Article 3: Cost Overrun

(Category: costs-eligilbilty)

Article Summary

Due to the nature of the Public Assistance program, cost estimates are frequently approved before project work is finalized. When actual expenses incurred during performance exceed the approved estimate, it is classified as a Cost Overrun. These overruns are primarily driven by four variables: hidden disaster damage discovered post-approval, variations in unit pricing for labor/materials, scope of work modifications during performance, or unavoidable starting and completion delays.

FEMA processes overruns differently based on project classification:

• Large Projects: The applicant must evaluate the overrun and submit a formal request for supplemental funding through the State to FEMA as soon as possible. If additional work or hidden damage is discovered mid-construction, the State and FEMA must be notified immediately before performing the work so a federal site inspection can be conducted if necessary. All requests must be heavily backed by documentation proving the extra costs track strictly to eligible work.
• Small Projects: Overruns are not reviewed on an individual, case-by-case basis. Instead, if the aggregate actual cost across all of an applicant's small projects exceeds the total approved budget for those projects, the applicant can file a single collective appeal for a significant net cost overrun. This appeal must be submitted through the State to FEMA within 60 days of completing the applicant's very last small project. The documentation must comprehensively reconcile actual costs and line-item changes for every single small project, capturing both overruns and underruns.

Five Key Takeaways for CTA FEMA Compliance

1. Differentiate Project Size Overrun Procedures: Process large project overruns through immediate, individual funding requests, whereas small project overruns must be bundled into a collective, net-cost appeal covering the entire small project portfolio.
2. Observe Strict Small Project Appeal Windows: Ensure any portfolio-wide appeal for small project net cost overruns is formally submitted within the mandatory 60-day deadline following the completion of your final small project.
3. Notify FEMA Prior to Executing New Work Scopes: If hidden damage or a necessary scope change is discovered during active construction on a large project, notify the State and FEMA immediately before performing the work so a federal site inspection can be coordinated.
4. Maintain Comprehensive Line-Item Reconciliation: For a small project net overrun appeal, compile actual cost documentation for every single line item across all projects, explicitly accounting for and explaining both overruns and underruns.
5. Substantiate Cause for Delays and Price Shifts: Meticulously document that any cost increases driven by market pricing variations or unexpected project delays were entirely reasonable, justified, and tied strictly to executing the approved eligible work.

Article 4: Donated Resources

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