In the Matter of BOARD OF EDUCATION FOR THE

August 3, 2022

CBCA 7388-FEMA

In the Matter of BOARD OF EDUCATION FOR THE

PUBLIC SCHOOLS OF ROBESON COUNTY

Danielle Aymond of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Baton

Rouge, LA; Wendy Huff Ellard of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC,

Jackson, MS; and Ernest B. Abbott of Baker, Donelson, Bearman, Caldwell & Berkowitz,

PC, Washington, DC, counsel for Applicant.

Will Polk and Jonathan Ekblad, Office of the General Counsel, North Carolina

Department of Public Safety, Raleigh, NC, counsel for Grantee.

Maureen Dimino, Stanley Thompson, Jr., and Shahnam Thompson, Office of Chief

Counsel, Federal Emergency Management Agency, Department of Homeland Security,

Washington, DC, counsel for Federal Emergency Management Agency.

Before the Arbitration Panel consisting of Board Judges DRUMMOND, SULLIVAN, and

O’ROURKE.

The Board of Education for the Public Schools of Robeson County (BERC) sought

to arbitrate the denial by the Federal Emergency Management Agency (FEMA) of its request

for public assistance funds to replace and relocate sixteen buildings damaged by flood

waters. FEMA denied the request because it found that the cost of repair was less than fifty

percent of the cost of replacement for each of the buildings. Before the arbitration panel,

both BERC and FEMA relied upon estimates that had not been presented to the other party

prior to the issuance of FEMA’s decision in 2021. For the reasons outlined below, the panel

sends the matter back to FEMA for further evaluation in accordance with the guidance

provided here. Regrettably, the panel cannot reach a determination on the current record.

CBCA 7388-FEMA

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Background

Damage. In October 2016, Hurricane Matthew inundated Robeson County, North

Carolina, with flood waters that remained in BERC’s buildings for approximately two weeks.

See Request for Arbitration (RFA), Exhibit 3 at 5. After the water drained, BERC found that

West Lumberton Elementary School and fifteen of its central administrative buildings had

sustained damage. BERC cleaned the facilities and undertook remediation efforts to

preclude mold growth while it sought public assistance funding from FEMA. In October and

November 2017, the City of Lumberton determined that all of the facilities were

“substantially damaged,” which triggered a requirement that BERC bring all of the buildings

into compliance with local flood ordinances, as well as other current building codes and

standards, if it undertook any effort to repair the buildings. Id., Exhibit 8.

2017 Draft Determination Memos. FEMA created eight project worksheets (PWs)

to process the request for public assistance funds. In May and June 2017, FEMA emailed

to BERC representatives draft determination memos regarding the funds for repair work to

these facilities. RFA, Exhibit 3. Each of these draft determinations stated that “[i]t appears

that the applicant failed to take measures to protect the facility from further damages by

performing remediation” and, based upon this finding, recommended that an amount be

deducted from the amount to be granted. See, e.g., id. at 2-3. Unlike the determination

memo on appeal, these drafts did not contain full descriptions of the project, the legal

authorities relied upon, or a full analysis supporting the recommendation. Compare RFA,

Exhibit 1, with id., Exhibit 3. The determinations were not forwarded with a cover letter to

the grantee and applicant’s representatives and did not contain a notice of BERC’s appeal

rights. RFA, Exhibit 3. FEMA obligated funds on these PWs in March 2018. FEMA’s

Response to Request for Arbitration (FEMA’s Response), Exhibit 2.

Request for Public Assistance Alternative Procedures (PAAP) and Extensions. In

August 2017, BERC requested that FEMA consider its request under the PAAP. RFA,

Exhibit 9, app. A. In September 2017, BERC sought an extension to reach an agreement

with FEMA on a cost estimate for the project. RFA, Exhibit 10 at 32. On December 12,

2019, FEMA granted an extension of an unstated duration. Id.; FEMA’s Response at 9.

FEMA was considering BERC’s submission for inclusion in the PAAP program as recently

as May 8, 2020. Id. The record contains no notice to BERC that it is no longer eligible for

the PAAP program or any request from BERC that FEMA send BERC’s cost estimate to the

expert panel created by statute for review.

