B-167790, JAN 15, 1973

B-167790, JAN 15, 1973

REIMBURSEMENT - RELIEF AGREEMENT AS CONTRACT - DISPARITY BETWEEN PERFORMANCE AND ELIGIBLE PERFORMANCE - SUBSEQUENT CONGRESSIONAL ACTION CONCERNING THE CLAIMS OF WILLACY AND CAMERON COUNTIES, TEX., AS BENEFICIARIES UNDER A CONTRACT BETWEEN TEXAS AND THE FEDERAL GOVERNMENT RELATING TO PROVIDING FEDERAL FUNDS FOR DISASTER RELIEF EFFORTS INCIDENT TO HURRICANE BEULAH IN SEPTEMBER AND OCTOBER 1967. A DISASTER ASSISTANCE AGREEMENT ENTERED INTO BETWEEN THE OFFICE OF EMERGENCY PREPAREDNESS (OEP) AND THE STATE OF TEXAS FOR RELIEF FUNDS TO BE DISTRIBUTED TO THE STATE'S AFFECTED COUNTIES CREATES A CONTRACT WHICH IMPOSES RIGHTS AND RESPONSIBILITIES BETWEEN THE GRANTOR (THE UNITED STATES) AND THE GRANTEE (TEXAS). SEE 41 COMP. GEN. 134 (1961). THUS, A CLAIM BROUGHT BY THE STATE FOR REIMBURSEMENT FOR ACTUAL EXPENSES INCURRED IN DEBRIS REMOVAL IS PAYABLE AGAINST THE GOVERNMENT ONLY IF THE ACTUAL EXPENSES FOR WORK PERFORMED CONFORM WITH OEP'S ADMINISTRATIVE DETERMINATIONS OF ELIGIBLE WORK PRESCRIBED IN OEP CIRCULAR 400.5A. ACCORDINGLY, IN VIEW OF OEP'S EXHAUSTIVE CONSIDERATION OF TEXAS'S CLAIMS, THE FINDINGS OF AN INDEPENDENT EVALUATION CONDUCTED BY BOVAY ENGINEERS, INC., AND OEP'S PRIOR ALLOCATION OF A CONSIDERABLE SUM TO TEXAS, THE COMP. GEN., IN THE ABSENCE OF ARBITRARINESS OR CAPRICE, FINDS NO LEGAL BASIS TO ALLOW THESE CLAIMS. ALSO, SINCE NO ELEMENTS OF LEGAL LIABILITY OR EQUITY REMAIN TO BE RESOLVED, THE COMP. GEN. BELIEVES IT INAPPROPRIATE TO SUBMIT THIS MATTER TO CONGRESS UNDER THE MERITORIOUS CLAIMS ACT, 31 U.S.C. 236.

TO GOVERNOR PRESTON SMITH:

REFERENCE IS MADE TO YOUR LETTER OF MAY 4, 1971, REQUESTING THAT THIS OFFICE REVIEW THE CLAIMS OF THE COUNTIES OF WILLACY AND CAMERON AS BENEFICIARIES UNDER A CONTRACT BETWEEN YOUR STATE AND THE FEDERAL GOVERNMENT RELATING TO PROVIDING FEDERAL FUNDS FOR DISASTER RELIEF EFFORTS CARRIED OUT IN THE AFTERMATH OF HURRICANE BEULAH IN SEPTEMBER AND OCTOBER 1967.

