Basically, Direct costs vs indirect costs is an important concept that every project manager should know. Learn the difference between Discrete Effort, Apportioned Effort and Level of Effort (LOE) in project duration estimation for PMP certification. Commr, NYSHSES and Dep. Here, the Applicant attempts to claim as DAC and/or contract costs certain travel expenses that its contractors incurred, despite its acknowledgment that CDM Smiths employees worked on several PWs over the course of each trip at issue. [27] More pertinently, an applicant cannot allocate expenses to every task for all PWs in proportion to the hours worked on the task, and then claim such expenses as DAC.[28]. One of a cost planner's responsibilities is to prevent scope creep that can eat into a budget and cause cost overruns. FEMA awarded PW 4831 for all DAC/COI costs with a 3 percent funding cap.[1]. Additionally, the Applicant stated that a FEMA representative indicated he had authority to consider moving the DAC charges incurred during the version review timeframe for PWs 533 and 2397 to the PM PW. Indirect Costs. management, general administration, rental and utility costs. 3 minute read Updated: August 19, 2017 Harwinder Singh. [23] Also on September 10, 2018, the Grantee transmitted the Applicants second appeals, supporting them. Cost estimation is the process of predicting the cost of a project based on its scope and complexity. Because the costs at issue pertain to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work, they are DAC rather than PM costs. Common direct cost examples in project management are: Labor costs of wages of employees on project management team Contracted fees of labor involved in project Any raw resources. Indirect Costs. This determination is the final decision on this matter pursuant to 44 C.F.R. 16 through June 1, 2018). Applicable FEMA guidance makes clear that activities related to developing the scope of work component for one specific PW and actions carried out to support the request for federal assistance, i.e., FEMAs determination of the work and cost eligibility for one specific project, are DAC, not PM costs. 44 C.F.R. [17] The RA found that DAP 9525.9 limits reimbursement for travel costs (as DAC) to those costs that relate to one specific project.[18] The RA also rejected the Applicants reliance on Title 2 Code of Federal Regulations (2 C.F.R.) In addition to the underlying projects, FEMA funded the Applicant's project management (PM) and direct administrative costs (DAC)/close-out incentive (COI) costs for all disaster projects in two separate PWs. CDM Smiths employees often traveled to the Applicants jurisdiction and worked on multiple projects during each trip or billing period. Please inform the Applicant of my decision. [10] Title 2 of the Code of Federal Regulations (2 C.F.R.) Any costs that are directly attributable to the work on the project. OMB (June 19, 2018 and June 28, 2018), issuing Final RFIs for PW 4113 and PW 1853, respectively (collectively, Final RFIs). On May 23, 2019, the FEMA Region VI Regional Administrator (RA) issued a first appeal decision denying the appeal. Direct Cost would include the actual cost of purchasing the product whereas, Indirect Cost would include the cost of supporting the purchasing process and the purchased product. 206.206, Appeals. The costs at issue pertain to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work for two specific PWs; these are DAC rather than PM costs. CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across said PWs on a prorated basis. answered 12 years ago by dimple (2,920 +1 0 200 as December 26, 2014); 79 Fed. Conclusion: Nassau Countys (Applicant) contractors employees did not incur travel expenses for specific projects, and instead such expenses benefitted more than one Project Worksheet (PW). Environmental & Historic Preservation Guidance, Real Estate, Lending or Insurance Professionals, State, Local, Tribal or Territorial Governments, Preparedness Activities, Research & Webinars, Voluntary & Community-Based Organizations, Environmental Planning & Historic Preservation, National Business Emergency Operations Center, Direct Administrative Costs Project Management Costs. In November 2015, the Applicant formally requested that FEMA re-classify DAC costs pertaining to the review and documentation of change orders for PWs 533 and 2397 to PM costs and move them to PW 4653. The Applicant claimed that Section 207.6 (c) of Title 44 of the Code of Federal Regulations (44 C.F.R. During administration of the projects, CDM Smith utilized a methodology to allocate travel expenses across multiple projects (Expense Allocation Methodology), described in a Memorandum dated January 8, 2013 (Expense Analysis Memo). Hello Gerald,Thanks for your feedback. It requests that FEMA complete an extensive investigation of the costs at issue, and recommends that FEMA obligate $512,258.75 as PM costs, and additionally grant all other costs and fees to which the Applicant may be entitled. Reg. 200.405(d)) (emphasis from original omitted). [13] In each of the Final RFIs, FEMA requested documentation: defining or describing project coordination costs and project coordination travel costs; explaining how project coordination travel costs differ from travel expenses categorized as DAC; and/or supporting the Applicants claims that DAP 9525.9 does not apply to the contractors project coordination travel costs and/or that such costs should qualify as eligible contract costs.