Puerto Rico Disaster Recovery: FEMA Actions Needed to Strengthen Project Cost Estimation and Awareness of Program Guidance

In September 2017, two major hurricanes—Irma and Maria—struck Puerto Rico, destroying roads and buildings among other things. Puerto Rico estimates that $132 billion will be needed to repair and reconstruct infrastructure and services through 2028. FEMA is the lead federal agency responsible for assisting Puerto Rico to recover from these disasters. FEMA administers the Public Assistance program in partnership with Puerto Rico to provide funds to rebuild damaged infrastructure and restore services. GAO was asked to review federal recovery efforts in Puerto Rico.

In this report, GAO examines, among other things, (1) the status of FEMA Public Assistance program funding and any challenges in implementing the program, (2) the extent to which Public Assistance cost estimating guidance addresses conditions in Puerto Rico and aligns with best practices, and (3) the extent to which FEMA has developed policies and guidance for the program and any challenges with these policies and guidance. GAO reviewed FEMA's cost estimation guidance as well as documentation and data on the Public Assistance program through September 2019. GAO conducted site visits to Puerto Rico and interviewed FEMA and Puerto Rico government officials regarding the status of recovery efforts.

As of September 30, 2019, the Federal Emeregency Management Agency (FEMA) had obligated nearly $6 billion in Public Assistance grants to Puerto Rico for 1,558 projects since the September 2017 hurricanes. Of this $6 billion, $5.1 billion was obligated for emergency work projects such as debris removal and temporary power restoration. However, FEMA and Puerto Rico faced challenges in developing long-term, permanent work projects under the Public Assistance program. The large number of damaged sites and delays in establishing cost estimation guidance specific to Puerto Rico have also presented challenges to developing projects, according to FEMA and Puerto Rico officials. Both parties must agree to fixed cost estimates for these projects before work can begin. FEMA and Puerto Rico had approved fixed cost estimates for 19 projects as of September 2019, out of 9,344 damaged sites in Puerto Rico, such as schools, hospitals, and roads. FEMA and Puerto Rico have recently taken actions, including extending the deadline for fixed cost estimates, to address these challenges. However, it is too soon to assess the impact of these actions.

FEMA has adapted its Public Assistance cost estimating guidance to accurately reflect costs in Puerto Rico but could improve the guidance to further enhance its reliability. GAO found that FEMA's guidance substantially or fully met best practices for nine of 12 steps included in the GAO Cost Estimating and Assessment Guide , such as documenting and defining the purpose of the estimate. However, FEMA could improve the guidance in three areas, including analyzing risks and future uncertainties that could affect these estimates.

FEMA has developed Public Assistance policies and guidance to respond to complex recovery conditions in Puerto Rico. However, Puerto Rico government officials GAO spoke with stated that they were not always certain about how to proceed in accordance with FEMA policy because they did not consistently understand what guidance was in effect. Further, FEMA does not maintain a repository of Public Assistance guidance available to all recovery partners that includes current applicable guidance. Without real time access to current applicable guidance, recovery partners risk using guidance that has been revised or replaced.

GAO recommends that FEMA (1) revise its cost estimating guidance for Public Assistance to more fully adhere to best practices and, (2) develop a repository of current applicable Public Assistance guidance available to all relevant recovery partners in Puerto Rico. The Department of Homeland Security concurred with these recommendations.

In a span of 14 days in September 2017, two major hurricanes—Irma and  Maria—struck Puerto Rico causing billions of dollars in damage to its  infrastructure, housing, and economy. In its recovery plan, Puerto Rico  estimates that $132 billion in funding from 2018 through 2028 will be  needed to repair and reconstruct the infrastructure damaged by the  hurricanes, exacerbating an already difficult financial situation in Puerto  Rico, which had been operating under severe fiscal constraints prior to  the storms. Estimating the costs to repair or replace damaged  infrastructure is an important task to determine federal funding needed to  support Puerto Rico’s recovery.

The Federal Emergency Management Agency (FEMA)—a component of  the Department of Homeland Security (DHS)—is the lead federal agency  responsible for assisting Puerto Rico as it recovers from these natural  disasters. Among other responsibilities, FEMA administers the Public  Assistance program in partnership with the government of Puerto Rico,  including officials from various levels of government who work together as  partners in the recovery, providing grant funding for a wide range of  eligible response and recovery activities. The Public Assistance program  provides funding for debris removal efforts; life-saving emergency  protective measures; and the repair or replacement of disaster-damaged  publicly-owned facilities, roads and bridges, electrical utilities, among  other activities.

On November 2, 2017, Amendment 5 to the president’s disaster  declaration for Hurricane Maria imposed a number of grant conditions,  including that FEMA must obligate all large project funding for Public  Assistance permanent work through alternative procedures as authorized  by the Sandy Recovery Improvement Act of 2013. The stated goals of  the alternative procedures are to reduce costs to the federal government,  increase flexibility in the administration of the Public Assistance program,  expedite the provision of assistance under the program, and provide  financial incentives to recipients of the program for the timely and cost- effective completion of projects. The alternative procedures also require  that FEMA and Puerto Rico develop cost estimates before work can  begin on large Public Assistance permanent work projects.

We have previously reported on federal disaster response and recovery  efforts in Puerto Rico. For example, in September 2018, we reported on  our observations of FEMA’s response to hurricanes Irma and Maria in  Puerto Rico, among other impacted areas. In March 2019, we reported on  the status of FEMA’s Public Assistance program in Puerto Rico, including  FEMA’s obligations and expenditures in Puerto Rico, and initial  challenges with the recovery process.

You asked us to review the federal government’s response and recovery  efforts related to the 2017 hurricanes. In this report, we examine: (1) the  status of FEMA’s Public Assistance funding in Puerto Rico and any  challenges FEMA and Puerto Rico face in developing Public Assistance  projects; (2) the extent to which Public Assistance cost estimating  guidance addresses specific conditions in Puerto Rico and aligns with  best practices for cost estimating; (3) the extent to which FEMA has  developed policies and guidance for the Public Assistance program in  Puerto Rico and any challenges recovery partners faced with these  polices and guidance; and (4) the structures Puerto Rico and FEMA have  put in place to manage and oversee Public Assistance program funding.

To address these objectives, we reviewed relevant laws and FEMA Public  Assistance grant program guidance, including the April 2018 Public  Assistance Program and Policy Guide, and the April 2018 and September  2019 revised Public Assistance Alternative Procedures Permanent Work  Guide for Puerto Rico. We also observed the data systems FEMA uses to  develop, manage, and oversee individual projects. These include the  Emergency Management Mission Integrated Environment and the  Integrated Financial Management Information System. We interviewed  officials from FEMA headquarters, as well as officials from FEMA Region  II, the FEMA regional office with oversight for Puerto Rico. Further, in  May, August, and September of 2018, and March of 2019, we conducted  site visits to Puerto Rico to observe hurricane-damaged areas and  interview relevant FEMA and Puerto Rico government officials. These site  visits were not generalizable to all damaged areas across Puerto Rico,  but provided important context about the status of recovery efforts.

To assess the status of Public Assistance program funding in Puerto  Rico, we obtained and analyzed data on FEMA’s obligations and Puerto  Rico’s expenditures from September 2017 through September 30, 2019,  the most recent data available at the time of our review. We reviewed  information about these systems, interviewed data users and managers  responsible for these data, and cross-checked data across sources to  ensure consistency. Based on these steps, we determined these data to  be sufficiently reliable for the purposes of describing the status of Public  Assistance funding in Puerto Rico. To identify any challenges FEMA and  Puerto Rico faced implementing the Public Assistance program in Puerto  Rico, we reviewed documentation on the use of alternative procedures for  Public Assistance and interviewed FEMA officials in Puerto Rico, FEMA  Region II, and FEMA headquarters. These interviews focused on the  agency’s responsibilities and processes for ensuring Puerto Rico  implemented the Public Assistance program in accordance with relevant  laws, regulations, policies, and FEMA guidance. Further, we reviewed  documents and interviewed officials from Puerto Rico’s Central Office of  Recovery, Reconstruction, and Resilience (central recovery office).

