direct costs in project management

This is in response to letters from your office dated September 10, 2018, which transmitted the referenced second appeals on behalf of Nassau County, New York (Applicant). Budget Dir., Nassau Cty. [29] City of Duluth, FEMA-4069-DR-MN, at 5. It requested the re-classification of those costs because expenses captured in the DAC/COI PW were subject to the 3 percent cap, whereas PM costs were fully reimbursed. Request to move COI (DM) charges to PM as a result of the significant work effort on Change Orders, Rep., GOHSEP, at 2 (citing DM06, the task code for the cited direct management task description) (undated). In November 2015, the Applicant formally requested that FEMA re-classify DAC costs pertaining to the review and documentation of change orders for PWs 533 and 2397 to PM costs and move them to PW 4653. Eligible PM activities include oversight of an eligible project from the design phase to the completion of work. Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. LockA locked padlock First, the RA found that because the work involved discussions on the eligibility of the changes to the approved scopes of work and were administrative in nature, the costs associated with that time were correctly classified as DAC/COI rather than PM. decision to uphold a partial denial of funding for certain travel expenses claimed as Direct Administrative Costs (DAC) under PWs 2214, 2608, 2609, 2671, 2909, 3640, 3988, and 4001, on the basis that such expenses were indirect costs, and ineligible for reimbursement as DAC. Accordingly, the Applicants request to re-classify the DAC charges to PM costs is denied. In 2015, the Applicant, the New York State Division of Homeland Security & Emergency Services (Grantee), and FEMA agreed to a process that would allow for further review of certain contractor expenses without delaying reimbursement for other work done on the various PWs. Cost Budgeting. In this post, well learn about the difference between direct costs and indirect costs in project management with detailed examples and explanation. However, as noted, a pro rata allocation of expenses across every task for all PWs on the basis worked on the task does not make such expenses eligible for reimbursement as DAC. 200.110 expressly excludes all disasters declared prior to December 26, 2014 from the allocation principles codified in 2 C.F.R. According to the PMBOK Guide, 5th Edition the project assumption of whether indirect costs are included or excluded from the project cost estimates are documented in: Both direct and indirect costs should be considered while making Make-or-Buy decisions on projects. Direct costs are costs that can be directly attributed to a specific project, e.g. Variance between these two measures gives an accurate estimate of the health of the project. [6] FEMA published post-disaster guidance for DAC charges that applies retroactively to this disaster in a September 8, 2009 memorandum. A time phased budget would include the costs incurred at each interval or milestone of the project. Dir., Nassau Cty. Recovery Div., FEMA Region VI, to Dir., GOSHEP and Superintendent, Cameron Par. Hosp. [11] Applicants First Appeals, at 4 (quoting 2 C.F.R. OMB (Mar. FEMA issued a Final Request for Information (Final RFI) for each of the PWs via letters dated between June 19, 2018 and June 28, 2018. New York State Division of Homeland Security and Emergency Services, Re: Second Appeal Nassau County, PA ID 059-99059-00, FEMA-4085-DR-NY, Project Worksheets (PWs) 1853, and 4113 Direct Administrative Costs Project Management Costs. If you have other examples of direct and indirect costs that are not listed here, please contribute them to this post by using the comments section below. ProjectManager is a cloud-based project management software with online Gantt charts and resource management features that give you control over your project costs. The Applicant submitted its second appeals via letters dated September 10, 2018 and reiterated its prior arguments from its first appeals. [25] More pertinently, an applicant cannot allocate expenses to every task for all PWs in proportion to the hours worked on the task, and then claim such expenses as DAC.[26]. pt. [27] More pertinently, an applicant cannot allocate expenses to every task for all PWs in proportion to the hours worked on the task, and then claim such expenses as DAC.[28]. [7] Letters from Dep. According to the Project Management Body of Knowledge, project managers can look at costs in three ways: Planned value - The value of the . pt. ), read in conjunction with DAP 9525.9, allows applicants to claim, as DAC, those costs which can be identified separately and assigned to a specific project if such costs can be and are attributed to individual projects.[9] The Applicant supported this argument by pointing to a pair of U.S. Office of Management and Budget (OMB) regulations, which encourage applicants to allocate reasonable costs[10] among multiple projects, if said costs benefit two or more projects in proportions that can be determined without undue effort or cost.