August 28, 2020
Editor’s Note: The Fernandina Observer is posting the first appeal letter to FEMA issued by City Manager Dale Martin for your review. We did not include the numerous attachments to this letter but you can send a request for the entire submittal to [email protected]
August 28, 2020
Mr. Jared Moskowitz, Director
Florida Division of Emergency Management 2555 Shumard Oak Blvd.
Tallahassee, FL 32399
Re: First Appeal, Reasonable Costs/Repair vs. Replacement
FEMA-4283-DR-FL; PW#: 831 & 1085
City of Fernandina Beach (Applicant ID: 089-22175-00)
Dear Director Moskowitz:
The City of Fernandina Beach (“Applicant”) is in receipt of two Determination Letters from FEMA, both dated May 28, 2020, which partially approved costs for repairs to the Northern Section of Municipal Dock 1, as well as ancillary buildings (PW-1085), and also partially approved costs for repairs to the Southern Section of Municipal Dock 1 (PW-831). As the Applicant had originally requested full replacement of these systems under FEMA’s “50% Rule,” and as the result of these partial approvals of cost do not lead to the 50% Rule being satisfied, this first appeal follows.
Please note that as the facilities being repaired under these PWs are truly one Municipal facility, as there remains no real reason as to why the work should be bifurcated across two different PWs (see the “Relief Requested” section of this first appeal, below), and as the Applicant’s consultant considered all of the work together as part of their analysis, the argument presented in this first appeal will be combined as if both PWs were combined in one project. Accordingly, this document will serve as the Applicant’s first appeal letter to the Recipient for both PWs.
Having received the two subject Determination Letters from FEMA by email on May 28, 2020, this First Appeal request is being submitted as timely before the August 30, 2020, deadline established by the Assistant Administrator, Recovery Directorate, in his Memorandum to all Regional Administrators dated May 28, 2020.
The Applicant in this case is the City of Fernandina Beach, FL. As a result of wind and pressuredriven storm surge as a result of Hurricane Matthew, the Applicant’s wave attenuator system (part of the Municipally-owned Marina), docks and ancillary buildings suffered severe structural damage, to include things such as: broken concrete, bent thru-rods, broken and misaligned concrete piles, lost fixed-dock decking, and other significant damage. Accordingly, the Applicant had numerous inspections of the damaged facilities conducted, and a bid for full replacement of the damaged facilities was obtained in the amount of $4,855,583.00. In September of 2018, based on repair quotes obtained by the Applicant, eligible repair costs were estimated by FEMA at $1,500,706.55 for the northern section of the wave attenuator and ancillary buildings, and $6,421,595 for damages to the southern section of the wave attenuator. Taken together, the two repair estimates represented 163% of the Applicant’s original estimated replacement cost, and the facility was (preliminarily) determined to be eligible for replacement under FEMA’s 50% Rule.
On further review of the project, FEMA determined that there were issues with the Applicant’s repair quotes, to include: the inclusion of ineligible “soft costs” in the calculations, inclusion of damage that was not truly the result of the disaster, replacement of elements that did not require replacement, and the failure of the original repair estimate to appropriately itemize costs. As a result, FEMA reviewed documentation that had previously been submitted for the project, which both FEMA Determination Memos acknowledged only evaluated damage above the water-line,3 and re-assessed the Applicant’s repair and replacement estimates in April 2020.
To benefit the Applicant, FEMA then bifurcated the project a different way than was contemplated when the projects were originally broken into two projects. As a result of the re-assessment, FEMA determined that the appropriate replacement cost for the wave attenuator system (north and south sections together) should be $4,429,182.15 (hard costs only), which is much larger than FEMA’s hard cost repair total for the wave attenuator system (north and south sections together) of $473,886.08. With a repair vs. replacement ratio of 10.7%, FEMA determined that the wave attenuator system did not qualify for replacement.
In regard to the remaining ancillary buildings (fuel dock and fuel building), FEMA constructed their own repair and replacement values as a result of the re-assessment of the existing documentation. Determining that the appropriate replacement cost for the ancillary buildings was $486,059.29, and that the appropriate repair cost was $285,543.54, this re-assessment resulted in a repair vs. replacement ratio of 58.7%, and FEMA determined that full replacement would be allowed for the ancillary fuel dock and fuel building.
