[Federal Register Volume 85, Number 169 (Monday, August 31, 2020)]
[Proposed Rules]
[Pages 53725-53748]
[FR Doc No: 2020-16040]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Part 206

[Docket ID: FEMA-2019-0012]
RIN 1660-AB00

Public Assistance Appeals and Arbitrations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Emergency Management Agency (FEMA) is proposing
regulations to implement the new right of arbitration authorized by the
Disaster Recovery Reform Act of 2018 (DRRA), and to revise its
regulations regarding first and second Public Assistance appeals.

DATES: Comments must be received no later than October 30, 2020.

ADDRESSES: You may submit comments, identified by Docket ID: FEMA-2019-
0012, via the Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.

FOR FURTHER INFORMATION CONTACT: Shabnaum Amjad, Deputy Associate Chief
Counsel, Regulatory Affairs, Office of Chief Counsel, Federal Emergency
Management Agency, 500 C Street SW, Washington, DC 20472. Phone: 202-
212-2398 or email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Public Participation

    We encourage you to participate in this rulemaking by submitting
comments and related materials. We will consider all comments and
materials received during the comment period.
    If you submit a comment, identify the agency name and the Docket ID
for this rulemaking, indicate the specific section of this document to
which each comment applies, and give the reason for each comment. All
submissions will be posted, without change, to the Federal e-Rulemaking
Portal at www.regulations.gov, and will include any personal
information you provide. Therefore, submitting this information makes
it public. For more about privacy and the docket, visit https://www.regulations.gov/document?D=DHS-2018-0029-0001.
    Viewing comments and documents: For access to the docket to read
background documents or comments received, go to the Federal e-
Rulemaking Portal at http://www.regulations.gov.

II. Background

A. The Public Assistance Program

    Under the Public Assistance (PA) Program, authorized by the Robert
T. Stafford Disaster Relief and Emergency Assistance Act \1\ (Stafford
Act), FEMA awards grants to eligible applicants to assist them in
responding to and recovering from Presidentially-declared emergencies
and major disasters. The recipient, as defined at 44 CFR 206.201(m), is
the government to which a grant is awarded, and which is accountable
for the use of the funds provided. Generally, the State for which the
emergency or major disaster is declared is the recipient. The recipient
can also be an Indian Tribal government. The applicant, as defined at
44 CFR 206.201(a), is a State agency, local government, or eligible
private nonprofit organization submitting an application to the
recipient for assistance under the recipient's grant.
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    \1\ Disaster Relief Act of 1974, Public Law 93-288, 88 Stat. 143
(May 22, 1974), as amended, 42 U.S.C. 5121 et seq.
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    The PA Program provides Federal funds for debris removal, emergency
protective measures, and permanent restoration of infrastructure. When
the President issues an emergency or major disaster declaration
authorizing PA FEMA may accept applications from eligible applicants
under the PA Program. To apply for a grant under the PA Program, the
eligible applicant must submit a Request for PA to FEMA through the
recipient. Upon award, the recipient notifies the applicant of the
award, and the applicant becomes a subrecipient.
    FEMA uses Project Worksheets (PWs) to administer the PA Program. A
FEMA Project Specialist develops PWs for large projects, working with a
recipient representative and the applicant. A PW is the primary form
used to document the location, damage description and dimensions, scope
of work, and cost estimate for a project. Although large projects are
funded on documented actual costs, work typically is not complete at
the time of project formulation, PW development, and approval.
Therefore, FEMA obligates large project grants based on estimated costs
and relies on financial reconciliation at project closeout for final
costs.
    The obligation process is the process by which FEMA makes funds
available to the recipient. The funds reside in a

Federal account until drawn down by the recipient and disbursed to the
applicant, unless partially or otherwise deobligated for reasons
including, but not limited to, discrepancies between estimated and
actual costs, updated estimates, a determination that a prior
eligibility determination was incorrect, additional funds received from
other sources that could represent a prohibited duplication of
benefits, or expiration of the period of performance.
    Occasionally, an applicant or recipient may disagree with FEMA
regarding a determination related to their request for Public
Assistance. Such disagreements may include, for instance, whether an
applicant or recipient, facility, item of work, or project is eligible
for Public Assistance; whether approved costs are sufficient to
complete the work; whether a requested time extension was properly
denied; whether a portion of the cost claimed for the work is eligible;
or whether the approved scope of work is correct. In such
circumstances, the applicant or recipient may appeal FEMA's
determination. 44 CFR 206.206.

B. 44 CFR 206.206, Public Assistance Appeals

    Under the appeals procedures in 44 CFR 206.206, an eligible
applicant, subrecipient, or recipient may appeal any determination made
by FEMA related to an application for or the provision of Public
Assistance. There are two levels of appeal. The first appeal is to the
FEMA Regional Administrator. The second appeal is to the FEMA Assistant
Administrator for Recovery at FEMA Headquarters.
    The applicant must file an appeal with the recipient within 60
calendar days of the applicant's receipt of a notice from FEMA of the
Federal determination that is being appealed. 44 CFR 206.206(c)(1). The
applicant must provide documentation to support the position of the
appeal. In this documentation, the applicant will specify the monetary
amount in dispute and the provisions in Federal law, regulation, or
policy with which the applicant believes FEMA's initial action was
inconsistent. 44 CFR 206.206(a). The recipient reviews and evaluates
the appeal documentation. The recipient then prepares a written
recommendation on the merits of the appeal and forwards that
recommendation to the FEMA Regional Administrator within 60 calendar
days of the recipient's receipt of the appeal from the applicant. 44
CFR 206.206(c)(2). Recipients may make recipient-related appeals to the
FEMA Administrator.
    The FEMA Regional Administrator reviews the appeal and takes one of
two actions: (1) Renders a decision on the appeal and informs the
recipient of the decision; or (2) requests additional information. If
the appeal is granted, the FEMA Regional Administrator takes
appropriate action, such as approving additional funding or sending a
Project Specialist to meet with the appellant to determine additional
eligible funding. 44 CFR 206.206(c)(3).
    If the FEMA Regional Administrator denies the appeal, the applicant
or recipient may submit a second appeal.\2\ The applicant must submit
the second appeal to the recipient within 60 calendar days of receiving
the notice of the FEMA Regional Administrator's decision on the first
appeal. The recipient must forward the second appeal with a written
recommendation to the FEMA Regional Administrator within 60 calendar
days of receiving the second appeal. 44 CFR 206.206(c)(2). The FEMA
Regional Administrator will forward the second appeal for action to the
FEMA Assistant Administrator for Recovery as soon as practicable.
Recipients may make recipient-related second appeals to the FEMA
Assistant Administrator for Recovery.
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    \2\ Introductory text of paragraph(a) of 44 CFR 206.206.
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    The FEMA Assistant Administrator for Recovery at FEMA Headquarters
reviews the second appeal and renders a decision or requests additional
information from the applicant. In a case involving highly technical
issues, FEMA may request an independent scientific or technical
analysis by a group or person having expertise in the subject matter of
the appeal. 44 CFR 206.206(d). Upon receipt of requested information
and reports from the applicant, FEMA must render a decision on the
second appeal within 90 calendar days. 44 CFR 206.206(c)(3). This
decision constitutes the final administrative decision of FEMA. 44 CFR
206.206(e)(3).

C. 44 CFR 206.209, Arbitration for Public Assistance Determinations
Related to Hurricanes Katrina and Rita

    Under 44 CFR 206.209, applicants may request arbitration to resolve
disputed PA applications under major disaster declarations for
Hurricanes Katrina and Rita, pursuant to the authority of the American
Recovery and Reinvestment Act of 2009 (ARRA).\3\ Pursuant to section
601 of the ARRA, FEMA promulgated 44 CFR 206.209 to establish
arbitration procedures to resolve outstanding disputes regarding PA
projects over $500,000. The ARRA arbitration regulations are only
available to the States of Louisiana, Mississippi, Alabama, and Texas
under the following declarations: DR-1603, DR-1604, DR-1605, DR-1606,
and DR-1607.
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    \3\ American Recovery and Reinvestment Act of 2009, Public Law
111-5, 123 Stat. 115 (Feb. 17, 2009), 26 U.S.C. 1 note.
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D. Former 44 CFR 206.210, Dispute Resolution Pilot Program

    The Sandy Recovery Improvement Act of 2013 \4\ (SRIA) authorized
FEMA to conduct a Dispute Resolution Pilot Program (DRPP), which was in
effect from August 16, 2013 to December 31, 2015. 78 FR 49950, Aug 16,
2013. FEMA promulgated regulations at 44 CFR 206.210 (since removed) to
effectuate the pilot program. It included arbitration by an independent
review panel to resolve disputes relating to PA projects, to facilitate
an efficient recovery from major disasters. Applicants could choose to
use for their second appeal either the DRPP or the review already
offered under 44 CFR 206.206. Arbitration by an independent review
panel was available only for disputes in an amount equal to or greater
than $1,000,000 for projects with non-Federal cost share requirement
(where, the subrecipient had a cost share requirement), and for
applicants that had completed a first appeal pursuant to 44 CFR
206.206.
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    \4\ Sandy Recovery Improvement Act of 2013, Public Law 113-2,
127 Stat. 43 (Jan. 29, 2013), 42 U.S.C. 5189a note.
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    The arbitration decisions under this section were to be binding
upon the parties to the dispute, as required by section 1105(b)(2) of
SRIA. Under section 1105 of SRIA, the authority to accept a request for
arbitration pursuant to the DRPP sunset on December 31, 2015, and FEMA
has since removed these regulations.\5\ FEMA did not receive any
requests for arbitration pursuant to the DRPP.
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    \5\ See Removal of Dispute Resolution Pilot Program for Public
Assistance Appeals, 83 FR 44238, Aug. 30, 2018.
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E. Arbitration Under the Disaster Recovery Reform Act of 2018 (DRRA)

    On October 5, 2018, the President signed into law the Disaster
Recovery Reform Act of 2018 (DRRA).\6\ Section 1219 of DRRA, which
amended Section 423(d) of the Stafford Act (42 U.S.C. 5189a), provides
a right of arbitration to certain applicants of the PA Program that
have a dispute concerning the eligibility for assistance or repayment
of assistance.
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    \6\ Disaster Recovery Reform Act of 2018, Public Law 115-254,
132 Stat. 3186 (Oct. 5, 2018), 42 U.S.C. 5189a.

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    To request arbitration pursuant to the newly amended 42 U.S.C.
5189a, a PA applicant (1) must have a dispute arising from a disaster
declared after January 1, 2016, (2) must be disputing an amount that
exceeds $500,000 (or $100,000 for an applicant in a ``rural area'' with
a population of less than 200,000 and outside of an urbanized area),
and (3) must have submitted a first appeal pursuant to the requirements
established under 44 CFR 206.206. Such applicants that receive a
negative first appeal decision then have the option of submitting
either a request for a second appeal or a request for arbitration. In
addition, an applicant that has had a first appeal pending with FEMA
for more than 180 calendar days may withdraw such appeal and submit a
request for arbitration.
    Applicants that had a second appeal pending with FEMA as of October
5, 2018, from a disaster declared after January 1, 2016 may, if they
meet the amount in dispute requirement of $500,000 (or $100,000 for
rural areas), withdraw their second appeal and request arbitration.
Following the DRRA's enactment, FEMA individually notified applicants
with pending second appeals that were eligible to withdraw those
appeals and request arbitration.
    Applicants that are not eligible to request arbitration are (1)
applicants that have received a second appeal determination from FEMA
prior to October 5, 2018, and (2) applicants that were eligible to
submit a second appeal prior to October 5, 2018, but did not do so
within the 60 calendar days required by 44 CFR 206.206.\7\
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    \7\ On December 18, 2018, FEMA implemented section 1219 of DRRA
by posting a Fact Sheet on its website. After CBCA published their
March 5, 2019 proposed rule, see 84 FR 7861, FEMA updated the:
Section 1219 Public Assistance Appeals and Arbitration Fact Sheet on
March 27, 2019. A link to the current Fact Sheet: https://www.fema.gov/media-library/assets/documents/175821. Accessed May 15,
2020.
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    As amended by Section 1219 of the DRRA, 42 U.S.C. 5189a(d) names
the Civilian Board of Contract Appeals (CBCA) as the entity responsible
for conducting these arbitrations. The CBCA has promulgated regulations
at 48 CFR part 6106 establishing its arbitration procedures for such
purpose. The CBCA also currently conducts arbitrations arising from
Hurricanes Katrina and Rita under the ARRA regulations pursuant to an
Inter-Agency Agreement between the CBCA and FEMA.