[11] The Applicant also provided meeting notes, email correspondence, and various memoranda, and in a supplemental narrative, stated that the Project Coordination category of work was the creation of FEMA, in order to capture certain expenses from CDM Smiths employees as contract costs, rather than DAC. The Applicant states Hoffpauir relied on an instruction from a Grantee representative to continue the discussions on the changes to the approved scopes of work. Sometimes also referred to as "unburdened" or "bare" costs, direct costs include: Material; Labor; Equipment; and; Subcontractor costs We are a ISO 2001:2015 Certified Education Provider. 200.110 expressly excludes all disasters declared prior to December 26, 2014 from the allocation principles codified in 2 C.F.R. See also Letter from Regl Admr, FEMA Region VI, to Deputy Dir. and the Memorandum from the Assistant Administrator, Disaster Assistance Directorate, dated September 8, 2009. 200.404, 200.405(d) (2014). Accordingly, this appeal is denied. 405(d) in support of its appeal; however, this regulation does not apply to disasters declared before December 26, 2014. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. [28] FEMA Second Appeal Analysis, City of Duluth, Multiple PWs, FEMA-4069-DR-MN, at 5 (June 15, 2015) [hereinafter City of Duluth]. CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across said PWs on a prorated basis. Between March 12, 2018 and March 20, 2018, following its final inspection of the LPFA Requests, FEMA applied the DAC Determination Memo to each PW and denied funding for the types of travel costs that it had previously found to be indirect costs, as those indirect costs were ineligible for reimbursement as DAC or as contract costs. Nassau County (Applicant) hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. The RA also determined that FEMA had not committed to approving the re-classification request. They have direct links to specific outputs or services, and you can assign them to a single customer or product. [1] See Letter from Dir. CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across said PWs on a prorated basis. [32], The Applicant also relies on the indirect cost allocation under 2 C.F.R. Dirs. Office of Management and Budget (OMB), at 2 (Jan. 6, 2017) (FEMA will not amend the PWs to include apportioned travel expenses spread across multiple PWs as DAC.). The most important thing to remember when estimating project costs is to be as accurate as possible. Level of precision: the degree to which activity cost estimates will be rounded up or down (e.g., US$100.49 to US$100, or US$995.59 to US $1,000) Level of accuracy: the acceptable range (e.g., 10%) Organizational . 200.405, since 2 C.F.R. FEMA issued a Final Request for Information for each of the PWs via letters dated between March 15, 2018 and May 14, 2018 (Final RFIs). Governors Office of Homeland Sec. See Applicants First Appeals, at 3. [16] The Applicant noted that assignment/allocation of consultant expenses as DAC was a continuing source of contention, and disputed FEMAs consistent interpretation of DAP 9525.9. 207.6(c)), read in conjunction with DAP 9525.9, allows applicants to claim, as DAC, those costs which can be identified separately and assigned to a specific project, if such costs can be and are attributed to individual projects.[9] The Applicant supported this argument by pointing to a pair of U.S. Office of Management and Budget (OMB) regulations,[10] which encourage applicants to allocate reasonable costs[11] among multiple projects, if said costs benefit two or more projects in proportions that can be determined without undue effort or cost.[12], Between January 25, 2018 and April 13, 2018, the Grantee transmitted the Applicants First Appeals to FEMA Region II. [13] See Public Assistance Guide, FEMA 322, at 62 (June 2007). (Jan. 8, 2013) [hereinafter Expense Analysis Memo]. Indirect costs - Indirect costs for a project are costs which do not directly lead to project completion but are still vital for the company or individual working on said project. Here, the Applicant attempts to claim as DAC and/or contract costs certain travel expenses that its contractors incurred, despite its acknowledgment that CDM Smiths employees worked on several PWs over the course of each trip at issue. Costs of Subgrantees, at 3. Cost in project management is the sum total of fixed and variable costs that are incurred during the entire life cycle of a project. OMB, at 2 (Oct. 31, 2017 through Jan. 31, 2018) (table showing indirect travel costs as ineligible for reimbursement as either contract costs or as DAC). OMB, to Commr, NYSHSES (Apr. the time spent by both direct and subcontract labour is a well-established discipline. A direct cost is a price that can be directly tied to the production of specific goods or services. Indirect Cost is nothing to do with the Project Construction and these are Project Management Team, Temporary works (Labor materials, equipment and subcontractors) works that are not related to the Project Constructions, Adminstration Team, Utilities, Misc. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. Dir., Nassau Cty. This is an addition to my 80+ Commonly Confused Concepts for PMP Certification. The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated August 20, 2018 (First Appeal Determinations). The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated August 20, 2018 (First Appeal Determinations). 44 C.F.R. 206.201(j) defines project approval as when the Regional Director or a designee reviews and signs an approval of work and costs on a PW. [19] The RA found that DAP 9525.9 limits reimbursement for travel costs (as DAC) to those costs which are tied to one specific project.