Because of the nature of the Public Assistance Program, applicants may find that in most instances cost estimates are approved by FEMA prior to the completion of the associated work. On occasion, the actual costs incurred by the applicant during performance of the work exceed the approved estimate. This situation is known as a Cost Overrun. Cost overruns are usually caused by one of the following:
Hidden damage: additional disaster damage may become evident.
Variations in unit pricing: The unit prices used in the cost estimate may have been lower than those the applicant was actually charged.
Change in the scope of work: While performing the work, the applicant may find that additional eligible work or changes in the prescribed work are necessary.
Delay in starting or completion times: Problems beyond the applicant’s control may contribute to delays in starting or completing work.
The applicant should evaluate cost overruns on large projects. If the additional costs are justified, the applicant can request additional funding. The applicant should contact the State as soon as possible to ensure that proper guidelines for documenting any additional costs are followed. The State will forward requests for additional funding to FEMA. Such requests must contain documentation to support that the additional costs were incurred during the performance of eligible work. If the need for additional work is discovered during the performance of work on the project, the State must be notified and must notify FEMA so that FEMA may inspect the site, if necessary.
Small projects are handled differently. If there is a gross error or omission in the scope of work, the applicant should make a request for a change as described for large projects. Otherwise, cost overruns are not handled on a project-by-project basis; rather, the applicant may request supplemental funding for a significant net cost overrun on all small projects by submitting an appeal through the State to FEMA. An appeal should be submitted only when the total costs for all small projects exceed the total cost approved for all small projects. The appeal must be submitted within 60 days of the completion of that applicant’s last small project. The appeal must include documentation of actual costs correlated to each line item in the scopes of work. This includes projects with underruns as well as those with overruns. An explanation of all cost and quantity differences with the approved scopes of work should be included (see Appeals).
References: 44 CFR §206.204(e)
Public Assistance Guide, FEMA 322, pages 109, 113, 140