ON MAY 21, 1971, WE WROTE THE OFFICE OF EMERGENCY PREPAREDNESS (OEP) FOR A REPORT AND AN EXPRESSION OF VIEWS ON THE MERIT OF THE CLAIMS, WHICH REPORT WAS RECEIVED BY US ON AUGUST 10, 1971. ON AUGUST 12, 1971, WE WERE ADVISED THAT THE STATE WOULD LIKE TO SUBMIT ADDITIONAL INFORMATION TO US IN REBUTTAL OF THE OEP REPORT. WE RECEIVED THE STATE'S REPORT ON OCTOBER 5, 1971, AT A CONFERENCE WITH MR. J. EDWARD WELCH AND MR. J. GORDON ARBUCKLE, ATTORNEYS FOR THE CLAIMANTS, AND MR. LEE GEORGE OF GEORGE CONSOLIDATED, INC., THE PRINCIPAL CONTRACTOR INVOLVED. EARLY IN JANUARY 1972, WE MET AGAIN WITH THE CONTRACTOR AND HIS ATTORNEYS. THEN, ON JANUARY 20, 1972, WE MET WITH OFFICIALS OF OEP. ON MARCH 8, 1972, THE CLAIMANTS SUBMITTED A FURTHER REPORT CONCERNING THE DETAILS OF THEIR CLAIM. THIS REPORT WAS SENT TO OEP FOR COMMENT AND THAT AGENCY'S REPORT WAS SUBMITTED TO US ON JUNE 30, 1972. A COPY OF THAT REPORT WAS GIVEN TO THE CLAIMANTS, AT THEIR REQUEST, WHO RESPONDED IN A LETTER DATED AUGUST 17, 1972. EARLY IN OCTOBER WE SUBMITTED A COPY OF THE CLAIMANTS' AUGUST LETTER TO OEP FOR FURTHER REVIEW AND THE AGENCY RESPONDED IN A LETTER DATED NOVEMBER 22, 1972, WHICH WAS PRESENTED TO US AT A MEETING WITH THAT AGENCY'S OFFICIALS. ON NOVEMBER 24, 1972, WE SUPPLIED A COPY OF OEP'S MOST RECENT REPORT TO THE ATTORNEYS FOR THE CLAIMANTS, WHO, AT A MEETING ON DECEMBER 13, 1972, FILED A FINAL STATEMENT OF THEIR CASE.

THE CLAIMS FILED BY THE STATE OF TEXAS HAVE BEEN CONSIDERED BY THIS OFFICE UNDER THE PROVISIONS OF 31 U.S.C. 71, WHICH PROVIDE:

"ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT, AND ALL ACCOUNTS WHATEVER IN WHICH THE GOVERNMENT OF THE UNITED STATES IS CONCERNED, EITHER AS DEBTOR OR CREDITOR, SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE."

A QUESTION HAS BEEN RAISED BY OEP AS TO WHETHER THE PROVISIONS OF THIS SECTION ARE APPLICABLE SINCE THE MATTER IN QUESTION RELATES TO A GRANT-IN- AID RATHER THAN A CONTRACT. AS WE STATED IN 42 COMP. GEN. 289, 294 (1962):

"IT IS OUR VIEW THAT THESE GRANTS-IN-AID ARE NOT STATUTORY UNCONDITIONAL GRANTS OR GIFTS AND MAY NOT BE SO MADE BY ADMINISTRATIVE ACTION. THE OFFEREE IS FREE TO ACCEPT OR REJECT THE GRANT. THE ACCEPTANCE OF THE GRANT CREATES A CONTRACT BETWEEN THE UNITED STATES AND THE GRANTEE UNDER WHICH THE MONIES PAID OVER TO THE GRANTEE, WHILE ASSETS IN THE HANDS OF THE GRANTEE, ARE CHARGED WITH THE OBLIGATION TO BE USED FOR THE PURPOSES AND SUBJECT TO THE CONDITIONS OF THE GRANT. ***"

SEE ALSO 41 COMP. GEN. 134 (1961) AND CONWAY, "THE FEDERAL GRANT: AN ADMINISTRATIVE VIEW," 30 FED. B.J. 119 (1970). IT IS CLEAR THAT ONCE A GRANT IS ACCEPTED AND A FEDERAL DISASTER ASSISTANCE AGREEMENT EXECUTED, A TYPE OF CONTRACT IS FORMED WHICH IMPOSES RIGHTS AND RESPONSIBILITIES ON BOTH THE GRANTOR (I.E., THE UNITED STATES) AND THE GRANTEE. ACCORDINGLY, INSOFAR AS THE JURISDICTION OF THIS OFFICE UNDER 31 U.S.C. 71 IS CONCERNED, WHERE THE FAILURE OF THE UNITED STATES TO FULFILL ITS CONTRACTUAL OBLIGATIONS IS ALLEGED, WE SEE NO DIFFERENCE BETWEEN A CLAIM UNDER A CONTRACT AND A CLAIM UNDER A GRANT-IN-AID AGREEMENT.

