication of bene?ts. Of the insurance proceeds described above, the RA noted that $90,000.00 had been allocated to a PW addressing demolition work. $811,249.61 had been allocated to a PW covering the high school grounds. Accordingly, the remaining $54,782,641 .74 in insurance receipts was allocable to PW 1980. - A In light of the foregoing, the ?rst appeal decision stated that the net increase of insurance deductions applicable to PW 1980 was $649,743.00,15 and that this amount needed to be deobligated from the PW. Implementing this decision, EMA prepared PW 1980 Version 2, which included an additional insurance reduction of $649,747.00. Second Appeal The Applicant ?led its second appeal in a letter dated January 17, 2018. It argues, ?rst, that its request was based on take?offs from the building plans, and that this was an appropriate method of analysis for a building that was destroyed. It reiterates its argument that it did not need to ?le an appeal, but that the PW could be amended until closeout. It asserts that this is what FEMA did in PW 1438, when a new PW was issued to include a kitchen that was omitted from a prior versmn. 15 The accuracy of this net change will be discussed later in this appeal. Second Appeal Analysis, PA ID 097-U4T46-00 Page 9 of 20 Joplin Schools, PW 1980 It reiterates that it was not seeking funding for the actual costs of the school that was constructed, but was seeking an increase in the estimated cost for the eligible repair project. It also states that it was not seeking ?nding for new or additional damage, but rather seeking to amend the SOW and cOsts. It argues that its procedure of having its architectural ?rm review drawings was appropriate to evaluate the estimates for the project. It also notes that EMA modi?ed PW 1438 to include a kitchen that was omitted from the SOW, and argues that FEMA is treating PW 1684 inconsistently. I The Applicant also argues that it was not required to appeal the obligated PW, even if it disagreed with the amount of capped funding. It argues that PWs may be continually amended up until ?nal closeout. It acknowledges that PA Guide states that if an applicant believes eligible costs exceed the original estimate the amount of the grant can be appealed, but argues that this does not require a formal appeal, only a request for an amendment to the PW. It also asserts that such a requirement con?icts with advice it received from a FEMA employee, and again references the email exchange it included with its ?rst appeal. The Applicant argues that it could not have made the request earlier because the information was not available until its architectural ?rm completed its analysis of the CEF. It acknowledges that it believed the SOW in Version 1 of PW 1980 was incorrect at the time of obligation, but states that it was not possible to request an amendment at that time. It also acknoWledges that it provided the square footage of Joplin High School to FEMA, but states that this shouldhave been adjusted once its architectural ?rm determined that the original submission was incorrect. With respect to DAC, the Applicant argues that its procurement of Witt?s services was proper because Witt had a good reputation as a provider of disaster recovery assistance services and it offered at or below the rates it offered through its GSA contract. It characterizes the ?rst appeal decision as ?nding that a term of three years was not allowable for disaster recovery services and argues that disaster recovery often takes much longer than three years. It argues that when it joined HGAC, it con?rmed that its procurement of Witt was proper. While Task Order No. 1 had an expiration date of May 31, 2013, the Applicant states that it needed Witt?s services and intended to continue the relationship through May 31, 2016, and therefore it did not matter that there was no signed contract in place for a period of time. Next, the Applicant argues that FEMA should not have established $155 per hour as the only reasonable rate. It again asserts that Witt?s rates were at or below those offered in its GSA contract, and asserts that this makes them reasonable. The Applicant argues that its allocation of Witt?s travel-related costs among various PWs was proper. It explains that all Witt employees prepared daily timesheets indicating the hours that they worked on speci?c PWs, and that hours not related to a speci?c PW were considered to be indirect management costs. It further explains that it took each employee?s travel related costs and divided them by the total number of hours worked, thereby proportionally allocating them among the various PWs. It argues that this process is reasonable and conforms to federal cost allocation standards. Finally, the Applicant argues that the entire period during which Witt