To examine the extent to which Public Assistance cost estimating  guidance addresses specific conditions in Puerto Rico, we interviewed  FEMA officials in Puerto Rico and at FEMA headquarters. We also  reviewed FEMA documentation on exceptions FEMA developed to adapt  their Cost Estimating Format to specific costs in Puerto Rico. To  determine how well FEMA cost estimating guidance for Public Assistance  alternative procedures aligns with best practices for cost estimating, we  evaluated FEMA’s Public Assistance Alternative Procedures (Section  428) Guide for Permanent Work FEMA-4339-DR-PR issued in April 2018  and updated in September 2019, and FEMA’s Cost Estimation Format for  Large Projects Instructional Guide. We compared FEMA’s guidance for  developing cost estimates outlined in these documents against the best  practices in the 12 steps for cost estimating described in the GAO Cost  Estimating and Assessment Guide which we developed to establish a  consistent methodology that can be used across the federal government  to develop, manage, and evaluate cost estimates. We used a five point  scale for our assessment:

Fully met. FEMA provided complete evidence that satisfies all the  elements of the step.

Substantially met. FEMA provided evidence that satisfies a large  portion of the elements of the step.

Partially met. FEMA provided evidence that satisfies about half of the  elements of the step.

Minimally met. FEMA provided evidence that satisfies a small portion  of the elements of the step.

Not met. FEMA provided no evidence that satisfies any of the  elements of the step.

We have summarized our findings for each of the Cost Guide’s 12 steps  in appendix IV of this report.

To assess the extent to which FEMA has developed policies and  guidance for the Public Assistance program in Puerto Rico and any  challenges recovery partners have had with those policies and guidance,  we reviewed FEMA policy and guidance on national and Puerto Rico- specific Public Assistance and alternative procedures guidance and  compared them to FEMA’s National Disaster Recovery Framework. We  interviewed officials from FEMA, the central recovery office and six Puerto  Rico government agencies and public corporations headquartered in San  Juan, Puerto Rico. We selected the six entities with the greatest shares of  Public Assistance obligations in Puerto Rico as of December 6, 2018. We  also interviewed Puerto Rico government officials from 10 selected  municipal governments throughout Puerto Rico. We selected these  municipalities based on population and Public Assistance per capita  spending. In interviews with agencies and municipalities, we asked  officials about their experience working with FEMA to implement the  Public Assistance program and any challenges they faced. The results  from our interviews cannot be generalized to all of Puerto Rico’s  government agencies, public corporations, and municipalities; however,  they provide important context about the Public Assistance program in  Puerto Rico.

To describe the structures FEMA and Puerto Rico have created to  manage and oversee Public Assistance program funding, we reviewed  FEMA documentation. This included the Public Assistance Program  Management and Grant Closeout Standard Operating Procedure and  Puerto Rico’s administrative plans and recovery management guide  outlining the territory’s programmatic management and project oversight  activities for these programs, among other relevant documents. Further,  we interviewed FEMA officials and Puerto Rico officials from Puerto  Rico’s central recovery office and reviewed Puerto Rico government  documents related to recovery planning and internal controls.

We conducted this performance audit from March 2018 through January  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

On September 6, 2017, the eye of Hurricane Irma traveled about 50  nautical miles to the north of the northern shore of Puerto Rico as a  category 5 hurricane. Less than two weeks later, Hurricane Maria made  landfall as a category 4 hurricane on the main island of Puerto Rico on  the morning of September 20, 2017, with wind speeds up to 155 miles per  hour. The center of the hurricane moved through southeastern Puerto  Rico to the northwest part of the island, as shown in figure 1 below.

In response to the request of the governor of Puerto Rico, the president  declared a major disaster the day after each hurricane impacted Puerto  Rico. Major disaster declarations can trigger a variety of federal  response and recovery programs, including assistance through FEMA’s  Public Assistance program. Under the National Response Framework,  DHS is the federal department with primary responsibility for coordinating  disaster response, and within DHS, FEMA has lead responsibility.

FEMA’s Public Assistance program provides grant funding to state,  territorial, local, and tribal governments, as well as certain types of private  nonprofit organizations, to assist them in responding to and recovering  from major disasters or emergencies. As shown in figure 2, Public  Assistance program funds are categorized broadly as either “emergency  work” or “permanent work.” Within those two broad categories are  separate sub-categories. In addition to the emergency work and  permanent work categories, FEMA’s Public Assistance program includes  Category Z, which represents any indirect costs, any direct administrative  costs, and any other administrative expense associated with a specific  project.

Entities Involved in Puerto Rico’s Recovery

Given the immense scale and scope of devastation, disaster recovery in  Puerto Rico is a complex and dynamic process involving a large number  of entities. As shown in figure 3, implementing the Public Assistance  program involves recovery partners from the federal government; the  Commonwealth of Puerto Rico; and Puerto Rico government agencies,  public corporations, municipalities, and eligible nonprofits in Puerto Rico.  These recovery partners play a role in implementing the Public  Assistance program by developing projects and providing or receiving  grants and sub-grants (subawards).

FEMA. FEMA administers the Public Assistance program in partnership  with Puerto Rico and makes Public Assistance grant funding available to  Puerto Rico.

Puerto Rico Central Office of Recovery, Reconstruction and  Resilience. Puerto Rico was required, as a condition to receiving Public  Assistance grant funding, to establish an oversight authority supported by  third-party experts and provide centralized oversight over recovery funds.  In October 2017, the governor of Puerto Rico established the Central  Office of Recovery, Reconstruction, and Resilience (central recovery  office) to be the recipient for all Public Assistance funding consistent with  the conditions provided in Amendment 5 to the President’s disaster  declaration. The central recovery office is a non-federal entity that  provides a subaward to an applicant to carry out part of the federal  program. As a recipient of federal funds, the central recovery office must  oversee subrecipients to ensure that they are aware of and comply with  federal regulations. According to central recovery office officials, the  office was also established to ensure coordination with FEMA across the  numerous partners in recovery.

Commonwealth agencies, local entities, and private non-profits.  Puerto Rico’s agencies, such as the Department of Housing, and public  corporations, such as the Puerto Rico Electric Power Authority, act as  subrecipients. Specifically, they work with FEMA and the central recovery  office to identify, develop, and implement Public Assistance projects.  Local entities, including Puerto Rico’s 78 municipalities and eligible  private non-profits that provide critical services, are also subrecipients of  FEMA Public Assistance funding. As subrecipients, these entities receive  subawards from the central recovery office to carry out work under the  Public Assistance program.

Alternative Procedures for Public Assistance Funds

According to a November 2017 amendment to Puerto Rico’s major  disaster declaration, FEMA must obligate all large project funding for  Public Assistance permanent work through alternative procedures due to  the extraordinary level of infrastructure damage caused by Hurricane  Maria, as well as Puerto Rico’s difficult financial position.

To develop projects under the Public Assistance program, FEMA and  Puerto Rico officials are to collaborate to identify and document the  damage caused by a disaster to a particular facility. These officials are  to then use the damage description to formulate the scope of work—or  activities required to fix the identified damage—as well as the estimated  cost of these activities.

Under the standard Public Assistance program, FEMA will fund the actual  cost of a large project, and will increase or reduce the amount of funding  based on the cost of completed eligible work. In contrast, in Puerto Rico,  the alternative procedures require that the central recovery office and  subrecipients work collaboratively with FEMA to develop a fixed cost  estimate. According to FEMA officials, once this fixed cost estimate is  agreed to and obligated, subrecipients have flexibility within that fixed  cost estimate to rebuild in the manner that they find most appropriate.  Subrecipients could do the actual work used to develop the fixed cost  estimate, or they could put funds towards another FEMA approved  project. Unlike the standard Public Assistance program, the subrecipient  is responsible for actual costs that exceed the fixed cost estimate. If  actual costs are less than the fixed cost estimate, the subrecipient may  use all or part of excess funds for other eligible purposes, such as for  additional cost-effective hazard mitigation measures to increase the  resiliency of public infrastructure, as detailed in figure 4 below.