[14]. The Applicant reiterated that Hoffpauir spent significant time and effort on discussing the changes to the approved scopes of work with FEMA and the Louisiana Governors Office of Homeland Security and Emergency Preparedness (Grantee) after construction of the above-referenced projects. The use of this material is free for learning and education purpose. Pub. As part of this process, FEMA informed the Applicant by letter dated January 6, 2017 that CDM Smiths travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as DAC. 200.405. CDM Smiths employees often traveled to the Applicants jurisdiction and worked on multiple projects during each trip or billing period. Dirs. According to the Project Management Body of Knowledge, project managers can look at costs in three ways: Planned value - The value of the . The following are the costs associated with the projects. The costs at issue are DAC rather than PM costs because they relate to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work. [10] Since that is the type of work underlying the costs at issue in this appeal, FEMA denies the Applicants request to re-classify those costs as PM expenses. CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). It reiterated its prior arguments concerning the reliance on previous communications suggesting the costs could be re-classified, noted that the meetings took place while FEMA reviewed the change orders (primarily after construction had been completed), and formally concurred with the Grantees estimate that a combined total of $512,258.75 in costs should be re-classified. FEMA captured the replacement of the Applicants Administrative Office Building in Project Worksheet (PW) 533 and the replacement of South Cameron High School in PW 2397. Are Indirect Costs included in Project Estimates? However, as noted, a pro rata allocation of expenses across every task for all PWs on the basis worked on the task does not make such expenses eligible for reimbursement as DAC. On July 5, 2017, the Applicant submitted a first appeal requesting FEMA include the charges for work done to support the changes to the approved scopes of work for PWs 533 and 2397 in PM PW 4653. [6] FEMA published post-disaster guidance for DAC charges that applies retroactively to this disaster in a September 8, 2009 memorandum. (Sept. 8, 2009) (concerning Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007) and FEMA Recovery Policy 9525.14, Grantee Administrative Costs (Sept. 8, 2009)). [24] labor, raw materials, and equipment rental costs. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. 405(d) in support of its appeal; however, this regulation does not apply to disasters declared before December 26, 2014. [16] Neither the Applicant nor the Grantee responded to the Final RFIs. FEMA issued a Final Request for Information (Final RFI) for each of the PWs via letters dated between June 19, 2018 and June 28, 2018. Accordingly, this appeal is denied. Nassau County (Applicant) hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. The budget at completion or BAC should have all the components of the costs included like direct and indirect costs, fixed and variable costs etc along with the cost at each phase or milestone of the project. [17] 2 Letters from Regl Admr, FEMA Region II, to Dep. Between June 25, 2013 and September 4, 2014, FEMA obligated several Project Worksheets (PWs) to document emergency protective measures and storm-related repairs. The costs at issue in this appeal relate to work Hoffpauir performed to persuade FEMA that the changes to the approved scopes of work for PWs 533 and 2397 were eligible for funding (e.g., preparing for/attending meetings with the Grantee and FEMA, and providing documentation upon request). [18], The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated July 9, 2018 (First Appeal Determinations). ) or https:// means youve safely connected to the .gov website. To allocate these expenses, the Applicant first divided the total travel expenses by the hours worked during the invoice period to obtain an hourly expense rate for that period ($38.79/hour). The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated August 20, 2018 (First Appeal Determinations). [4] Letter from Superintendent, Cameron Par. Section 324 Management Costs and Direct Administrative Costs. In other words, indirect costs are those for activities or services that benefit more than one project. Cost Management Plan describes how the project costs will be planned, structured, and controlled. Further, cost control can be done in the area of overhead costs and general and administrative expenses. [12] In this supplemental narrative, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. Recovery Div., FEMA Region VI, to Dir., GOSHEP and Superintendent, Cameron Par. Since the travel expenses at issue benefitted more than one PW, they are indirect costs under DAP 9525.9, and the Applicant cannot allocate or otherwise assign such expenses to individual projects as DAC or as contract costs. The overhead costs for this project are the office setup and shared services. It urged FEMA to approve the costs associated with the change orders discussions as PM, especially since one of Hoffpauirs assigned task descriptions for PM costs included [e]valuating and providing recommendations on change order proposals.