In response to the Disaster Mitigation Act of 2000, FEMA is increasingly obligating funds based on estimates for small projects. This enables funding to be disbursed more quickly in support of community recovery.

Accurate estimates are essential to providing adequate funding for eligible projects and reducing problems resulting from either an overage or shortage in the original grant.

Public Assistance program requirements include performing a cost or price analysis to establish reasonable costs for every procurement action, including contract modifications. The Applicant's estimate developed for the cost or price analysis may become part of the project cost estimate within FEMA Grants Portal Software.

The method and degree of analysis depends on the facts surrounding the particular procurement situation, but as a starting point, independent estimates are required before receiving bids or proposals.

Applicants should independently estimate project costs or prices prior to receiving bids or proposals.

A cost analysis is required if:

• An Applicant is required to submit the elements of an estimated cost
• Adequate price competition is lacking
• It is a sole source procurement, including contract modifications and change orders, unless price reasonableness can be established
• There is a cost overrun

The requirement for a cost price analysis can be met by conducting an independent validation of the estimate. The Cost Estimating Format tool should be used to conduct a cost or price analysis. The process is outlined in the CEF Instructional Guide V2.1 and will also be discussed later in this course.

The Applicant is responsible for ensuring that all eligible work is identified and that all costs for completing the eligible scope of work are submitted.

Applicant damage claims are addressed through a project. Projects are developed within the Grants Portal and are comprised of:

1. A Damage Description and Dimension
2. A scope of work for repair
3. Estimated costs for work to be completed (with actual costs for completed work)
4. Documentation to support the damage claim and repair costs

Methods of preparing the project and funding the work vary, depending on whether the work constitutes a small or large project, which is based on the estimated cost of the work.

Often, differences arise between FEMA, Applicant, and contractor estimates. The immediate reaction may be to look for mistakes in the estimating process, form, and cost data.

However, experience has shown that the difference is most often due to differences in the scope of work deemed eligible by the project formulation team, the scope of work desired by the Applicant, and the scope of work defined in the bid documents provided to the contractor.

When the three scopes of work are aligned, the estimates generally also fall into alignment quickly.

Once properly procured, bids along with any actual costs will help eliminate the concern of the estimate amounts for large projects.

Why is it important to prepare accurate estimates?

• Promotes appropriate use of Federal dollars
• Encourages acceptance by the Applicants
• Reduces the potential for future adjustments to grants

Congressional legislation requires FEMA to work toward establishing methods that will allow funding to be granted on the basis of estimates, a process that is highly dependent on FEMA's ability to prepare accurate scopes of work and corresponding cost estimates.

A consistent approach and format to all estimates is important for accuracy and validation. Consistent organization of the estimate and supporting documentation promotes efficiency in preparation, processing, and approval of projects.

The general process for preparing a cost estimate applies to all types of cost estimates, regardless of the type of facility or the size of the project.

FEMA uses the Cost Estimating Format to prepare cost estimates for large projects using factors to represent costs that frequently cannot be determined at the time the project is created in Grants Portal (e.g., base construction cost). However, the construction cost estimate (base cost, Part A of the Cost Estimating Format) is prepared using the same principles that are used for other cost estimates.

Cost estimates must be prepared in a manner that promotes accuracy and acceptance by the Applicants, and they must be defensible.

Standard industry practices and methods must be used to prepare cost estimates, regardless of the size or complexity of the project.

Quality control promotes ongoing improvements to estimating procedures and ensure that estimates are accurate before projects are approved and funding is obligated.

Quality control measures include:

• Training, mentoring, and oversight of the Estimating Specialists
• An effective review process

Cost Estimating is a step-by-step process. Each step of the estimating process should be addressed for every Public Assistance project estimate.

However, the complexity of the project's scope of work will drive the speed and schedule for development of the estimate. Accurate estimates require a thorough understanding of the scope of work.

An incomplete or poorly defined scope of work will result in an inaccurate estimate. If more attention is spent up front doing a detailed site visit and perfecting the scope of work, the development of the estimate will be a success.

The Applicant is responsible for preparing the design, determining the methods and schedule for completing the work, and preparing the specifications. FEMA and the Applicant develop the eligible scope of work and cost estimate.

FEMA will prepare a cost estimate using the Applicant's design and other data or validate the Applicant's cost estimate to verify that it is accurate, appropriate for the eligible scope of work, and sufficient to use as the basis for funding.

Pursuant to the Disaster Mitigation Act of 2000, the Cost Estimating Format was endorsed as the cost estimating methodology and instrument of the Public Assistance program. The Cost Estimating Format is designed to serve the unique requirements of the Public Assistance program. The way it is organized promotes consistency in documentation.

The Cost Estimating Format has the ability to import and incorporate cost data from most electronic cost data providers. It is flexible and more readily adaptable to the needs of the Public Assistance program than inflexible estimating systems required by some other agencies.

The Cost Estimating Format must be used for all projects that have the following characteristics:

• Projects that meet the large project threshold
• Permanent, restorative work (i.e., Public Assistance Categories C-G)
• Work that is less than 90 percent complete at the time of inspection

Cost estimate validation involves several steps. Experience has shown that validation typically requires an independent estimate of the costs of project elements equivalent to about 50-70% of the project scope of work and should include a minimum of 20% of the Construction Specifications Institute MasterFormat Divisions included in the scope.

1. Review eligibility of work included in the estimate or bid schedule of values.

2. Perform cost validation to determine reasonableness.

• Check 6-10 of the largest cost items using local average weighted unit cost or industry standard unit cost data, these items representing at least 25% of the MasterFormat Divisions included in the estimate
• Check 25% of remaining cost items, which should include systems or components representing an additional 25% of the eligible scope of work

The items checked should be within 10% of the local average weighted unit costs or industry standard unit cost data.

• If they are, use the Architect and Engineering estimates of the construction bid schedule of values as part of the project estimate
• If not:
• Check to see if the applicant provided costs are based on bid values; they may include general contractor costs
• Check to see if the separately listed items may need to be combined to accurately validate the cost
• If the costs cannot be brought within 10%, then develop a new independent estimate for eligible work”

3. Confirm procurement method.