provided services was covered by contract. Regarding allocation of insurance proceeds, the Applicant argues that the $1,000,000.00 received for Law and Ordinance coverage was properly allocated to the Emerson Elementary School PW because its insurer paid that amount based on information submitted for that school. Finally, the Second Appeal Analysis, PA ID 097-U4T46-00 Page 10 of 20 Joplin Schools, PW 1980 Applicant notes that there appeared to be a mathematical error in the ?nal obligated PW. It points to the ?rst appeal decision, Which determined that the insurance proceeds allocable to PW 1980 were $54,782,641.74, which it says should lead to a ?nal obligation of $6,971,035 .60. It argues that the ?nal obligated amount of $6,671,3 02.99 was short by $299,732.61. The Grantee forwarded the second appeal on January 24, 2018, supporting the Applicant?s arguments. Discussion Improved Project16 The Applicant?s request for an increase to the capped funding for its improved project can be separated into two categories. The ?rst seeks an increase of $13,358,64223 for items of work not included in PW 1980?s SOW, or higher costs for items that were included in the SOW, as well as the cost of the review by its architectural ?rm. The second seeks an increase of $15,001,100.87 in cost adjustments in PW 1980?s CEF factors. . Errors, Omissions, and Architectural Review FEMA provides Public Assistance (PA) funding for work to restore damaged eligible facilities to their predisaster design, function, and capacity in accordance with applicable codes and standards.17 It is the applicant?s responsibility to identify and report all damage and submit all costs for disaster-related funding.18 The applicant has 60 days from the ?rst substantive meeting, usually the kickoff meeting, to provide this information. 19 Failure to report damage within the required timeframe can jeopardize funding.20 If an applicant discovers hidden damage, additional work that is necessary to complete a project, or costs that are higher than estimated, the applicant should notify the state as soon as possible.21 It should not be assumed that such costs can be reported at the end of the project and that additional funds will be approved.22 The timing must be such that the newly claimed damage can be inspected before it is covered up or repaired.23 Federal regulations require that an applicant must obtain prior approval 16 The RA denied the ?rst appeal, in part, based on the Appiicant?s untimely submission of the appeal. August 7, 2014 denial of the Applicant?s request for the additional funding, however, did not inform the Applicant of their appeal right, and the format, content, and timeframe requirements outlined in 44 C. F. R. 206. 206 See Recovery D11 ecto: are Manual, Public Assistance P1 ogv am Appeal Pl ocedul es Version 3, at 11 (Apr. 4, 2014). Accordingly, FEMA will consider the Applicant?s second appeal. 17 44 C. R. 206. 2010') 206.226 (2010); Public Assistance Guide, FEMA 322, at 79 (June 2007) [hereinafter PA Guide]. 18 44 C. F. R. 206. 202(d)( 1) PA Guide at 96. 19 44 R. 206. 202(d)(1)(ii), PA Guide at 96. 20 FEMA Second Appeal Analysis, Los Angeles Dep? 2? of Ware: and Power, FEMA-1577-DR-CA, at 2 (Mar. 29, 2010) (denying request to expand SOW to correct alleged errors and omissions because the new damage was not identi?ed within the regulatory time??ame). . 21 PA. Guide at 139-140. 22 Id. at 140. 23 Id. Second Appeal Analysis, PA ID 097-U4T46-00 Page 11 of 20 Joplin Schools, PW 1980 whenever it is anticipated that additional funding 01 any 1evision of the scope of the project will be required. 24 When performing permanent restoration work, if an applicant decides to make improvements to the facility while still restoring its predisaster function, it may request an improved proj ect.25 It must obtain this approval prior to the start of construction.26 PA funding for improved projects is limited to the costs that would be associated with repairing or replacing the damaged facility to its predisaster design.? This limit represents a funding cap, and the balance of the funds required to complete the project is the applicant?s responsibility.28 If an applicant believes that eligible costs exceed the estimate, and those costs can be tracked and documented separately from the improvements, then the applicant may appeal the amount of the grant.29 There are certain instances where FEMA may adjust the funding cap of an improved project for errors and omissions, for example, where additional costs are necessary to complete the original when the applicant demonstrated that the PW underestimated the costs required to complete the original or where it was later discovered that the CEF contained a calculation error.3 2However, FEMA has denied 1equests to adjust funding caps in situations