[20] The RA also rejected the Applicants reliance on Title 2 Code of Federal Regulations (2 C.F.R.) [5] Memorandum from Assistant Admr, Disaster Assistance Directorate, to Regl Admrs, Acting Regl Admrs, Transl Recovery Office Dirs., Fed. , expenses allocated to every task for all PWs in proportion to the hours worked on the task are not eligible as DAC. [14] Applicants First Appeals, Nassau County Position Paper Consultant Expenses as Direct Administrative Costs, [hereinafter Applicant Position Paper] at 1 2 (noting ongoing contention and disagreement, and referring to FEMAs current statement that a consultants [sic] expenses would only be eligible as DAC if that consultant worked on a single project all day as being void of logic.). Budget Dir., Nassau Cty. OMB, to Commr, NYSHSES (Oct. 15, 2018) [hereinafter PW 1853 Second Appeal] and Letter from Dep. FEMA issued a Final Request for Information for each of the PWs via letters dated between March 15, 2018 and May 14, 2018 (Final RFIs). As outlined above, all the costs that accumulate up to a particular phase can be called the cumulative costs of the project. Disaster Recovery Div., GOSHEP, at 2 (Jan. 9, 2014) (stating that the aggregate DAC/COI would not exceed 3 percent of all the Applicants project costs). [5] Memorandum from Assistant Admr, Disaster Assistance Directorate, to Regl Admrs, Acting Regl Admrs, Transl Recovery Office Dirs., Fed. The overhead costs for this project are the office setup and shared services. The Applicant is appealing the Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) decision to deny the re-classification of. This is in response to letters from your office dated October 23, 2018, which transmitted the referenced second appeals on behalf of Nassau County (Applicant). These can include direct and indirect costs. Direct Costs in Construction. [4] This determination rested on FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, issued on November 13, 2007 and the Memorandum from the Assistant Administrator, Disaster Assistance Directorate dated September 8, 2009, [5] (DAC Guidance). In the RFI Responses, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. The following are the costs associated with the projects. Office of Personnel Management v. Richmond. Thanks for sharing your experience, Joel.Is there any part of the post that you do not agree with or are you trying to support it with more details from your experience? al. The Applicant reiterated that Hoffpauir spent significant time and effort on discussing the changes to the approved scopes of work with FEMA and the Louisiana, Governors Office of Homeland Security and Emergency Preparedness (, It also noted the multiple times, starting in 2012, that Hoffpauir told the Grantee and FEMA. I hope you found this post useful. Through a second letter dated July 22, 2019, the Applicant reiterates previously raised arguments requesting FEMA re-classify $512,258.75 in DAC to PM costs. I missed answering this question earlier. Direct costs are easy to identify, trace and quantify. Because the costs at issue pertain to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work, they are DAC rather than PM costs. labor, raw materials, and equipment rental costs. to each PW and denied funding for the types of travel costs that it had previously found to be indirect costs, as those indirect costs were ineligible for reimbursement as DAC or as contract costs. However, as noted, a pro rata allocation of expenses across every task for all PWs on the basis of hours worked on the task does not make such expenses eligible for reimbursement as DAC. management, general administration, rental and utility costs. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. 22, 2001) (although grantees may receive reimbursement for all eligible contractor costs, including travel and per diem, [t]here is no similar provision for subgrantees because all of their grant management and administrative costs are required by statute to be considered under the Statutory Administrative Costs allowance (also known as the subgrantees Administrative Allowance or sliding scale).). Please inform the Applicant of my decision. Subsequently, the Grantee submitted a Large Project Final Accounting (LPFA) request for each of the PWs. Accordingly, I am denying the appeal. ). Any costs that are directly attributable to the work on the project. By letter dated January 6, 2017 (DAC Determination Memo), however, FEMA informed the Applicant that CDM Smiths indirect travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as DAC. Costs that change in proportion to the amount of time and material that are spent on produced in the project. Between June 25, 2013 and December 8, 2015, FEMA obligated several Project Worksheets (PWs) to document emergency protective measures and disaster-related repairs. (Sept. 8, 2009) to determine whether a cost is a DAC charge [hereinafter DAC Memo]). [24] See DAC Guidance, at Attachment (emphasis in original). In addition to the underlying projects, FEMA funded the Applicants project management (PM) and direct administrative costs (DAC)/close-out incentive (COI) costs for all disaster projects in two separate PWs. Start free trial [2] CDM Smith then multiplied an employees travel expense rate for the billing period by the number of hours billed to a specific task by that employee, in order to allocate travel expenses to each project on a pro rata basis. [6] See