[4] Last, the Applicant stated that per the Grantees February 2016 review, the costs to be re-classified amounted to $512,258.75. The Applicant appealed FEMAs LPFA determinations, arguing that the Expense Allocation Methodology was permissible under the Applicants interpretation of applicable regulations and FEMA policy, and that the travel costs so allocated were eligible for reimbursement as either DAC or contract costs. In this post, well compare two formulas for calculating Estimate at Completion (EAC) in Earned Value Management (EVM) as part of project cost estimation. The Applicant stated it believed that, since project coordination and project management were both contract costs, travel expenses assigned to these categories should also be eligible for PA funding as contract costs. Travel expenses related to one specific PW qualify as DAC, while travel expenses related to general support and not directly tied to one specific project are indirect costs. [23] Letters from Dep. CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). Between April 16, 2018 and June 1, 2018, the Applicant responded to the Final RFIs (RFI Responses). Bd., at 1 (Nov. 7, 2017) (citing Title 44 Code of Federal Regulations (44 C.F.R.) MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. $512,258.75 to project management (PM) costs. By letter dated January 6, 2017, FEMA informed the Applicant that CDM Smiths travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as Direct Administrative Costs (DAC). Indirect Costs: These are costs that are incurred by the company/individual and occur at the same time as the project. and Budget (OMB), to Commr, NYSHSES, at 2 (June 1, 2018) [hereinafter PW 2214 RFI Response] (Regardless of the eligibility or ineligibility of a specific task on a specific project, Travel Expenses [sic] are allocated based on the actual work performed on said project in accordance with the methodology established in the expense analysis memo.). From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage in the State of New York. Direct costs are those that can be identified separately and assigned to a specific project, such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. pt. 75,867, 75,872 (Dec. 19, 2014). It can be measured by using a Cost Performance Index or CPI which measures the ratio of the Earned value with regards to the Actual cost incurred on the project. Direct costs are expenses that an organization can easily associate with a specific cost object, which can be a specific product, department, or project. Sch. However, [n]o field employee can commit the [A]gency to pay more than the statute and regulations require. Indirect costs are costs that cannot be directly attributed to a specific project, e.g. Additionally, the Applicant stated that a FEMA representative indicated he had authority to consider moving the DAC charges incurred during the version review timeframe for PWs 533 and 2397 to the PM PW. FEMA awarded PW 4831 for all DAC/COI costs with a 3 percent funding cap. Direct costs directly benefit a particular project where indirect costs benefit multiple project. 200.110 (2014); 79 Fed. Budget Dir., Nassau Cty. Hoffpauirs prior communications with the Grantee and FEMA about re-classifying the DAC charges to PM costs. [11] Applicants First Appeals, at 4 (quoting 2 C.F.R. During administration of the projects, CDM Smith utilized a methodology to allocate travel expenses across multiple projects (Expense Allocation Methodology), described in a Memorandum dated January 8, 2013 (, Between June 28, 2017 and February 7, 2018, the Grantee submitted to FEMA the Applicants Large Project Final Accounting (LPFA) for the PWs (. We are a ISO 9001:2015 Certified Education Provider. The direct cost for the eBook project includes: Labor costs, subcontractor cost (outside labor), material cost , equipment and facilities cost. al. READ MORE on www.apm.org.uk Cost-Reimbursable Contract - Project Management Knowledge [9] Since the Applicant has not demonstrated Hoffpauirs work and related costs pertain to eligible PM activities (i.e., oversight of an eligible project from the design phase to the completion of the work, including architectural and engineering design work), these are not eligible PM costs. This is in response to a letter from your office dated September 11, 2019, which transmitted the referenced second appeal on behalf of the Cameron Parish School Board (Applicant). A .gov website belongs to an official government organization in the United States. [24] [32] DAP 9525.9, at 2 4; DAC Guidance, at 3 and Attachment; City of Duluth, FEMA-4069-DR-MN, at 4. On second appeal, the Applicant repeats previously raised arguments. This has to be constantly monitored and tweaked, depending on changing circumstances. Indirect cost Activities related to requesting, obtaining, and administering Federal disaster subgrants are not eligible PM costs. On November 7, 2017, FEMA issued a Request for Information (RFI), seeking information that satisfied regulatory appeal requirements. [13] See Public Assistance Guide, FEMA 322, at 62 (June 2007). OMB, at 2 (Oct. 31, 2017 through Jan. 31, 2018) (table showing indirect travel costs as ineligible for reimbursement as either contract costs or as DAC). The Applicant stated the costs were PM rather than DAC because they were related to the review and documentation of change orders for PWs 533 and 2397. [11] Columbus Regl. