Appeal Type:
2nd
Report Type:
PW
Appeal Categories:
Time Extension
Applicant Name:
Plaquemines Parish
Disaster Number:
FEMA-1603
DSR:
17448
Date Signed:
Wednesday, December 28, 2016
PA ID:
075-99075-00
Summary/Brief:
Conclusion: Plaquemines Parish (Applicant) failed to file its first appeal within the 60 day timeframe outlined in 44 C.F.R. § 206.206(c)(1). Accordingly, this appeal is denied. Moreover, the RA correctly determined a liquidated damages offset is a credit requiring reduced eligible funding.
Summary Paragraph
On August 29, 2005, Hurricane Katrina impacted the Applicant and substantially damaged Applicant’s Gainard Woods Pump Station (Facility). FEMA prepared Project Worksheet (PW) 17448, documenting costs to replace the facility. FEMA later reduced the award by $202,500.00 based on a change order taking a liquidated damages offset against the final contract price. The Applicant asserted the reduction was improper and requested that FEMA reinstate it. In a March 9, 2015 letter, FEMA denied the request. On June 29, 2015, the Applicant filed its first appeal arguing FEMA inappropriately reduced the award by the amount of the liquidated damages offset. The Region VI Regional Administrator (RA), denied the appeal, asserting it was untimely and liquidated damages were a credit requiring a reduction of the award. The Applicant filed a second appeal through a May 23, 2016 letter, arguing 1) it filed the first appeal within 60 days of receiving a letter from the Governor’s Office of Homeland Security and Emergency Preparedness, and 2) the liquidated damages offset was not a credit.
Authorities and Second Appeals
44 C.F.R. § 206.206(c)(1).
OMB Circular A-87 Att. A (C)(4)(a), 2 C.F.R. § 225 App. A (C)(4)(a).
FEMA Second Appeal Analysis, Florida Department of Transportation, FEMA-4068-DR-FL, at 3 (Aug. 5, 2016).
FEMA Second Appeal Analysis, Florida Department of Transportation, FEMA-1785-DR-FL, at 3 (July 9, 2016).
Headnotes
Under 44 C.F.R. § 206.206(c)(1), the Applicant has 60 days to file an appeal upon receipt of notice of the decision being appealed.
In this instance, the Applicant received notice of FEMA’s decision to reduce funding through a March 9, 2015 letter but filed its appeal on June 29, 2015, 112 days after March 9, 2015.
Pursuant to OMB Circular A-87 App. A (C)(4)(a), applicable credits refer to those receipts or reduction for expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the governmental unit relate to allowable cost, they shall be credited to the federal award either as a cost reduction or cash refund, as appropriate.
The liquidated damages offset is a recovery on a loss; accordingly they should be credited to the federal award.
Letter:
James Waskom
Director
Governor’s Office of Homeland Security and Emergency Preparedness
7667 Independence Boulevard
Baton Rouge, Louisiana 70806
Re: Second Appeal – Plaquemines Parish, PA ID 075-99075-00, FEMA-1603-DR-LA, Project Worksheet (PW) 17448 – Time Extension-Appeal
Dear Mr. Waskom:
This is in response to a letter from your office dated July 14, 2016, which transmitted the referenced second appeal on behalf of Plaquemines Parish (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $202,500.00 in funding tied to a liquidated damages offset taken by the Applicant.
As explained in the enclosed analysis, I agree with the first appeal determination that the Applicant failed to file its appeal within the 60 day timeframe outlined in 44 C.F.R § 206.206(c)(1). Accordingly, I am denying the appeal. Regarding the issue of liquidated damages, I also find that the Regional Administrator appropriately determined a liquidated damages offset is a credit requiring reduced funding. Upon receipt of documentation, the RA must adjust the offset amount. Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
Sincerely,
/s/
Christopher Logan
Director
Public Assistance Division
Enclosure
cc: George A. Robinson
Regional Administrator
FEMA Region VI
Analysis:
Background
On August 29, 2005, Hurricane Katrina impacted Plaquemines Parish (Applicant) and substantially damaged the Applicant’s Gainard Woods Pump Station (Facility). FEMA prepared Project Worksheet (PW) 17448 to document replacement costs.
The Applicant contracted with M R Pittman Group L.L.C. (Contractor) to perform the work. The construction contract required the Contractor to complete work within 455 calendar days. For delays past the established completion date, the Contractor would owe the Applicant $500 per day in liquidated damages that would be deducted from progress payments and reduce the overall contract price.[1] The Applicant issued a notice to proceed on January 12, 2009, which established an April 12, 2010 completion date.