Letters from Pub. In this post, well compare two formulas for calculating Estimate at Completion (EAC) in Earned Value Management (EVM) as part of project cost estimation. In such an environment, direct costs would include: Direct costs are included in the project cost estimate (and budget), whereas Indirect Costs may or may not be included in the project cost estimate. The budget at completion or BAC should have all the components of the costs included like direct and indirect costs, fixed and variable costs etc along with the cost at each phase or milestone of the project. If the worker's hourly rate is 50.00, for every hour that the worker works on the project, the project is charged one of the following indirect cost amounts: Using a percentage of the hourly rate, indirect costs are 5.00 per hour: (10 percent * 50) Using a specific amount per hour, indirect costs are 10.00 per hour. 206.206(a) (2004)). 225 (2012) (codifying OMB CIRCULAR A-87, which sets forth the applicable cost principles for the Applicant in FEMA-4085-DR-NY based on the October 30, 2012 declaration date). These costs include those incurred in shared services like cost of office space, taxes paid by the organization and other services like secretarial and janitorial staff. Under FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, these expenses are therefore indirect costs and are not eligible for reimbursement as Direct Administrative Costs (DAC). 22, 2001) (although grantees may receive reimbursement for all eligible contractor costs, including travel and per diem, [t]here is no similar provision for subgrantees because all of their grant management and administrative costs are required by statute to be considered under the Statutory Administrative Costs allowance (also known as the subgrantees Administrative Allowance or sliding scale).). OMB, at 2 (Mar. On November 28, 2014, FEMA obligated funds under Project Worksheet (PW) 4179 for emergency protective measures totaling $183,080.60, including $22,641.25 in direct administrative costs (DAC). Ineligible PM activities are those necessary to requesting, obtaining, and administering Federal disaster subgrants. Any costs that are directly attributable to the work on the project. [22] By contrast, costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted[23] are indirect costs. A .gov website belongs to an official government organization in the United States. State of New York. [30] DAP 9525.9, at 2 4; DAC Guidance, at 3 and Attachment; City of Duluth, FEMA-4069-DR-MN, at 4. The Applicant submitted its second appeals via letters dated September 10, 2018 and reiterated its prior arguments from its first appeals. An official website of the United States government. [17] The Applicant claimed that FEMA and the Applicant had agreed that the Applicant would record the expenses associated with Project Management and Project Coordination tasks as contract costs, rather than DAC. Dir., Nassau Cty. [33] See 2 C.F.R. Separately, PM activities, such as procurement, document . [2] Analysis of Cameron Par. During administration of the projects, CDM Smith utilized a methodology to allocate travel expenses across multiple projects (Expense Allocation Methodology), described in a Memorandum dated January 8, 2013 (Expense Analysis Memo). The Applicant is appealing the U.S. Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) decision to uphold a partial denial of funding for certain travel expenses claimed as Direct Administrative Costs (DAC) under Project Worksheets 1853 and 4113. Hello Gerald,Thanks for your feedback. The direct cost allocation principles in 2 C.F.R. CDM Smiths employees often traveled to the Applicants jurisdiction and worked on multiple projects during each trip or billing period. 44 C.F.R. See how ProjectManager can assist with your project cost estimation by taking this free 30-day trial today. [7] In its first appeal requests, the Applicant argued that costs it was claiming as DAC directly correspond to the number of labor hours an employee spent working on a specific project,[8] per the Expense Allocation Methodology described in the Expense Analysis Memo. The Applicant appealed FEMAs LPFA determinations, arguing that the Expense Allocation Methodology was permissible under the Applicants interpretation of applicable regulations and FEMA policy, and that the travel costs so allocated were eligible for reimbursement as either DAC or contract costs. 75,867, 75,872 (Dec. 19, 2014) (For grants authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, this rule is applicable for emergency or major disaster declarations issued on or after December 26, 2014.)); see also 2 C.F.R. Following its final inspection of each Large Project Final Accounting (LPFA) for the PWs, FEMA adjusted the PWs to include DAC that it found the Applicant had substantiated, but denied funding for indirect travel costs in each PW, in accordance with its January 6, 2017 letter. ), read in conjunction with DAP 9525.9, allows applicants to claim, as DAC, those costs which can be identified separately and, In this supplemental narrative, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. These are the costs that a project incurs in its core day-to-day management. Direct costs are expenses tied directly to the product or the project. Such costs are only reimbursable as management expenses, if at all. Since the travel expenses at issue benefitted more than