As a result of all of the re-analysis of the project, including the multiple bifurcations of the overall project shown above, it is difficult to develop an actual amount that is up for appeal in this action. FEMA has listed the amount denied as $5,989,821.68 across both PWs. While the Applicant does not dispute these amounts listed by FEMA, the eventual (monetary) plea for relief is simply for the Applicant to obtain full replacement for all subject systems under FEMA’s 50% Rule.
Applicant’s Argument on Work & Cost
From the earliest days of this project, fundamental disagreements between FEMA estimators and the Applicant’s contractors have existed regarding:
– How much labor will be required for certain repair tasks,
– What elements were actually damaged by the storm,
– What structural elements must be removed, relocated or otherwise “broken” so that other damaged structural elements in the interior of the system can be reached and repaired, and
– What utility elements (such as electrical and plumbing systems) have to be removed, relocated or otherwise “broken” so that damaged structural elements in the interior of the system can be reached and repaired?
To settle the matter, in response to FEMA’s re-assessment of the projects in April, 2020, the Applicant hired a licensed (FL) Professional Engineer, with over 40 years of expertise in Marina assessment and underwater assessment, Mr. Gary K. Greene, P.E., who completed a thorough review of all documentation available for this project, as well as a review of the construction and structural analysis methodologies proposed by FEMA and the Applicant. Mr. Greene’s complete engineering report (“Applicant’s Engineering Report”) on the dock system, meaning the wave attenuators plus the fuel dock, is attached to this appeal as Attachment B.
Applicable FEMA Policy
According to FEMA’s PAPPG v1, the Applicant is entitled to use their own Cost Estimate, if the estimate:
1. Is prepared by an appropriate professional who certifies that the estimate was prepared in accordance with industry standards,
2. Includes certification that the estimated cost directly corresponds to the repair of the agreed upon damage,
3. Is based on unit costs for each component of the SOW and not a lump-sum amount,
4. Contains a level of detail sufficient for FEMA to validate that all components correspond with the agreed-upon SOW, and
5. Is reasonable.
Regarding the Applicant’s Engineering Report, the Report was prepared (and signed/sealed) by a licensed (FL) Professional Engineer who discusses what proper industry standards should be for such an analysis on Page 1 of the Report. The signing/sealing of the Report is the required Engineer’s certification of the costs for repair to the listed damage. The Report clearly shows a line-by-line set of unit costs for each component of the (proper) SOW. Additionally, the Report contains 8 pages of detailed discussion of the methodology for developing the (proper) SOW. Finally, in regard to reasonableness, while this is always somewhat of a judgment call, the Report has been signed and sealed by a licensed P.E. who is effectively banking his license on the veracity, and thus the reasonableness, of the Report.
As the Applicant’s Engineering Report, as presented to FEMA as Attachment B to this document, and as prepared by a licensed (FL) Professional Engineer meets all of the criteria posed in the PAPPG, the Applicant is entitled to have their Cost Estimate utilized for the 50% Rule calculations.
Applying the 50% Rule Using the Applicant’s Engineering Report
The Applicant’s Engineering Report provides a detailed analysis of work required to adequately repair the Applicant’s Docks (including work below the water-line not previously considered by FEMA), along with a line-by-line costing of the work and equipment needed to make those repairs. That being said, a few caveats must be mentioned regarding the Applicant’s Engineering Report for dock repairs.
Meaning of the Word “Replacement” in the Report
The Applicant’s Engineering Report is one which is designed to focus on Repair of the dock system. This is clear through analysis of the first page of the Report, which notes that the purpose of the report is to [aid in the] “… development of a construction procedure that would be necessary to ensure that all damaged items are identified and repaired appropriately.” Additionally, later the first page of the Report it is noted that “[t]he key error in FEMA’s re-evaluation of required repairs is that it…” From these statements introducing the document, the focus of the Report is one of identification and repair of damaged systems.