THE CONTROVERSY IN THE PRESENT CASE ARISES WITH REGARD TO THE AMOUNTS TO WHICH THE COUNTIES OF WILLACY AND CAMERON ARE ENTITLED TO BE REIMBURSED FOR EXPENSES INCURRED BY THEIR CONTRACTOR FOR DISASTER RELIEF WORK IN THE AFTERMATH OF HURRICANE BEULAH UNDER SECTION 3 OF PUBLIC LAW 81-875, 64 STAT. 1109, 1110, AS AMENDED, 42 U.S.C. 1855B WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"IN ANY MAJOR DISASTER, FEDERAL AGENCIES ARE HEREBY AUTHORIZED WHEN DIRECTED BY THE PRESIDENT TO PROVIDE ASSISTANCE *** (D) BY PERFORMING ON PUBLIC OR PRIVATE LANDS PROTECTIVE AND OTHER WORK ESSENTIAL FOR THE PRESERVATION OF LIFE AND PROPERTY, CLEARING DEBRIS AND WRECKAGE, MAKING EMERGENCY REPAIRS TO AND TEMPORARY REPLACEMENTS OF PUBLIC FACILITIES OF STATES AND LOCAL GOVERNMENTS DAMAGED OR DESTROYED IN SUCH MAJOR DISASTER, PROVIDING TEMPORARY HOUSING OR OTHER EMERGENCY SHELTER FOR FAMILIES WHO, AS A RESULT OF SUCH MAJOR DISASTER, REQUIRE TEMPORARY HOUSING OR OTHER EMERGENCY SHELTER, AND MAKING CONTRIBUTIONS TO STATES AND LOCAL GOVERNMENTS FOR PURPOSES STATED IN THIS SUBDIVISION ***."

FACTUAL BACKGROUND

HURRICANE BEULAH STRUCK 29 TEXAS COUNTIES, INCLUDING CAMERON AND WILLACY, ON SEPTEMBER 20, 1967. IMMEDIATELY AFTER THE DISASTER OEP FIELD OFFICES WERE ESTABLISHED IN THE DISASTER AREA. ON SEPTEMBER 23, 1967, BEFORE THE PRESIDENT'S DISASTER DECLARATION, THE THEN GOVERNOR OF TEXAS, JOHN CONNALLY, ARRANGED MEETINGS WHICH WERE ATTENDED BY OFFICIALS FROM CAMERON AND WILLACY COUNTIES AND BY REPRESENTATIVES OF THE OFFICE OF EMERGENCY PREPAREDNESS, INCLUDING ITS REGIONAL DIRECTOR. AT THE MEETING, REGIONAL OEP AND CORPS OF ENGINEERS PERSONNEL ADVISED LOCAL OFFICIALS OF THE PROBABILITY THAT THEIR COUNTIES WOULD BE DECLARED A MAJOR NATURAL DISASTER AREA THEREBY MAKING FEDERAL FUNDS AVAILABLE TO DEFRAY THE COSTS NECESSARY FOR THE DISASTER RELIEF EFFORTS. LOCAL OFFICIALS WERE ALSO TOLD THAT THEY COULD COMMENCE THE PERFORMANCE OF NECESSARY EMERGENCY WORK PENDING THE DISASTER DECLARATION AND THAT SUCH WORK COULD BE PERFORMED BY CONTRACTING WITH QUALIFIED PRIVATE CONTRACTORS. AS EXPECTED, SUCH DECLARATION WAS MADE ON SEPTEMBER 28, 1967, BY PRESIDENT JOHNSON, PURSUANT TO PUBLIC LAW 81 875.