A change order dated January 2, 2012 documented $202,500.00 in liquidated damages and noted a November 19, 2010 completion date.[2] Upon review of this change order, FEMA reduced funding by $202,500.00.[3] The Applicant asserted the reduction was improper and requested that FEMA reinstate it. During a February 23, 2015 meeting, FEMA orally notified the Applicant of the denial and subsequently issued a determination letter to both the Grantee and Applicant denying the request. [4] The letter also informed the Applicant that it had 60-days to appeal the determination.[5] The Grantee also transmitted the determination letter to the Applicant on April 28, 2015.
First Appeal
The Applicant filed its first appeal through a June 29, 2015 letter to the Grantee. The Applicant asserted the liquidated damages did not actually reduce the cost of construction, arguing they were an offset not a reduction of overall costs. It also contended the liquidated damages should not be considered a credit against eligible costs.
In a letter dated March 23, 2016, the RA denied the appeal on timeliness. The RA found that the Applicant filed its appeal on June 29, 2015, 112[6] days after the RA’s March 9, 2015 determination letter—52 days past the 60 day deadline established by Title 44 Code of Regulations (44 C.F.R.) § 206.206(c)(1). Addressing the issue of liquidated damages, the RA found that an “offset” constituted a credit to the project cost, reducing the actual cost of the project.
Second Appeal
In a May 23, 2016 letter, the Applicant filed its second appeal arguing that it filed the first appeal within 60 days of receiving the Grantee’s April 28, 2015 notification letter—thus making the first appeal timely. The Grantee, through its transmittal letter to FEMA, provides additional arguments in support of the Applicant’s position. The Grantee points to 44 C.F.R. § 206.200(b)(2) and argues only a grantee’s notice to an applicant can trigger the 60-day appeal deadline. Regarding liquidated damages, the Applicant and Grantee renew their first appeal arguments that liquidated damages are not a credit against otherwise eligible costs.
Discussion
Timeliness
The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) § 423,[7] as implemented by 44 C.F.R. § 206.206, allows an eligible applicant to appeal any PA eligibility determination within 60 days of receiving notice of the appealable action.[8] Following receipt of an applicant’s appeal, a grantee has 60 days to forward it, together with a written recommendation to FEMA.[9] Neither the Stafford Act nor 44 C.F.R. provide FEMA with the authority to grant time extensions for filing appeals.[10]
In this instance, the Louisiana Recovery Office Director sent the Applicant notice of the eligibility determination through a determination letter dated March 9, 2015. The determination letter informed the Applicant that it had a 60-day timeframe to file an appeal. The Applicant has never disputed receiving this letter. The Applicant subsequently filed its first appeal through a letter dated June 29, 2015—112 days after issuance of the determination letter. Accordingly, the first appeal was not filed timely. Moreover, the Applicant was aware of FEMA’s determination as early as February 23, 2015, prior to its receipt of the determination letter.[11]
The Applicant argues that the Grantee’s April 28, 2015 letter, not the RA’s March 9, 2015 letter, triggered the 60 day time frame.[12] While 44 C.F.R. § 206.206(c) does not explicitly define which entity is required to provide notice to the applicant of FEMA’s decision, it indicates that the Applicant has 60 days to submit an appeal upon receipt of notification of the decision. In this instance, the Applicant was advised of the decision through the March 9, 2015 determination letter and explicitly told through it that they “may, within 60 days of notification of this determination, file a request with the Grantee to appeal FEMA’s determination, in accordance with [44 C.F.R. § 206.206].”[13]
The Grantee asserts that 44 C.F.R. § 206.200(b)(2)(i) provides grantees with the sole authority to notify an applicant of a PA eligibility determination.[14] While this regulation does create an expectation that grantees will inform applicants about the status of their applications, it does not preclude FEMA from giving such notifications, as was done in this case.
Liquidated Damages
Pursuant to Stafford Act § 406, FEMA is authorized to provide reimbursement for the associated expenses incurred by a local government during the repair, restoration, reconstruction, or replacement of a facility damaged as the result of a declared disaster.[15] Allowable costs must be, among other things, necessary, reasonable, allocable, and the net of all applicable credits.[16] “Applicable credits” refers to those receipts or reductions that “offset or reduce expense items allocable” to the PA award.[17] Examples of such transactions are: purchase-discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges.[18] To the extent that such credits accrue or relate to an otherwise allowable cost, they shall be credited to the federal award either as a cost reduction or cash refund, as appropriate.[19]
In this instance, contract costs to repair the facility are directly allocable to the PA award. As such, any offset taken for liquidated damages would reduce those costs[20] and be a credit to the PA award. Such an offset is similar to an indemnity on a loss or insurance proceeds and requires FEMA to reduce the PA award by the amount of the offset. Accordingly, the RA correctly determined that a liquidated damages offset was a credit requiring reduced funding. However, the administrative record does not adequately substantiate the specific amount of the offset. [21] Therefore, the RA must, upon receipt of proper documentation, establish the amount of the offset and reduce the PA award accordingly.