Unfortunately, the Report is peppered with the poor word choice of “replace” (in multiple forms of the word). To clarify, the context of these uses of the word “replace” is not in the same vein as FEMA would use the word “replace” in terms of repair/replace regarding the 50% Rule. In the Report, the Applicant’s Engineer has used the word “replace” to generally mean the eventual reconstruction of outer systems that must be removed, relocated or otherwise “broken” so that damaged structural or utility elements in the interior of the system can be reached and repaired. FEMA policy has long recognized that it may be necessary in some cases to create additional “damage” in order to reach and repair eligible damage that is otherwise unreachable. In the cases where the Applicant’s Engineer has used the term “replace” in the Report, this is the meaning that should be attached to the usage of this word.
The Inclusion of Mobilization in the Engineer’s Costs
While it was always intended for the Applicant’s Engineering Report to solely represent hard costs, one soft cost line item was inadvertently included in the Engineer’s costing. This would be the first line of the second table on page 7 of 8, which is for “Mobilization,” which is admittedly a soft cost. With this being acknowledged, the Engineer’s final cost analysis will be summarized after subtracting out the “Mobilization” soft costs from the remainder of the hard costs.
Repair/Replace Analysis (Engineer’s Costs) for Just the North and South Dock Work
As noted on page 4 of 10 of both Determination Memos, FEMA developed a replacement cost of $4,429,182.15 for both the north and south wave attenuator (docks), considered together, with only hard costs being considered. In comparison, the Applicant’s Engineering Report developed minimum and maximum cost estimates for repairing the dock systems, however to compare “apples to apples,” we must first remove the ineligible soft costs for mobilization (discussed above), as well as 2 line items for the Fuel Dock repairs that appear in the Applicant’s Engineering Report, but which are contained in the FEMA repair/replace analysis for the ancillary fuel dock and fuel building, not for the analysis of the North and South Wave Attenuators.
So, to make these needed corrections for the analysis of the North and South Wave Attenuators as a system by itself, the following reductions must be taken from the figures presented in the Applicant’s Engineering Report:
Item Min. Cost Max. Cost
Total Repair Cost $3,516,432 $3,850,992
Less mobilization – $40,000 -$40,000
Less fuel dock floats -$88,320 -$88,320
Less fuel dock pilings -$41,670 -$41,670
Total Revised Repair Cost $3,346,442 $3,681,002
When these Total Revised Repair Costs, which now simply include hard costs for the North and South Wave Attenuators (docks), are compared against the FEMA developed replacement cost of $4,429,182.15, the resulting ratios for application of FEMA’s 50% Rule are as follows:
Min. Ratio = $3,346,442/$4,429,182.15 = 75.6%
Max. Ratio = $3,681,002/$4,429,182.15 = 83.1%
As even the minimum ratio between the Applicant’s Engineering Report New Total Repair Costs, and the FEMA-developed replacement costs is greater than 50%, the 50% Rule is satisfied, and the North and South Wave Attenuator (dock) portion of the project should be considered eligible for full replacement, based off of the Scope of Work and Costing that was prepared by the Applicant’s P.E.
Plea for Relief
Remembering from earlier in this Appeal document that the system containing the remaining ancillary buildings (fuel dock and fuel building) had already been determined to meet the 50% Rule, with the above calculation it can be seen that all work proposed under these projects meets FEMA’s 50% Rule, and thus, all work proposed under these two PWs should be authorized by FEMA for Full Replacement.
As an additional request, as the overall project had originally been bifurcated due to a possible EHP issue with one of the sections of the Wave Attenuator system (docks), and as that issue no longer exists to necessitate any bifurcation, the Applicant also requests that these two PWs be recombined into a single PW for the convenience of all parties (Applicant AND FEMA).
Mr. Moskowitz, through this First Appeal request, the City of Fernandina Beach, FL, has addressed FEMA’s denial of replacement costs for the North and South Wave Attenuator system (docks), under FEMA’s 50% Rule. An Applicant’s Engineering report has been presented to validate the SOW and Costing that FEMA had improperly mischaracterized in its previous analysis.
The City of Fernandina Beach appreciates any assistance that your office will be able to provide during the review, endorsement, and transmittal stages of this First Appeal, and look forward to a successful resolution of this matter. If you have any further questions regarding this First Appeal, please contact me at our office for further discussions.
Mr. Dale L. Martin