2019 PWs and 2021 Determination Memo. In October 2019, FEMA assisted BERC

with preparing a new project worksheet, PW 1901, that proposed to replace and relocate all

of the facilities under the PAAP program authority. RFA, Exhibit 2 at 11. In support of this

new PW, BERC obtained a new set of estimates to support the repair versus replacement

CBCA 7388-FEMA

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calculation. RFA, Exhibit 9 (2019 estimates). For the repair estimates, BERC’s architects

used the “initial damage assessment inspections.” Id. at 9. For the replacement estimates,

BERC’s architects derived the costs based on “current function and the Codes and Standards

that existed at the time [the buildings] were constructed.” Id. Based upon these estimates,

the PW demonstrated that the buildings were eligible for replacement. BERC’s architects

provided a third set of estimates, described as the “full [cost estimating format (CEF)] for the

replacement” of the facilities at issue. These estimates were based upon square footage “for

a school with the capacity of 897 students and current industry standards for personnel and

function of the other facilities at the time of the event.” Id. at 11. At the time of the disaster,

the school was designed to accommodate fewer than 400 students. The estimates also

included “site development costs associated with relocation and demolition costs for the

damaged buildings.” Id. at 16. In PW 1901, the FEMA author noted that “remediation and

stabilization of the facilities were done by the applicant following the event” and described

the recommended deductions in the 2017 determination memos as speculation. RFA,

Exhibit 2 at 12.

In June 2021, FEMA issued a final determination memo, denying BERC’s request for

funds to replace and relocate the sixteen buildings. FEMA performed the 50% calculation

using the 2017 PW repair figures, minus the deductions in the draft determination memos

issued in 2017, as the numerator.1 For the denominator, FEMA used the square footage

figures for each of the buildings that BERC provided in the full CEF for the replacement of

all eight buildings. FEMA noted that it had not received information from BERC or its

architects regarding the “specific methodology employed by [BERC’s architects] to develop

the increased square footage requirements for all the sites . . . as well as the actual number

of students at this school prior to the disaster event to address the reasonableness of the code”

standards applied. RFA, Exhibit 1 at 7. The determination was issued under the original

project worksheet numbers, not PW 1901, and said nothing about BERC’s request to use the

funds under the PAAP program. The cover letter to the determination memo advised BERC

of its appeal rights.

First Appeal and Request for Arbitration. BERC filed its first appeal of FEMA’s 2021

determination on October 7, 2021. With its appeal, BERC submitted new estimates for the

repair and replacement of its buildings, correcting errors that were made in the square

footage for the buildings provided with PW 1901. RFA at 40-44; RFA, Exhibits 15, 16

1

The repair figures denoted in the 2021 determination memo do not match the

amounts set forth in the draft 2017 determination memos. Compare RFA, Exhibit 1 at 7,

with id., Exhibit 3 at 2. No FEMA witness testified about this discrepancy, and FEMA

provided no further explanation regarding how the figures in either determination memo

were derived.

CBCA 7388-FEMA

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(2021 estimates). When FEMA did not issue a decision on that first appeal and more than

180 days had elapsed since its submission, BERC submitted its request for arbitration to the

Civilian Board of Contract Appeals (CBCA), as permitted by 42 U.S.C. § 5189a(d)(5)

(2018).

FEMA’s Estimates. FEMA’s response to the request for arbitration included a new

set of estimates that it offered as the proper calculation of the 50% rule for BERCs facilities.

FEMA Exhibits 8a, 8b. These figures had been generated by one of FEMA’s witnesses in

his initial evaluation of BERC’s 2019 submission for the full CEF for replacement. The

witness prepared the analysis initially during a two-month review in 2020 and provided his

analysis to others within FEMA when he transferred to a new position. He did not know

what those responsible for evaluating BERC’s request did with his analysis. When preparing

for the arbitration hearing, FEMA counsel learned of the witness’ analysis and offered it as

the basis for the 50% calculation that the panel should consider.

Prior to the hearing, the panel chair asked counsel for both BERC and FEMA to

identify which set of estimates, among the six in the record, they intended to rely upon in

their presentation to the panel. BERC chose the 2021 estimates (RFA, Exhibits 15, 16), and

FEMA chose the estimates it included in its response (FEMA Exhibits 8a, 8b).

Discussion

Estimates. The panel has been asked to determine the eligible scope of work for

public assistance funds for BERC. The decision turns upon the results of the 50%

calculation—whether BERC is eligible for funds to repair or replace sixteen buildings

damaged during and following Hurricane Matthew. FEMA regulation requires a comparison

between the costs of repair and replacement:

Repair vs. replacement. (1) A facility is considered repairable when disaster

damages do not exceed 50 percent of the cost of replacing a facility to its

predisaster condition, and it is feasible to repair the facility so that it can

perform the function for which it was being used as well as it did immediately

prior to the disaster.

44 CFR 206.226(f) (2016). The repair cost “is the cost of repairing disaster-related damage

only and includes costs related to compliance with standards that apply to the repair of the

damaged elements only.” Public Assistance Program and Policy Guide (PAPPG) (Jan. 2016)

at 96. Repair costs do not include upgrades of non-damaged elements even if those upgrades

are required by standards (e.g., elevation of an entire facility triggered by repair). Id.

at 96-97. The replacement cost “is the cost of replacing the facility on the basis of its predisaster design (size and capacity) and function in accordance with applicable standards.”

