Reasonable Costs

Summary Paragraph

On December 31, 2005, high floodwaters caused damage to Rooney Dam, resulting in substantial scouring of the dam and the washing away of trees from the bank.  FEMA prepared a PW version for $352,077.00, an estimated cost for completing the work based on a previous project, and later the Applicant determined that actual costs on the project were $141,786.50.  On March 8, 2012, FEMA determined the Applicant did not properly procure its professional services contract, and the costs for those services were unreasonable given the construction costs.  FEMA also determined that the project was an improved project because some of the approved scope of work was completed along with a fish ladder project funded by another agency.  FEMA found eligible costs to be $74,946.64 and deobligated $277,130.36.  In the first appeal, the Applicant requested FEMA provide the actual costs, arguing that it followed procurement procedures and all costs were reasonable.  The Region IX Deputy Regional Administrator denied the first appeal on the issue of eligible costs, finding the Applicant failed to follow procurement procedures and did not verify the soft costs solely pertaining to the FEMA project.  On second appeal, the Applicant argues that all actual costs are the reasonable costs related to the FEMA project and that the fish ladder project was distinct from the FEMA project.

Authorities and Second Appeals

• 44 C.F.R. §§ 13.22(a)(1), 13.36, 206.203(d)(1).

• OMB Circular A-87, 2 C.F.R. § 225.

• PA Guide (1999), at 34, 39, 75-79.

Headnotes

• Pursuant to 44 C.F.R. § 13.36(c), applicants procurement of services under a federal grant must do so in a way that provides full and open competition, unless the applicant meets one of the exceptions under 13.36(d)(4)(i).

  • The Applicant did not demonstrate that it properly procured the professional services contract nor did it show that it met one of the exceptions.As a result, FEMA assessed, but could not verify the reasonableness of the costs.

• Pursuant to 44 C.F.R. § 206.203(d)(1), federal funding for improved projects shall be limited to the Federal share of the approved estimate of eligible costs.

  • The construction costs for the project are $47,227.00 and the claimed amount for soft costs is $94,559.50.The Applicant provided a spreadsheet noting task descriptions and the amounts attributable to those tasks for the Rooney Dam project.The task descriptions did not provide sufficient detail for FEMA to assess cost reasonableness.

FEMA applied an approved methodology to estimate reasonable costs.