Section 20601 of the Bipartisan Budget Act of 2018 authorized FEMA,  when using the alternative procedures, to provide assistance to fund the  replacement or restoration of disaster-damaged infrastructure that  provides critical services—such as medical and educational facilities—to  an industry standard without regard to pre-disaster condition. It also  allows for restoration of components not damaged by the disaster when  necessary to fully effectuate restoration of the disaster-damaged  components to restore the function of the facility or system to industry  standards. For example, through the Act, FEMA may fund the restoration  of a disaster-damaged school building—which provides a critical  service—to accepted industry standards applicable to the construction of  education facilities. Therefore, according to FEMA policy, if the school  building was not up to industry standards, or in poor condition prior to the  2017 hurricanes, the Act allows FEMA to fund the restoration of this  building to a better condition than it was in prior to the storms. Further, the  Additional Supplemental Appropriations for Disaster Relief Act of 2019  (Supplemental Relief Act), which was signed into law on June 6, 2019,  provides additional direction to FEMA in the implementation of section  20601. Following the Supplemental Relief Act, FEMA issued additional guidance in September 2019 that includes information on eligibility and  applicable industry standards.

FEMA Obligated Nearly $6 Billion for Public Assistance in Puerto Rico as of September 2019, but FEMA and Puerto Rico Face Significant Challenges in Developing Projects

Status of FEMA Public Assistance Funding in Puerto Rico

Since the 2017 hurricanes, FEMA has obligated nearly $6 billion in Public  Assistance program funding for 1,558 projects across Puerto Rico,  according to our analysis of FEMA’s data as of September 30, 2019 (see  fig. 5). Specifically, FEMA had obligated approximately $5.1 billion for  emergency work projects (categories A and B), $487 million for  permanent work projects (categories C through G), and $315 million for  management costs (Category Z).

Of the nearly $6 billion FEMA has obligated, Puerto Rico has expended  approximately $3.9 billion as of September 30, 2019—about 65 percent of  total Public Assistance program obligations to Puerto Rico—to reimburse  subrecipients for completed work. As shown in table 1, Puerto Rico has  expended about $3.7 billion for emergency work projects, $39 million for  permanent work projects, and $104 million for management costs.

The majority of FEMA’s obligations and the funding Puerto Rico  expended as of September 30, 2019, are for emergency work because  these projects began soon after the disasters struck and focused on  debris removal and providing assistance to address immediate threats to  life and property. In contrast, permanent work projects take time to  identify, develop, and ultimately complete as they represent the longer- term repair and restoration of public infrastructure, such as a sports  center in Caguas, Puerto Rico, as shown in figure 6 below.

FEMA and Puerto Rico Face Significant Challenges in Developing Public Assistance Projects

FEMA and Puerto Rico officials identified challenges in developing Public  Assistance projects in Puerto Rico. Specifically, they cited: (1) delays in  establishing a cost estimating guidance for projects in Puerto Rico, (2) the  large number of damaged sites that require finalized fixed cost estimates,  and (3) challenges with the implementation of the flexibilities authorized  by section 20601 of the Bipartisan Budget Act.

Delays in establishing cost estimating guidance. Given the  importance of reaching mutual agreement on fixed cost estimates for  alternative procedures projects, FEMA and Puerto Rico have taken a  deliberative approach to establishing the data and procedures that will be  used to develop these fixed cost estimates. This includes, among other  things, adapting the way FEMA estimates costs to the specific post- disaster economic conditions in the territory, including developing  exceptions to FEMA’s cost estimating guidance. According to FEMA,  these exceptions were developed to account for risk, including higher  anticipated costs due to increased demand for labor, equipment, and  materials in Puerto Rico’s post-disaster economy. To develop these  exceptions, FEMA and the central recovery office established a Center of  Excellence staffed with mutually agreed upon representatives. FEMA  used cost estimators from RAND Corporation (RAND) as their chosen  representatives, while the central recovery office hired separate  contractors as their representatives. According to FEMA officials, the  Center of Excellence was established, among other things, to involve  Puerto Rico in developing cost estimating guidance and to ensure that the  exceptions made to FEMA’s Cost Estimating Format were agreeable to  both parties. However, this approach has been beset by delays. For  example, it took nearly one year for Puerto Rico to hire its chosen  representatives to the Center of Excellence. According to FEMA, the  central recovery office did not select members for the Center of  Excellence until February 2019, which delayed progress on the  development of finalized fixed cost estimates for permanent work. In July  2019, FEMA leadership signed an agreement establishing the exceptions  to FEMA’s cost estimating guidance based on an assessment conducted  by a panel of FEMA engineers. These exceptions are intended to address  certain costs specific to post-disaster conditions in Puerto Rico, for  example adjustments to account for increased labor and material costs.

Large number of damaged sites requiring a fixed cost estimate. In  addition, FEMA and Puerto Rico officials have cited the large number of  sites requiring damage assessments, project development, and mutually  agreed-upon fixed cost estimates as a challenge. As of September 30,  2019, FEMA identified a total of 9,344 damaged sites in various stages of  development. According to FEMA, 6,304 sites (67.5 percent of total sites  identified) have completed damage assessments; 3,021 sites (32.3  percent of total sites identified) are pending the completion of damage  assessments to begin project development; and 19 projects (0.2 percent  of total sites identified) have finalized fixed cost estimates.

According to FEMA guidance, October 11, 2019, was the deadline for  completing fixed cost estimates for Public Assistance alternative  procedures projects. However, on October 8, 2019, officials from the  central recovery office requested an extension to the deadline, which  FEMA granted. FEMA officials acknowledged that significant work  remains on the part of Puerto Rico, subrecipients, and FEMA towards  developing fixed cost estimates for all Public Assistance alternative  procedures projects in Puerto Rico. According to FEMA officials, as of  October 2019, FEMA and Puerto Rico are working together to establish  specific time frames for the completion of fixed cost estimates.

Implementation challenges with Section 20601 of the Bipartisan  Budget Act of 2018. Puerto Rican government and FEMA officials  identified challenges with the implementation of the flexibilities authorized  by section 20601 of the Bipartisan Budget Act. As previously discussed,  this section of the Act allows for the provision of assistance under the  Public Assistance alternative procedures to restore disaster-damaged  facilities or systems that provide critical services—such as medical and  educational facilities to an industry standard without regard to pre-disaster  condition. Officials from Puerto Rico’s central government stated that  they disagreed with FEMA’s interpretation of the types of damages  covered by section 20601 of the Bipartisan Budget Act of 2018. In  response, FEMA officials in Puerto Rico stated they held several briefings  with Puerto Rico’s central recovery office to explain FEMA’s interpretation  of the section, and released new guidance in September of 2019. It is  too soon to assess the impact this guidance may have on current and  future projects, but we will continue to examine this in future work.

We will continue to monitor the status of FEMA’s cost estimating process,  the development of the remaining fixed cost estimates for permanent  work and the impact of FEMA’s new guidance on the implementation of  section 20601 of the Bipartisan Budget Act.

FEMA Has Adapted Cost Estimating Guidance to Specific Conditions in Puerto Rico, but Could Take Further Action to Fully Align the Guidance with Best Practices

FEMA Has Adapted Its Guidance to Estimate Public Assistance Costs to Address Post-Disaster Conditions in Puerto Rico

As Puerto Rico is responsible for any costs that exceed fixed cost  estimates for large infrastructure projects under the alternative  procedures, FEMA has adapted its guidance for estimating costs to  ensure that these estimates accurately reflect the total costs of Public  Assistance projects. As previously mentioned, FEMA and Puerto Rico  established a Center of Excellence to develop proposed exceptions to  adapt FEMA’s Cost Estimating Format—the agency’s standard guidance  used for Public Assistance cost estimating nationwide—to more  accurately estimate costs in Puerto Rico. After consideration of these  proposals, FEMA approved two exceptions: (1) a cost factor to account  for local labor, equipment, and material costs in Puerto Rico, and (2) a  future price factor and price curve to account for anticipated rises in  construction costs over time due to the massive influx of disaster recovery  funds, coupled with limited material and labor resources in Puerto Rico.