where the additional funding requested was associated with work FEMA did not app1ove, 33 the costs we1e inappropriate to the 01iginal SOW, 34 the work was not required as a direct result of the disaster,35 or when the applicant should have been aware of damage but did not report it until it was too late for FEMA to perform an inspection.36 - While the Applicant has characterized its request as a correction of ?errors and omissions,? it actually seeks funding for work outside the SOW approved in PW 1980, and additional funding for speci?c line items that were included in the CEF. The CEF contained a specific, detailed description of the Applicant?s claimed damages and the work and associated costs requii ed to address those damages. The Applicant sought approval for additional work and costs well after it agreed to the funding cap calculated in the CEF. 2? 44 C.F.R. 25 44 C.F.R. PA Guide at 110. 26 PA Guide at 111. 27 Id. at 110. 28 Id. 291d. 30 EMA Second Appeal Analysis, Nashville?Davidson Cty, at 4 (Sept. 25, 2015) (approving cap increase where it was discovered during performance of eligible wo1k certain items could not be repaired and required replacement). 31 FEMA Second Appeal Analysis, Clarke Elec. Coop, at 3?4 (Jan. 12, 2015) (approving cap increase where applicant submitted new estimating methodology for a complex project and a FEMA engineer agreed). 32 FEMA Second Appeal Anaiysis, Town of Killingz?on FEMA- at 7 8 (Dec. 7, 2017FEMA Second Appeal Analysis, Los Angeles Cry, 1577 DR-CA, at 4- 5 (Sept. 11 ,2012). 35 FEMA Second Appeal Analysis, Trenton Special Sch. Dist, FEMA-1909-DR-TN, at 3 (Aug. 5, 2016). 36 EMA Second Appeal Analysis, Spring FEMA-423 at 3 (Nov. 27, 2017) (denying cap increase where applicant should have-been aware of aileged errors or omissions but did not submit modi?cation request until after work was completed). - Second Appeal Analysis, FEMA 1980 PA ID O97-U4T46- 00 Page 12 of20 Joplin Schools, PW 1980 This is not a situation where the Applicant discovered hidden damage during the performance of eligible work. The funding for an architectural ?rm?s review had never been determined to'be eligible. Similarly, while the two schools were eligible for replacement, the work to replace a copper electrical bus system and ?xed equipment, and to ?ll mining tunnels had never been identi?ed in the damage description or SOW. These are examples of the type of additional work that should have been identi?ed early in the process. The Applicant mischaracterizes this as a failure on part. On the contrary, it is the Applicant?s responsibility to identify damage and costs. Because of the delay in reporting this damage, FEMA could not conduct inspections or otherwise verify eligibility of the work and costs. Regarding the Applicant?s request for work that it asserted to be required to ensure ADA compliance, FEMA may increase the funding cap if additional work is required due to codes and standards-.37 But here, the Applicant did not provide any documentation showing how the CEF estimate was not ADA compliant, it simply asserted that additional square footage was necessary The Final RFI requested the calculations and data upon which all of the Applicant?s requests were based, but the Applicant did not provide further information. For each of the requested additional items of work, all of the information that these requests were based on was available to the Applicant when it agreed to the funding cap, and there was no hidden damage. This was not similar to when EMA added the kitchen to the SOW for PW 1438. In that case, FEMA had originally included the kitchen but had inadvertently omitted in a later revision of the PW. Here, by contrast, the additional items of work had never been determined to be eligible. This was also not a situation where the Applicant demonstrated through bids or some other documentation that the CEF underestimated costs associated with an eligible item of work. The Applicant?s request for additional funding for line items already included in thelCEF stated that its architectural ?rm provided a higher take-off estimate. The Applicant included a spreadsheet showing that it created its estimates using different cost codes, different unit prices, different unit quantities, or a combination of these. However, it did not provide any documentation showing that the CEF underestimated unit prices, used incorrect cost codes, or underestimated the required amount of materials. Regarding the additional square footage for Joplin High School, The Applicant provided and consistently accepted a size of 244,300 square feet until 2014, after the original school had been demolished. This number was used in the analysis of whether the school was eligible for replacement, as well as for whether FEMA would approve the