III. Proposed Rule

    FEMA proposes to revise its current PA appeals regulation at 44 CFR
206.206 to add in the new right to arbitration under DRRA, in
conjunction with some revisions to the current appeals process. The
DRRA adds arbitration as a permanent alternative to a second appeal
under the PA Program. Additionally, applicants that have had a first
appeal pending with FEMA for more than 180 calendar days may withdraw
such appeal and submit a request for arbitration. In both cases, the
amount in dispute must be greater than $500,000, or greater than
$100,000 for an applicant for assistance in a rural area. The other
major proposed revisions to 44 CFR 206.206 include adding definitions;
adding subparagraphs to clarify what actions FEMA may take and will not
take while an appeal is pending and state that FEMA may issue separate
guidance as necessary, similar to current 44 CFR 206.209(m); adding a
finality of decision paragraph; requiring electronic submission for
appeals and arbitrations documents; and clarifying overall time limits
for first and second appeals.
    These proposed rules for arbitration are separate and distinct from
the arbitration provisions located in 44 CFR 206.209.
    Applicants should also review the Civilian Board of Contract
Appeals regulations at 48 CFR part 6101, Rules of Procedure of the
Civilian Board of Contract Appeals, and 48 CFR part 6106, Rules of
Procedure for Arbitration of Public Assistance Eligibility or
Repayment, for additional CBCA rules of procedure.
    FEMA proposes to change the 44 CFR 206.206 section heading from
``Appeals'' to ``Appeals and arbitrations,'' since FEMA proposes new
regulatory text to implement DRRA's right of arbitration at Sec.
206.206. Throughout this section, FEMA proposes to change references to
the ``Disaster Assistance Directorate'' to the ``Recovery
Directorate.'' The proposed changes are technical edits, as they
represent past FEMA organizational changes. Also, throughout this
section FEMA proposes to change all ``dates'' to ``calendar dates'' for
clarity. Finally, since FEMA is proposing new arbitration regulations,
FEMA is proposing that the first appeal, second appeal, and arbitration
requirements are in separate paragraphs for clarity. Currently in Sec.
206.206, FEMA's first and second appeal requirements are comingled.

A. Definitions (Proposed 44 CFR 206.206(a))

    Currently, Sec.  206.206 does not include any definitions. FEMA
proposes to add the terms ``Administrator,'' ``Amount in dispute,''
``Applicant,'' ``Final agency determination,'' ``Recipient,'' ``Rural
area,'' and ``Urbanized area,'' as follows.
    Administrator. FEMA proposes to define the term ``Administrator''
to mean the Administrator of the Federal Emergency Management Agency
for clarity.
    Amount in dispute. FEMA proposes to define the term ``Amount in
dispute'' to mean the difference between the amount of financial
assistance sought for a Public Assistance project and the amount of
financial assistance for which FEMA has determined such Public
Assistance project is eligible. The DRRA amendments to 42 U.S.C.
5189a(d)(1) introduced the term ``dispute,'' and also added dollar
thresholds that applicants must meet (which differ depending on the
area of the country in which the applicant applies for assistance) in
order to request arbitration. ``Amount in dispute'' is not used in the
current appeals section, 44 CFR 206.206, because there is no required
dollar threshold to appeal a decision. Accordingly, FEMA proposes to
define the term ``amount in dispute'' because applicants seeking
arbitration must state an amount in dispute as a prerequisite for the
arbitration portion of proposed 44 CFR 206.206.
    A Project is a logical grouping of work required as a result of the
declared major disaster or emergency. The scope of work and cost
estimate for a project are documented on a PW. 44 CFR 206.201(k).
Applicants and recipients cannot combine PWs together in order to
obtain eligibility. FEMA makes PA determinations at the PW level.
    Facility means any publicly or privately owned building, works,
system, or equipment, built or manufactured, or an improved and
maintained natural feature. Land used for agricultural purposes is not
a facility. 44 CFR 206.201(c). FEMA must consider the amount in dispute
at the PW level, rather than by facility (as one PW could encompass
multiple facilities) or by appeal (which could consolidate multiple
PWs, thereby increasing the amount in dispute).
    Applicant. FEMA proposes to define the term ``Applicant'' to refer
to the definition at 206.201(a) for the sake of consistency within the
program.
    Final agency determination. FEMA proposes to define the term
``Final agency determination'' to mean the decision of FEMA, if the
applicant or recipient does not submit a first appeal within the time
limits provided for in paragraph (b)(1)(ii)(A) of proposed Sec.
206.206; or the decision of FEMA, if the applicant or recipient
withdraws the pending appeal and does not file a

request for arbitration within 30 calendar days of the withdrawal of
the pending appeal; or the decision of the FEMA Regional Administrator,
if the applicant or recipient does not submit a second appeal within
the time limits provided for in paragraph (b)(2)(ii)(A) of proposed
Sec.  206.206. This term was introduced by the DRRA amendments to 42
U.S.C. 5189a(d)(5)(B) and requires a definition.
    The purpose of the proposed definition is to clearly state when a
FEMA determination is final and thus no longer ripe for any additional
review through FEMA's administrative appeal process or arbitration
under the DRRA. Using ``final agency determination'' to replace the
current term ``final administrative decision,'' used in Sec.
206.206(e)(3), will align FEMA's regulation with the language
introduced by the DRRA amendments at 42 U.S.C. 5189a(d)(5)(B).
    Recipient. FEMA proposes to define the term ``Recipient'' to refer
to the definition at Sec.  206.201(m) for the sake of consistency
within the program.
    Rural area. FEMA proposes to define the term ``Rural area'' to mean
an area with a population of less than 200,000 outside an urbanized
area. As amended by the DRRA, 42 U.S.C. 5189a(d)(4) defines this term.
    FEMA makes PA determinations at the PW level. Therefore,
considerations of the amount in dispute and rural/urban status must be
done at the PW level, rather than by facility (as one PW could
encompass multiple facilities) or by appeal (which could consolidate
multiple PWs. If a PW encompasses multiple facilities, and those
facilities happen to be in both rural and urbanized areas, then FEMA
will consider the entire PW as ``rural.''
    Urbanized area. FEMA proposes to define the term ``Urbanized area''
to mean the area as identified by the United States Census Bureau. The
Census Bureau defines an ``urbanized area'' as an area that consists of
densely settled territory that contains 50,000 or more people.\8\ The
DRRA amendments to 42 U.S.C. 5189a(d)(4) introduced this term and it
requires a definition. FEMA proposes to defer to the Census Bureau
definition, which meets FEMA's needs for determining eligibility for an
arbitration.
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    \8\ See ``Qualifying Urban Areas for the 2010 Census, 77 FR
18651, Mar. 27, 2012.
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B. Appeals and Arbitrations (Proposed 44 CFR 206.206(b) Introductory
Paragraph)

    For the introductory paragraph of Sec.  206.206(b), FEMA proposes
to state that an eligible applicant or recipient may appeal or an
eligible applicant may arbitrate any determination previously made
related to an application for or the provision of Public Assistance
according to the procedures of proposed Sec.  206.206. This language is
similar to the current regulation at Sec.  206.206 introductory
paragraph. FEMA proposes changing '' applicant, subrecipient, or
recipient'' to ``applicant or recipient'' since the definition of
applicant at Sec.  206.201(a) includes subrecipient. FEMA proposes
changing ``Federal assistance'' to ``Public Assistance'' to clarify
that appeal and arbitration procedures only apply to Public Assistance.
Additionally, FEMA proposes to add ``or an eligible applicant may
arbitrate'' to the proposed Sec.  206.206(b) introductory paragraph,
since the current Sec.  206.206 only discusses an appeal and 42 U.S.C.
5189a requires applicants to have the choice to either request an
arbitration or a second appeal. FEMA also proposes to replace
``procedures below'' with ``procedures of this section'' for clarity.

C. First Appeal (Proposed 44 CFR 206.206(b)(1))

    In the introductory paragraph of proposed paragraph (b)(1), FEMA
states that the applicant must make a first appeal in writing and
submit it electronically through the recipient to the Regional
Administrator. The current regulation (at 44 CFR 206.206(a)) does not
require submission electronically, but states submissions must be in
writing. FEMA proposes this revision to the current regulation to
accurately track the transmittal/receipt of appeals for the purposes of
establishing deadlines for second appeal and arbitration.
    The revision removes the mandatory language that the recipient
``shall review and evaluate'' all subrecipient appeals before
submission to the Regional Administrator. Instead, FEMA proposes that
the recipient must include a written recommendation on the applicant's
appeal with the electronic submission of the applicant's first appeal
to the Regional Administrator. To include a recommendation on the
applicant's appeal, the recipient must review and evaluate the appeal.
Accordingly, FEMA proposes striking the review and the evaluation
portion of the sentence as superfluous. FEMA's proposed language
regarding the mandatory recommendation includes electronic submission
to the Regional Administrator. Again, the change to electronic
submissions is to accurately track the transmittal/receipt of
recommendations for the purposes of establishing deadlines for second
appeals and arbitrations.
    FEMA is proposing a requirement that the recipient provide a
recommendation on the applicant's appeal due to the recipient's grant
management responsibilities and fiscal accountability for all PA grants
under a major disaster declaration, including its commitment to comply
with the applicable cost share requirement.\9\ The recipient has a
responsibility to ensure all applicants abide by grant and cost share
requirements, so in this capacity FEMA believes that the recipient
should make a recommendation on the substance of the applicant's first
appeal.
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    \9\ All grants FEMA administers must comply with the government-
wide rules governing all Federal assistance. These rules, set out at
2 CFR part 200, apply to FEMA awards to recipients as well as to
subawards under the FEMA award, which a recipient, as pass-through
entity, awards to subrecipients. These rules govern administrative
and grants management requirements, cost principles, and audit
requirements. FEMA Manual 205-0-1, ``Grants Management,'' as a whole
serves to explain key requirements of 2 CFR part 200 as they pertain
to FEMA assistance. The following regulations cover FEMA's cost
share requirement: 44 CFR 206.36(c)(5), 206.44, and 206.203(b).
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    The final sentence of proposed paragraph (b)(1) is currently the
third sentence in paragraph 206.206(a), which states that the recipient
may make recipient-related appeals to the Regional Administrator.
    In proposed paragraph (b)(1)(i), FEMA states the requirements of a
first appeal, which must include all documented justification
supporting the applicant or recipient's position; the specific amount
in dispute, as applicable; and the specific provisions in Federal law,
regulation, or policy with which the applicant or recipient believes
the FEMA determination was inconsistent. This is consistent with the
current regulation in Sec.  206.206(a), except that FEMA proposes to
change ``initial action'' to ``FEMA determination.'' This change
clarifies what the ``initial action'' actually is and aligns the
regulation with the terminology the program now uses. As such, no
substantive change is intended. Similarly, FEMA proposes to change
``monetary figure in dispute'' to ``amount in dispute, as applicable''
so that we could use one term for both appeals and arbitrations, plus
for clarity. Currently, FEMA allows an applicant, subrecipient, or
recipient to appeal a provision of assistance without providing a
monetary figure. (E.g. time extension requests, scope of work change
requests, etc.) Therefore, FEMA has proposed ``amount in dispute, as
applicable'' to replace the current regulations of ``monetary figure in

