FEMA reimburses costs incurred using three types of contract payment obligations: fixed-price, cost-reimbursement, and, to a limited extent, time and materials (T&M). The specific contract types related to each of these are described in FEMA’s Procurement Guidance for Recipients and Subrecipients Under 2 C.F.R. Part 200 (Uniform Rules).123

The Applicant must include required provisions in all contracts awarded and maintain oversight to ensure contractors perform according to the conditions and specifications of the contract and any purchase orders.

FEMA does not reimburse costs incurred under a cost plus a percentage of cost contract or a contract with a percentage of construction cost method.

FEMA advises against the use of T&M contracts and generally limits the use of these contracts to a reasonable time based on the circumstances during which the Applicant could not define a clear scope of work (SOW). T&M contracts do not provide incentives to the contractor for cost control or labor efficiency. Therefore, FEMA may reimburse costs incurred under a T&M contract only if all of the following apply:

• No other contract was suitable;

• The contract has a ceiling price that the contractor exceeds at its own risk; and

• The Applicant provides a high degree of oversight to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls.127

The Applicant should define the SOW as soon as possible to enable procurement of a more acceptable type of contract.

The simplified acquisition threshold is set by the Federal Acquisition Regulation at 48 CFR § 2.101. The threshold is adjusted periodically for inflation.

Some entities, such as Rural Electrical Cooperatives, provide the materials necessary to restore their facilities and refer to such contracts as Time and Equipment (T&E) contracts. The limitations and requirements that apply to T&M contracts also apply to T&E contracts.

The Davis Bacon Act, which requires “prevailing wage” payment to contracted workers based on the local union wage scale defined by the U.S. Department of Labor, does not apply to State, Territorial, Tribal, local government, or PNP contracts for PA-funded projects. However, if the Applicant incorporates prevailing wage rates as part of its normal practice for all contracts regardless of the funding source, then those rates are eligible.


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