one PW, they are indirect costs under DAP 9525.9, and the Applicant cannot allocate or otherwise assign such expenses to individual projects as DAC or as contract costs. Direct costs are those that can be "identified separately and assigned to a specific project," such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. Budget Dir., Nassau Cty. Applicable FEMA guidance makes clear that activities related to developing the scope of work component for one specific PW and actions carried out to support the request for federal assistance, i.e., FEMAs determination of the work and cost eligibility for one specific project, are DAC, not PM costs. Direct costs are also known as project overhead costs and are the expenses that are directly linked to the physical construction of the project. During administration of the projects, CDM Smith utilized a methodology to allocate travel expenses across multiple projects (Expense Allocation Methodology), described in a Memorandum dated January 8, 2013 (Expense Analysis Memo). [21] First Appeal Determinations, at 5 (citing 2 C.F.R. Off. FEMA awarded PW 4653 for all PM costs with no cap. . Activities related to requesting, obtaining, and administering Federal disaster subgrants are not eligible PM costs. This determination is the final decision on this matter pursuant to 44 C.F.R. [4] Letter from N.Y. Sandy Branch Chief, FEMA Region II, to Dep. The project overhead costs are the costs incurred in the shared services such as secretarial staff and other services provide to the project and can be directly billable as such. This post is another in the series on PMP Study Notes to help make your concepts crystal clear and give you confidence as you go into the PMP exam. By letters dated between May 11, 2018 and May 24, 2018, the Applicant transmitted its first appeals to the Grantee (Applicants First Appeals). 2013); see also Office of Personnel Management v. Richmond, 496 U.S. 414 (1990) (Payments of money from the Federal Treasury are limited to those authorized by statute, and erroneous advice given by a Government employee to a benefits claimant cannot estop the Government from denying benefits not otherwise permitted by law.). Between June 25, 2013 and September 4, 2014, FEMA obligated several Project Worksheets (PWs) to document emergency protective measures and storm-related repairs. OMB (July 9, 2018), enclosing the First Appeal Determinations. 200.404 (2014). Second, in response to the Applicants statement that FEMA had assured it the Agency had authority to approve the costs as PM expenses, the RA pointed out the Agency had never actually made a commitment or promise to approve the request. In support of this belief, the Applicant relied on a provision in FEMAs Public Assistance Guide, which allows costs incurred for project supervision and management under a contractors Master Service Agreement to qualify as contract costs. The Applicant claimed that Section 207.6 (c) of Title 44 of the Code of Federal Regulations (44 C.F.R. [19] First Appeal Determinations, at 5 (citing 2 C.F.R. By December 8, 2015, FEMA had obligated funds under Project Worksheet (PW) 4100 for disaster-related repairs to the Facility totaling $1,037,810.13, including $31,437.50 in direct administrative costs (DAC). FEMA awarded PW 4831 for all of the Applicants direct administrative costs (DAC)/close-out incentive costs, with funding capped at 3 percent. Accordingly, under DAP 9525.9, the Applicant cannot allocate or otherwise assign such expenses to individual projects as DAC or contract costs. Direct costs. The Applicant submitted a first appeal, noting that in 2012 its contractor informally notified the Louisiana Governors Office of Homeland Security and Emergency Preparedness (Grantee) and FEMA of its re-classification request. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. Under FEMA Disaster Assistance Policy (DAP) 9525.9, these expenses are therefore indirect costs and are not eligible for reimbursement as Direct Administrative Costs (DAC). This determination is the final decision on this matter pursuant to 44 C.F.R. This includes the costs of production materials, labour, and the costs of goods sold (COGS). [13] Since a FEMA designee never signed a PW approving the requested transfer of costs, the Agency does not find merit in the Applicants argument concerning reliance on prior FEMA communication. [26] Indirect costs are not eligible for reimbursement as DAC. This is in response to a letter from your office dated September 11, 2019, which transmitted the referenced second appeal on behalf of the Cameron Parish School Board (Applicant). The Applicant claimed that Section 207.6 (c) of Title 44 of the Code of Federal Regulations (44 C.F.R. The following are the costs associated with the projects. It can be measured by using a Cost Performance Index or CPI which measures the ratio of the Earned value with regards to the Actual cost incurred on the project. 206.206, Appeals. Dirs. After the spring of 2011, the Applicants contractor performed work supporting the eligibility of change orders pertaining to PWs 533 and 2397. New York State Division of Homeland Security and Emergency Services. Indirect Costs: These are costs that are incurred by the company/individual and occur at the same time as the project. As such, they are a part of individual project costs. 