dispute.'' Also, the current regulation uses the term ``appellant''
instead of ``applicant or recipient'' for the requirement of specifying
the provisions in Federal law, regulation, or policy in dispute. FEMA's
reason for changing from ``appellant'' to ``applicant or ``recipient''
is for consistency in terminology and no substantive change is
intended. Finally, in keeping with principles of transparency and plain
language, FEMA proposes to replace ``shall'' with ``must'' in the last
sentence of current Sec.  206.206(a) and reorganizing the last sentence
by separating it into subparagraphs (b)(1)(i)(A) through (C).
    Proposed paragraph (b)(1)(ii) addresses time limits for first
appeals. Under proposed paragraph (b)(1)(ii)(A), the applicant may make
a first appeal through the recipient within 60 calendar days from the
date of the FEMA determination that is the subject of the appeal, and
the recipient must electronically forward to the Regional Administrator
the applicant's first appeal with a recommendation within 120 calendar
days from the date of the FEMA determination that is the subject of the
appeal. FEMA proposes to change the term ``appellant'' to ``applicant''
for consistency in terminology; no substantive change is intended. FEMA
also proposes to change ``after receipt of a notice of the action that
is being appealed'' to ``from the date of the FEMA determination that
is the subject of the appeal'' to enable FEMA to accurately track the
transmittal/receipt of appeals.
    The proposed revision removes the mandatory language that the
recipient ``will review'' the first appeal. In order for the recipient
to provide a written recommendation, the recipient must review the
appeal, so the deleted language is superfluous. FEMA proposes adding a
requirement that the recipient forward the applicant's appeal and the
recipient's recommendation electronically to the Regional
Administrator. The proposed change to electronic submissions is to
accurately track the transmittal/receipt of appeals for the purposes of
establishing deadlines for second appeal and arbitration.
    Finally, under proposed paragraph (b)(1)(ii)(A), FEMA proposes to
state that FEMA will deny all first appeals it receives from the
recipient more than 120 calendar days from the date of the FEMA
determination that is the subject of the appeal. This addition is added
for clarity to explain what occurs if an applicant misses the deadline.
This addition is not a new deadline. Currently, 44 CFR 206.206(c)(1)
allows an applicant 60 days to file an appeal and paragraph
206.206(c)(2) allows a recipient to review and forward an applicant's
appeals along with a written recommendation within 60 days. FEMA has
combined the two 60-day deadlines into a 120-calendar days deadline.
    Under proposed paragraph (b)(1)(ii)(B), within 90 calendar days
following receipt of a first appeal, if there is a need for additional
information, the Regional Administrator will provide electronic notice
to the recipient and applicant. This is consistent with the current
regulations, with the added requirement for electronic notification and
simultaneous notification of the applicant. FEMA also proposes for
clarity to state that if there is no need for additional information,
then FEMA will not provide notification. Finally, FEMA also proposes to
state that the Regional Administrator will generally allow the
recipient 30 calendar days to provide any additional information. This
is consistent with the current regulation, except that the current
regulation does not include the 30-calendar day timeframe, but rather
states that the Regional Administrator will include a date by which the
information must be provided. This change is to better allow FEMA to
issue timely determinations on first appeal. The proposed regulations,
at (b)(1)(ii)(B) and (C), have split the current regulations into two
paragraphs.
    Under proposed paragraph (b)(1)(ii)(C), FEMA will require the
Regional Administrator to provide electronic notice of the disposition
of the appeal to the applicant and recipient within 90 calendar days of
receipt of the appeal or within 90 calendar days following the receipt
of additional information or following expiration of the period for
providing the information. The proposed regulations reorganize the word
order of the current regulation and adds the following phrase ``within
90 calendar days of receipt of the appeal'' for clarification.
Additionally, proposed paragraph (b)(1)(ii)(C) adds the requirement to
provide electronic notice of the disposition of the appeal, removes the
requirement that it be ``in writing,'' and includes simultaneous
notification of the applicant. The change to electronic submissions is
to accurately track the transmittal/receipt of appeals for the purposes
of establishing deadlines for second appeal and arbitration. Currently,
FEMA may receive submissions several ways, including electronically,
through courier delivery, and through the United States (U.S.) mail.
    Proposed paragraph (b)(1)(iii) addresses technical advice and
states that in appeals involving highly technical issues, the Regional
Administrator may, at his or her discretion, submit the appeal to an
independent scientific or technical person or group having expertise in
the subject matter of the appeal for advice or recommendation. The
period for technical review may be in addition to other allotted time
periods. Within 90 calendar days of the report, the Regional
Administrator will provide electronic notice of the disposition of the
appeal to the recipient and applicant. This is consistent with the
current regulation at 44 CFR 206.206(d), except for the requirement to
electronically notify the recipient and provide simultaneous notice to
the applicant.
    FEMA proposes to add a new paragraph regarding the effect of an
appeal in proposed paragraph (b)(1)(iv). Proposed paragraph
(b)(1)(iv)(A) states that FEMA will take no action to implement any
determination pending an appeal decision from the Regional
Administrator, subject to the exceptions in paragraph (b)(1)(iv)(B) of
proposed Sec.  206.206. This section is added to provide clarity to an
appellant as to what actions FEMA will not take and what actions FEMA
may take while an appeal is pending. It does not alter any current FEMA
practices or procedures, nor does the rule limit any rights an
appellant has regarding their appeal.
    In proposed paragraph (b)(1)(iv)(B), FEMA states that,
notwithstanding (b)(1)(iv)(A), FEMA may suspend funding (referring to 2
CFR 200.338); defer or disallow other claims questioned for reasons
also disputed in the pending appeal; or take other action to recover,
withhold, or offset funds if specifically authorized by statute or
regulation. As stated above, this section is added to provide clarity
to an appellant as to what actions FEMA will not take and what actions
FEMA may take while an appeal is pending and does not alter any of
FEMA's current practices or procedures or limit any rights an appellant
has regarding their appeal.
    As stated in the current regulation in the final sentence of Sec.
206.206(c)(3), if the Regional Administrator grants an appeal, the
Regional Administrator will take appropriate implementing action(s).
This language is now in proposed paragraph (b)(1)(v).
    In proposed paragraph (b)(1)(vi), FEMA states that FEMA may issue
separate guidance as necessary to supplement paragraph (b)(1). This
language arises from 44 CFR 206.209(m) and is carried over to this
proposed regulation for consistency. Since FEMA has separated first
appeal, second

appeal, and arbitration requirements into separate paragraphs for
clarity, FEMA proposes adding a guidance subparagraph to the first and
second appeal paragraphs for consistency. FEMA already provides
guidance for first appeals in the Public Assistance Program and Policy
Guide, FP-104-009-2 (April 2018). FEMA likewise provides guidance for
staff implementing appeals procedures in Recovery Directorate Manual
Public Assistance Program Appeal Procedures (Version 4) Approval Date:
March 29, 2016. As such, proposed paragraph (b)(1)(vi) will not alter
current practice.

D. Second Appeal (Proposed 44 CFR 206.206(b)(2))

    The introductory paragraph to proposed Sec.  206.206(b)(2) states
that if the Regional Administrator denies a first appeal in whole or in
part, the applicant may make a second appeal in writing and submit it
electronically through the recipient to the Assistant Administrator for
the Recovery Directorate. This is consistent with the current
regulation, except for the addition of the requirement to submit
electronically. This requirement ensures the accurate and clear
tracking of transmittal dates of appeals for the purposes of
establishing deadlines for arbitrations. In addition, the current
regulation refers to the ``Assistant Administrator for the Disaster
Assistance Directorate.'' The title of this position is now the
``Assistant Administrator for the Recovery Directorate;'' the proposed
regulation reflects this new title.
    The second to last sentence under the introductory paragraph to
proposed Sec.  206.206(b)(2) states that the recipient must include a
written recommendation on the applicant's appeal with the electronic
submission of the applicant's second appeal to the Assistant
Administrator for the Recovery Directorate. This is consistent with
FEMA's current implementation of Sec.  206.206(c)(2). FEMA's proposed
language regarding the mandatory recommendation includes electronic
submission to the Assistant Administrator for the Recovery Directorate.
Again, the change to electronic submissions is to accurately track the
transmittal/receipt of recommendations for the purposes of establishing
deadlines.
    The last sentence under the introductory paragraph to proposed
Sec.  206.206(b)(2) states that the recipient may make recipient-
related second appeals to the Assistant Administrator for the Recovery
Directorate. This is consistent with the current third sentence in
paragraph 206.206(a) that the recipient may make recipient-related
appeals to the Regional Administrator.
    In proposed paragraph (b)(2)(i), FEMA states the requirements of a
second appeal, which must include all documented justification
supporting the applicant or recipient's position; the specific amount
in dispute, as applicable; and the specific provisions in Federal law,
regulation, or policy with which the applicant or recipient believes
the FEMA determination was inconsistent. This is consistent with the
current regulation, with the substitution of ``FEMA determination'' for
``initial action'' and ``appellant'' for ``applicant or recipient'' for
clarity as described above.
    Also consistent with the proposed paragraph (b)(1)(i) described
above, FEMA proposes replacing ``monetary figure in dispute'' with
``amount in dispute, as applicable,'' since FEMA allows an applicant or
recipient to appeal a FEMA determination that does not concern a
monetary figure. Additionally, FEMA proposes again to change
``appellant'' to ``applicant or recipient'' in this paragraph for
consistency of terminology, and replacing ``shall'' with ``must'' for
purposes of plain language. FEMA finally proposes reorganizing the last
sentence by separating it into subparagraphs (b)(2)(i)(A)-(b)(2)(i)(C).
    Proposed paragraph (b)(2)(ii) addresses time limits for second
appeals. Under proposed paragraph (b)(2)(ii)(A), if the Regional
Administrator denies a first appeal in whole or in part, the applicant
may make a second appeal through the recipient within 60 calendar days
from the date of the Regional Administrator's first appeal decision and
the recipient must electronically forward to the Assistant
Administrator for the Recovery Directorate the applicant's second
appeal with a recommendation within 120 calendar days from the date of
the Regional Administrator's first appeal decision. FEMA will deny all
second appeals it receives from the recipient more than 120 calendar
days from the date of the Regional Administrator's first appeal
decision. This proposed language allows the recipient the same level of
review and involvement in the second appeal process as they have with
the first appeals process, which is consistent with how FEMA currently
implements Sec.  206.206, and emphasizes that FEMA will deny all second
appeals it receives from the recipient more than 120 calendar days from
the date of the Regional Administrator's first appeal decision. This
addition is not a new deadline. Currently, 44 CFR 206.206(c)(1) allows
an applicant 60 days to file an appeal and paragraph 206.206(c)(2)
allows a recipient to review and forward an applicant's appeals along
with a written recommendation within 60 days. FEMA has combined the two
60-day deadlines into a 120-calendar day deadline.
    Proposed paragraph (b)(2)(ii)(B) states that within 90 calendar
days following receipt of a second appeal, if there is a need for
additional information, the Assistant Administrator for the Recovery
Directorate will provide electronic notice to the recipient and
applicant. If there is no need for additional information, then FEMA
will not provide notification. The Assistant Administrator for the
Recovery Directorate will generally allow the recipient 30 calendar
days to provide any additional information. This is consistent with the
current regulation, except that the current regulation does not include
the 30-calendar day time limit or simultaneous notification of the
applicant.
    Proposed paragraph (b)(2)(ii)(C) states that the Assistant
Administrator for the Recovery Directorate will provide electronic
notice of the disposition of the appeal to the recipient and applicant
within 90 calendar days of receipt of the appeal or within 90 calendar
days following the receipt of additional information or following
expiration of the period for providing the information. This is
consistent with the current regulations except for the requirement that
the notice be provided electronically, and the simultaneous
notification of the applicant. Again, the change to electronic
submission is to accurately track the transmittal/receipt.
    Proposed paragraph (b)(2)(iii) states that in appeals involving
highly technical issues, the Assistant Administrator for the Recovery
Directorate may, at his or her discretion, submit the appeal to an
independent scientific or technical person or group having expertise in
the subject matter of the appeal for advice or recommendation. The
paragraph further states that the period for this technical review may
be in addition to other allotted time periods and within 90 calendar
days of receipt of the report, the Assistant Administrator for the
Recovery Directorate will provide electronic notice of the disposition
of the appeal to the recipient and applicant. Proposed paragraph
(b)(2)(iii) has been added to this section to be consistent with
proposed paragraph (b)(1)(iii), which mirrors this section for first
appeals.
    Proposed paragraph (b)(2)(iv) addresses the effect of an appeal and
has

been added to this section to be consistent with the proposed paragraph
in (b)(1)(iv), which mirrors this section for first appeals.
    Proposed paragraph (b)(2)(v) states that if the Assistant
Administrator for the Recovery Directorate grants an appeal, the
Assistant Administrator for the Recovery Directorate will direct the
Regional Administrator to take appropriate implementing action(s).
Proposed paragraph (b)(2)(v) has been added to this section for
consistency with the proposed paragraph in (b)(1)(v), which mirrors
this section for first appeals.
    Proposed paragraph (b)(2)(vi) addresses guidance and has been added
to this section for consistency with the proposed paragraph (b)(1)(vi),
which mirrors this section for first appeals.