The Applicant also argues the liquidated damages are not a credit because the damages corresponded to “a myriad of damages [the Applicant] incurred as compensatory consequential damages” though they “are difficult or impossible to quantify and prove.”[22] The Grantee also asserts that by reducing the PA award by liquidated damages, the Applicant will never be made whole for the damages (i.e. increased operating costs) it sustained as a result of the delay.[23] These arguments are not substantiated.
The Grantee separately argues that there is no duplication of benefit because its liquidated damages pertain to operating expenses, which are ineligible for PA funding. Pursuant to Section 312 of the Stafford Act, PA funding is prohibited when an applicant has received assistance from another source. This issue need not be addressed because, as explained above, the liquidated damages relate directly to overall contract costs and FEMA was required by regulation to credit the liquidated damages to the PA award. [24]
Conclusion
The Applicant failed to file its first appeal within the 60-day timeframe required by 44 C.F.R. § 206.206(c)(1). For this reason, this appeal is denied. Furthermore, the RA correctly determined that a liquidated damages offset is a credit to a PA award requiring reduced funding. The RA must adjust the PA award upon receipt of documentation necessary to establish the liquidated damages offset.
[1] Construction Contract between Plaquemines Parish Gov’t. & M R Pittman Group L.L.C., General Conditions, at 13-14 (Aug. 29, 2008) [hereinafter Construction Contract]. Article I of the executed contract incorporates the contractor’s proposal by reference. The Applicant proffers the liquidated damages clause of the General Conditions, which are part of the proposal, as controlling. Though the proposal is not executed, it mentions the Facility by name and the Applicant cites to the provision.
[2] It should be noted that FEMA has never received a certificate of final payment, explicitly establishing the total amount of liquidated damages offset from contract costs. The contractor nor the Applicant signed this change order.
[3] The determination was made on December 21, 2012 through Version 4 of the PW.
[4] Letter from Dir., FEMA, La. Recovery Office, to Deputy Dir., Governor’s Office of Homeland Security and Emergency Preparedness, State of La., at 2 (Mar. 9, 2015) [hereinafter Determination Letter] (stating sub-grantee acknowledged receipt of the decision).
[5] Id.
[6] The RA stated the timeframe between March 9, 2015 and June 29, 2015 is 114 days. However, the actual timeframe is 112 days.
[7] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 423(a), 42 U.S.C. § 5189a(a) (2003).
[8] 44 C.F.R. § 206.206(c)(1) (2004).
[9] Id. § 206.206(c)(1).
[10] FEMA Second Appeal Analysis, Public Health Trust of Miami-Dade, FEMA-3259-EM-FL, at 2
(Mar. 27, 2015); FEMA Second Appeal Analysis, Broward County School Board of Florida, FEMA-1609-DR-FL, at 2 (Sep. 4, 2014).
[11] Determination Letter, at 2.
[12] The Applicant filed its first appeal on June 29, 2015, 62 days after the Grantee’s April 28, 2015 transmittal letter.
[13] Determination Letter, at 2 (emphasis added).
[14] In furtherance of its argument, the Grantee also contends that FEMA could have changed the determination outlined in the March 9th decision, had the Grantee provided a valid reason supporting a change—arguing the Applicant had to wait for the Grantee’s decision on the matter. Even assuming arguendo FEMA had changed its determination subsequent to issuing the March 9, 2015 letter, notice of any new determination would have triggered a new deadline.
[15] Stafford Act § 406(a)(1)(A).
[16] Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, Att. A (C)(1)(2004) (codified at 2 C.F.R. § 225, App. A (C)(1)) [hereinafter OMB Circular A-87].
[17] Id. at Att. A (C)(4)(a).
[18] Id.
[19] Id.
[20] Construction Contract, General Conditions, at 13-14.
[21] The liquidated damages offset is unsubstantiated for these reasons: 1) the Applicant has not provided a final payments certificate conclusively establishing the amount of any offset; 2) neither the Contractor or Applicant signed the change order; and 3) the change order do not clearly establish how liquidated damages were calculated.
[22] Letter from counsel, Plaquemines Parish Gov’t, to State Coordinating Officer, Governor’s Office of Homeland Security and Emergency Preparedness, at 7 (May 23, 2016).
[23] Letter from Assistant Deputy Dir., Governor’s Office of Homeland Security and Emergency Preparedness, to Assistant Adm’r, Recovery Directorate, FEMA, at 3 (July 14, 2016).
[24] The Applicant also references federal acquisition regulations to argue that liquidated damages cannot be punitive or negative performance incentives. While this may be a true assertion, the OMB circular A-87 establishes that liquidated damages are a credit. FEMA is thus required by regulation to credit the liquidated damages to the PA award.