200.404 (2014); also Applicants First Appeals, at 3. Bd., to Asst Deputy Dir. [1] 200.110 (2014) (specifying the effective date for the Uniform Rules under 2 C.F.R. Officers, and Disaster Assistance Div. As an example, in PW 2608, the Applicant claims a CDM Smith employee spent 234.5 hours performing work on 27 projects which has been individually tracked and documented on CDM Smiths invoice #3.[30] This employee incurred a total of $9,097.10 in travel, lodging, and meal expenses during the period covered by CDM Smiths invoice #3. As an example, in PW 4113, the Applicant claims a CDM Smith employee spent 234.5 hours performing work on 27 projects which has been individually tracked and documented on CDM Smiths invoice #3.[28] This employee incurred a total of $9,097.10 in travel, lodging, and meal expenses during the period covered by CDM Smiths invoice #3. However, as noted, a pro rata allocation of expenses across every task for all PWs on the basis of hours worked on the task does not make such expenses eligible for reimbursement as DAC. Direct costs are those that can be "identified separately and assigned to a specific project," such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. Accordingly, the Applicants request to re-classify the DAC charges to PM costs is denied. 206.206. labor, raw materials, and equipment rental costs. 405(d) in support of its appeal; however, this regulation does not apply to disasters declared before December 26, 2014. In a 2017 determination, FEMA denied the request, concluding the change orders eligibility work was DAC, not PM. On November 7, 2017, FEMA issued a Request for Information (RFI), seeking information that satisfied regulatory appeal requirements. [3], Between February 29, 2016 and December 11, 2017, the Grantee submitted to FEMA the Applicants Large Project Final Accounting (LPFA) for the PWs (LPFA Requests). FEMA awarded PW 4831 for all DAC/COI costs with a 3 percent funding cap. Governors Office of Homeland Security and Emergency Preparedness. This can include software, equipment, and raw materials, but it also can include manpower, assuming that this manpower is specific to the product, department, or project. 15 through May 14, 2018) [hereinafter Final RFIs]. Bidding as an Essential Skill for Project Managers, Time/Material Billing & Fixed Cost Billing, Why Project Managers Should Not Overpromise and Underestimate at the Same Time, The Need for Person Independence in Software Project Management, The Importance of Ethics in Project Management, Why Most Projects Run into Problems and How to Avoid them and What to do about it, Why Project Managers Must Master the Art of Dealing with Disruptions, Why Project Managers Must Focus on Last Mile Connectivity to Ensure Success, How Project Managers Can Benefit from Knowledge Management Systems, Why Project Managers Must be Prepared to Deal with Disruptions of All Kinds, Transitioning to Agile? Re: Second Appeal Cameron Parish School Board, PA ID: 023-00E84-00, FEMA-1607-DR-LA, Multiple Project Worksheets (PW) Direct Administrative Costs . The 5 costs they cover are: Direct cost Indirect cost Fixed cost Variable cost Sunk cost Let's look at each of these in turn. pt. Labor: The costs of the various categories of labor in the project are estimated as well as the hourly cost. Indirect Costs: The costs that are indirectly related to the project. Direct operating costs take the form of expenses required for production materials with direct effects on a cost object. of its concerns over costs incurred from continuing discussions on the eligibility of the changes to the approved scopes of work, and therefore its request to have its work classified as PM costs, not DAC. [18], The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated July 9, 2018 (First Appeal Determinations). Share sensitive information only on official, secure websites.. Learn the difference between Discrete Effort, Apportioned Effort and Level of Effort (LOE) in project duration estimation for PMP certification. Between January 25, 2018 and April 13, 2018, the Grantee transmitted the Applicants First Appeals to FEMA Region II. FEMA issued a Final Request for Information (Final RFI) for each of the PWs via letters dated between June 19, 2018 and June 28, 2018. Reg. From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage throughout the. This determination is the final decision on this matter pursuant to 44 C.F.R. Assistance, GOHSEP, at 2 (Dec. 6, 2017) (citing to task code 15 from Hoffpauir PM Task Descriptions). In response, a Grantee representative instructed Hoffpauir to continue with its effort so that the Grantee could use it as precedence for other applicants. The Applicant stated it believed that, since project coordination and project management were both contract costs, travel expenses assigned to these categories should also be eligible for PA funding as contract costs. [15] Letters from Dep. [23] Letters from Dep. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. Section 324 Management Costs and Direct Administrative Costs. Here, the Applicant attempts to claim as DAC and/or contract costs certain travel expenses that its contractors incurred, despite its acknowledgment that CDM Smiths employees worked on several PWs over the course of each trip at issue. Direct costs directly benefit a particular project where indirect costs benefit multiple project. Additionally, the Applicant stated that a FEMA representative indicated he had authority to consider moving the DAC charges incurred during the version review timeframe for PWs 533 and 2397 to the PM PW. Although there are some significant differences between them, it is not easy to make a clear distinction between direct and indirect costs all the time. ) or https:// means youve safely connected to the .gov website. 