FEMA's Cost Eligibility Determination of Puerto Rico Electric Power Authority's Contract with Cobra Acquisitions LLC

FEMA’s December 2017 Eligibility Determination of Cobra contract costs for its Public Assistance (PA) program was unsound. Federal regulations and FEMA policy require all costs claimed under the PA program to be necessary and reasonable to accomplish the work properly and efficiently. FEMA conducted an analysis of the Cobra contract rates and determined that contract costs were reasonable and eligible for the PA program. However, FEMA did not evaluate the actual time and materials costs incurred under the contract for reasonableness, and its analyses of the contract rates for labor, equipment, and other costs were not always logical, complete, and supported. As a result, FEMA approved a PA grant and reimbursed millions of dollars for Cobra contract costs based on an unsound eligibility determination. We made one recommendation that, when implemented, will correct the deficiencies with FEMA’s evaluation of cost reasonableness of Cobra contract costs. FEMA concurred with our recommendation and described the corrective actions necessary to address the issues we identified in our report. Specifically, FEMA will update its October 2018 Public Assistance: Reasonable Cost Evaluation Job Aid and the Public Assistance Program and Policy Guide to include additional guidance specific to Time and Materials contracts. FEMA is also conducting additional analyses of the actual time and material costs to determine the reasonability and eligibility of Cobra contract costs for PA funding.