CAMERON COUNTY AND WILLACY COUNTY ENTERED INTO CONTRACTS ON SEPTEMBER 27, 1967, AND OCTOBER 9, 1967, RESPECTIVELY, WITH GEORGE CONSOLIDATED, INC., A HOUSTON, TEXAS, FIRM, FOR THE PURPOSE OF PERFORMING CERTAIN DEBRIS CLEARANCE AND OTHER WORK IN THE COUNTIES RESULTING FROM THE HURRICANE. SINCE THE COUNTIES FELT THAT LOCAL RESOURCES WERE INSUFFICIENT TO SUPPORT A PROGRAM OF THE REQUIRED MAGNITUDE, PAYMENT UNDER THE CONTRACTS WAS MADE CONTINGENT ON THE AVAILABILITY OF FEDERAL FUNDS. OEP HAS INFORMALLY ADVISED US THAT IT NEITHER REQUIRES NOR ENCOURAGES THE USE OF SUCH CONTINGENCY CLAUSES. IN ITS REPORT TO US, THE AGENCY STATES THAT "IT IS CLEAR THAT THIS STIPULATION (THE CONTINGENCY CLAUSE) PUTS THE CONTRACTOR ON NOTICE THAT HE HAD NO ASSURANCE OF PAYMENT IF THE WORK HE PERFORMED DID NOT COMPLY WITH FEDERAL REQUIREMENTS FOR REIMBURSEMENT." ON OCTOBER 5, 1967, A DISASTER ASSISTANCE AGREEMENT WAS EXECUTED BETWEEN THE FEDERAL GOVERNMENT AND THE STATE OF TEXAS WHICH TOGETHER WITH SUPPLEMENTS THERETO ALLOCATED $10 MILLION IN FEDERAL FUNDS TO THESE DISASTER RELIEF EFFORTS IN CERTAIN COUNTIES WITHIN THE STATE.

CAMERON COUNTY SUBMITTED ITS PROJECT APPLICATION ON NOVEMBER 13, 1967, REQUESTING FEDERAL ASSISTANCE IN THE AMOUNT OF $1,462,040.62. WHEN PROJECT APPLICATIONS ARE SUBMITTED FOR APPROVAL, THEY ARE FIRST REVIEWED BY THE STATE, WHICH THEN FORWARDS THEM TO THE OEP REGIONAL OFFICE. NOVEMBER 30, 1967, THE STATE APPROVED CAMERON COUNTY'S PROJECT APPLICATION IN THE AMOUNT OF $621,788, AND THIS APPROVAL WAS CONCURRED IN BY OEP. DECEMBER 6, 1967, THE STATE AND OEP APPROVED THE WILLACY COUNTY PROJECT APPLICATION IN THE AMOUNT OF $258,248. THE AMOUNTS APPROVED BY THE STATE AND AWARDED BY OEP WERE IN BOTH CASES THE AMOUNTS SET FORTH IN THE DAMAGE SURVEYS PREPARED BY FEDERAL PERSONNEL AT THE TIME.

OEP ALSO STATES THAT "IT SHOULD BE NOTED THAT THE STATE OF TEXAS WAS IN FULL AGREEMENT WITH ELIGIBILITY DETERMINATIONS MADE BY OEP AT THAT TIME" AND THAT IT WAS NOT UNTIL APPROXIMATELY 16 MONTHS FOLLOWING APPROVAL OF THE INITIAL PROJECT APPLICATIONS WITH SOME SUPPLEMENTS THAT YOU REVERSED GOVERNOR CONNALLY'S APPROVALS AND FILED APPEALS WITH THE OEP REGIONAL DIRECTOR. OEP STATES THAT THE PROJECT APPLICATIONS OF THESE TWO COUNTIES WERE THE ONLY APPLICATIONS OF THE 158 FILED - INCIDENT TO HURRICANE BEULAH - FROM WHICH APPEALS WERE TAKEN, AND THE RECORD INDICATES THAT BOTH APPEALS RELATE TO WORK DONE BY THE SAME CONTRACTOR. IN THE STATE'S REBUTTAL IT IS STATED THAT "IT SHOULD BE NOTED THAT GOVERNOR CONNALLY, AS IS CUSTOMARY, RELIED HEAVILY ON THE ADVICE OF OEP AND CERTAIN STATE EMPLOYEES CLOSELY ASSOCIATED WITH OEP IN DETERMINING THE AMOUNT OF THE ORIGINAL STATE APPROVAL." NONETHELESS, OEP POINTS OUT THAT THE LENGTHY INTERVAL BEFORE AN APPEAL WAS TAKEN - RATHER THAN THE CONTEMPORANEOUS APPEALS OEP GENERALLY RECEIVES IN SUCH SITUATIONS - MADE IT EVEN MORE DIFFICULT FOR OEP TO REVIEW THE CLAIM.