improved project. The Applicant did not establish that the newly claimed larger size was more reliable than what had been used in these previous two determinations. Had the Applicant raised this issue in a timely manner, FEMA could have taken steps to verify the school size prior to its demolition. Similarly, the Applicant provided no reason to explain why estimate of costs per square foot was unreliable, other than to say that its architectural ?rm came up with a different estimate. This was insuf?cient for the RA to adjust the funding cap. It was incumbent upon the Applicant to identify all of the additional work and costs before it agreed to a funding cap, which it, knew represented the limit of available federal funding for the 37 See, FEMA Second Appeal Analysis, St. Tammany Parish, at 6-7 (Aug. 1, 2017) (granting increase where applicant established that certain additional co de-driven? work was related to approved work and couldbe tracked separately). Second Appeal Analysis, PA ID 097-U4T46-00 Page 13 of 20 Joplin Schools, PW 1980 project. All of the facts upon which its request was based were available to the Applicant at the time that it agreed to the funding cap. While the Applicant argues that it could not have made the request for additional funding until it received a report from its retained architectural ?rm, this argument is unpersuasive. The Applicant states that, during the process of formulating PW 1980, it believed that there were additional damages and costs not identi?ed in the CEF, and it knew that it intended to seek additional money. However, it did not previously inform FEMA that it needed additional time for an architectural ?rm to review the project, nor did it justify its decision not to involve its architects earlier in the process. The Applicant could not avoid the timeframe for reporting damage or the need for additional funding by delaying taking the measures required to identify the additional work or costs. This conclusion does not contradict the email response from a FEMA employee that the Applicant included in the record. A review of this email exchange shows the Applicant asked a very speci?c question: whether FEMA would approve additional funding if competitive bids for an item of work came in higher than estimated in the PW. FEMA responded that additional funding could be approved if the higher cost was related to an approved SOW. This was a correct statement of practice, and as noted above, FEMA has previously approved cap increases in such circumstances. In this email exchange, FEMA did not tell the Applicant that it would later fund new work that was not previously approved, nor that it would approve additional costs that were not based on documentation such as higher bids. In light of the foregoing, it was unreasonable for the Applicant to expect that FEMA would approve a substantial increase in funding in 2014 when it ?rst made the request, much less at closeout in 2016. When FEMA obligated the PW, the Applicant knew that the funding was capped and if it believed additional funding was eligible, it needed to inform the Grantee and FEMA as soon as practicable. Here, it failed to do so. Moreover, the requests for increased costs associated with the approved SOW were not substantiated by documentation. Therefore, the RA properly denied the ?rst appeal With respect to the claimed errors and omissions. CEF Factors The CEF provides a uniform method of estimating costs for large proj ects.38 The first part of the CEF is Part A, and it is designed to capture the detailed construction costs required to complete the eligible These base costs can be derived from cost estimating resources, such as When using national industry standard cost data, city cost indices are used to adjust national unit prices to the nearest city.? Then, a series of factors (Parts through H) are applied that represent potential additional eligible project costs that can reasonably be expected to be incurred because they are usually encountered during the course of a construction proj ect.42 It is the applicant?s burden to substantiate its appeal.43 33 CEFfor Large Projects Instructional Guide V2.1, at 1-2 (Sept. 2009) [hereinafter CEF Guide]. 39 Id. at 3-3. 4" Id. at 4-8. 41 Id. App1-2. 