Cost Factor: According to FEMA officials, during the development of  a cost factor by the Center of Excellence, FEMA learned that Gordian,  a company that provides local cost indices called RSMeans which  FEMA uses as part of their standard Cost Estimating Format, was  developing four localized cost indices to apply to San Juan, urban  areas, rural areas, and remote island (the islands of Vieques and  Culebra) areas of Puerto Rico. FEMA officials told us that these cost  indices compile location-specific construction costs for each of the  four areas. In 2019, a panel of FEMA engineers assessed the  methodologies proposed by RAND, the Center of Excellence, and the  RSMeans localized indices for Puerto Rico. On July 12, 2019, in  agreement with the panel’s assessment, FEMA decided to use  RSMeans’s localized cost indices to act as the cost factor for fixed  cost estimates in Puerto Rico beginning on September 27, 2019. For  fixed cost estimates developed before this date, FEMA used a  different cost index that RSMeans had previously developed for San  Juan. According to FEMA, cost estimates signed before September  27, 2019 using RSMeans’s San Juan cost index as the cost factor are  considered final.

Future Price Factor and Curve: According to FEMA officials, FEMA  began using a future price factor—an economic model based on  expected construction conditions to estimate construction costs  across ten years—in July 2019 to estimate costs in Puerto Rico.  FEMA is using this future price factor along with the cost factor. FEMA  has also asked RAND to develop a future price curve, an analysis that  will adjust as time goes on to account for changing economic  conditions, to eventually replace the future price factor. FEMA  estimates that RAND will take until November 2019 to develop the  future price curve, and that the future price factor is being used in the  meantime. FEMA officials stated that cost estimates produced using  the future price factor are considered final and will not be eligible for  revisions in the future once FEMA implements the future price curve.

According to FEMA officials, the use of the cost factor combined with the  future price factor and curve are intended to adapt FEMA’s cost  estimating guidance to the specific post-disaster economic conditions in  Puerto Rico.

FEMA Cost Estimating Guidance Met Most Cost Estimating Best Practices, but FEMA Could Take Further Action to Fully Align with Best Practices

FEMA’s cost estimating guidance for Public Assistance fully or  substantially met nine of the 12 steps from GAO’s Cost Estimating and  Assessment Guide (GAO Cost Guide). However, the guidance partially  met two and minimally met one of the remaining cost estimating steps, as  shown in figure 7 below. The GAO Cost Guide outlines best practices for  cost estimating and presents 12 steps that, when incorporated into an  agency’s cost estimating guidance, should result in reliable and valid cost  estimates that management can use to make informed decisions. A  reliable cost estimate is critical to the success of any construction  program. Such an estimate provides the basis for informed decision  making, realistic budget formulation and program resourcing, and  accountability for results. For example, FEMA, Puerto Rico and  subrecipients rely on cost estimates to help ensure that funding is  sufficient for the costs of the Public Assistance projects carried out under  the fixed cost estimate. Accurate and reliable cost estimating is especially  important in Puerto Rico where all large permanent Public Assistance  projects are being developed under the alternative procedures, which  require a fixed cost estimate that cannot be revised once the award is  made. Given Puerto Rico’s financial situation, accurate cost estimates are  necessary so that Puerto Rico has adequate funds to complete Public  Assistance projects.

For example, on the basis of our analysis, we determined that FEMA’s  guidance fully met the step to “define the estimate’s purpose” because it  describes the estimate’s purpose, level of detail required, and overall  scope. In addition, the guidance provides a time frame for which the  estimates must be developed and reach agreement. FEMA’s guidance  substantially met another step, “identify the ground rules and  assumptions”, because it provides measures to ensure assumptions are  not arbitrary, are founded on expert judgments, and are documented.  However, we rated this step as substantially met instead of fully met  because FEMA’s guidance does not address all of GAO’s best practices  for ground rules and assumptions. For example, it does not discuss the  risk of an assumption being incorrect and the resultant effect on the cost  estimate. Additionally, FEMA guidance substantially met the step to  “document the estimate” because it contains, among other things, basic  information about the project and the estimate; a description of the scope  of work; the basis for the estimate; and supporting backup information.  However, we assessed this step as substantially met instead of fully met  because FEMA policy does not require documentation to include a  discussion of high risk areas.

Further, we found that FEMA’s guidance for cost estimating does not fully  or substantially meet three steps: (1) conduct a sensitivity analysis; (2)  obtain the data; and (3) conduct a risk and uncertainty analysis.

Sensitivity analysis (Minimally met): We found that FEMA’s cost  estimating guidance only minimally met the best practice regarding  sensitivity analysis. A sensitivity analysis addresses some of the  uncertainty in a cost estimate by testing assumptions and other factors  that could change cost. By examining each assumption or factor  independently, while holding all others constant, the cost estimator can  evaluate the results to discover which assumptions or factors most  influence the estimate. A sensitivity analysis also requires estimating the  high and low uncertainty ranges for significant cost driver input factors.  According to the GAO Cost Guide, when an agency does not identify the  effect of uncertainties associated with different assumptions, this  increases the chance that decisions will be made without a clear  understanding of these impacts on costs.

According to FEMA officials, FEMA’s cost estimating guidance accounts  for construction, cost, and market risks over time which allows FEMA to  plan and estimate costs for unknown or unforeseen circumstances such  as cost escalation or overhead. In addition, FEMA officials stated that  their use of RSMeans unit costs, a benchmark industry standard based  on ongoing iterative analysis of construction costs nationwide, allows  FEMA to account for fluctuations and uncertainties in the market.  However, we rated this step as minimally met because FEMA guidance  does not indicate that cost estimators are to conduct a sensitivity analysis  as part of FEMA’s cost estimating process. Specifically, the guidance  does not require that an estimator examine the effect of changing  assumptions and the effect these changes could have on a cost estimate.  Since the guidance does not direct estimators to conduct a sensitivity  analysis, estimators may not fully understand which variable most affects  the cost estimate and FEMA risks making decisions without a clear  understanding of the impact of costs.

Obtaining the data (Partially met): We found that FEMA’s cost  estimating guidance only partially met the best practice for obtaining  data—assembling information to serve as the foundation of a cost  estimate. The quality of the data obtained affects a cost estimate’s overall  credibility. Depending on the data quality, an estimate can range from a  mere guess to a highly defensive cost position. We found that FEMA did  not meet some of the best practices for obtaining data. Specifically,  FEMA’s guidance did not outline procedures for making sure data was  validated using historical data as a benchmark for reasonableness. In  addition, FEMA’s guidance did not stipulate that data be normalized to  remove the effects of inflation or analyzed with a scatter plot to determine  trends and outliers. As mentioned previously, FEMA used a city cost  index based on San Juan as an interim measure to estimate costs  throughout Puerto Rico until September, 2019 when FEMA began using  additional cost indices to target costs in particular regions of Puerto Rico.  Similarly, FEMA has been using a static future price factor as an interim  measure until a more dynamic and iterative future price curve is finalized.  FEMA does not plan to adjust cost estimates developed using these  interim measures. Without adjusting these costs when better data  becomes available consistent with the obtaining the data step, FEMA  risks creating estimates that may not be based on accurate data.

According to FEMA, estimates are developed based on historical costs or  nationally available industry standard data. In addition, FEMA officials  stated that FEMA does not revisit cost estimates to reflect updated  market conditions or newly available cost information because FEMA  uses an industry standard cost database that is updated quarterly. FEMA  officials stated that the interim measures used to estimate costs are  intended to enable work to continue and cost estimates to be developed  while the future cost curve is being developed. However, we rated the  step relating to obtaining data as partially met because without finalizing  the future cost curve, and updating estimates to reflect this information,  estimates may not be based on accurate data. Additionally, while the use  of industry standard cost estimating resources addresses some best  practices for this step such as data normalization and data validation,  industry data is only one of many sources referenced in FEMA’s  guidance. For other data sources identified, FEMA guidance does not  describe a process to analyze the data for cost drivers or to adequately  document the data.

Risk and uncertainty analysis (Partially met): We found that FEMA’s  cost estimating guidance does not include best practices consistent with  performing a statistical analysis of risk to determine a range of possible  costs and the level of confidence in achieving the estimate. By conducting  a risk and uncertainty analysis, a cost estimator can model the effect of  schedules slipping and missions changing, allowing for a known range of  potential costs. Having a range of costs around a point estimate is useful  to decision makers because it conveys the level of confidence in  achieving the most likely cost and informs estimators about potential  risks. We found that FEMA’s cost estimating guidance does not require  a statistical analysis of risks to be performed to determine a range of  possible costs. While contingencies are accounted for within the  guidance, they are not derived from a statistical analysis, nor do they  reflect a level of confidence in the estimate.