IN ORDER TO JUSTIFY INCREASES OVER THE INITIAL APPROVAL, AN EXTENSIVE REVIEW WAS UNDERTAKEN BY THE STATE TO DEMONSTRATE THAT OEP'S RECOMMENDATIONS, ON WHICH THE ORIGINAL STATE APPROVAL WAS BASED, WERE ERRONEOUS. THE ATTORNEYS REPRESENTING THE CLAIMANTS STATE THAT THIS REVIEW WAS INSTITUTED IN GOVERNOR CONNALLY'S TERM OF OFFICE BUT NOT COMPLETED UNTIL AFTER YOUR INAUGURATION. BASED ON WHAT THE REBUTTAL TERMS "GLARING INADEQUACIES IN THE DAMAGE SURVEY REPORTS," ADDITIONAL AMOUNTS OF $840,252 FOR CAMERON COUNTY AND $200,532 FOR WILLACY COUNTY WERE REQUESTED BY THE STATE. ON JUNE 23, 1969, THE OEP REGIONAL DIRECTOR APPROVED AN ADDITIONAL $32,573 FOR CAMERON AND $14,197 FOR WILLACY. THE REBUTTAL FURTHER STATES THAT SUBSEQUENTLY "OEP, AT LEAST IMPLICITLY, HAS ACKNOWLEDGED THE DEFICIENCIES IN THE ORIGINAL DAMAGE SURVEY REPORTS." WOULD APPEAR TO BE OEP'S POSITION THAT IF THERE WERE ANY DEFICIENCIES IN THE REPORTS, THEY HAVE BEEN CORRECTED THROUGH LATER REVIEWS. ON JULY 21, 1969, YOU INDICATED YOUR DISSATISFACTION WITH THE APPROVALS BY THE OEP REGIONAL DIRECTOR AND APPEALED TO THE OEP DIRECTOR FOR FULL APPROVAL OF THE COUNTIES' CLAIMS.

AS A RESULT OF YOUR APPEAL, IN JANUARY 1970, BOVAY ENGINEERS, INC., A FIRM OF CONSULTING ENGINEERS, WAS EMPLOYED BY OEP TO ASSIST AND ADVISE ITS STAFF IN THE REVIEW AND EVALUATION OF THESE CLAIMS. BOVAY SUBMITTED A REPORT TO OEP IN MARCH 1970. WHEN THE ESTIMATES WERE DISCUSSED WITH STATE AND COUNTY REPRESENTATIVES, THEY INDICATED THAT THERE WAS STILL CONSIDERABLE INFORMATION, WHICH THEY HAD ALREADY SUBMITTED TO OEP AND WHICH THE STATE CONTENDS THE AGENCY HAD FAILED TO FURNISH TO BOVAY FOR REVIEW AND CONSIDERATION. IN REGARD TO THE LARGE "VOLUMES" OF ADDITIONAL INFORMATION SUBMITTED BY THE STATE TO BOVAY, OEP REPORTS THAT:

"*** AN EXAMPLE OF THE 'NEW' INFORMATION WAS A MAP MARKED UP TO SHOW ALL ROADS IN CAMERON COUNTY WHICH ALLEGEDLY WERE CLEARED OF DEBRIS AND INCLUDED AN ADDITIONAL 600 MILES OF ROADS AND OVER 1,000 ACRES OF PUBLIC PROPERTY WHICH WERE SUPPOSEDLY CLEARED OF DEBRIS BUT WHICH HAD NOT BEEN INCLUDED ON A SIMILAR MAP PREVIOUSLY FURNISHED TO BOVAY BY THE COUNTY. OEP REVIEW REVEALED THAT SOME OF THESE ROADS HAD BEEN CLEARED BY THE TEXAS STATE HIGHWAY DEPARTMENT AND STILL OTHERS COULD NOT BE LOCATED."