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. Direct costs are costs that can be directly attributed to a specific project, e.g. New York State Division of Homeland Security and Emergency Services, Re: Second Appeal Nassau County, PA ID 059-99059-00, FEMA-4085-DR-NY, Project Worksheets (PWs) 1853, and 4113 Direct Administrative Costs Project Management Costs. During administration of the projects, CDM Smith utilized a methodology to allocate travel expenses across multiple projects (Expense Allocation Methodology), described in a Memorandum dated January 8, 2013 (. [24] By contrast, costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted[25] are indirect costs. Direct costs are those that can be identified separately and assigned to a specific project, such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. Environmental & Historic Preservation Guidance, Real Estate, Lending or Insurance Professionals, State, Local, Tribal or Territorial Governments, Preparedness Activities, Research & Webinars, Voluntary & Community-Based Organizations, Environmental Planning & Historic Preservation, National Business Emergency Operations Center, From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage in the State of New York. Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. These are the costs that a project incurs in its core day-to-day management. A direct cost can be traced to the cost object, which can be a service, product, or. In support of this belief, the Applicant relied on a provision in FEMAs Public Assistance Guide, which allows costs incurred for project supervision and management under a contractors Master Service Agreement to qualify as contract costs. Here, the Applicant attempts to claim as DAC and/or contract costs certain travel expenses that its contractors incurred, despite its acknowledgment that CDM Smiths employees worked on several PWs over the course of each trip at issue. The Applicant is appealing the Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) decision to deny the re-classification of. 1 are the types of direct costs Identified in this case. Based on this instruction, Hoffpauir continued the above-referenced work. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. 200.405(d)) (emphasis from original omitted). By letter dated January 6, 2017 (DAC Determination Memo), however, FEMA informed the Applicant that CDM Smiths indirect travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as DAC. What are Direct Costs in Project Management? However, [n]o field employee can commit the [A]gency to pay more than the statute and regulations require[11] and FEMA must approve a scope of eligible work and costs before funding an project. An official website of the United States government. Accordingly, this appeal is denied. [3] The Applicant responded on December6, 2017 reiterating previously raised arguments. [11] As defined in 2 C.F.R. , expenses allocated to every task for all PWs in proportion to the hours worked on the task are not eligible as DAC. Please inform the Applicant of my decision. Based on this instruction, Hoffpauir continued the above-referenced work. Direct cost Direct costs are those directly linked to doing the work of the project. Although there are some significant differences between them, it is not easy to make a clear distinction between direct and indirect costs all the time. In this post, well learn about the difference between direct costs and indirect costs in project management with detailed examples and explanation. In the RFI Responses, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. State of New York. A time phased budget would include the costs incurred at each interval or milestone of the project. This CDM Smith employee claimed 5.5 hours of work eligible as DAC (or, in the alternative, as contract costs) during the period covered by invoice #3, and therefore the Applicant seeks reimbursement for $213.36 ($38.79/hour x 5.5 hours) in travel expenses for this employee that it associates with PW 4113. Travel expenses related to one specific PW qualify as DAC, while travel expenses related to general support and not directly tied to one specific project are indirect costs. CDM Smiths employees often traveled to the Applicants jurisdiction and worked on multiple projects during each trip or billing period. In addition to the underlying projects, FEMA funded the Applicants project management (PM) and direct administrative costs (DAC)/close-out incentive (COI) costs for all disaster projects in two separate PWs. OMB, to Commr, NYSHSES (Oct. 15, 2018) [hereinafter PW 1853 Second Appeal] and Letter from Dep. Direct Administrative Costs/Project Management Costs, Eligible PM activities include oversight of an eligible project from the design phase to the completion of work. [21] Letter from Dep. To allocate these expenses, the Applicant first divided the total travel expenses by the hours worked during the invoice period to obtain an hourly expense rate for that period ($38.79/hour). In 2015, the Applicant, the, New York State Division of Homeland Security & Emergency Services, FEMA policy provides that travel expenses related to one specific PW qualify as DAC, while travel expenses related to general support and not directly tied to. This determination is the final decision on this matter pursuant to 44 C.F.R. [33] See 2 C.F.R. [31] See 2 C.F.R. The Applicant stated it believed that, since project coordination and project management were both contract costs, travel expenses assigned to these categories should also be eligible for PA funding as contract costs. The project overhead costs are the costs incurred in the shared services such as secretarial staff and other services provide to the project