200.110 (2014); 79 Fed. the cost units of measure. [29] The Applicant believes it is entitled to reimbursement for the hourly travel expense rate for a given employee multiplied by the number of hours that employee billed for each PW in a given billing period, since it does not attempt to claim a pro rata share of travel expenses for hours spent on indirect tasks. [19] Further, the RA found that the Applicant had not substantiated its contention that travel expenses associated with project coordination tasks should be treated as contract costs, since DAP 9525.9 and the DAC Guidance specifically define[] DAC as including costs associated with the preparation and submission of PWs.[20]. Assistance (PA) Branch Chief, N.Y. Sandy Branch, FEMA Region II, to Dep. [2] See Expense Analysis Memo (The expenses and hours incurred on the project are totaled for each team member then divided by the total hour value for each team member.). The Applicant stated that the Grantee instructed its contractor to continue the work associated with seeking FEMA funding for the change orders, and FEMA responded that it would consider transferring the costs from the PM PW to the DAC PW. From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage in the State of New York. Dir., Nassau Cty. OMB, to Commr, NYSHSES (Sept. 10, 2018). [3] Id. This is in response to a letter from your office dated September 11, 2019, which transmitted the referenced second appeal on behalf of the Cameron Parish School Board (Applicant). Of Mgmt. In the RFI Responses, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. The budget for the same would be the costs at each stage of the project. management, general administration, rental and utility costs. (Sept. 8, 2009) (concerning Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007) and FEMA Recovery Policy 9525.14, Grantee Administrative Costs (Sept. 8, 2009)). Cost Management Plan describes how the project costs will be planned, structured, and controlled. For example, equipment costs, direct materials . It also noted the multiple times, starting in 2012, that Hoffpauir told the Grantee and FEMA of its concerns over costs incurred from continuing discussions on the eligibility of the changes to the approved scopes of work, and therefore its request to have its work classified as PM costs, not DAC. [31] See 2 C.F.R. 16 through June 1, 2018). Prior to these submissions, however, FEMA had informed the Applicant by letter dated January 6, 2017 (DAC Determination Memo) that CDM Smiths travel expenses associated with direct administrative and project coordination tasks were indirect costs, and not eligible for reimbursement as DAC. FEMA transmitted an additional RFI on October 29, 2018, requesting documentation: (1) explaining how the claimed activities qualify as PM versus DAC, and why PW 4653 is the appropriate project for the claimed activities; (2) specifying the provisions in federal law, regulation, or policy with which the applicant believes the initial action was inconsistent; and, (3) the monetary figure in dispute for each of the PWs mentioned in the appeal, PWs 533, 2397, 4653, and 4831. The Grantee found that certain task descriptions of work performed after March 2011, all of which the Applicant had previously categorized as direct management tasks, should be considered for a move to the PM PW. (Jan. 8, 2013) [hereinafter Expense Analysis Memo]. Direct costs are costs that can be directly attributed to a specific project, e.g. [15] In each of the Final RFIs, FEMA requested documentation: (1) defining or describing project coordination costs and project coordination travel costs; (2) explaining how project coordination travel costs differ from travel expenses categorized as DAC; and/or (3) supporting the Applicants claims that DAP 9525.9 does not apply to the contractors project coordination travel costs and/or that such costs should qualify as eligible contract costs. Costs that do not change with the timeline or progress of the project. Nassau County (Applicant) hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. Commr, NYSHSES and Dep. [4] Letter from Superintendent, Cameron Par. Copyright 2022 All rights are reserved. 75,867, 75,872 (Dec. 19, 2014). OMB, at 2 (Jan. 6, 2017) (FEMA will not amend the PWs to include apportioned travel expenses spread across multiple PWs as DAC.). 206.206, Appeals. Hoffpauirs prior communications with the Grantee and FEMA about re-classifying the DAC charges to PM costs. Bd., at 1 (Nov. 7, 2017) (citing Title 44 Code of Federal Regulations (44 C.F.R.) [17] 2 Letters from Regl Admr, FEMA Region II, to Dep. Reg. It requests that FEMA complete an extensive investigation of the costs at issue, and recommends that FEMA obligate $512,258.75 as PM costs, and additionally grant all other costs and fees to which the Applicant may be entitled. 