E. Arbitration (Proposed 44 CFR 206.206(b)(3))

    Proposed paragraph 206.206(b)(3)(i) states that an applicant may
request arbitration from the CBCA if there is a disputed agency
determination arising from a major disaster declared on or after
January 1, 2016. This is consistent with the requirements set forth in
42 U.S.C. 5189a(d), as amended by Section 1219 of the DRRA. The
proposed paragraph sets forth additional requirements for eligibility
to request arbitration, stating in (b)(3)(i)(B) that the amount in
dispute is greater than $500,000, or greater than $100,000 for an
applicant for assistance in a rural area; and in (b)(3)(i)(C) that the
Regional Administrator has either denied a first appeal decision or
received a first appeal but not rendered a decision within 180 calendar
days of receipt. These eligibility requirements are consistent with the
requirements set forth in 42 U.S.C. 5189a(d). FEMA added proposed
paragraph (b)(3)(ii) to clarify that arbitration is in lieu of a second
appeal. The proposed regulatory text clarifies that an applicant cannot
submit a second appeal after requesting arbitration.
    Proposed paragraph 206.206(b)(3)(iii) details how applicants may
request arbitration. Proposed paragraph 206.206(b)(3)(iii)(A) states
that an applicant may initiate arbitration by submitting an electronic
request simultaneously to the recipient, CBCA, and FEMA. See 48 CFR
part 6106 (CBCA's ``Rules of Procedure for Arbitration of PA
Eligibility or Repayment''). Proposed paragraph
206.206(b)(3)(iii)(B)(1) states that an applicant must submit a request
for arbitration within 60 calendar days from the date of the Regional
Administrator's first appeal decision. This proposed rule is consistent
with 42 U.S.C. 5189a(d)(5)(A).
    FEMA is proposing in paragraph 206.206(b)(3)(iii)(B)(1) a 60
calendar day deadline for submission of requests for arbitration. FEMA
is proposing 60 calendar days to be consistent with the submission time
limits for second appeals.
    Proposed paragraph 206.206(b)(3)(iii)(B)(2) provides that if the
first appeal was timely submitted, and the Regional Administrator has
not rendered a decision within 180 calendar days of receiving the
appeal, an applicant may electronically submit a withdrawal of the
pending appeal simultaneously to the recipient, the FEMA Regional
Administrator, and the CBCA. The applicant may then submit a request
for arbitration within 30 calendar days from the date of the withdrawal
of the pending appeal. This proposed language describes the right to
arbitration consistent with 42 U.S.C. 5189a(d)(5)(A) and adds a 30-day
deadline to ensure that applicants make requests for arbitration
promptly. Since the applicant will have already received 60 calendar
days when they initially filed their appeal, FEMA believes that
allowing 30 calendar days to request arbitration following withdrawal
of their appeal is a sufficient submission period. If the applicant
does not request arbitration within 30 calendar days after withdrawing
their pending appeal, then the decision of FEMA becomes the final
agency determination.
    Proposed paragraph 206.206(b)(3)(iii)(C) states that the request
for arbitration must contain a written statement that specifies the
amount in dispute, all documentation supporting the position of the
applicant, the disaster number, and the name and address of the
applicant's authorized representative or counsel. This rule is
consistent with 42 U.S.C. 5189a(d)(5)(A), which refers to the
arbitration process established under the authority of section 601 of
ARRA codified at 44 CFR 206.209.\10\
---------------------------------------------------------------------------

    \10\ American Recovery and Reinvestment Act of 2009, Public Law
111-5, 123 Stat. 115 (Feb. 17, 2009), 26 U.S.C. 1 note.
---------------------------------------------------------------------------

    Proposed paragraph 206.206(b)(3)(iv) states that expenses for each
party will be paid by the party who incurred the expense. This is
consistent with 42 U.S.C. 5189a(d)(5)(A). Since 42 U.S.C. 5189a(d)(1)
requires the Civilian Board of Contract Appeals to conduct
arbitrations, CBCA's regulations state that the CBCA arbitrates at no
cost to the parties. (See 48 CFR 6106.606.)
    Proposed paragraph 206.206(b)(3)(v) states that FEMA may issue
separate guidance as necessary to supplement paragraph (b)(3). This
proposed rule is consistent with 42 U.S.C. 5189a(d)(5)(A) and directly
corresponds to language contained in 44 CFR 206.209(m).

F. Finality of Decision (Proposed 44 CFR 206.206(c))

    Proposed paragraph 206.206(c) states that a FEMA final agency
determination or a decision of the Assistant Administrator for the
Recovery Directorate on a second appeal constitutes a final decision of
FEMA. In the alternative, a decision of the majority of the CBCA panel
constitutes a final decision, binding on all parties. See 48 CFR
6106.613. (CBCA's Decision; finality regulation.) Final decisions are
not subject to further administrative review. This is consistent with
the provision in 42 U.S.C. 5189a(d)(1) that CBCA decisions are binding.
The purpose of this paragraph is to clarify that an applicant cannot
appeal, arbitrate, or pursue any administrative remedy for any matter
for which FEMA has issued a final agency determination or a second
appeal decision; or regarding which the CBCA has issued an arbitration
decision.

G. Removal of Current 44 CFR 206.206(e), Transition

    FEMA proposes removing current paragraphs 206.206(e)(1) and (2) as
they are no longer necessary for this section. FEMA proposes removing
current paragraph 206.206(e)(3) because FEMA proposes defining ``final
agency determination'' in Sec.  206.206(a). Using the proposed term
``final agency determination'' to replace the current term ``final
administrative decision,'' used in Sec.  206.206(e)(3), will align
FEMA's regulation with the language introduced by Congress in 42 U.S.C.
5189a(d)(5)(B), offering consistency with the statute.

IV. Regulatory and Statutory Analyses

A. Executive Order 12866, as Amended, Regulatory Planning and Review,
Executive Order 13563, Improving Regulation and Regulatory Review; and
Executive Order 13771, Reducing Regulation and Controlling Regulatory
Costs

    Executive Orders 12866 (``Regulatory Planning and Review'') and
13563 (``Improving Regulation and Regulatory Review'') direct agencies
to assess the costs and benefits of available regulatory alternatives
and, if regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety

effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility.
Executive Order 13771 (``Reducing Regulation and Controlling Regulatory
Costs'') directs agencies to reduce regulation and control regulatory
costs and provides that ``for every one new regulation issued, at least
two prior regulations be identified for elimination, and that the cost
of planned regulations be prudently managed and controlled through a
budgeting process.''
    The Office of Management and Budget (OMB) has designated this rule
as a non-significant regulatory action, under section 3(f) of Executive
Order 12866. Accordingly, OMB has not reviewed it. Due to this non-
significant determination, this rule is also exempt from the
requirements of Executive Order 13771. See the OMB Memorandum titled
``Guidance Implementing Executive Order 13771, titled `Reducing
Regulation and Controlling Regulatory Costs' '' (April 5, 2017.)
    FEMA is proposing this rule to implement a new right of arbitration
authorized by DRRA, and to revise its regulations regarding first and
second PA appeals.
    FEMA's PA Program provides Federal grant assistance to government
organizations and eligible private nonprofit (PNP) organizations
following a Presidential disaster declaration. The PA Program is
administered through a coordinated effort between FEMA, States, or
federally recognized Tribes and local governments or eligible PNPs
(subrecipients).
Need for Regulatory Action
    Under current regulations, when FEMA determines that an applicant
or recipient is ineligible for PA funding, or if the applicant or
recipient disputes the amount awarded, FEMA has implemented a process
to appeal the decision. First, the applicant or recipient can appeal to
the FEMA Regional Administrator. If the applicant or recipient does not
submit a second appeal within 60 days, the result of the first appeal
is the final agency determination. If the applicant or recipient is not
satisfied with the result of the first appeal, they can submit a second
appeal to the FEMA Assistant Administrator for the Recovery
Directorate. The result of the second appeal is a final decision of
FEMA.
    FEMA is proposing in this rule to implement provisions for
arbitration in lieu of a second appeal, or in cases where an applicant
has had a first appeal pending with FEMA for more than 180 calendar
days. Applicants choosing arbitration would have their case heard by a
panel of judges with the CBCA. A decision by the majority of the CBCA
panel constitutes a final decision that would be binding on all
parties. Final decisions would not be subject to further administrative
review.
    Pursuant to 42 U.S.C. 5189a, as amended by section 1219 of the
DRRA, to request arbitration, an applicant (1) must have a dispute
arising from a disaster declared after January 1, 2016; (2) must be
disputing an amount that exceeds $500,000 (or $100,000 for an applicant
in a ``rural area'' with a population of less than 200,000 and outside
of an urbanized area); and, (3) must have submitted a first appeal and
has either received a denial of the first appeal or has not received a
decision after 180 calendar days.
    This proposed rule would directly affect applicants or recipients
disputing FEMA PA eligibility determinations or disputing the amount
awarded for PA projects. Applicants would be required to submit appeals
through their State, or in the case of a Tribal declaration,\11\ their
Tribal government (recipients). The recipient would then forward the
request to the FEMA Regional Administrator, along with a recommendation
for a first appeal.
---------------------------------------------------------------------------

    \11\ Tribes may choose to apply for PA independently as a
recipient (tribal declaration) or may submit through their State as
a subrecipient.
---------------------------------------------------------------------------

    If an applicant has not received a decision on their first appeal
after 180 days and meets the other two previously-outlined criteria,
they may withdraw the first appeal and request arbitration.
Alternatively, if the applicant does not agree with the Regional
Administrator's decision on the first appeal, they may either submit a
second appeal to the FEMA Assistant Administrator for the Recovery
Directorate or request arbitration. A panel of judges with the CBCA
would hear any arbitration cases. The applicant would send a
representative and possibly expert witnesses to the arbitration
hearing. The recipient would also send a representative to support the
applicant. FEMA representatives and expert witnesses would also attend
the hearing to defend FEMA's determination.
    The proposed rule would codify regulations for the appeals and
arbitration process as directed by 42 U.S.C. 5189a(d)(5). Applicants
are eligible for arbitration for disputes arising from major disasters
declared on or after January 1, 2016. This process is already
available, and eligible applicants have been notified of this
option.\12\
---------------------------------------------------------------------------

    \12\ On December 18, 2018, FEMA implemented section 1219 of DRRA
by posting a Fact Sheet on its website. After CBCA published their
March 5, 2019 proposed rule, see 84 FR 7861, FEMA updated the:
Section 1219 Public Assistance Appeals and Arbitration Fact Sheet
(3-27-19). A link to the current Fact Sheet: https://www.fema.gov/media-library/assets/documents/175821. Accessed May 15, 2020.
---------------------------------------------------------------------------