43 44 C.F.R. FEMA Second Appeal Analysis, Vill. of Waterford, at 4 (Sept. 4, 2014). Second Appeal Analysis, PA ID Page 14 of 20 Joplin Schoois, PW 1980 - In its second appeal, the Applicant does not directly address ?rst appeal analysis regarding the CEF factors, although it attaches copies of. the arguments it raised previously. Speci?cally, the Applicant argued that the CEF factor, drawn from cost adjustment in Parts through H, should have been higher to capture the costs of the project, and that the Part A cost estimate should have been increased by an additional 17 perCent because of cost escalations. These requests are without merit. First, the RA properly found that the Applicant had not demonstrated that a higher CEF factor should have been used. The Applicant has not provided any documentation showing that the estimate was inaccurate. Second, the RA correctly determined that the Applicant had not substantiated its request for a 17 percent increase in funding. The Applicant provided no basis for this increase other than to say that its construction company had recently completed a different project in a different city at a lower cost. This was not a suf?cient reason to adjust the CEF. Accordingly, the Applicant did not demonstrate that any changes in the CEF factors were justi?ed. Procurement The Applicant?s second appeal of the partial denial of DAC is related to costs incurred after June 8, 2014, costs incurred in excess of $155 per hour, and costs associated with travel expenses. Funding under the PA program is available for management costs, which a1e administrative expenses and any other expense not directly chargeable to a speci?c project under a major disaster. 44 In addition to these management costs, FEMA will reimburse DAC incurred by applicants that are properly documented and can be tracked, charged, and accounted for directly to a speci?c project. 45 Such costs must be 1easonable for the work performed and accounted for in accordance with applicable federal regulations.46 Costs that are not tracked to a speci?c project, but are instead indirect costs are not DAC and may be reimbursed as management expenses.4 7Where an applicant uses a contractor to perform administrative services, FEMA will consider certain factors when evaluating DAC, such as the method for contracting the services, the skill 4level of the people performing the activities, and the amount of time to perform an activity.48 In determining whether DAC are reasonable, FEMA considers whether cont1 actors utilized appropriate skill level for the work, which for most PA projects is a junior or mid- level technical or program specialist (or equivalent), although, for complex projects, staff with a higher level of technical pro?ciency or experience may be appropriate.49 Travel and per diem costs for contractor employees are eligible as direct costs only if such costs can be attributed to 4? The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93?288, 324(a), 42 U. S. C. 5165b(a) (2011); Disaster Assistance Policy DAP 9525. 9, Section 324 Management Costs and D11 ect Administiative Costs, at2- 5 (Nov. 13, 2007). 45 DAP 9525. 9, at2Id. Memorandum from Assistant Adm?r, Disaster Assistance Directorate, EMA, to Reg?l Adm?rs, FEMA, at 2 (Sept. 8, 2009) [hereinafter DAP 9525.9 Guidance Memo]. 49 161.; see also FEMA Second Appeal Analysis, City of Cedar Rapids, at 4-5 (May 19, 2014) (?nding that an hourly rate of $285 for administrative services was unreasonable absent evidence that the tasks performed were particulariy complex). Second Appeal Analysis, PA ID Page 15 of 20 Joplin Schools, PW 1980 . individual proj ects.50 Travel expenses not tied to one speci?c project are indi1ect expenses and may be reimbuISable as 324 management costs, not DAC. 51 When choosing a vendor to provide administrative services, applicants must comply with all procurement requirements}? Accordingly, a contract award must comply with both federal procurement standards, and an applicant?s own procurement standards.53 For large projects, this generally means that the contract must provide for full and open competition, for example, by receiving sealed bids or competitive proposals from a number of vendors following a public solicitation.54 Under federal regulations, noncompetitive procurement, whereby a proposal is received from only one source, may only be used when it is not feasible to use a competitive procedure and a speci?c justi?cation exists, such as when a public exigency or emergency will. not permit a delay resulting from competitive solicitation.55 Typically, FEMA ?nds an exigency when lives or property are at stake, where the contract is for actual work to restore critical services, or where the contract is for work that is not permanent in nature.56 By contrast, the administrative services that can be funded as DAC are activities such as identifying damage, attending brie?ngs, establishing ?les and oversight procedures, providing documentation, preparing for audits, working with federal and state authorities to monitor projects, developing cost estimates, and collecting cost data.57 Even if administrative services .are performed during the exigency period, EMA does not generally View them as critical services or as activities that protect life or property.58 Where an applicant materially fails to comply with a term of a federal grant, such as complying with local and federal procurement standards, FEMA has discretionary enforcement authority, which it exercises on a case-by-case basis.59 range of authorized actions includes disallowing all or part of the cost of the activity or action not in compliance.60 1n exercising this discretionary authority, the selected action must be appropriate to the circumstanCes and, to the extent that EMA allows funding, FEMA must consider the reasonableness of the costs. 