Buildings and Equipment: Mastering One of the Most Complex Categories of Work



...projects, to optimize available funding and eliminate unnecessary redundancies.

Keep in mind that all costs must be tracked to each separate funding source, whether this involves a 406 hazard mitigation or 404 HMGP project — or some combination thereof.

Repair vs. Replacement (50 Percent Rule)

This topic was covered in depth by Disaster Recovery Today Issue #12, but it is well worth mentioning in an overview of considerations related to Category E projects, since it can be one of the most important determinations that will be made regarding a facility’s disaster funding.

The determination is made using an equation that puts the estimated cost to repair (numerator) over the estimated cost to replace (denominator). The equation is weighted to favor repair by not including in the numerator the cost of upgrades of other elements triggered by codes and standards, or the design costs associated with upgrades, whereas these costs are included in the denominator. Neither includes demolition of the entire facility (although repair cost may include demolition essential to the repair of the damaged elements), site work, applicable project management costs, contents, and/or hazard mitigation measures.

Once the calculation is made, the amount of eligible costs can be determined. For example, if the repair costs exceed 50 percent of the estimated replacement cost, then the facility’s actual replacement cost is eligible. If the repair costs do not exceed 50 percent of the replacement cost, but upgrades are triggered by codes and standards, the repair of eligible damages plus the mandatory upgrade costs are both eligible for funding; however total eligible costs are capped at the estimated replacement cost.

Another consideration that may come into play for structures located in a Special Flood Hazard Area (SFHA) is whether the damages constitute substantial damage, defined by...

“Essentially, the 50 Percent Rule is intended to determine whether it will be more cost-effective to repair the damaged facility or to tear down and replace the entire facility.”