    As amended by Section 1219 of the DRRA, 42 U.S.C. 5189a(d) names
the CBCA as the entity responsible for conducting these arbitrations.
The CBCA has promulgated regulations at 48 CFR part 6106 establishing
its arbitration procedures for such purpose.
    FEMA is proposing in paragraph 206.206(b)(3)(iii)(B) a 60 calendar
day deadline for submitting requests for arbitration. FEMA is proposing
this as FEMA does not want different submission time limits for second
appeals and arbitrations. Rather, FEMA believes that there should be
consistency between the time to request arbitration and the time to
submit second appeals for administrative ease and to reduce potential
confusion amongst applicants.
Affected Population
    The proposed rule would affect PA applicants arising from major
disaster declarations. Specifically, applicants that (1) submitted a
first appeal and received a negative decision, or, (2) have a first
appeal pending for more than 180 days and wish to withdraw the appeal
in favor of arbitration. Applicants may only request arbitration for
disputes in excess of $500,000, or $100,000 in rural areas, and for
disputes that arise from major disasters declared on or after January
1, 2016.
Summary of Regulatory Changes
    FEMA proposes to revise its current PA appeals regulation at 44 CFR
206.206 to add in the new right to arbitration under DRRA, in
conjunction with some revisions to the current appeals process. DRRA
adds arbitration as a permanent alternative to a second appeal under
the PA Program, or for applicants that have had a first appeal pending
with FEMA for more than 180 calendar days that may withdraw such appeal
and submit a request for arbitration, provided the dispute is in excess
of $500,000, or $100,000 in rural areas, and for disputes that arise
from major disasters declared on or after January 1, 2016. The other
major proposed revisions to 44 CFR 206.206 include adding definitions;
adding subparagraphs to clarify what actions FEMA may take and will not
take while

an appeal is pending and state that FEMA may issue separate guidance as
necessary, similar to current 44 CFR 206.209(m); adding a finality of
decision paragraph; requiring electronic submission for appeals and
arbitrations documents; and clarifying overall time limits for first
and second appeals.
Assumptions
    This analysis uses the following assumptions:
     All monetary values are presented in 2018 dollars. FEMA
used the Bureau of Labor Statistics (BLS) Consumer Price Index for All
Urban Consumers (CPI-U): U.S. city average, all items, by month, Annual
Average as published May 2019.\13\
---------------------------------------------------------------------------

    \13\ Accessed and downloaded June 17, 2019. https://www.bls.gov/cpi/tables/supplemental-files/historical-cpi-u-201905.pdf.
---------------------------------------------------------------------------

     This proposed rule does not apply to emergency disaster
declarations. Thus, FEMA only included major disaster declarations in
this analysis.
     FEMA assumes the length of time for an arbitration case is
based on the hearing location.
     FEMA used 2018 wage rates for all parties involved in
arbitration cases.
Baseline
    Following guidance in OMB Circular A-4, FEMA assesses the impacts
of this proposed rule against a pre-statutory baseline. The pre-
statutory baseline is an assessment of what the world would look like
if the relevant statute(s) had not been adopted. In this instance, FEMA
has been accepting arbitration cases since the implementation of DRRA,
and retroactive to January 1, 2016. Since the statute has already been
implemented and because this rule is not making additional substantive
changes, the rule has no cost or benefits related to the new right of
arbitration. The benefit of this rule is making information publicly
available in the CFR for transparency and to prevent any confusion on
the most up-to-date arbitration process.
    Currently, FEMA has no permanent regulations for arbitrations
outside of Hurricanes Katrina and Rita. Since the passage of the DRRA,
certain PA applicants under declarations since January 1, 2016 may
request arbitration pursuant to 42 U.S.C. 5189a(d). On June 21, 2019,
CBCA published a final rule (see 84 FR 29085) and FEMA has published a
corresponding fact sheet. Between January 1, 2016 and May 7, 2020, FEMA
received 15 \14\ requests for arbitration. Five of these cases are
still in progress, so FEMA does not have available data on the outcome
of these cases. Of the 10 closed cases, FEMA prevailed in 6 cases, the
applicant prevailed in 3 cases, and the applicant withdrew from the
arbitration process prior to a decision in 1 case. Of the four cases
involving PNPs, FEMA prevailed in three cases and the applicant
prevailed in one case. These figures will continue to change as FEMA
continues to receive arbitration requests.
---------------------------------------------------------------------------

    \14\ The number of arbitration requests was provided by FEMA's
Office of Chief Counsel Disaster Disputes Branch as of May 7, 2020.
---------------------------------------------------------------------------

    While arbitration is available for disaster declarations
retroactive to January 1, 2016, the process did not become available to
applicants until FEMA published guidance in December 2018, and FEMA did
not begin receiving arbitration requests until March 7, 2019. This
means that FEMA only has 14 months of historical data, and therefore,
FEMA also relies on older arbitration regulations as a proxy for the
expected number of arbitration cases arising out of this proposed rule.
    FEMA previously had regulations permitting arbitrations arising
from disaster declarations for Superstorm Sandy. No applicants
requested arbitration pursuant to these regulations. The authority for
these arbitrations has sunset and FEMA has since removed the
regulations. FEMA has regulations, at 44 CFR 206.209, permitting
arbitrations arising from disaster declarations for Hurricanes Katrina
and Rita. This regulation is only available for PA applicants under
Hurricane Katrina and Rita disaster declarations. The number of
arbitrations submitted under this authority and the process relied on
to conduct these arbitrations provide insight to project the number of
arbitration cases in this proposed rule. While the Katrina/Rita
arbitration regulations have some key differences from the proposed
regulations, such as time frames and allowing applicants to request
arbitration in lieu of first appeals, it is the best historical data
that FEMA has available to estimate the number of expected arbitration
cases for this proposed rule.
    FEMA recognizes that the regulations at 44 CFR 206.209 have a 30
day time limit for submitting arbitration requests; whereas, FEMA is
proposing a 60 calendar-day time limit for arbitrations under this
proposed rule. FEMA does not know the impact that these additional 30
days may have on the number of arbitrations submitted.
Number of Potential Arbitration Cases
    In addition to reviewing the limited historical data available on
the 15 arbitration cases, FEMA also examined the number of arbitrations
submitted from the Hurricane Katrina and Rita disasters pursuant to 44
CFR 206.209, in lieu of filing a first appeal, from 2009 through 2017
to derive an estimate on the number of arbitration cases that
applicants might submit per year pursuant to 42 U.S.C. 5189a(d).
Pursuant to 42 U.S.C. 5189(d)(5)(A), arbitrations authorized by the
DRRA must follow the process established in 44 CFR 206.209 for Katrina
and Rita arbitrations, so FEMA relied on the annual average percentage
of cases submitted under this regulation as a basis for estimating the
number of cases that would arise for this proposed rule. The authority
to arbitrate in lieu of filing a first appeal for Hurricanes Katrina
and Rita became available in February 2009 and 2017 is the latest
calendar year where complete data was available at the time of this
analysis. Applicants could arbitrate in lieu of a first appeal only if
the amount of the project was greater than $500,000.\15\ During this
period, applicants submitted a total of 75 arbitrations and a total 290
first appeals.\16\ From this available data, applicants chose
arbitration in lieu of a first appeal 26 percent of the time ((75 /
290) x 100 = approximately 26 percent).
---------------------------------------------------------------------------

    \15\ Please note that arbitration cases for Hurricanes Katrina
and Rita are not bound by a threshold for rural areas as is proposed
by this rule. FEMA does not know if this limitation would result in
more or less cases filed.
    \16\ Data on appeals and arbitrations is provided by FEMA's
Office of Chief Counsel Disaster Disputes Branch. Not all of these
first appeals would have been eligible for arbitration. To be
eligible for arbitration, the amount in dispute would have had to
have been greater than $500,000. FEMA does not have amount in
dispute data available for these cases, so the arbitration
percentage may be overstated.
---------------------------------------------------------------------------

    Pursuant to 42 U.S.C. 5189(d)(5)(B), arbitration is authorized by
the DRRA in lieu of a second appeal where the dispute is more $500,000,
or $100,000 for rural areas. For second appeals estimates, FEMA looked
at all PA appeals from 2009 through 2017, rather than just the appeals
resulting from Hurricanes Katrina and Rita since a second appeal was
available to all applicants. FEMA found that there were 801 \17\ second
appeals submitted. Of that total, FEMA had data on the amount in
dispute for 559 appeals. FEMA applied the proposed urban/rural and
minimum

project amount requirements to these appeals and found that 261 or 47
percent would have been eligible for arbitration under this proposed
rule \18\ ((261/ 559) x 100 = approximately 47 percent).
---------------------------------------------------------------------------

    \17\ During the period of 2009-2017, 801 second level appeals
were submitted. FEMA has amount in dispute data for 559 cases. The
amount in dispute for 242 cases was not available. FEMA does not
have the amount in dispute data on the 242 cases because FEMA did
not maintain electronic records for appeals prior to 2015. Prior to
2015, this data was manually entered into a database with many
fields left blank. Therefore, the percentages used for estimates for
this proposed rule are based on a total of 559 cases.
    \18\ Out of 559 cases, 166 had an amount in dispute greater than
$500,000 and would be eligible regardless of the urban/rural
classification. 193 cases were for amounts between $100,000 and
$500,000, of which 95 were classified as rural. 261 (166 + 95 = 261)
cases out of 559, or 47 percent would have met the eligibility
requirements for arbitration in lieu of a second appeal.
---------------------------------------------------------------------------

    FEMA then applied the arbitration rate of 47 percent from the
Katrina and Rita arbitrations to the number of second appeals that
would have been eligible under this proposed rule, by year, from 2009
to 2017 as shown in Table 1.

                     Table 1--Total and Annual Average Estimated Arbitration Cases per Year
----------------------------------------------------------------------------------------------------------------
                                                                                Expected
                                                    Number of        Percent          Percent        number of
                       CY                        second appeals   eligible under     choosing       arbitration
                                                                  proposed rule     arbitration        cases
----------------------------------------------------------------------------------------------------------------
2009...........................................             122               47              26              15
2010...........................................              92               47              26              11
2011...........................................             107               47              26              13
2012...........................................              93               47              26              11
2013...........................................             102               47              26              12
2014...........................................              82               47              26              10
2015...........................................              43               47              26               5
2016...........................................              83               47              26              10
2017...........................................              77               47              26               9
                                                ----------------------------------------------------------------
    Total......................................             801  ...............  ..............              96
                                                ----------------------------------------------------------------
    Average....................................              89  ...............  ..............              11
----------------------------------------------------------------------------------------------------------------

    Based on historical data from 2009 through 2017 and case data from
44 CFR 206.209, FEMA estimates that there would be an average of 11
arbitration cases in lieu of a second appeal per year under the
proposed rule.
    The option to withdraw a first appeal and request arbitration was
not available under 44 CFR 206.209, so FEMA could not use this
historical data \19\ to estimate the number of arbitration cases after
a first appeal withdrawal. However, arbitration has been available
under 42 U.S.C. 5189a(d)(5) since January 1, 2016. So far, 15 cases
were submitted, with two submitted for a first appeal lasting more than
180 days. Based on this limited data, FEMA estimates that 13.3 percent
of arbitration cases would result from a withdrawal of a first appeal.
((2 / 15) x 100 = 13.3 percent). Applying the 13.3 percent rate to the
annual average number of expected arbitration cases would result in one
additional arbitration case per year (13.3 percent x 11 cases = 1.46,
rounded to one case). Therefore, FEMA estimates an average of 12
arbitration cases per year (11 + 1 = 12 arbitrations per year).
---------------------------------------------------------------------------

    \19\ Out of 3,778 first appeals between 2009 and 2017, 1,834 or
49 percent lasted longer than 180 days. ((1,834 / 3,778) x 100 = 49
percent).
---------------------------------------------------------------------------

Costs
    Based on experience from the arbitrations conducted for Hurricanes
Katrina and Rita, costs from this proposed rule would arise mainly from
travel expenses; opportunity costs of time for the applicant and
applicant's representatives, recipient's representatives, and FEMA's
representatives; and contract costs for applicants and FEMA to retain
legal counsel and experts. Cost estimates are based on the expected
number of arbitration cases per year. Since FEMA does not reimburse for
applicant arbitration expenses, FEMA does not have data on the expenses
incurred by applicants who have arbitrated from Hurricanes Katrina and
Rita to serve as a proxy for this proposed rule. Other provisions of
the proposed rule, such as timeframe requirements, electronic filing
requirements, technical advice and clarifications would not have
associated costs. FEMA does not expect the electronic filing
requirement to have associated costs since nearly all applicants have
access to internet and email, and most submit arbitration requests
through their attorneys. The proposed timeframe requirements would
align the submission deadlines for arbitration and appeals and would
not place additional burdens on the applicants. FEMA currently provides
technical advice as needed, so this would not be a new practice under
this proposed rule.
    The arbitration process is highly customizable for the applicant.
The applicant may choose to use an attorney, or several attorneys to
represent them during the arbitration process. The applicant may also
choose not to hire legal representation at all. Additionally, the
applicant may use any number of expert witnesses or none. Because of
the variability in the way arbitrations are conducted, FEMA is
presenting what it considers a typical case upon which to base its cost
estimates. This ``typical case'' is based on recent experience with the
15 arbitration already cases filed. Generally, the applicant will use
one or two attorneys and at least one expert witness. However, the
arbitration process is extremely flexible, and an applicant can use
whatever resources it thinks would be most appropriate for its case.
For example, in one case, the applicant hired several non-local
attorneys for representation. In another case, the arbitration was
conducted via written reports only, and no hearing was conducted.
    Costs to the CBCA are not discussed in this analysis. CBCA
promulgated their own regulations regarding their procedures for FEMA
arbitration cases. Under DRRA, CBCA will be responsible for covering
the costs of conducting arbitration hearings. All other parties
including the applicant, the recipient, and FEMA would be responsible
for covering their own expenses. The proposed rule does not mandate any
costs for the applicant or recipient. The arbitration process would be
entirely voluntary on the part of the applicant. Applicants would
choose to request arbitration, if they determine that the cost of
arbitration is justified by the potential benefits.