61 A cost is reasonable if, 1n its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances 62 Here, the Applicant?s contract award to Witt was a noncompetitive procurement. The Applicant contends that a noncompetitive procurement was allowable under its own procurement 50 DAP 9525.9 Guidance Memo, at 511d, attach. at 1-3. 52 DAP 9525.9 Guidance Memo, at 2. 53 44 C.F.R. PA Guide, at 51. 54 44 CPR. PA Guide, at 51?52. 55 44 C.F.R. PA Guide, at 52. 56 FEMA Second Appeal Analysis, Marrinsville USD, FEMA-1771-DR-IL, at 4 (July 19, 2016); FEMA Second Appeal Analysis, Columbus Reg?l Hosp, at 7?8 (Dec. 27, 2017). 57 Columbus Reg ?1 Hosp, at 8; see also DAP 9525.9 Guidance Memo, attach. at 1-3; 53 Columbus Reg ?1 Hosp, at 8; see also FEMA Second Appeal Analysis, City of Pierre, FEMA-1984-DR-SD, at 11 (May 27, 2015) (de?ning exigency as ?something that is necessary to a particular situation that 1equires or demands immediate aid or action?) 59 44 F. R. 13. 43(a), FEMA Second Appeal Analysis, City of Nome at 5 (Sept. 28, 2016). 60 44 C. F. R. 13. 43(a). 61 City of Nome FEMA 4050-DR-AK, at 5-6. 62 2 C.F.R. Part. 225, App. A Second Appeal Anaiysis, PA ID 097-U4T46-00 . Page 16 of 20 Joplin Schools, PW 1980 guidelines as well as federal procurement standards under a public exigency or emergency exception to the competition requirement. The Applicant has stated that the initial Witt contract was necessary, but it has consistently failed . to explain why it was necessary to enter into a multi-year, multi-million dollar contract for administrative services without the bene?t of competition within ten days of the disaster. It has not explained why it was not feasible to use a competitive procurement process under the circumstances. Even accepting that there was a public exigency that required Witt?s services, the Applicant has not explained why such an exigency would not allow it to take the time for a competitive solicitation, particularly where the contract was for an extended period of time and in excess of $3 million. Additionally weighing against the Applicant?s argument is the fact that this procurement was for administrative services. As noted above, FEMA does not generally view an administrative services contract as one which is necessary to meet an emergency need or resolve an exigency. Even if there were hypothetical circumstances in which noncompetitive procurement of such a contract could be justi?ed under an emergency exception, here, the Applicant?s three?year contract clearly exceeded any exigency, and so would not qualifyfor an emergency exception. The Applicant?s second contract with Witt entered into through HGAC, Task Order No. 1, does not change this result, regardless of whether it is viewed as a new contract or modi?cation to the original agreement.63 If viewed as a new contract, Task Order No. 1 was executed in December 2011, and the Applicant has not explained why noncompetitive procurement was necessary at that point, which was seven months removed from the disaster. If viewed as a contract modification, as the RA correctly explained, a later modi?cation could not remedy the initial noncompliant procurement. Finally, the Applicant has also attempted to justify its decision to use noncompetitive procurement by emphasizing that Witt?s price schedule was reasonable. Even accepting for the sake of argument that the contract costs were reasonable, it would not change the result because this is a separate issue. The fact that costs are reasonable does not excuse noncompliance with procurement regulations. Accordingly, the RA correctly determined that the Applicant?s DAC contract with Witt was noncompliant. Because of the procurement noncompliance, FEMA had discretionary enforcement authority to award reasonable costs or to disallow all costs. Here, the RA elected to award certain costs determined to be reasonable. Speci?cally, the RA awarded actual DAC for those hours billed at less than $155 per hour through June 8, 2014. This represented the majority of DAC hours, which were billed at approximately $133 per hour. What the RA disallowed were: (1) hourly costs billed above $155 per hour, (2) costs for hours billed after June 8, 2014, and (3) costs associated with travel expenses for Witt staff. These costs are the subject of this second appeal, and