200.405. We are a ISO 9001:2015 Certified Education Provider. Reg. [9] Applicants First Appeals, at 3 (emphasis in original). On May 11, 2018, the Grantee transmitted the Applicants First Appeals to FEMA Region II, expressing support for them. [1] Email from N.Y. St. DR-4085 PA Operations Lead, to N.Y. Sandy Branch Chief, FEMA Region II, (Oct. 4, 2016); CDM Smith Memorandum, Determination and Allocation of Expense Portion of Project Costs. Nassau County (Applicant) hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. [29] Since the travel expenses at issue benefitted more than one PW, they are indirect costs. Between June 25, 2013 and December 8, 2015, FEMA obligated several Project Worksheets (PWs) to document emergency protective measures and disaster-related repairs. Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. What are Direct Costs in Project Management? Any costs that are directly attributable to the work on the project. [21] By letters dated October 23, 2018, the Grantee transmitted the Applicants second appeals to FEMA Region II, supporting them. Commr, NYSHSES and Dep. [13] Id. The cumulative costs of the project are the ones that are incurred up to a specific phase or milestone of the project. [10] Title 2 of the Code of Federal Regulations (2 C.F.R.) and Emergency Preparedness (GOSHEP), at 2 (Nov. 30, 2015) (clarifying a January 9, 2014 letter from FEMA, by confirming that [t]he [Applicant] may receive more than three percent for eligible DAC/COI on a single project, as long as the total DAC/COI obligation does not exceed of the [Applicants] aggregate pre-reduction value of all eligible projects.). Eligible DAC work includes activities related to developing the scope of work (SOW) component for one specific project worksheet. ), Costs of equipment shared by multiple projects (like shared printers). FEMA awarded PW 4653 for all PM costs with no cap. Direct costs. The Applicant reiterated that Hoffpauir spent significant time and effort on discussing the changes to the approved scopes of work with FEMA and the Louisiana Governors Office of Homeland Security and Emergency Preparedness (Grantee) after construction of the above-referenced projects. FEMA awarded the project management (PM) costs for all of the Applicants projects through PW 4653, at the full estimated costs with no cap. LockA locked padlock Under FEMA Disaster Assistance Policy (DAP) 9525.9. these expenses are therefore indirect costs and are not eligible for reimbursement as Direct Administrative Costs (DAC). These can include the salaries paid to the resources, the billing rate of the resources and costs of the software and hardware that are used for building the website. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. [24] By contrast, costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted[25] are indirect costs. A distinction can be made depending on the nature of the product and business. . [9] Since the Applicant has not demonstrated Hoffpauirs work and related costs pertain to eligible PM activities (i.e., oversight of an eligible project from the design phase to the completion of the work, including architectural and engineering design work), these are not eligible PM costs. Conclusion: Nassau Countys (Applicant) contractors employees did not incur travel expenses for specific projects, and instead such expenses benefitted more than one Project Worksheet (PW). Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. The costs at issue in this appeal relate to work Hoffpauir performed to persuade FEMA that the changes to the approved scopes of work for PWs 533 and 2397 were eligible for funding (e.g., preparing for/attending meetings with the Grantee and FEMA, and providing documentation upon request). Direct Administrative Costs & Management Costs. Assistance (PA) Branch Chief, N.Y. Sandy Branch, FEMA Region II, to Dep. The changes orders related to additional work beyond that previously approved, such as the installation of additional electronic and fire safety equipment. What Project Managers Must Know About This Hot Methodology, Overcoming the Challenges of Delivering Projects on Time and Without Cost Overruns, The Opportunities and Challenges of Project Management in Virtual Workplaces, Costs in Project Management - Costs associated with the Projects. [5] Ineligible PM activities include those necessary in requesting and obtaining Federal disaster subgrants, such as attending Grantee and FEMA meetings or completing documents to request assistance. Please inform the Applicant of my decision. [3] The Applicant responded on December6, 2017 reiterating previously raised arguments. Direct costs are those that can be identified separately and assigned to a specific project, such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. Cost planning is an essential part of the project management process. There should be a measurement of the costs involved and their variances tracked, if any. [24] Indirect costs are not reimbursable as DAC. As an example, in PW 2608, the Applicant claims a CDM Smith employee spent 234.5 hours performing work on 27 projects which has been individually tracked and documented on CDM Smiths invoice #3.. Conclusion: Nassau Countys (Applicant) contractors employees did not incur travel expenses for specific projects, and instead such expenses benefitted more than one PW. (PWs) 2214, 2608, 2609, 2671, 2909, 3640, 3988, 4001. Between April 16, 2018 and June 1, 2018, the Applicant responded to the Final RFIs (RFI Responses). The Applicant also relies on the indirect cost allocation under 2 C.F.R. This determination is the final decision on this matter pursuant to 44 C.F.R. 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