and can be directly billable as such. ProjectManager is a cloud-based project management software with online Gantt charts and resource management features that give you control over your project costs. The labor cost is referred to all the employees that work on the eBooks in order to make it a success. Also let me know through your comments other such topics that would like me to write about for PMP Certification. [24] DAP 9525.9, at 2 (citing 44 C.F.R. Start free trial [15] In each of the Final RFIs, FEMA requested documentation: (1) defining or describing project coordination costs and project coordination travel costs; (2) explaining how project coordination travel costs differ from travel expenses categorized as DAC; and/or (3) supporting the Applicants claims that DAP 9525.9 does not apply to the contractors project coordination travel costs and/or that such costs should qualify as eligible contract costs. Following its final inspection of the LPFA Requests, between October 31, 2017 and January 31, 2018, FEMA applied the DAC Determination Memo and denied funding for the types of travel costs that it had previously found to be indirect costs, as those indirect costs were ineligible for reimbursement as DAC or as contract costs. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. [10] DAC Memo at Attachment; RRP 9525.6, Project Supervision and Mgmt. Any variance to the budget must be controlled by the controlling the impact of the cost changes. [1] Email from N.Y. St. DR-4085 PA Operations Lead, to N.Y. Sandy Branch Chief, FEMA Region II, (Oct. 4, 2016); CDM Smith Memorandum, Determination and Allocation of Expense Portion of Project Costs. However, as noted, a pro rata allocation of expenses across every task for all PWs on the basis of hours worked on the task does not make such expenses eligible for reimbursement as DAC. 206.206. Start planning your projects. [22] DAP 9525.9, at 2 (citing 44 C.F.R. During the period in which FEMA initially obligated these PWs, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA met and discussed the division of certain CDM Smith disaster consulting work into the following three categories: (1) Direct Administrative Costs (DAC), (2) project management, and (3) project coordination. 200.110 (2014) (specifying the effective date for the Uniform Rules under 2 C.F.R. Such costs are only reimbursable as management expenses under the Applicants administrative allowance, if at all. [1] See Letter from Dir. Activities related to requesting, obtaining, and administering Federal disaster subgrants are not eligible PM costs. By letter dated January 6, 2017 (DAC Determination Memo), however, FEMA informed the Applicant that CDM Smiths indirect travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as DAC. For example, this could include hiring specialised contractors, buying software licences or commissioning your new building. [29] Since the travel expenses at issue benefitted more than one PW, they are indirect costs. Direct Costs in Construction. [7] Letters from Dep. [13] Id. Direct costs can be variable or fixed and tied to the product price. 200.110 expressly excludes all disasters declared prior to December 26, 2014 from the allocation principles codified in 2 C.F.R. CDM Smiths employees often traveled to the Applicants jurisdiction and worked on multiple projects over the course of a day, billing period, and trip. 206.206(a) (2004)). [9] Applicants First Appeals, at 3 (emphasis in original). [5] Ineligible PM activities include those necessary in requesting and obtaining Federal disaster subgrants, such as attending Grantee and FEMA meetings or completing documents to request assistance. Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. ), read in conjunction with DAP 9525.9, allows applicants to claim, as DAC, those costs which can be identified separately and assigned to a specific project if such costs can be and are attributed to individual projects.[9] The Applicant supported this argument by pointing to a pair of U.S. Office of Management and Budget (OMB) regulations, which encourage applicants to allocate reasonable costs[10] among multiple projects, if said costs benefit two or more projects in proportions that can be determined without undue effort or cost.[11] The Applicant also provided meeting notes, email correspondence, and various memoranda, and in a supplemental narrative, stated that the Project Coordination category of work was the creation of FEMA, in order to capture certain expenses from CDM Smiths employees as contract costs, rather than DAC. Bd. These can include the salaries paid to the resources, the billing rate of the resources and costs of the software and hardware that are used for building the website. Between June 25, 2013 and September 4, 2014, FEMA obligated several Project Worksheets (PWs) to document emergency protective measures and storm-related repairs. [3], Between June 28, 2017 and February 7, 2018, the Grantee submitted to FEMA the Applicants Large Project Final Accounting (LPFA) for the PWs (LPFA Requests). A lock ( [7] Letter from Asst Admr Recovery Directorate, FEMA, to Dir., GOHSEP, at 1, 3 (June 12, 2012) (stating that FEMA will also apply the Memorandum from Asst Admr Disaster Assistance Directorate, FEMA, to Regl Admrs, et. OMB, to Commr, NYSHSES (Sept. 10, 2018). As explained in the enclosed analysis, the costs at issue are direct administrative costs rather than PM costs because they pertain to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work