each of these will be addressed in turn. 53 While the identi?cation of Task Order No. 1 as a new contract or a contract modi?cation is not important to the question of compliant procurement, it will be important to the question of reasonable costs, which will be addressed later. Second Appeal Analysis, PA ID Page 17 of 20 Joplin Schools, PW 1980 Regarding hours billed above $155 per hour, two things should be noted at the outset. First, the RA did not disallow those costs in their entirety, but rather awarded costs at a rate of $155 per hour. Second, the RA did not determine that $155 per hour was the only reasonable hourly rate. Rather, the RA acted in accordance with prior regional communication about the issue which stated that, where an applicant sought reimbursement for DAC over the $155 per hour rate, it needed to provide a justi?cation for the higher rate being reasonable under the circumstances. The Applicant had the opportunity to provide such justi?cation, but only argued that Witt?s rates were the same as those offered to other federal and state entities. It failed to offer a justi?cation of why staff members billing at an hourly rate higher than $155 for a number of hours was appropriate to the work and required for this project, which is what is required for reimbursement of DAC. In light of the lack of justi?cation for a higher rate, it was within the discretion to limit the award to$155 per hour as part of the enforcement action for the procurement noncompliance. 64 Regarding costs for hours billed after June 8, 2014, the RA disallowed these costs because they were not incurred pursuant to an active contract between the Applicant and Witt.65 To clarify the timeline, the Applicant?s initial contract with Witt ran until June 8, 2014. The Applicant?s second contract with Witt (Task Order No. 1) ran until May 31, 2013. The Applicant did not execute a new contract with Witt (Modi?cation No. 1) until January 15, 2016. The 2016 contract purported to be retroactive to June 1, 2013. That the contract was backdated, however, does not change the fact that there was no contract in place during the period in which the disallowed costs were incurred. If, as the Applicant has maintained, Task Order No. 1 replaced the initial contract with Witt, then there was no contractin place between June 1, 2013, and January 15, 2016. In the past, EMA has determined that DAC incurred without a contract are ineligible for PA funding.66 Despite this,.the RA decided to allow costs incurred up to June 8, 2014, because that was the period of the original contract. The exercise of discretion was an appropriate enforcement action to address the procurement noncompliance. Finally with respect to Witt?s travel costs, it should be noted that, although the Applicant and First Appeal decision discussed these costs separately, these were also DAC which were disallowed following a procurement noncompliance. As the RA correctly noted, in order to reimburse travel costs, FEMA requires that they be tied to one single proj ect.67 Notwithstanding any other federal cost attribution guidelines, where travel costs are incurred for the bene?t of multiple projects, FEMA does not treat themas DAC. Accordingly, the decision to disallow these costs as part of the enforcement action was appropriate. 64 Letter from Reg?l Adin?r, FEMA Region VII, to Dir., Mo. State Emergency Mgmt. Agency, at 1?2 (June 23, 20 i I). . 65 Contrary to the Applicant?s assertion on second appeal, the RA did not determine that a three?year contract was impermissible. These costs were denied because there was not an active contract in place at the time. 66 See, City of Cedar Rapids, at 4?5 (?nding that DAC incurred without a contract in place was ineligible for PA funding); Cizjxof Nome, at 5? (finding that without a written contract, the documentation required by federal regulations cannot exist). 67 DAP 9525.9 Guidance Adamo, attach. at 1?3. Second Appeal Analysis, PA ID Page 18 of 20 Joplin Schools, PW 1980 Insurance When administrating the PA program, EMA must ensure that an applicant does not receive federal assistance for any loss for which it has received funding from insurance.68 To do this, EMA deducts insurance proceeds from otherwise-eligible costs.69 Law and Ordinance Reduction The Applicant received $1,000,000.00 in insurance proceeds for Law and Ordinance, which was the policy limit for that type of funding. While the Applicant allocated this funding to the Emerson Elementary School project, the RA determined that it was more appropriately allocated to PW 1980. A review of the insurance policy indicates that the Law and Ordinance insurance proceeds were in their own category of funding, and were not solely for Emerson Elementary School.70 Even if the Applicant reached its policy limit