...the NFIP as damage that results in costs to restore the structure that are 50 percent or more of the market value of the structure prior to the event. The local floodplain manager will make a substantial damage determination, not FEMA or the state, so it will be important to coordinate with your floodplain manager if the facility is in an SFHA.
If the facility is determined to be substantially damaged, the Advisory Base Flood Elevation will be used to design the replacement facility and to determine eligible costs. If the 50 Percent Rule calculation indicates repair, however, the total eligible project cost including the cost to elevate or flood-proof the structure will be capped at the lesser of either the cost of repairs plus meeting applicable codes or the replacement cost. This means replacement may still present the most cost-effective, or in some cases — such as the inability to meet relevant codes at the current location — the only option for a substantially damaged facility. It is important to keep in mind that a substantial damage determination is not the same thing as FEMA’s 50 Percent Rule, despite the fact that these are often confused in the field.
Improved/Alternate Projects and Related Cost Estimating Considerations
The FEMA Public Assistance (PA) program was designed to be flexible, while at the same time ensuring good stewardship of public funds. The PA program will reimburse applicants for the repair or replacement of a facility to pre-disaster design, capacity and functional use, taking into account applicable codes and standards.
However, the disaster event may present an applicant with an opportunity for improvements and changes more in keeping with the local community vision or long-term recovery plan. In this case, applicants may opt to undertake what are defined within the PA program as Improved and Alternate Projects.
An Improved Project is one that has the same function and at least the equivalent capacity as the pre-disaster facility, but includes improvements (e.g., an expanded fire station or rearranged classroom space) that go above and beyond what FEMAwould normally fund. An Alternate Project is one in which the applicant decides that rather than restore the damaged facility, the public welfare would be best served by utilizing a portion of those eligible funds for another project.
Unlike a standard large project, which is reimbursed based on actual costs, funding for Improved Projects is capped at the federal share of the eligible costs that would have been associated with repairing or replacing the facility back to its pre-disaster design, capacity and function (“as it was”), along with code compliance requirements (“as it has to be”). Similarly, Alternate Projects are capped at 90 percent of the federal share of these same eligible costs (except in the case of private non-profits, which are capped at 75 percent of the federal share, or for applicants who elect to pursue their project under the Alternative Procedures Pilot Program authorized by the Sandy Recovery Improvement Act of 2013, which allows full payment of the federal share for “Alternate Projects”). Because neither type of project is paid based on actual cost, as a standard large project would be, both of these options rely heavily on the accuracy and completeness of the damage assessment, scope of work and cost estimate of the original, standard (“as it was” plus “as it has to be”) project.
The importance of developing a complete and accurate scope of work cannot be overemphasized, and proper use of FEMA’s Cost Estimating Format (CEF) — a forward pricing methodology — is important for taking into account not only construction costs such as labor and materials, but also soft costs including post-disaster inflation. (Following hurricanes Katrina and Rita, use of well-prepared CEFs for one applicant in Mississippi increased funding an average of 60 percent versus utilizing a more static tool such as RSMeans —making a difference for this applicant of tens of millions of dollars in funding.) Use of the CEF is required by FEMA for all category C-G large projects that are less than 90 percent complete at the time of inspection.