According to FEMA, risks associated with changing costs and conditions  over the life of a Public Assistance alternative procedures construction  project is not a risk that the federal government takes on. Rather, the risk  is transferred to the recipient and subrecipients responsible for executing  work using Public Assistance alternative procedures funding. In addition,  FEMA officials told us that alternative procedures funding is not always  used to restore facilities to pre-disaster condition, and therefore may not  represent the final cost of work completed. In addition, the procedures are  designed to incentivize subrecipients to manage grants and use excess  funds for eligible work, as described earlier. However, GAO’s Cost Guide  states that point estimates alone are insufficient for good decision- making. For management to make good decisions, the program estimate  must reflect the degree of uncertainty, so that a level of confidence can  be given about the estimate regardless of the entity holding the risk. In  the case of alternative procedures projects in Puerto Rico, where actual  costs that exceed the estimate are borne by the recipient or subrecipient,  estimates that accurately reflect the degree of uncertainty are important in  establishing a level of confidence about the estimate.

While FEMA fully or substantially met nine of the 12 steps in the GAO  Cost Guide, FEMA could improve its cost estimating guidance to ensure  that all best practices in the 12 steps in the GAO Cost Guide are fully met.  In doing so, FEMA could further enhance the reliability of its cost  estimating guidance.

FEMA Has Developed Public Assistance Program Policies and Guidance over Time for Puerto Rico, but Recovery Partners Reported Challenges

FEMA Public Assistance Program Policies and Guidance for Puerto Rico

In response to the complexity of the recovery, as well as the nature of  change in a recovery environment, FEMA has developed and issued  guidance that is specific to the implementation of the Public Assistance  program in Puerto Rico. As previously discussed, disaster recovery in  Puerto Rico is a complex and dynamic process that requires the  coordination of many entities, including FEMA, the government of Puerto  Rico, and numerous subrecipients. Recovery in Puerto Rico also involves  the use of Public Assistance structures including alternative procedures  and new flexibilities afforded to FEMA under the Bipartisan Budget Act of  2018.

FEMA officials told us that many elements of the Public Assistance  process in Puerto Rico are the same as in other declared disasters  across the United States. Therefore, according to FEMA officials, the  standard guidance for the Public Assistance program, Public Assistance  Policy and Procedures Guide (Policies and Procedures Guide), generally  applies in Puerto Rico.

FEMA has also developed policies and guidance to address the specific  recovery circumstances in Puerto Rico. For example, in April of 2018 and  September of 2019, FEMA published the Public Assistance Alternative  Procedures Guide for Permanent Work to clarify how FEMA would  implement the program in Puerto Rico. This guidance describes the  scope and limitations of the alternative procedures; highlights changes to  aspects of the Public Assistance program to which these procedures  apply; identifies responsibilities for certain activities; and documents  timelines for key actions and decisions. FEMA also issued a policy on the  agency’s implementation of section 20601 of the Bipartisan Budget Act as  it applies in Puerto Rico in September of 2018, detailing the applicability  of the section to specific critical services and outlining eligible industry  standards for purposes of authorized projects, among other things.  Following the Supplemental Relief Act, FEMA issued guidance in  September 2019 that includes additional information on eligibility and  applicable industry standards. According to FEMA officials, FEMA has  also developed and implemented training specific to recovery in Puerto  Rico. This training has included presentations to the central recovery  office and subrecipients on the flexibilities of the Bipartisan Budget Act  and alternative procedures, among other things.

Recovery Partners in Puerto Rico Identified Challenges with the Accessibility of FEMA Public Assistance Policies and Guidance

FEMA has iteratively developed, refined, and clarified Public Assistance  guidance in Puerto Rico to respond and adapt to changing recovery  conditions since the 2017 hurricanes. While iterative and responsive  guidance is necessary in a complex and changing recovery, the pace of  change necessitates that all involved recovery entities have real-time  accessibility to current applicable FEMA guidance. Officials from the  central recovery office and four Puerto Rico government agencies we  spoke with stated that they did not consistently have the guidance they  needed to implement the Public Assistance program. For example, an  official from one Puerto Rico agency said that they delayed starting on  any large Public Assistance projects through alternative procedures  because they were waiting for FEMA to issue additional guidance.  Similarly, we reported in March 2019 that four municipal officials stated  that they were waiting on additional instruction from FEMA to establish  more clear and consistent guidance to begin projects in Puerto Rico.

According to FEMA officials, the agency works with Puerto Rico  government officials and subrecipients to provide relevant guidance and  technical assistance throughout the Public Assistance project  development process. However, we found that pertinent guidance may  not be shared with key recovery partners. For example, FEMA officials  told us that the Standard Operating Procedure for Alternative Procedures  (SOP) was available as of March 2019, but remains in draft form as of  October 2019, pending finalized information about cost estimating  procedures. This SOP provides instruction on specific procedures to  implement the Public Assistance alternative procedures guide. In April  2019, FEMA officials described the SOP as a “living document”; they also  stated that the draft SOP is in effect and has been sent to the central  recovery office for further dissemination to subrecipients. While the SOP  document is still in draft, according to FEMA officials, it is operative  guidance that FEMA expects the central recovery office to disseminate to  subrecipients. However, in June 2019, central recovery office personnel  told us they did not view the SOP as being in effect as it was still in draft  form. As such, central recovery office officials stated they had not  distributed the SOP to subrecipients. FEMA officials stated that they rely  on the central recovery office to disseminate at least some FEMA  guidance and policy to subrecipients in Puerto Rico, including  municipalities and government agencies. As the recipient for all Public  Assistance funding in Puerto Rico, the central recovery office is  responsible for monitoring and providing technical assistance to  subrecipients to ensure that federal funding is used in accordance with  federal statutes, regulations, and the requirements of the grant. FEMA  officials also stated that subrecipients have an assigned FEMA point of  contact to assist them through the project development process, including  communicating policy information and updates. However, municipal and  Puerto Rico agency officials we spoke to said that confusion persisted in  part due to changing points of contact.

FEMA’s reliance on the central recovery office or individual FEMA staff to  deliver and distribute FEMA guidance poses a risk that the guidance is  not made accessible to all partners involved in recovery, including  subrecipients. While FEMA officials told us that FEMA assigns a point of  contact to subrecipients to provide guidance and other necessary  information throughout the project development process, Puerto Rico  officials described a significant amount of “back and forth” with FEMA  regarding requests for clarification, guidance, or instruction. FEMA  officials acknowledge that FEMA has faced difficulties in disseminating  information in Puerto Rico. According to FEMA officials, FEMA does not  maintain a repository of Public Assistance policies and guidance available  to all relevant recovery partners. The accessibility of FEMA guidance is  especially important because FEMA releases iterative guidance to  respond and adapt to changing recovery circumstances, such as updated  legislation, among other things. Misunderstandings across recovery  partners about guidance applicability raise concerns that subrecipients do  not understand which guidance is currently in effect or how they should  proceed in accordance with FEMA policy. Without real-time access to the  totality of FEMA’s current applicable guidance, recovery partners risk  using guidance that has been revised or replaced.

According to FEMA’s National Disaster Recovery Framework, the federal  government has the role of ensuring that information is distributed in an  accessible manner such that all partners are informed of and aware of the  recovery process. Developing a repository of current applicable policy  and guidance and making it available to all relevant recovery partners in  Puerto Rico, including subrecipients, would improve the accessibility of  the information and provide greater assurance that recovery partners are  aware of current applicable guidance.

Puerto Rico and FEMA Have Structures in Place to Manage and Oversee Public Assistance Funding and FEMA Has Instituted Additional Controls to Mitigate Risk

Puerto Rico Established an Office to Manage and Oversee Public Assistance Funding and Help Ensure Compliance with FEMA Policy

Following the 2017 hurricanes, Puerto Rico took several steps to provide  management and oversight of the Public Assistance program to ensure  the program is implemented in compliance with applicable laws and  regulations, as well as FEMA policies and guidance. Specifically, Puerto  Rico (1) established a central recovery office to provide management and  oversight of recovery funds; (2) developed an administrative plan, as  required by FEMA policy; (3) developed an internal controls and recovery  management plan; and (4) created a system to oversee and assess  subrecipient risk.