in the Law and Ordinance category by submitting information about Emerson, that funding was available for any of its projects. What quali?es for coverage under insurance policy?s ?Law and Ordinance? provision71 is not necessarily the same as what FEMA considers eligible work to address codes and standards, so, as a general rule, whether FEMA approved a code and standard upgrade will usually not bear on whether a duplication of bene?ts has occurred. In this situation, however, because the Law and Ordinance insurance proceeds were available for any of the projects where code-required upgrades were made, and because the SOW for PW 1980 included code-required upgrades, it was appropriate for the RA to allocate these insurance receipts to PW 1980. Total Insurance Reduction The Applicant argues that the ?nal obligated amount in Version 3 of PW 1980 was lower than it should have been. Upon review, the Applicant is correct. In the ?rst appeal determination, the RA found that the Applicant?s total insurance proceeds for Joplin High School, Franklin Technical Center, and Law and Ordinance was $5 5,683,891 .35.72 This number appears to be correct, as it corresponds with the Applicant?s insurance settlement. Of this total amount, $90,000.00 was allocated to a PW addressing the demolition of Franklin Technical Center, and $811,249.61 was allocated to a PW addressing work to the grounds of the High School and Technical Center. All remaining insurance proceeds were allocated to PW 1980. The total insurance proceeds and their allocation were shown in helpful tables in the ?rst appeal decision which are reproduced below. From these tables, it? is clear that the total amount allocated among the various PWs needed to match (and did match) the total insurance settlement. 63 Stafford Act 312(a), 42 U.S.C. 5155(a). 69 44 CPR. 70 Contract between Travelers Insurance, and Joplin School District, at 23 (June 21, 2010). 71 . Id. . 72 The $276,000.00 discussed in the RFIs was also for the Joplin High School, but was speci?cally for demolition and was accounted for separately. Second Appeal Analysis, PA ID 097-U4T46-00 Page 19 of 20 Joplin Schools, PW 1980 Insurance Settlement Amounts - JHS Building FEMA PW Allocation - JHS Building Joplin High 5011001 344.318.391-35 FTC Demolition - PW 1704 $90,000.00 Franklin ?1'th - Buildings $9,865,000-00 JHS School Grounds - PW 1336 $811,249.61 Law Ordinance 1118 Replacement - PW 1980 $54,782,641,14 Total $55,683,89135 Unfortunately, in describing how to implement the determination, there was some confusion due to the complicated procedural history, multiple determination memoranda, and two RFIs. As a result, PW 1980 Version 3 incorrectly applied a total insurance reduction of $55,082, 381. 35. 73 Accordingly, the ?nal version of PW 1980 should include total project costs of $61, 753, 677. 34, 74 less 1nsu1ance proceeds of $54, 782, 641. 74, for a total ?nal eligible amount of$6, 971,035 60. Conclusion The RA properly determined the Applicant?s request for funding for work outside the approved SOW, as well as higher costs assOciated with items in the approved SOW, to be ineligible because the Applicant failed to identify new work and request additional funding in a timely manner. Moreover, the Applicant did not substantiate its claim that the proj ect?s CEF was incorrect or the estimate was improper. With respect to DAC, the Applicant?s contract award to Witt was the result of an impermissible noncompetitive procurement. The RA exercised appropriate discretion by awarding partial costs as an enforcement measure The RA also acted appropriately by declining to awaid hourly costs billed above $155 per hour, costs for hours billed after June 8, 2014, and costs associated with travel expenses for Witt staff The RA appropriately applied insurance proceeds of $1,000,000.00 for Law and Ordinance to PW 1980. However, the total insurance proceeds applied in Version 3 of PW 1980 inadvertently did not match the RA 3 determination in the ?rst appeal. Therefore, this appeal is partially granted so that a new version of PW 1980 can be obligated that matches the ?ndings regarding 1nsurance proceeds 1n the ?rst appeal determination. 73 This ?gure is derived by combining the insurance deduction in PW 1980 Version 2, which was $54,432,634.35, with the additional reduction in Version 3 of $649,747.00. Incidentally, the reduction in Version 3 also contained a typographical error, as the ?rst appeal decision stated that the reduction should be $649,743.00. This $4.00 difference will be conected when the next version of PW 1980 is obligated 74 This consists of construction costs of $57,543 ,.446 00, DAC of $432, 901 34, and Hazard Mitigation of $3,777,330. 00. Second Appeal Analysis, FEMA-1980 PA ID 097- 00 Page 20 of 20 Joplin Schools, PW 1980