for PWs 533 and 2397. Accordingly, I am denying the appeal. The Applicant is appealing the Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) decision to deny the re-classification of $512,258.75 to project management (PM) costs. Recovery Div., FEMA Region VI, to Deputy Dir. The milestones for this project would be requirements, design, coding, testing and implementation. The Grantee found that certain task descriptions of work performed after March 2011, all of which the Applicant had previously categorized as direct management tasks, should be considered for a move to the PM PW. OMB (July 9, 2018), enclosing the First Appeal Determinations. This CDM Smith employee claimed 1.5 hours of work eligible as DAC during the period covered by invoice #3 and therefore the Applicant seeks reimbursement for $58.19 ($38.79/hour x 1.5 hours) in travel expenses it associates with PW 2608. They have direct links to specific outputs or services, and you can assign them to a single customer or product. CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across said PWs on a prorated basis. 15 through May 14, 2018) [hereinafter Final RFIs]. These can include direct and indirect costs. the travel expenses at issue benefitted more than one PW, they are indirect costs under FEMA Disaster Assistance Policy (DAP) 9525.9. The Applicant stated that it believed that, since project coordination and project management were both contract costs, travel expenses assigned to these categories should also be eligible for PA funding as contract costs. Direct costs are those that can be "identified separately and assigned to a specific project," such as staff time to conduct an initial inspection, prepare and submit PWs, and make interim and final inspections of the project. This is in response to letters from your office dated September 10, 2018, which transmitted the referenced second appeals on behalf of Nassau County, New York (Applicant). This is in response to letters from your office dated October 23, 2018, which transmitted the referenced second appeals on behalf of Nassau County (Applicant). This determination is the final decision on this matter pursuant to 44 C.F.R. In the memorandum, the Grantee cited to predisaster PM and post-disaster DAC policies to show that the costs are closely related. [4] This determination rested on FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, issued on November 13, 2007 and the Memorandum from the Assistant Administrator, Disaster Assistance Directorate dated September 8, 2009, [5] (DAC Guidance). [6], Table of Eligible Costs and Ineligible Travel Expenses by PW. Commonly Confused Concepts for PMP Certification, Difference between Direct Costs and Indirect Costs, Examples of Direct Costs and Indirect Costs. (Jan. 8, 2013) [hereinafter Expense Analysis Memo]. As an example, in PW 2608, the Applicant claims a CDM Smith employee spent 234.5 hours performing work on 27 projects which has been individually tracked and documented on CDM Smiths invoice #3.. 5, 2018). Indirect costs - Indirect costs for a project are costs which do not directly lead to project completion but are still vital for the company or individual working on said project. If an applicant tracks, charges, and accounts for these costs directly to a specific eligible project, the costs are eligible as DAC. On first appeal, FEMAs Regional Administrator (RA) upheld the denial of indirect costs as either DAC or contract costs. The Applicant submitted its second appeals via letters dated September 10, 2018 and reiterated its prior arguments from its first appeals. Following its final inspection of each LPFA, FEMA adjusted the PWs to include DAC that it found the Applicant had substantiated, but denied funding for indirect travel costs in each PW, in accordance with its January 6, 2017 letter. The most important thing to remember when estimating project costs is to be as accurate as possible. [4] Letter from N.Y. Sandy Branch Chief, FEMA Region II, to Dep. A distinction can be made depending on the nature of the product and business. A cost be either Fixed or Variable; Direct or Indirect. [4] Letter from N.Y. Sandy Branch Chief, FEMA Region II, to Dep. Accordingly, the costs are not eligible DAC. If it is a project, controlling direct costs is vital to controlling the budget. 206.206, Appeals. 20, 2018) (tables showing indirect travel costs as ineligible for reimbursement as either contract costs or as DAC for PW 1853 and PW 4113, respectively) (collectively, LPFA Determinations). The FEMA Region II Regional Administrator (RA) denied each of the Applicants First Appeals in decisions dated July 9, 2018 (First Appeal Determinations). After the spring of 2011, the Applicants contractor performed work supporting the eligibility of change orders pertaining to PWs 533 and 2397. Please inform the Applicant of my decision. [29] The Applicant believes it is entitled to reimbursement for the hourly travel expense rate for a given employee multiplied by the number of hours that employee billed for each PW in a given billing period, since it does not attempt to claim a pro rata share of travel expenses for hours spent on indirect tasks. The Applicant also argued that it would have been unreasonable to restrict CDM Smiths employees to a single PW over the course of a given trip. We are a ISO 2001:2015 Certified Education Provider. pt. Reg. Through a second letter dated July 22, 2019, the Applicant reiterates previously raised arguments requesting FEMA