CBCA 7388-FEMA

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Id. at 97. Pre-disaster design is defined as “the size or capacity of a facility as originally

designed and constructed or subsequently modified by changes or additions to the original

design. It does not mean the capacity at which the facility was being used at the time the

major disaster occurred if different from the most recent designed capacity.” 44 CFR

206.201(j).

The result of the 50% calculation should be easy to decide. The difficulty for the

panel lies in knowing which estimates to use for that calculation. The parties generally agree

upon the numerator to the calculation—the repair estimates for each of the sixteen buildings.

For the denominator, the parties offered two, different sets of estimates and asked the panel

to choose between them.

We cannot select FEMA’s estimates because they are predicated upon incorrect

square footage amounts found in the “full CEF for the replacement estimates.” FEMA’s

policy requires that estimates be based upon “the design of such facilities as they existed

immediately prior to the disaster.” 44 CFR 206.206. If standards change the design of the

facility, the standards must “apply to the type of repair or restoration required” and “be

appropriate to the predisaster use of the facility.” Id. 206.206(d). Regarding estimates for

schools, FEMA’s policy guide specifically requires that replacement costs be based upon the

pre-disaster design capacity of the school. PAPPG at 82. As noted, FEMA did not know the

basis for the square footage amounts, but did not provide evidence that it tried to obtain that

information. If it had, perhaps the error would have been discovered and this appeal would

not have been necessary. The estimates also included site development and demolition costs,

costs that should not be included in the replacement costs when calculating whether a facility

is eligible for replacement. PAPPG at 97. It is not clear that the estimates that FEMA

offered for the panel’s consideration removed these costs.

In addition, FEMA’s estimates are based solely upon the FEMA witness’ work and

do not appear to have been through the normal review process within FEMA. We recognize

that BERC is the source of the square footage error underlying these estimates, but errors are

to be corrected through the review and appeal process. 42 U.S.C. § 5189a(d)(2) (requirement

for panel to “consider from the applicant all original and additional documentation,

testimony, or other such evidence supporting the applicant’s position at any time during

arbitration”); 44 CFR 202.206(a), (c)(3) (provisions allowing for applicants to provide and

FEMA to seek additional information during the appeal process).

We also cannot accept BERC’s 2021 figures. Although they were prepared by a

licensed architect, the panel does not have the technical expertise to review these estimates

and determine that they are correct and should be used for the denominator without any

adjustments. Moreover, as with the estimates that FEMA offered to the panel, these

estimates have not been through the review process at FEMA. FEMA is better equipped to

CBCA 7388-FEMA

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review the costs and ensure that the proper costs are included. FEMA can determine why

the replacement estimates generated in 2021 are roughly the same as the estimates generated

in 2019, even though the square footage upon which they are based is smaller. FEMA can

also examine whether the soft costs in the 2021 estimates are disproportionately large

compared to the hard costs.

Feasibility of Repair. BERC also asserted that it was not feasible to repair the

buildings. Feasibility is not defined in FEMA regulation or policy. Only a few cases discuss

the feasibility aspect of the repair-versus-replace regulation, and those cases in which repair

has been deemed not to be feasible have focused upon the technical feasibility of the repair.

Moss Point School District, CBCA 1800-FEMA, 10-2 BCA ¶ 34,489, at 170,087; City of

Tallahassee, 1785-DR-FL (May 11, 2015) (FEMA second appeal decision),

https://www.fema.gov/appeal/50-percent-rule-and-procurement. FEMA’s expert defined

feasibility to include consideration of the cost of the effort.

FEMA did not discuss feasibility in its determination memo on review. BERC asserts

that repair of its buildings is not feasible because of the cost and difficulty of bringing all of

them up to current building codes and meeting flood-proofing requirements. At the hearing,

the parties focused upon the feasibility of flood-proofing the school, explaining that there are

three primary methods of flood-proofing: elevation, dry flood-proofing to prevent water

from entering the building, and relocation. FEMA also asserted that building a levee around

the school building would have been a workable option. BERC’s expert disagreed with this

contention, arguing that a levee could jeopardize student safety. The panel lacks a sufficient

evidentiary basis to determine feasibility of repair and flood-proofing of these facilities. That

issue should be examined by FEMA on remand.

2017 Determination Memos Not Binding. Although FEMA did not rely upon the

calculations and determinations set forth in the 2021 determination memo, which relied upon

the deductions from the 2017 determination memos, FEMA counsel reiterated, in closing,

FEMA’s position that these determinations were binding upon BERC because BERC had

failed to appeal those determinations. Therefore, the panel reaches the issue and finds that

those determinations were not final.