    This analysis estimates a range of potential costs based on the
applicant's or recipient's use of attorneys for representation. The
proposed rule would not require attorneys to represent any party for
arbitration. However, FEMA would be represented by attorneys at any
arbitration hearing.
    The costs to the applicant, recipient, and FEMA would be due to
travel and opportunity cost of time and contract costs for legal
counsel and experts. To estimate the opportunity cost of time, FEMA
assumed that each case would take each party 46.5 hours \20\ (rounded
to 47 hours) to prepare for the hearing, attend the hearing, and for
post hearing work. Hearings have historically lasted two working days,
or 16 hours.\21\ Additional time would be required for travel as is
discussed later in this analysis. FEMA also assumes that each party
would make use of expert witnesses in support of their case.
Additionally, FEMA generally pays for a court reporter.
---------------------------------------------------------------------------

    \20\ Based on information provided by FEMA Office of Chief
Counsel Disaster Disputes Branch.
    \21\ Based on information provided by FEMA Office of Chief
Counsel Disaster Disputes Branch.
---------------------------------------------------------------------------

Opportunity Cost of Time
    A typical arbitration request requires the work of several people,
including lawyers to represent the applicants, a court reporter to take
a transcript of the hearing, and State, local, Tribal, or PNP managers
who are responsible for compiling and submitting the original PA
request. Applicants will also typically supply expert witnesses when
making their case to the CBCA panel. FEMA used General and Operations
Managers to represent State, Tribal, local, and PNP managers. Many PA
projects involve repair or replacement of buildings and infrastructure,
so FEMA assumes that Engineers would be the most likely occupation used
as expert witnesses.
    FEMA used hourly wage rates from the Bureau of Labor Statistics
Occupational Employment Statistics for the following occupations:
Lawyers (SOC 23-1011), $69.34; Court Reporters (SOC 23-2091), $30.00;
Engineers (SOC 17-2000), $47.71; and General and Operations Managers
(SOC 11-1021) $59.56.\22\ To account for employee benefits, FEMA used a
wage multiplier of 1.46,\23\ resulting in fully-loaded hourly wages of
$101.24 for Lawyers, $43.80 for Court Reporters, $69.66 for Engineers,
and $86.96 for General and Operations Managers.
---------------------------------------------------------------------------

    \22\ U.S. Bureau of Labor Statistics. National Occupational
Employment and Wage Estimates United States. May 2018. Accessed May
20, 2020. https://www.bls.gov/oes/2018/may/oes_nat.htm.
    \23\ BLS Employer Costs for Employee Compensation, Table 1,
December 2018 located at https://www.bls.gov/news.release/archives/ecec_03192019.pdf. The loaded wage factor is equal to the total
compensation of $36.32 divided by the wages and salary of $24.91.
Values for the total compensation and wages and salary are for
civilian workers in the all workers occupational group. Accessed
April 29, 2019.
---------------------------------------------------------------------------

    FEMA used the 2018 hourly wage tables for the Washington-Baltimore-
Arlington, DC-MD-VA-WV-PA \24\ locality rate for FEMA employees
participating in arbitration cases. Based on current FEMA practice,
FEMA assumes that GS-13 employees would perform both legal and other
services for an arbitration case and the work would be reviewed by a
manager at the GS-15 level. The hourly GS-13 Step 5 salary was $52.66,
and the hourly GS-15 step 5 salary was $73.20. In order to account for
the benefits paid by employers, FEMA used a 1.46 multiplier to
calculate loaded wage rates of $76.88 for a GS-13 Federal employee and
$106.87 for a GS-15 Federal employee.
---------------------------------------------------------------------------

    \24\ U.S. Office of Personnel Management. 2018 General Schedule
(GS) Locality Pay Tables. Accessed May 22, 2020. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/18Tables/html/DCB_h.aspx.
---------------------------------------------------------------------------

Travel
    Arbitration cases are heard by a panel of judges of the CBCA, which
is based in Washington, DC. The arbitration process is very
customizable, so applicants can choose to have the hearings locally,
where a CBCA judge would travel to their location, and FEMA would also
send its representatives. Alternatively, cases could be heard at the
CBCA, and the applicant would travel to Washington, DC, along with any
lawyers and expert witnesses. Finally, the applicant could choose to
have the CBCA review documents, and nobody would be required to travel.
Because PA applicants are located throughout the U.S. and can be
travelling from any location within the U.S., FEMA used average
nationwide travel costs to estimate the travel costs for this rule.
    The U.S. General Service Administration (GSA) provides guidance on
travel policy, hotel rates, and meals and incidentals for Federal
employees. FEMA used GSA data on hotel prices and per diem rates to
estimate travel expense costs of attending a hearing in person.\25\
Because data on travel expenses for non-Federal employees is not
available, FEMA used the Federal lodging and per diem rates for
applicants travelling to Washington DC to attend hearings. According to
GSA, in 2018, the average price of a hotel room in the U.S. in the
Washington, DC was $219 per night and outside of Washington, DC was $93
per night. The per diem rate for meals and incidentals on the first and
last travel days is $52 and $69 for other travel day(s) in Washington,
DC. Similarly, the per diem rates for meals and incidentals on the
first and last day is $39 and $51 for the other days outside of
Washington, DC.
---------------------------------------------------------------------------

    \25\ U.S. General Services Administration. ``FY 2018 Per Diem
Rates for District of Columbia .'' Accessed on May 18, 2020.
Standard CONUS rate used for lodging and MI&E. https://www.gsa.gov/travel/plan-book/per-diem-rates/per-diem-rates-lookup/?action=perdiems_report&state=DC&fiscal_year=2018&zip=&city=. Per
diem rates are calendar year instead of fiscal year.
---------------------------------------------------------------------------

    The U.S. Department of Transportation (DOT) provides information on
the price of domestic airfare.\26\ According to the Bureau of
Transportation Statistics, the annual cost of an average domestic
flight within the United States, the average airfare was $350
roundtrip.\27\ The total travel costs for applicants attending hearings
in Washington, DC would be $1,249 per person ($350 average airfare +
($219 hotel in DC x 3 nights) + ($69 meals and incidentals x 2 days of
stay) + ($52 meals and incidentals x 2 travel days)) = $1,249).
---------------------------------------------------------------------------

    \26\ Bureau of Transportation Statistics. ``Annual Fares 1995-
2019 3Q 2019'' (.xlsx) March 23, 2020. U.S. Department of
Transportation. https://www.bts.gov/sites/bts.dot.gov/files/Annual%20Fares%201995-2019%203Q%202019.xlsx.
    \27\ The airfare was adjusted to 2018 dollars and excludes
airline tickets under $50.
---------------------------------------------------------------------------

Expert Witnesses
    FEMA assumes that each party would make use of expert witnesses to
support their case. The expert witnesses would be required to travel to
the hearing at the expense of the party that hired them. Based on
historical experience, preparing for the hearing is estimated to take
20 hours, the duration of the hearing is estimated to be 16 hours and
the travel time is estimated at 11 hours for a total of 47 hours for a
hearing in Washington, DC, the opportunity costs of time for one expert
witness to attend a hearing would be $3,274 ($69.66 x 47 hours). Thus,
the total cost for one expert witness' travel and opportunity cost of
time is $4,523 ($1,249 + $3,274). Table 2 shows the detailed the costs
of an expert witness. To provide a range of estimates since cases vary,
a hearing at the applicant's location for an expert witness would cost
$2,508 ($69.66 x 36 hours).

                                           Table 2--Estimated Cost per Expert Witness, Washington, DC Hearing
                                                                         [2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Opportunity
                                                                     Three nights of                                     costs of time
                         Round trip flight                           lodging at $219     Meals and       Total travel    for a hearing     Total expert
                                                                        per night       incidentals        expenses      in Washington,    witness cost
                                                                                DC
(A)                                                                             (B)                (C) (D) = (A + B +              (E)          (D + E)
                                                                                C)
--------------------------------------------------------------------------------------------------------------------------------------------------------
$350...............................................................            $657             $242           $1,249           $3,274           $4,523
--------------------------------------------------------------------------------------------------------------------------------------------------------

Cost for the Applicant
    The total cost for the applicant includes travel expenses (round
trip flight, three nights of lodging, and meals and incidentals) and
opportunity costs of time for the applicant, the applicant's
representatives, and the expert witnesses. The total travel expenses
for the applicant and the representative would be $2,498 ($1,249 x 2
personnel = $2,498), if the hearing is held in Washington DC. As
previously discussed in this analysis, costs include 47 hours for
hearing preparation, attending the hearing, and post hearing work, plus
11 hours of travel time for applicants and the applicant's
representative. FEMA notes that an applicant can choose not to bring a
representative or an applicant's representative could be one attorney
or in some cases more than one attorney. To provide a range of costs,
FEMA analyzes the typical case where one attorney or no attorneys are
present. If the applicant's representative is an attorney, the
opportunity costs of time would be $10,916 ($101.24 per hour wages for
a lawyer x 58 hours) + ($86.96 per hour wages for a general and
operations manager x 58 hours) = $10,916). If the applicant does not
use an attorney as their representative, the opportunity costs of time
would be $10,087 (2 general and operations managers at $86.96 each x 58
hours = $10,087). Table 3 shows the range of total costs to the
applicant.

                            Table 3--Range of Applicant Costs--Washington, DC Hearing
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                                    Opportunity
                                                                   cost of time       Travel           Total
----------------------------------------------------------------------------------------------------------------
1 Attorney and 1 Non-Attorney...................................         $10,916          $2,498         $13,414
2 Non-Attorneys.................................................          10,087           2,498          12,585
----------------------------------------------------------------------------------------------------------------

    The total cost to the applicant if they were to travel to
Washington, DC for a hearing with a representative and two expert
witnesses, ranges from $21,631 ((2 expert witnesses at a cost of $4,523
each) + $12,585 recipient cost) to $22,460 ((2 expert witnesses at
$4,523 each) + $13,414 recipient and attorney cost).
    For a local hearing, the costs to the applicant would include 47
hours of opportunity costs of time for the applicant and representative
(assuming the representative is local), and 36 hours of opportunity
costs of time to attend the hearing for two expert witnesses (assuming
the expert witnesses are local) and would range from $13,190 ((2
general and operations managers at $86.96 each x 47 hours) + (2 expert
witnesses at $69.66 each x 36 hours) = $13,190) to $13,861 (($86.96 for
a general and operations manager x 47 hours) + ($101.24 for an attorney
x 47 hours) + (2 expert witnesses at $69.66 each x 36 hours) = $13,861)
depending on who the recipient uses as a representative. Table 4 shows
the range of total costs for an applicant for hearings held at the
applicant's location.

                                     Table 4--Applicant Costs--Local Hearing
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                                      Expert        Opportunity
                                                                     witnesses     cost of time        Total
----------------------------------------------------------------------------------------------------------------
1 Attorney and 1 Non-Attorney...................................          $5,016          $8,845         $13,861
2 Non-Attorneys.................................................           5,016           8,174          13,190
----------------------------------------------------------------------------------------------------------------

Cost for the Recipient
    The recipient would not present information in the arbitration
case, but would send one or more representatives in a supporting role
for the applicant. The cost per arbitration case for the recipient, is
the opportunity costs of time for the representative totaling $10,087
(2 general and operations managers at $86.96 each x 58 hours = $10,087)
and travel expenses $2,498 (2 representatives x $1,249) of those
attending the hearing in Washington, DC. As shown in table 5, the total
cost to the recipient would be $12,585 if the hearing was held in
Washington, DC.