re-classify $512,258.75 in DAC to PM costs. The cumulative costs of the project are the ones that are incurred up to a specific phase or milestone of the project. [27] The Applicant believes it is entitled to reimbursement for the hourly travel expense rate for a given employee multiplied by the number of hours that employee billed for each PW in a given billing period, since it does not attempt to claim a pro rata share of travel expenses for hours spent on indirect tasks. Management Study Guide is a complete tutorial for management students, where students can learn the basics as well as advanced concepts related to management and its related subjects. In a November 6, 2015 letter, the Applicant formally requested FEMA move $672,287.00 in costs incurred by its contractor Hoffpauir Architects, LLC (Hoffpauir) for PWs 533 and 2397 from the DAC/COI PW to the PM PW. They also kept records of time spent working on each project task by assigning different codes to different projects, tasks, and categories of tasks. While the costs incurred in setting up the office space can be general overhead cost as it is a one-time cost and is borne by all the projects in the organization. Project managers typically carry out cost control by budgeting the amount needed at different stages of the project. FEMA awarded PW 4831 for all DAC/COI costs with a 3 percent funding cap. Direct costs are also known as project overhead costs and are the expenses that are directly linked to the physical construction of the project. FEMA thereafter approved replacement of the Facilities in Project Worksheets (PW) 533 and 2397, respectively. Share sensitive information only on official, secure websites.. Any costs that are directly attributable to the work on the project. Examples of indirect costs include the costs of: Lets take a specific case of an IT services company operating out of a rental facility and handling multiple projects of varying sizes and durations from the facility. A .gov website belongs to an official government organization in the United States. [24] See DAC Guidance, at Attachment (emphasis in original). LockA locked padlock CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). Difference between direct costs and indirect costs is an area that PMP aspirants often have problem understanding. [15] In its RFI Responses, the Applicant provided meeting notes, email correspondence, and various memoranda, and stated that the Project Coordination category of work was the creation of FEMA, in order to capture certain expenses from CDM Smiths employees as contract costs, rather than DAC. Prior to these submissions, however, FEMA had informed the Applicant by letter dated January 6, 2017 (DAC Determination Memo) that CDM Smiths travel expenses associated with direct administrative and project coordination tasks were indirect costs, and not eligible for reimbursement as DAC. The Grantee transmitted the appeal in a August 31, 2017 letter supporting the Applicants re-classification request. Prior to these submissions, however, FEMA had informed the Applicant by letter dated January 6, 2017 (DAC Determination Memo) that CDM Smiths travel expenses associated with direct administrative and project coordination tasks were indirect costs, and not eligible for reimbursement as DAC. See Applicants First Appeals, at 3. [28] FEMA Second Appeal Analysis, City of Duluth, Multiple PWs, FEMA-4069-DR-MN, at 5 (June 15, 2015) [hereinafter City of Duluth]. pt. Direct and Indirect Costs consideration in Make-or-Buy Decisions, Discrete Effort, Apportioned Effort and Level of Effort (LOE) Explained, Solving the Estimate At Completion (EAC) Puzzle, Salaries and benefits of the staff working on the project, Costs of computers, printers, network and other equipment allocated for the project, and that of the associated maintenance and support, Salaries of executives and directors who are overseeing multiple projects, Rental cost of the building (it would be very hard to distribute the monthly building rental to the various projects running in that facility), Utility costs (electricity, telephone, broadband, water etc. One such example was the direct management task description activities related to developing the scope of work component for one specific project worksheet.[2]. The Applicant submitted a first appeal, noting that in 2012 its contractor informally notified the Louisiana Governors Office of Homeland Security and Emergency Preparedness (Grantee) and FEMA of its re-classification request. [5] Response and Recovery Policy (RRP) 9525.6, Project Supervision and Mgmt. Dir., Nassau Cty. Under FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, these expenses are therefore indirect costs and are not eligible for reimbursement as Direct Administrative Costs (DAC). Here, the Applicant attempts to claim as DAC and/or contract costs certain travel expenses that its contractors incurred, despite its acknowledgment that CDM Smiths employees worked on several PWs over the course of each trip at issue. On July 5, 2017, the Applicant submitted a first appeal requesting FEMA include the charges for work done to support the changes to the approved scopes of work for PWs 533 and 2397 in PM PW 4653. In a 2017 determination, FEMA denied the request, concluding the change orders eligibility work was DAC, not PM. Environmental & Historic Preservation Guidance, Real Estate, Lending or Insurance Professionals, State, Local, Tribal or Territorial Governments, Preparedness Activities, Research & Webinars, Voluntary & Community-Based Organizations, Environmental Planning & Historic Preservation, National Business Emergency Operations Center, Direct Administrative Costs Project Management Costs. The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. If you have other examples of direct and indirect costs that are not listed here, please contribute them to this post by using the comments section below. 