First, as noted, the determination memos do not bear the indicia of finality. The

memos discussed “recommendations” regarding deductions and did not provide a full

explanation of the scope of the project or the analysis that supported the deductions. The

memos did not contain notice of BERC’s appeal rights. FEMA policy guidance applicable

at the time stated that final determinations would be accompanied by such notice: “When

eligibility issues cannot be worked out, FEMA will issue a formal eligibility determination

letter, setting forth an applicant’s appeal rights, with an accompanying memorandum that

explains the basis for the denial.” RFA Exhibit 26, Fact Sheet: Public Assistance Appeals

CBCA 7388-FEMA

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(last updated April 2017) at 1. On this basis, we find that the determinations were not final

and appealable and thus were not binding upon BERC.

Regarding the substance of the deduction, numerous BERC’s witnesses testified about

BERC’s efforts to clean up the buildings and mitigate further damage. Moreover, PW 1901

states that BERC undertook remediation efforts and describes the statements to the contrary

in the 2017 memos as speculation. FEMA provided no explanation to the panel regarding

why the deductions were taken. On this basis, we find the deductions set forth in the 2017

draft determination memos to be unsupported.

Eligibility for PAAP and Referral to Expert Panel. The final issues presented by the

parties are whether BERC remains eligible to use funds through the PAAP program and

whether FEMA is required to send BERC’s cost estimate to an expert panel for evaluation.

The Stafford Act permits FEMA to approve projects under alternate procedures adopted

towards the goal of reducing the costs of public assistance projects for the Federal

Government while “expediting the provision of such assistance” to state and local

governments. 42 U.S.C. § 5189f(a), (c). The Act requires FEMA to have an expert panel

validate the estimated cost for any project under the procedures:

[I]n determining eligible costs under section 5172 of this title, the

Administrator shall make available, at the applicant’s request and where the

Administrator or the certified cost estimate prepared by the applicant’s

professional licensed engineers has estimated an eligible Federal share for a

project of at least $5,000,000, an independent expert panel to validate the

estimated eligible cost consistent with applicable regulations and policies

implementing this section.

Id. § 5189f(e)(1)(E). FEMA’s policy guide implementing this provision requires that all

projects with an estimated cost of more than $25 million shall be sent to the expert panel but

only after the parties agree upon the estimated cost. Public Assistance Alternative

Procedures Pilot Program Guide for Permanent Work (Mar. 2016) at 9. FEMA’s policy

guide dictates that the applicant and FEMA must agree upon the estimated cost within a year

of the disaster, subject to extension requests, for a project to be eligible for PAAP. Id. at 7.

Prior to preparing the estimated cost, FEMA and the applicant “must agree on the disasterdamage dimensions, description, and the scope of work for the subaward.” Id. at 5.

FEMA asserts that BERC is no longer eligible for the PAAP program because BERC

and FEMA did not agree upon a cost estimate within the required time period. But the

duration of the required time period is unclear. FEMA counsel argued that the extension

period expired on October 25, 2019, when BERC submitted PW 1901, and that BERC should

have sought a further extension to allow time for the parties to agree. However, the record

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contains references to FEMA’s continued consideration of the PAAP program request after

this date. Given the passage of time and the lack of agreement upon the scope of work,

FEMA’s policy would preclude BERC’s participation in the PAAP program. However,

FEMA, upon remand, should determine when the extension period granted in December

2019 expired and provide that determination to BERC so that BERC’s eligibility can be

ascertained.

BERC asserts that FEMA has not followed the statutory requirement to send its cost

estimate to the expert panel. BERC’s failure to request that the estimate be sent is not fatal

to its request because FEMA’s policy dictates that estimated costs over $25 million shall be

sent to the expert panel. FEMA’s policy also requires that the estimated cost be sent only

after the parties have agreed upon that estimated cost. Although the statutory provision

quoted above leaves open the possibility that FEMA should send the cost estimate prepared

by applicant’s engineer regardless of whether the parties reach an agreement on the cost

estimate, we will not disturb FEMA’s interpretation that the statute only requires expert panel

review after the parties have agreed upon a cost estimate.

Decision

For the foregoing reasons, BERC’s request for replacement costs is denied without

prejudice. FEMA shall examine BERC’s 2021 estimates, obtain any additional information

needed from BERC, and perform a new calculation to determine whether BERC is eligible

for replacement costs based upon the 2021 estimates and the guidance provided in this

decision.

Marian E. Sullivan

MARIAN E. SULLIVAN

Board Judge

Jerome M. Drummond

JEROME M. DRUMMOND

Board Judge

Kathleen J. O’Rourke

KATHLEEN J. O’ROURKE

Board Judge