First, in accordance with Amendment 5 to the President’s disaster  declaration, the central recovery office has been supported by third-party  experts to help it establish its structure and carry out its management and  oversight mission. Specifically, the central recovery office has hired  contractors to help perform the following functions:

Design a management guide and assess subrecipient risk.

According to central recovery office officials, the office hired  contractors to develop management protocols and guidance to ensure  compliance with federal and state law, regulation, and guidance. The  office also tasked these contractors with developing a system to  oversee subrecipients using risk-based oversight.

Provide technical assistance. Central recovery office officials also  hired contractors to provide technical assistance and advise Puerto  Rico’s government agencies and municipalities regarding recovery  processes. This includes helping subrecipients define the scope of  damages, and providing technical assistance to develop Public  Assistance projects, among other things. The recovery office also  tasked these contractors with overseeing grant accounting and  reviewing reimbursement requests from subrecipients for eligible  Public Assistance work performed.

Develop data systems to track the central recovery office’s work.

The central recovery office launched an online transparency portal,  with the assistance of contractors, that is intended to provide a  breakdown of FEMA Public Assistance and other federal funding  made available for disaster recovery in Puerto Rico. According to  central recovery office officials, in addition to the development of the  online transparency portal, contractor personnel also developed  systems to track internal recovery data.

Second, to meet FEMA reporting requirements, the central recovery office  developed an administrative plan—or FEMA State Agreement—in 2019  for the Public Assistance program following the 2017 hurricanes. This  plan outlines the central recovery office’s management and oversight  activities as well as the procedures that Puerto Rico must follow in  implementing the programs. Puerto Rico is responsible, as required in the  FEMA State Agreement, to ensure that subrecipients are in compliance  with the conditions of the disaster grant award. For example, the plan  emphasizes FEMA’s requirement that Puerto Rico submit quarterly  progress and financial reports on the status of projects. Further, the plan  describes Puerto Rico’s specific roles and responsibilities for managing  and overseeing the program. For example, according to the Puerto Rico  2019 Public Assistance Administrative Plan, the central recovery office is  responsible for, among other things, processing requests for time  extensions to complete projects and conducting quarterly reviews, site  inspections, and audits to ensure program compliance.

Third, in addition to the administrative plan, in March 2019, the central  recovery office released the Disaster Recovery Federal Funds  Management Guide (management guide) that includes an internal  controls plan and other policies and procedures for managing recovery  funds. The management guide’s 14 chapters outline roles,  responsibilities, policies and procedures on various recovery functions  including procurement, payment and cash management, and subrecipient  management and oversight, among other things. FEMA officials told us  that they reviewed portions of the management guide, including sections  on the central recovery office’s payment and cash management plan and  subrecipient oversight. Further, FEMA worked with the central recovery  office to make revisions to the plan, which included, adding clarifying  information and correcting instances of duplication in the guidance,  among other things.

In addition, the central recovery office, with the help of contractors, is  taking steps to assist subrecipients in meeting compliance requirements  and supplementing their management capacity. FEMA and Puerto Rico  government agency officials cited varying levels of capacity to manage  federal grant funds, including Public Assistance funding. For example,  agency officials at one government agency we spoke with stated that they  were performing their own federal grants management and had prior  experience managing large federal funds. Other Puerto Rico government  officials we interviewed reported that central recovery office contractors  have helped augment capacity to oversee federal funds. For example,  officials from one subrecipient, a Puerto Rico public corporation, said that  their agency did not have prior experience managing federal funds on  such a large scale. The official told us that in order to bolster the capacity  of the agency to oversee these grant funds, central recovery office  contractors work closely with the agency to help them manage Public  Assistance funding. Similarly, officials at one Puerto Rico government  agency stated that the central recovery office offered help on uploading  and validating grant data.

Fourth, as detailed in its management guide, the central recovery office  has also developed criteria to evaluate subrecipients’ risk of  noncompliance with federal laws and regulations, as well as FEMA policy.  According to the procedures outlined in the central recovery office’s  management guide, each subrecipient is to be assessed annually to  determine whether they are at a low, moderate, or high risk for  noncompliance. The central recovery office is to place additional award  conditions on subrecipients with risk factors identified through the risk  assessment process. These may include additional oversight and more  frequent on-site visits from the central recovery office. Additionally, central  recovery office guidance states that corrective actions are to be taken in  cases when deficiencies are found during audits.

FEMA Has Instituted Additional Controls to Protect the Federal Investment in Puerto Rico’s Recovery

In March 2019, we reported that FEMA instituted a manual  reimbursement process in November 2017 for subrecipients in Puerto  Rico for federal funds, including Public Assistance funds, to mitigate  fiduciary risk and decrease the risk of misuse of funds. Specifically,  FEMA officials stated that they decided to institute this process because  the government of Puerto Rico had expended funds prior to submitting  complete documentation of work performed. According to FEMA  officials, they also decided to institute the manual reimbursement process  due to Puerto Rico’s financial situation, weaknesses in internal controls,  and the large amount of recovery funds, among other things.

The manual reimbursement process required that FEMA review each  reimbursement request before providing Public Assistance funds to  mitigate risk and help ensure financial accountability. In Puerto Rico, the  manual reimbursement process requires that the central recovery office  fill out the Office of Management and Budget’s Standard Form 270 and  submit supporting documentation to FEMA before obligated funds can be  withdrawn by Puerto Rico through the central recovery office and  reimbursed to subrecipients. Subsequently, FEMA must review the  submitted Standard Form 270 and all project documentation for  completeness, compliance, and accuracy before disbursing funds to the  recipient. In cases where FEMA requires additional documentation to  process a Standard Form 270 request, FEMA will submit requests for  information asking the central recovery office to supply the information  needed for FEMA to complete the review.

On March 25, 2019, FEMA and the government of Puerto Rico, through  the central recovery office, signed an agreement allowing the central  recovery office to directly access federal grant funds and reimburse  subrecipients for Public Assistance work they perform. During FEMA’s  review of the central recovery office’s management guide, FEMA asked  for revisions to sections, including chapters related to payment and cash  management and subrecipient management and monitoring. According to  the March 2019 agreement, these policies and procedures were  developed in collaboration with FEMA, and comments and concerns  provided by FEMA were addressed. FEMA officials also told us that they  sampled Public Assistance grant documentation for completeness to  ensure that the reimbursement requested was eligible for payment.  According to FEMA officials, FEMA communicated minor discrepancies  with the central recovery office for resolution, but said that they did not  find any significant discrepancies during their completeness review. On  April 1, 2019, FEMA removed the manual reimbursement process and  began a transition to allow the central recovery office to make direct  payments to subrecipients.

In July 2019, FEMA announced that it would reinstate the manual  reimbursement process due to, “ongoing leadership changes within the  Puerto Rican government, combined with continued concern over Puerto  Rico’s history of fiscal irregularities and mismanagement.” FEMA said  that these additional steps are being taken in order to protect the federal  investment in Puerto Rico’s recovery.

We previously reported that FEMA and central recovery office officials  told us that the manual reimbursement process caused delays in  reimbursements, but once FEMA increased the number of personnel  devoted to reimbursement reviews, delays decreased. In September  2019, FEMA once again lifted the manual reimbursement process  following a meeting between FEMA and Governor Vásquez’s senior  leadership. According to FEMA, the agreement to remove the manual  reimbursement process is contingent on Puerto Rico’s continued ability to  implement the mutually-acceptable internal controls plan. FEMA officials  also stated that they are selecting samples from fiscal year 2019 to test  Puerto Rico’s internal controls, and plan to move to a quarterly testing  routine after testing for fiscal year 2019 is complete.

As part of our ongoing review, we will continue to monitor the central  recovery office’s management and oversight of Public Assistance funding,  as well as of FEMA’s oversight of the federal investment in Puerto Rico’s  recovery.

