Cost Overrun

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

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