                           Table 5--Estimated Recipient Costs, Washington, DC Hearing
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                                 Opportunity
                                                                 cost of time        Travel           Total
----------------------------------------------------------------------------------------------------------------
General and Operations Managers..............................         $10,087           $2,498          $12,585
----------------------------------------------------------------------------------------------------------------

    For a local hearing, two representatives would spend 47 hours on
the case and the cost to the recipient would be $8,174 (2 general and
operations managers at $86.96 each x 47 hours = $8,174).
Cost to Government/FEMA
    FEMA would require two attorneys for a typical arbitration case, a
GS-13 step 5 attorney and a GS-15 step 5 supervisory attorney, to
review and to prepare a response to the request for arbitration. Based
on historical experience, the two attorneys' total time from
preparation to post hearing is 47 hours.\28\ The opportunity costs of
time of the attorneys, including preparation and review of a case, is
$8,636 (($76.88 GS 13 Step 5 attorney x 47 hours) + ($106.87 GS 15 Step
5 Supervisory Attorney x 47) hours = $8,636).
---------------------------------------------------------------------------

    \28\ Based on information provided by FEMA Office of Chief
Counsel Disaster Disputes Branch.
---------------------------------------------------------------------------

    Based on historical experience, FEMA would also require four non-
attorneys (e.g., GS-13 Step 5 program analysts) to support the
arbitration case only for the duration of the hearing. The opportunity
costs of time associated with the program analysts would be $4,920 (4
GS 13 Step 5 program analysts at $76.88 each x 16 hours = $4,920).
Thus, the total opportunity costs of time for all six FEMA personnel
would be $13,556.
    FEMA would also call their own expert witnesses to attend the
hearing. Based on historical experience, FEMA assumes that it would use
four expert witnesses per case for a total of $10,032 ($2,508 cost per
expert witness x 4 expert witnesses = $10,032). The expert witnesses
provide testimony on a range of subjects, for example soil degradation
or building construction.
    Arbitration hearings do not require transcription services.
However, FEMA has historically hired a court reporter for hearings and
provided the transcript to the CBCA for their records. FEMA would
continue to pay for a court reporter for the duration of a hearing
under the proposed rule. The opportunity costs of time for the court
reporter services for a transcript would be $701 per arbitration case
($43.80 per hour wages for Court Reporters x 16 hours of arbitration
time = $701).
    The estimated total cost to FEMA, including staff time, expert
witnesses and transcript services, would be $24,289 per case. Table 6
presents the cost of each component by opportunity cost of time and
other costs.

                              Table 6--Estimated FEMA Costs--Washington, DC Hearing
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                                                Cost for FEMA
                                                                                employees (2
                Cost for four expert witnesses                  Cost of court   attorneys and 4   Total per-case
                                                                   reporter         program        cost to FEMA
                                                                                analysts)
----------------------------------------------------------------------------------------------------------------
$10,032......................................................            $701          $13,556          $24,289
----------------------------------------------------------------------------------------------------------------

    For a hearing at the applicant's location, FEMA representatives
would need to travel to the location of the hearing. Costs for a local
hearing would be higher due to paying for travel time as well as actual
travel costs. Travel costs are estimated using the figures previously
mentioned and would be $1,249 per person for a total of $2,498, if 2
attorneys travel to the applicant's location. Additionally, FEMA
estimates that the time would increase to 58 hours due to 11 hours of
travel time for the attorneys totaling (2 attorneys at $106.87 each x
58 hours) $12,397 plus $4,920 for non-travelling program analysts
resulting in a total cost of $17,317. The estimated costs to FEMA for a
local hearing are presented in Table 7.

                                      Table 7--Estimated FEMA Costs--Local
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                                 Opportunity
                                               Cost of court    costs of time     Travel costs    Total per-case
       Cost for four expert witnesses             reporter         for FEMA      (2 attorneys)     cost to FEMA
                                                                  employees
----------------------------------------------------------------------------------------------------------------
$10,032.....................................            $701         $ 17,317           $2,498          $30,548
----------------------------------------------------------------------------------------------------------------

    In addition to these costs, FEMA's PA Program would also hire an
Arbitration Coordinator at the GS-13 Step 5 level with an annual salary
of $109,900.With the 1.46 multiplier for a fully loaded wage rate, the
additional cost to FEMA would be $160,454 per year. Therefore, the
annual total costs to FEMA range from $184,743 ($160,454 + $24,289) if
the hearing is held in Washington, DC to $191,002 ($160,454 + $30,548)
if the hearing is held at the applicant's location.

Total Costs
    The total cost per case vary based on who the applicant uses as a
representative, and whether the hearing is held in Washington, DC or
local to the applicant. Government and FEMA costs would be higher for a
hearing held local to the applicant, and likewise, applicant and
recipient costs would be higher if the hearing was held in Washington,
DC. FEMA estimates that the total costs per case to range between
$51,912 and $59,343. Table 8 presents the range of estimated costs per
arbitration case.

                                          Table 8--Total Cost Per Case
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                       FEMA          Applicant       Recipient         Total
----------------------------------------------------------------------------------------------------------------
Low.............................................         $30,548         $13,190          $8,174         $51,912
High............................................          24,289          22,460          12,585          59,334
----------------------------------------------------------------------------------------------------------------

    As established earlier in this analysis, FEMA estimate an average
of 12 arbitration cases per year. Therefore, FEMA estimates the total
annual costs to range between $783,398 ((12 cases x $30,548 per case) +
$160,454 for a new FEMA employee + (12 x $13,190 per case for
applicant) + (12 x $8,174 per case for the recipient)= $783,398) (low)
and $872,462((12 cases x $24,289 per case) + $160,454 for a new FEMA
employee + (12 x $22,460 per case for the applicant) + (12 x $12,585
for the recipient)= $872,462) (high). Table 9 shows the estimated total
costs per year of this proposed rule. The low cost estimate assumes
that all hearings would be held at the applicant's location, while the
high estimate assumes hearings would be held in Washington, DC.

                                    Table 9--Total Cost Per Year for 12 Cases
                                                     [2018$]
----------------------------------------------------------------------------------------------------------------
                                                       FEMA          Applicant       Recipient         Total
----------------------------------------------------------------------------------------------------------------
Low.............................................        $527,030        $158,280         $98,088        $783,398
High............................................         451,922         269,520         151,020         872,462
----------------------------------------------------------------------------------------------------------------

    Tables 10 and 11 show the total 10-year costs and 10-year costs
annualized at 3 percent and 7 percent.

                                       Table 10--10-Year Cost Totals Using 3 Percent and 7 Percent Discount Rates
                                                                  [Low Estimate, 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual costs    Annual costs
                          Year                              FEMA costs       Applicant       Recipient      Total costs    discounted at   discounted at
                                                                               costs           costs                          3% \1\          7% \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................        $527,030        $158,280         $98,088        $783,398        $759,896        $728,560
2.......................................................         527,030         158,280          98,088         783,398         737,099         677,561
3.......................................................         527,030         158,280          98,088         783,398         714,986         630,132
4.......................................................         527,030         158,280          98,088         783,398         693,536         586,023
5.......................................................         527,030         158,280          98,088         783,398         672,730         545,001
6.......................................................         527,030         158,280          98,088         783,398         652,548         506,851
7.......................................................         527,030         158,280          98,088         783,398         632,972         471,371
8.......................................................         527,030         158,280          98,088         783,398         613,983         438,375
9.......................................................         527,030         158,280          98,088         783,398         595,564         407,689
10......................................................         527,030         158,280          98,088         783,398         577,697         379,151
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       5,270,300       1,582,800         980,880       7,833,980       6,651,012       5,370,714
                                                         -----------------------------------------------------------------------------------------------
    Annualized..........................................  ..............  ..............  ..............  ..............         783,398         783,398
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The annualized amounts for 7 percent and 3 percent are equal in this table because the amounts for each year are identical and the first year is
  discounted.

                                       Table 11--10-Year Cost Totals Using 3 Percent and 7 Percent Discount Rates
                                                                 [High Estimate, 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual costs    Annual costs
                          Year                              FEMA costs       Applicant       Recipient      Total costs    discounted at   discounted at
                                                                               costs           costs                          3% \1\          7% \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................        $451,922        $269,520        $151,020        $872,462        $846,288        $811,390
2.......................................................         451,922         269,520         151,020         872,462         820,899         754,593
3.......................................................         451,922         269,520         151,020         872,462         796,273         701,771
4.......................................................         451,922         269,520         151,020         872,462         772,384         652,647

5.......................................................         451,922         269,520         151,020         872,462         749,212         606,962
6.......................................................         451,922         269,520         151,020         872,462         726,736         564,475
7.......................................................         451,922         269,520         151,020         872,462         704,934         524,962
8.......................................................         451,922         269,520         151,020         872,462         683,786         488,215
9.......................................................         451,922         269,520         151,020         872,462         663,272         454,040
10......................................................         451,922         269,520         151,020         872,462         643,374         422,257
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       4,519,220       2,595,200       1,510,200       8,724,620       7,407,158       5,981,312
                                                         -----------------------------------------------------------------------------------------------
        Annualized......................................  ..............  ..............  ..............  ..............         872,462         872,462
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The annualized amounts for 7 percent and 3 percent are equal in this table because the amounts for each year are identical and the first year is
  discounted.

    FEMA believes that it would not have any implementation or
familiarization costs. FEMA currently has an arbitration process that
is very similar to the proposed rule for cases arising from Hurricanes
Katrina and Rita. FEMA has already notified eligible applicants, dating
back to January 1, 2016 of their eligibility for arbitration under DRRA
section 1219.
    Further, applicants would not have familiarization costs because
the process for requesting arbitration would consist of an email
request and would use materials previously submitted in the application
for PA funding.
Benefits
    The benefits of this proposed rule would be qualitative in nature,
and would apply mostly to the applicant. FEMA believes that this
proposed rule would further its mission of supporting State, Tribal,
and local governments, as well as eligible PNPs by offering them an
alternative procedure for disputing PA eligibility and funding
decisions. Applicants retain the option to submit a second appeal. The
proposed rule would offer an alternative that the applicant may see as
more impartial because the arbitration cases would be heard by CBCA
judges, as opposed to second appeals that would continue to be
conducted entirely within FEMA. Additionally, applicants would have the
opportunity to present their case in person and call expert witnesses
to support their claims. These two options would allow applicants to
choose the course that would be most appropriate to their
circumstances.
Customization
    Applicants may select arbitration, if they consider this process
more customizable. The arbitration process would provide applicants
with the opportunity to appear in person before an impartial panel and
present evidence as to why they are disputing a FEMA determination.
Applicants can also retain expert witnesses to provide support to their
position. Expert witnesses provide testimony within their technical
specialty to assist the arbitration panel in understanding the
underlying work for which FEMA ultimately decides eligibility.
    Additionally, applicants would have the opportunity to respond in
real time to evidence presented by FEMA, allowing them more control
over the dispute than they might have under a second appeal. Applicants
may opt to hire an expert witness in arbitration to help present the
disputed information in a manner more favorable to the applicant. The
ability to hire expert witnesses may provide applicants with additional
utility and may be an incentive to select arbitration.
    The proposed rule would also allow applicants to present the same
technical documentation in both the appeals and arbitration procedures.
An applicant who submits a first appeal, but elects to withdrawal in
favor of arbitration may opt to reuse the information in the request
for arbitration that was previously submitted in the first appeal.
Applicants may gain utility from the convenience of reusing documents.
Impartiality
    It is not possible to quantify an applicant's increased utility due
to perceived impartiality. The purpose of arbitration is to create a
process to resolve the issues in a manner satisfactory to all parties.
Based on past cases, FEMA has granted or partially granted 23 percent
of the second appeals submitted by applicants.\29\ CBCA has found in
favor or partially in favor for the applicant in less than 20 percent
of Katrina/Rita arbitrations.\30\
---------------------------------------------------------------------------

    \29\ Based on information provided by FEMA Office of Chief
Counsel Disaster Disputes Branch.
    \30\ Based on information provided by FEMA Office of Chief
Counsel Disaster Disputes Branch.
---------------------------------------------------------------------------

    The applicant may nevertheless perceive they have a better
opportunity to gain additional Federal funding through arbitration.
Applicants would select arbitration as their case would be heard by a
third party, rather than an appeal process that is conducted entirely
by FEMA. Applicants would perceive a more impartial system, if the
forum encourages both parties to solicit discussion rather than
``paper'' based appeals. Applicants would expect that impartiality
would best achieve their objective of a fair resolution.
    Tables 12 and 13 analyze the historical outcomes from second
appeals and arbitration from 44 CFR 206.209. Because of the
unpredictable nature and unique circumstances of every disaster, these
figures may not be representative of future outcomes, as the outcomes
are based on the arbitration policies for Hurricanes Rita and Katrina
and the unique circumstances of each case.