After the devastation of the catastrophic 2017 hurricane season, FEMA  and Puerto Rico face a recovery of enormous scope. Puerto Rico  estimates that $132 billion in funding will be needed to repair and  reconstruct the infrastructure damaged by the hurricanes through 2028,  and FEMA has identified nearly ten thousand damaged sites in need of  Public Assistance funding. FEMA has taken steps to adapt its guidance to  estimate costs to post-disaster conditions in Puerto Rico, but  strengthening its cost estimating guidance could help FEMA provide  greater assurance that its cost estimating guidance for Public Assistance  projects is reliable. In addition, given the large number of individuals and  entities involved in Puerto Rico’s complex recovery, ensuring that all  recovery partners have easy access to the most current applicable policy  and guidance could help clarify which FEMA guidance and policies are in  effect.

We are making the following two recommendations to FEMA:  The FEMA administrator should revise FEMA’s cost-estimating guidance  for Public Assistance projects to fully align with all 12 steps in the GAO  Cost Estimating and Assessment Guide. (Recommendation 1)

The FEMA administrator should develop a repository for all current  applicable Public Assistance policies and guidance for Puerto Rico and  make it available to all recovery partners, including subrecipients.  (Recommendation 2)

We provided a draft of this product to FEMA, DHS and Puerto Rico’s  Central Office of Recovery, Reconstruction, and Resilience (central  recovery office) for comment. In its comments, reproduced in appendix III,  DHS concurred with our recommendations. FEMA also provided technical  comments, which we incorporated as appropriate.

DHS concurred with our first recommendation that FEMA revise its cost- estimating guidance for Public Assistance projects to fully align with all 12  steps in the GAO Cost Estimating and Assessment Guide. DHS stated  that FEMA will create a quality assurance checklist as an addendum to  FEMA’s Cost Estimating Format (CEF) to ensure that cost estimates  reflect best practices from the GAO Cost Estimating and Assessment  Guide. This action is a positive step to addressing our recommendation  and we will monitor FEMA’s efforts to complete this work.

In DHS’s concurrence to our second recommendation that FEMA develop  a repository for all current applicable Public Assistance policies and  guidance for Puerto Rico to be made available to all recovery partners,  DHS requested that GAO consider this recommendation resolved and  closed as implemented. DHS stated that FEMA maintains Public  Assistance policy and guidance documents, including those specific to  Puerto Rico, on the agency’s public web site, which FEMA stated it will  continue to update. DHS also stated that FEMA maintains non-publicly  available reference documents on the agency’s internal web site through  the Grants Manager and Grants Portal systems. As we noted in our  report, Puerto Rico’s recovery is a complex and dynamic process that  requires the coordination of many recovery partners, including numerous  municipalities and commonwealth agencies. For this reason, ensuring  that information is distributed in an accessible manner would provide  greater assurance that all recovery partners are aware of the most current  and applicable Public Assistance policies and guidance. We will monitor  FEMA’s public and internal web sites, including policy and guidance  updates, to assess whether the actions outlined by FEMA meet the intent  of our recommendation.

COR3 also provided comments to our draft report, which we reproduced  in appendix IV. In its comments, COR3 stated that it works with Public  Assistance applicants to, among other things, provide technical  assistance and training, and to monitor projects. COR3 also stated that it  has established joint efforts with FEMA to improve COR3’s technical  assistance, as well as compliance and monitoring efforts.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Administrator of  FEMA, the Puerto Rico government, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you and your staff have any questions, please contact me at (404) 679- 1875 or curriec@gao.gov. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: The Status of Public Assistance Program Funding in Puerto Rico

Since September 2017, the Federal Emergency Management Agency  (FEMA) obligated nearly $6 billion in Public Assistance grant funding for  1,558 projects across Puerto Rico as of September 30, 2019.  Specifically, FEMA had obligated $5.13 billion for emergency work  projects (categories A and B), about $487 million for permanent work  projects (categories C through G), and $315 million for management  costs, (category Z). As of that date, Puerto Rico expended nearly $3.9  billion—about 65 percent of total Public Assistance obligations to Puerto  Rico—to reimburse subrecipients for completed work. Of this, Puerto Rico  expended about $3.7 billion (96 percent of all expended funds) for  emergency work projects, $38.6 million (1 percent) for permanent work  projects, and $104 million (3 percent) for management costs.

The majority of FEMA’s obligations and the funding Puerto Rico  expended as of September 30, 2019 are for emergency work projects  because these projects began soon after hurricanes Irma and Maria  struck and focused on debris removal and providing assistance to  address immediate threats to life and property. In contrast, permanent  work projects take time to identify, develop, and ultimately complete as  they represent the longer-term repair and restoration of public  infrastructure. While the data in this appendix represent the status of  Public Assistance funding as of September, 2019, the amount of grant  funding FEMA obligates and Puerto Rico expends will likely increase over  time as additional projects are finalized and approved.

Emergency Work. As of September 30, 2019, FEMA obligated a total of  $5.13 billion for approximately 1,200 emergency work projects across  Puerto Rico. These projects focus on debris removal activities and  providing assistance to address immediate threats to life and property.

Category A: Debris Removal. FEMA obligated $637.0 million and  Puerto Rico expended $427.1 million for 331 projects focused on  debris removal activities in Puerto Rico under category A.

Category B: Emergency Protective Measures. FEMA obligated  nearly $4.5 billion for 871 projects under Category B. Of this, Puerto  Rico has expended $3.29 billion. For example, FEMA has obligated  more than $140 million to the Puerto Rico Aqueducts and Sewer  Authority under category B to fund emergency protective measures,  including using back-up generators to supply water to the island after  Hurricane Maria, among other things.

Permanent Work. As of September 30, 2019, FEMA has obligated about  $487.3 million for 159 permanent work (Categories C through G) projects  in Puerto Rico. These projects focus on the restoration of disaster- damaged infrastructure or systems.

Category C: Roads and Bridges. FEMA obligated $140.5 million  and Puerto Rico has expended $32.8 million for 20 projects focused  on the permanent repair of roads and bridges in Puerto Rico, such as  the damage illustrated in figure 8 below.

Category D: Water Control Facilities. As of September 30, 2019,  FEMA has obligated $435,493 for three projects, of which  approximately $150,000 has been expended. This includes work on  heavy water control infrastructure, such as berms or levees.

Category E: Buildings and Equipment. FEMA obligated $43.5  million and Puerto Rico expended nearly $4 million for 87 projects  focused on repairing and rebuilding damaged public buildings and  equipment, such as the school shown in figure 9 below.

Category F: Utilities. Of the $487 million FEMA obligated for  permanent work projects, the largest share, $282 million was  obligated for nine projects related to utilities, such as architectural and  engineering design services for design work for electricity grid  recovery projects. For example, in June 2019, FEMA obligated $111  million for architectural and engineering design services for design  work for electricity grid recovery projects. Puerto Rico has expended  just over $1 million of the funding obligated for projects related to  repairing utilities.

Category G: Parks, Recreational and Other Facilities. FEMA  obligated approximately $20.9 million and Puerto Rico has expended  just over $600,000 across 40 projects focused on repairing parks,  playgrounds, and other facilities.

Appendix II: Summary of GAO’s Assessment of the Federal Emergency Management Agency’s (FEMA) Cost Estimating Policies and Guidance

GAO’s Cost Estimating and Assessment Guide (GAO Cost Guide)  outlines best practices pertaining to cost estimating principles, presenting  12 steps to create high-quality estimates. These steps are generally  applicable in a variety of circumstances and range from defining the  purpose of the estimate to obtaining data to presenting the estimate to  management for approval. Application of these principles should result in  reliable and valid cost estimates that management can use to make  informed decisions. To assess the extent to which FEMA’s cost  estimating policy aligns with these best practices, we compared FEMA’s  information to the GAO Cost Guide. Specifically, we reviewed FEMA  documents containing cost estimating information pertinent to Public  Assistance projects including FEMA’s Public Assistance Alternative  Procedures Guide for Permanent Work FEMA-4339-DR-PR (Alternative  Procedures Guide) and FEMA’s Cost Estimating Format (CEF) for Large  Projects Instructional Guide V2.1 (dated September 2009). We compared  FEMA’s guidance for developing cost estimates outlined in these  documents against the 12 best practices described in the GAO Cost  Guide. We assessed the extent to which these documents aligned with  the best practices on a five point scale.

