A cost is reasonable if a prudent person would have paid it under the circumstances at the time. FEMA analyzes reasonableness for contract work bought without competition, time-and-materials or cost-plus-percentage contracts, and noncompliant procurements on large projects. For your own staff and equipment, it reviews only large projects.
FEMA weighs whether:
FEMA also considers shortages, project complexity, economy of scale, extraordinary labor needs and your written justification. If a cost is not reasonable, FEMA may fund only the reasonable portion, using the least-cost alternative, the lowest bid, another applicant’s properly procured price or a FEMA estimate.
Bid tabulations, your cost or price analysis, historical invoices for similar work, and a written justification for any cost above market, prepared at the time.
Write down why prices were high while it is happening: shortages, haul distances, access problems. A justification reconstructed months later carries far less weight.