                    Table 12--Second Appeals Outcomes
                               [2009-2017]
------------------------------------------------------------------------
                                                 Number of
             Second appeal outcome                 cases       Percent
------------------------------------------------------------------------
Granted.......................................          118         14.7
Denied........................................          445         55.6
Partially Granted.............................           67          8.4
Active........................................            1          0.1
Other \1\.....................................          170         21.2
                                               -------------------------
    Total.....................................          801          100
------------------------------------------------------------------------
\1\ The category of Other includes appeal decision not available,
  remand, rescind, arbitration, and withdrawn.

           Table 13--Arbitration Outcomes under 44 CFR 206.209
                               [2009-2017]
------------------------------------------------------------------------
                                                 Number of
              Arbitration outcome                  cases       Percent
------------------------------------------------------------------------
Binding Decision without CBCA.................            3          4.0
In Favor of FEMA..............................           17         22.7
In Favor of Applicant.........................           10         13.3
Partial in Favor of Applicant.................           31         41.3
Withdrawn.....................................            3          4.0
Other \2\.....................................           11         14.7
                                               -------------------------
    Total.....................................           75          100
------------------------------------------------------------------------
\2\ The category of Other includes other decision, dismissed, and
  ongoing cases.

Transfers
    FEMA is unable to quantify transfers due to this proposed rule.
Transfers would arise from the possibility that FEMA may award a
different amount of grant funding under the arbitration process than it
would under current regulations that only allow for a second appeal.
However, it would be speculative for FEMA to make an estimate as to the
potential changes in grant disbursement due to the proposed rule.
Impacts
    Table 14 summarizes the costs, benefits, and transfer impacts from
the proposed rule.

                                   Table 14--OMB Circular A-4 Accounting Table
----------------------------------------------------------------------------------------------------------------
                                           Estimates                                  Units
           Category            ---------------------------------------------------------------------------------
                                 Low estimate    High estimate    Year dollar    Discount rate   Period covered
----------------------------------------------------------------------------------------------------------------
Benefits:
    Annualized Monetized......              $0              $0            2018              7%  10 Years.
                                            $0              $0            2018              3%  10 Years.
    Annualized Quantified.....               0               0
                               ---------------------------------------------------------------------------------
                                             0               0
    Qualitative...............   Additional option for review of PA projects and decisions.
                                 Greater perception of impartiality in the arbitration process.
                                 Ability to customize arbitration process.
----------------------------------------------------------------------------------------------------------------
Costs:
    Annualized Monetized......        $783,398       $ 872,462            2018              7%  10 Years.
                                      $783,398       $4872,462            2018              3%  10 Years.
    Annualized Quantified.....               0               0
                                             0               0
                               ---------------------------------------------------------------------------------
Qualitative...................   Longer time frame to resolve disputes under arbitration option.
----------------------------------------------------------------------------------------------------------------
Transfers                       Possible changes to PA grant disbursements.
----------------------------------------------------------------------------------------------------------------
Effects:
    Small Entities............  FEMA expects 9 arbitration cases per year from small entities with an estimated
                                cost of between $13,190 and $22,460 per small entity.
    Wages.....................  None.
    Growth....................  None.
----------------------------------------------------------------------------------------------------------------

Uncertainty Analysis
    The estimates of the costs of the proposed rule are subject to
uncertainty due to the uniqueness of each arbitration case. The cost
estimates can vary widely depending on complexity and other factors. As
a result, the cost estimate could be overstated or understated.
    There are several sources of uncertainty in this analysis: The
number of eligible applicants, the proposed deadlines for filing, and
the potential number of arbitration cases. Major disasters do not occur
on a regular time interval. The severity of the disaster would affect
the number of applicants that decide to apply for funding in the PA
Program. The number of eligible applicants can vary year-to-year.
    Historical data used in this analysis was based on the arbitration
process for Hurricanes Katrina and Rita, which is different in a couple
of key respects from the proposed arbitration process. While the cost
shares for Katrina and Rita were 100 percent, cost shares for future
disaster declarations may be as high as 25 percent for applicants.
Because Katrina/Rita applicants were not required to pay for any
portion of their project cost, they had an incentive to apply for more
costly projects and pursue arbitration when denied. Future disasters
with a cost share may lead applicants to be more conservative in
applying for PA projects, which may result in fewer arbitration
requests than was indicated in the primary estimate.
    Additionally, the timeframe for submitting arbitration requests
under 44 CFR 206.209 was 30 days. However, FEMA is proposing a 60 day
submission deadline for arbitration submissions under DRRA requirements
to align with the current 60 day submission timeframe for second
appeals. This additional time may affect the number of arbitration
cases submitted in the future, but FEMA cannot reliably predict these
impacts at this time.
Alternatives
    FEMA considered several alternative regulatory approaches to the
requirements in the proposed rule. The alternatives included: (1) Not
issuing a mandatory regulation; (2) proposing an alternate definition
of rural; and (3) not requiring electronic submission. FEMA did not
consider a no-action alternative. The DRRA mandates FEMA to promulgate
a rule allowing the option of arbitration in lieu of a second appeal
and specifies the CBCA as the arbitration administrator. As such, FEMA
must pursue a regulatory action.

    FEMA considered using OMB's nonmetropolitan area definition as an
alternate definition of the term ``rural.'' OMB's nonmetropolitan area
is defined as areas outside the boundaries of metropolitan areas.
    Nonmetropolitan areas are outside the boundaries of metropolitan
areas and are further subdivided into two types:

    1. Micropolitan (micro) areas, which are nonmetro labor-market
areas centered on urban clusters of 10,000-49,999 persons and
defined with the same criteria used to define metro areas.
    2. All remaining counties, often labeled ``noncore'' counties
because they are not part of ``core-based'' metro or micro areas.

    OMB defines metropolitan areas to include:

    1. Central counties with one or more urbanized areas; urbanized
areas are densely-settled urban entities with 50,000 or more people.
    2. Outlying counties that are economically tied to the core
counties as measured by labor-force commuting. Outlying counties are
included if 25 percent of workers living in the county commute to
the central counties, or if 25 percent of the employment in the
county consists of workers coming out from the central counties--the
so-called ``reverse'' commuting pattern.

    FEMA did not recommend using the OMB's definition because it
combines rural area populations into Metropolitan counties. The OMB
definition would also result in some rural areas such as the Grand
Canyon being considered a metropolitan county. This alternative would
not result in reducing the impact on small entities, while
accomplishing the stated objective of the rule.
    FEMA considered not requiring applicants to submit a request for
arbitration electronically. Current practices allow FEMA to accept hard
copy submissions (through U.S. Mail or other means) for first and
second appeals. In addition, FEMA currently accepts electronic
submissions for requests for arbitration under 44 CFR 206.209. FEMA
chose this alternative, as it would provide FEMA with enhanced ability
to track and establish deadlines in the arbitration process. CBCA's
rule requires applicants to use an electronic method to submit their
documentation and request for arbitration to CBCA. Thus, FEMA believes
requiring electronic submission would not pose an undue burden on most
applicants.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) and
Executive Order 13272 (67 FR 53461, Aug. 16, 2002) require agency
review of proposed and final rules to assess their impact on small
entities. An agency must prepare an initial regulatory flexibility
analysis (IRFA) unless it determines and certifies that a rule, if
promulgated, would not have a significant economic impact on a
substantial number of small entities. FEMA does not believe this
proposed rule will have a significant economic impact on a substantial
number of small entities. However, FEMA is publishing this IRFA to aid
the public in commenting on the potential small business impacts of the
proposed requirements in this NPRM. FEMA invites all interested parties
to submit data and information regarding the potential economic impact
on small entities that would result from the adoption of this NPRM.
FEMA will consider all comments received during the public comment
period when making a final determination. In accordance with the
Regulatory Flexibility Act, an IFRA must contain the following
statements, including descriptions of the reason(s) for the rulemaking,
its objective(s), the affected small entities, any additional burden
for book or record keeping and other compliance requirements; any
Federal rules that duplicate, overlap, or conflict with the rulemaking,
and significant alternatives considered. The following sections address
these subjects individually in the context of this proposed rule.
1. A Description of the Reasons why Action by the Agency Is Being
Considered
    PA helps State and local governments respond to and recover from
the challenges faced during major disasters and emergencies. To support
State and local governments facing those challenges, Congress passed
DRRA.
    Under the PA Program, as authorized by the Stafford Act, FEMA
awards grants to eligible applicants to assist them in responding to
and recovering from Presidentially-declared emergencies and major
disasters. The recipient, as defined at 44 CFR 206.201(m), is the
government to which a grant is awarded, and which is accountable for
the use of the funds provided. Generally, the State for which the
emergency or major disaster is declared is the recipient. The recipient
can also be an Indian Tribal government. The applicant, as defined at
44 CFR 206.201(a), is a State agency, local government, or eligible
private nonprofit organization submitting an application to the
recipient for assistance under the State's grant.
    The PA Program provides Federal funds for debris removal, emergency
protective measures, repair and replacement of roads and bridges,
utilities, water treatment facilities, public buildings, and other
infrastructure. When the President declares an emergency or major
disaster declaration authorizing disbursement of funds through the PA
Program, that presidential declaration automatically authorizes FEMA to
accept applications from eligible applicants under the PA Program. To
apply for a grant under the PA Program, the eligible applicant must
submit a Request for PA to FEMA through the recipient. Upon award, the
recipient notifies the applicant of the award, and the applicant
becomes a subrecipient.
    The DRRA requires FEMA to promulgate a regulation providing
applicants with a right of arbitration under FEMA's PA Program.
Applicants currently have a right to arbitration to dispute FEMA
eligibility determinations associated with Hurricanes Katrina and Rita;
see 44 CFR 206.209. The proposed rule would expand the scope by
allowing applicants to request arbitration for disputes under all
disaster declarations after January 1, 2016 that are above certain
dollar amount thresholds. The proposed rule would grant applicants an
additional method of recourse.
2. A Succinct Statement of the Objectives of, and Legal Basis for, the
Proposed Rule
    The proposed rule would implement section 1219 of the DRRA by
providing applicants with a right to arbitration for the PA Program
under major disaster declarations. Pursuant to section 1219, to request
arbitration a PA applicant (1) must have a dispute arising from a
disaster declared after January 1, 2016, (2) must be disputing an
amount that exceeds $500,000 (or $100,000 for an applicant in a ``rural
area'' with a population of less than 200,000 outside an urbanized
area), and (3) must have submitted a first appeal pursuant to the time
requirements established in 44 CFR 206.206.
    Accordingly, FEMA is initiating a rulemaking to amend appeals
regulation at 44 CFR 206.206 to add in the new right to arbitration
under DRRA. The proposed rule would revise appeals procedures and
establish arbitration procedures.
3. A Description of and, Where Feasible, an Estimate of the Number of
Small Entities to Which the Proposed Rule Will Apply
    ``Small entity'' is defined in 5 U.S.C. 601. The term ``small
entity'' can have the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.''

Section 601(3) defines a ``small business'' as having the same meaning
as ``small business concern'' under Section 3 of the Small Business Act
(SBA). This includes any small business concern that is independently
owned and operated and is not dominant in its field of operation.
Section 601(4) defines a ``small organization'' as any not-for-profit
enterprise which is independently owned and operated and is not
dominant in their field of operation. Section 601(5) defines ``small
governmental jurisdiction'' as governments of cities, counties, towns,
townships, villages, school districts, or special districts, with a