Fully met. FEMA provided complete evidence that satisfies the  elements of the step.

Substantially met. FEMA provided evidence that satisfies a large  portion of the elements of the step.

Partially met. FEMA provided evidence that satisfies about half of the  elements of the step.

Minimally met. FEMA provided evidence that satisfies a small portion  of the elements of the step.

Not met. FEMA provided no evidence that satisfies any of the  elements of the step.

Taken together, FEMA’s documents provided cost estimating information  that either substantially or fully meets nine of the 12 cost estimating steps.  Furthermore, the information partially met two of the 12 steps, and  minimally met one of the 12 steps. Table 1 summarizes GAO’s  assessment of the extent to which FEMA’s information aligns with the 12  steps identified in the GAO cost guide.

Appendix III: Comments from the Department of Homeland Security

Appendix IV: Comments from the Commonwealth of Puerto Rico

Appendix V: GAO Contact and Staff Acknowledgments

Chris Currie, (404) 679-1875 or curriec@gao.gov.

In addition to the contact named above, Joel Aldape (Assistant Director),  Taylor Hadfield (Analyst in Charge), Michelle Bacon, Brian Bothwell,  Lorraine Ettaro, Eric Hauswirth, Heidi Nielson, Danielle Pakdaman,  Amanda Prichard, Kevin Reeves, and Mary Weiland made key  contributions to this report.

U.S. Virgin Islands Recovery: Additional Actions Could Strengthen  FEMA’s Key Disaster Recovery Efforts. GAO-20-54. Washington, D.C.:  November 19, 2019.

Disaster Resilience Framework: Principles for Analyzing Federal Efforts  to Facilitate and Promote Resilience to Natural Disasters.  GAO-20-100SP. Washington, D.C.: October 23, 2019.

Disaster Recovery: Recent Disasters Highlight Progress and Challenges.  GAO-20-183T. Washington, D.C.: October 22, 2019.

Wildfire Disasters: FEMA Could Take Additional Actions to Address  Unique Response and Recovery Challenges. GAO-20-5. Washington,  D.C.: October 9, 2019.

Puerto Rico Electricity Grid Recovery: Better Information and Enhanced  Coordination Is Needed to Address Challenges. GAO-20-141.  Washington, D.C.: October 8, 2019.

Emergency Management: FEMA’s Disaster Recovery Efforts in Puerto  Rico and the U.S. Virgin Islands. GAO-19-662T. Washington, D.C.: July  11, 2019.  2017 Disaster Relief Oversight: Strategy Needed to Ensure Agencies’  Internal Control Plans Provide Sufficient Information. GAO-19-479.  Washington, D.C.: June 28, 2019.

Emergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight Imperative for Further Improvements.  GAO-19-617T . Washington, D.C.: June 25, 2019.

Emergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight the Imperative for Further Improvements.  GAO-19-594T. Washington, D.C.: June 12, 2019.

Disaster Assistance: FEMA Action Needed to Better Support Individuals  Who Are Older or Have Disabilities. GAO-19-318. Washington, D.C.: May  14, 2019.

Disaster Contracting: Actions Needed to Improve the Use of Post- Disaster Contracts to Support Response and Recovery, GAO-19-281.  Washington, D.C.: April 24, 2019.  2017 Hurricane Season: Federal Support for Electricity Grid Restoration  in the U.S. Virgin Islands and Puerto Rico. GAO-19-296. Washington,  D.C.: April 18, 2019.

FEMA Grants Modernization: Improvements Needed to Strengthen  Program Management and Cybersecurity. GAO-19-164. Washington,  D.C.: April 9, 2019.

Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed.  GAO-19-232. Washington, D.C.: March 25, 2019.

Puerto Rico Hurricanes: Status of FEMA Funding, Oversight, and  Recovery Challenges. GAO-19-256. Washington, D.C.: March 14, 2019.

Huracanes de Puerto Rico: Estado de Financiamiento de FEMA,  Supervisión y Desafíos de Recuperación. GAO-19-331. Washington,  D.C.: March 14, 2019.

High-Risk Series: Substantial Efforts Needed to Achieve Greater  Progress on High-Risk Areas. GAO-19-157SP. Washington, D.C.: March  6, 2019.

U.S. Virgin Islands Recovery: Status of FEMA Public Assistance Funding  and Implementation. GAO-19-253. Washington, D.C.: February 25, 2019.  2017 Disaster Contracting: Action Needed to Better Ensure More  Effective Use and Management of Advance Contracts. GAO-19-93.  Washington, D.C.: December 6, 2018.

Continuity of Operations: Actions Needed to Strengthen FEMA’s  Oversight and Coordination of Executive Branch Readiness.  GAO-19-18SU. Washington, D.C.: November 26, 2018.

Homeland Security Grant Program: Additional Actions Could Further  Enhance FEMA’s Risk-Based Grant Assessment Model. GAO-18-354.  Washington, D.C.: September 6, 2018.  2017 Hurricanes and Wildfires: Initial Observations on the Federal  Response and Key Recovery Challenges. GAO-18-472. Washington,  D.C.: September 4, 2018.

Federal Disaster Assistance: Individual Assistance Requests Often  Granted but FEMA Could Better Document Factors Considered.  GAO-18-366. Washington, D.C.: May 31, 2018.  2017 Disaster Contracting: Observations on Federal Contracting for  Response and Recovery Efforts. GAO-18-335. Washington, D.C.:  February 28, 2018.

Disaster Recovery: Additional Actions Would Improve Data Quality and  Timeliness of FEMA’s Public Assistance Appeals Processing.  GAO-18-143. Washington, D.C.: December 15, 2017.

Disaster Assistance: Opportunities to Enhance Implementation of the  Redesigned Public Assistance Grant Program. GAO-18-30. Washington,  D.C.: November 8, 2017.

Climate Change: Information on Potential Economic Effects Could Help  Guide Federal Efforts to Reduce Fiscal Exposure. GAO-17-720.  Washington, D.C.: September 28, 2017.

Federal Disaster Assistance: Federal Departments and Agencies  Obligated at Least $277.6 Billion during Fiscal Years 2005 through 2014.  GAO-16-797. Washington, D.C.: September 22, 2016.

Disaster Recovery: FEMA Needs to Assess Its Effectiveness in  Implementing the National Disaster Recovery Framework. GAO-16-476.  Washington, D.C.: May 26, 2016.

Disaster Response: FEMA Has Made Progress Implementing Key  Programs, but Opportunities for Improvement Exist. GAO-16-87.  Washington, D.C.: February 5, 2016.

Hurricane Sandy: An Investment Strategy Could Help the Federal  Government Enhance National Resilience for Future Disasters.  GAO-15-515. Washington, D.C.: July 30, 2015.

Budgeting for Disasters: Approaches to Budgeting for Disasters in  Selected States. GAO-15-424. Washington, D.C.: March 26, 2015.

High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February  11, 2015.

Emergency Preparedness: Opportunities Exist to Strengthen Interagency  Assessments and Accountability for Closing Capability Gaps. GAO-15-20.  Washington, D.C.: December 4, 2014.

Fiscal Exposures: Improving Cost Recognition in the Federal Budget.  GAO-14-28. Washington, D.C.: October 29, 2013.

Federal Disaster Assistance: Improved Criteria Needed to Assess a  Jurisdiction’s Capability to Respond and Recover on Its Own.  GAO-12-838. Washington, D.C.: September 12, 2012.

Para la versión de esta página en español, ver a GAO-20-381.

After 2 hurricanes devastated Puerto Rico in 2017, FEMA identified about 10,000 damaged sites including schools, hospitals, and roads needing funds to repair or rebuild.

FEMA and Puerto Rico manage a Public Assistance Program that provides federal funds to state and local governments and some nonprofits to help in recovery efforts.

FEMA has issued recovery policy and guidance that are specific to Puerto Rico’s evolving conditions. But for many recovery partners, figuring out which guidance to follow and accessing it can be difficult. FEMA could also take steps to improve its cost estimation guidance. We recommended FEMA address these issues.