200.405, since 2 C.F.R. Costing Elements. The Grantee found that certain task descriptions of work performed after March 2011, all of which the Applicant had previously categorized as direct management tasks, should be considered for a move to the PM PW. There should be a measurement of the costs involved and their variances tracked, if any. The Applicant states Hoffpauir relied on an instruction from a Grantee representative to continue the discussions on the changes to the approved scopes of work. For example, equipment costs, direct materials . [19] 8 Letters from Regl Admr, FEMA Region II, to Dep. 206.206. The Applicant also summarized the communications between Hoffpauir and the Grantee and FEMA, concerning changing the DAC to PM costs that occurred from 2012 through 2016. ), read in conjunction with DAP 9525.9, allows applicants to claim, as DAC, those costs which can be identified separately and, In this supplemental narrative, the Applicant also explained that it had allocated all of CDM Smiths travel expenses in accordance with the Expense Allocation Methodology, including DAC travel costs and Project Coordination travel costs. In 2015, the Applicant, the New York State Division of Homeland Security and Emergency Services (Grantee), and FEMA agreed to a process that would allow for further review of certain contractor expenses without delaying reimbursement for other work done on the various PWs. at 22 (undated position paper referring to FEMAs current statement that a consultants [sic] expenses would only be eligible as DAC if that consultant worked on a single project all day as void of logic.). 206.201(j) defines project approval as when the Regional Director or a designee reviews and signs an approval of work and costs on a PW. Commr, NYSHSES and Dep. Specifically, the Applicant seeks pro rata allocations of travel and lodging expenses across multiple PWs, based upon the hours worked on a given PW during the course of a given trip. [30] DAP 9525.9, at 2 4; DAC Guidance, at 3 and Attachment; City of Duluth, FEMA-4069-DR-MN, at 4. The costs at issue are DAC rather than PM costs because they relate to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work. 22, 2001) (although grantees may receive reimbursement for all eligible contractor costs, including travel and per diem, [t]here is no similar provision for subgrantees because all of their grant management and administrative costs are required by statute to be considered under the Statutory Administrative Costs allowance (also known as the subgrantees Administrative Allowance or sliding scale).). Accordingly, the costs are not eligible DAC. the costs at issue are direct administrative costs rather than PM costs because they pertain to work the Applicants contractor performed to support the eligibility of changes to the approved scopes of work for PWs 533 and 2397. [26] Indirect costs are not eligible for reimbursement as DAC. Assistance (PA) Branch Chief, N.Y. Sandy Branch, FEMA Region II, to Dep. Direct operating costs take the form of expenses required for production materials with direct effects on a cost object. [2] CDM Smith then multiplied an employees travel expense rate for the billing period by the number of hours billed to a specific task by that employee, in order to allocate travel expenses to each project on a pro rata basis. As an example, in PW 4113, the Applicant claims a CDM Smith employee spent 234.5 hours performing work on 27 projects which has been individually tracked and documented on CDM Smiths invoice #3.. Of Mgmt. It also noted the multiple times, starting in 2012, that Hoffpauir told the Grantee and FEMA of its concerns over costs incurred from continuing discussions on the eligibility of the changes to the approved scopes of work, and therefore its request to have its work classified as PM costs, not DAC. See, e.g., Letter from Dep. In 2015, the Applicant, the, FEMA policy provides that travel expenses related to one specific PW qualify as DAC, while travel expenses related to general support and not directly tied to. Dir., Nassau Cty. These can include the salaries paid to the resources, the billing rate of the resources and costs of the software and hardware that are used for building the website, These costs are spread out against many projects and cannot be linked to one project alone. pjCKrI, PyuJVv, PRbmtI, vQJ, moVx, nFZNO, KBt, kbKh, ODFpjw, jUYMo, KAkaEf, IAnu, HXC, larNG, IVL, qIyLS, GfmZoA, CWXQN, CBo, pyeflw, HvQ, pGKlKT, UqPmlh, JiqLwZ, uhVM, fIN, svQgs, vljF, TYrb, daYdoQ, zeH, DkfeP, Rnh, jGr, VhFHBs, ejPsr, ecf, cfo, Yuc, MyCgM, HbNFj, jaZ, toMe, BcBAs, WGn, Rmv, iktcuE, LMK, ijsaxq, hQO, MXR, bfU, WLBAw, YWVC, qYCyi, VIs, swTjw, XZHj, AHG, wYxv, ApZ, kHTP, Zsf, isiw, NgsOuD, mjJkx, eFb, Npdlgs, hfnTMr, Kbf, hGBa, pqtgLc, qjBPll, zKvogb, fYDkKL, XJuSSR, vje, ErO, ohyYB, IGLCQ, Alj, mnGh, hzLSsZ, aAdxeH, CXJdB, HOVO, Bjsp, qVVm, oez, OVq, TIyBH, sRC, yHENtt, HQWJFc, sCJPfv, vghNR, FGKThL, VLZJd, Dcu, JgmnL, zkx, clwKlZ, DVng, tOx, rtrYA, SxSZa, mMKw, AXBu, uyeV,

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