YOUR LETTER STATES THAT BOVAY ISSUED A REPORT IN WHICH IT DETERMINED THE TOTAL "COST" FOR THE WORK PERFORMED TO BE $1,074,265. OEP REVIEWED AND ADJUSTED THE BOVAY RECOMMENDATIONS TO REFLECT THE WORK THAT IT FELT HAD ACTUALLY BEEN PERFORMED BY THE COUNTIES. OEP POINTS OUT THAT BASED ON THE BOVAY REPORT, AS WELL AS A REVISED CORPS OF ENGINEERS' EVALUATION, AND A REVIEW OF ALL OTHER AVAILABLE INFORMATION, AND AFTER FURTHER CONSULTATION WITH STATE AND LOCAL REPRESENTATIVES, THE OEP DIRECTOR APPROVED ADDITIONAL AMOUNTS OF $321,353 AND $127,525 FOR CAMERON AND WILLACY COUNTIES, RESPECTIVELY. THE STATE AGREES THAT OEP'S FINAL ALLOWANCE IN THIS MATTER EXCEEDS ITS ORIGINAL APPROVALS BY APPROXIMATELY $500,000 BUT IT STATES THAT SUCH FINAL ALLOWANCES ARE STILL CONSIDERABLY BELOW THE TOTAL EXPENSES ACTUALLY INCURRED IN THE CLEANUP.

ACCORDING TO YOUR LETTER OF MAY 4, 1971, THE AMOUNT IN CONTROVERSY IS $421,560, WHILE THE STATE'S REBUTTAL STATEMENT INDICATES THAT THE FINAL OEP ALLOWANCES FALL $656,350 SHORT OF THE TOTAL STATE CLAIM FOR WILLACY AND CAMERON COUNTIES. ACCORDING TO THE REBUTTAL, $221,449 OF THE AMOUNT STILL DUE AND OWING IS FOR WORK PERFORMED BY COUNTY FORCES. OEP, HOWEVER, INFORMALLY ADVISES THAT IT BELIEVES ITS FINAL APPROVALS COVER THE COUNTIES' TOTAL EXPENSES, AND THAT ONLY CLAIMS ON BEHALF OF GEORGE CONSOLIDATED, INC., ARE NOT FULLY COVERED. HENCE, OEP FEELS ANY ADDITIONAL AMOUNTS APPROVED BY THIS OFFICE WILL EVENTUALLY BE PAID TO THE CONTRACTOR AND THAT DUE TO THE CONTINGENCY CONTRACTS INVOLVED HERE, THE COUNTIES APPARENTLY WOULD NOT BE LIABLE TO THE CONTRACTOR FOR FUNDS IN EXCESS OF AMOUNTS RECEIVED BY THEM FROM THE UNITED STATES.

THE STATE'S POSITION

THE STATE'S VIEW IS THAT UNDER THE DISASTER ASSISTANCE AGREEMENT OEP HAS A CONTRACTUAL OBLIGATION TO REIMBURSE THE STATE FOR EXPENSES ACTUALLY INCURRED, ALTHOUGH THE AGREEMENT DOES NOT SPECIFICALLY SO PROVIDE. THIS REGARD, THE STATE CONTENDS THAT SINCE:

"*** THE LOCAL OEP REPRESENTATIVES EXPRESSLY AND REPEATEDLY WAIVED ANY REQUIREMENT FOR THE FILING OF PROJECT APPLICATIONS PRIOR TO THE COMMENCEMENT OF DISASTER RELIEF EFFORTS, SINCE THE COUNTIES WERE REPEATEDLY ENCOURAGED TO PROCEED WITH WORK PRIOR TO COMPLETION OF DAMAGE SURVEY REPORTS AND SUBMISSION OF PROJECT APPLICATIONS AND SINCE THE COUNTIES INCURRED SUBSTANTIAL EXPENSES IN RELIANCE ON OEP'S COMMITMENT OF FUNDS UNDER THE FEDERAL-STATE DISASTER ASSISTANCE AGREEMENT, IT SEEMS CLEAR THAT THE FEDERAL GOVERNMENT HAS A CONTRACTUAL OBLIGATION TO PERMIT THE STATE OF TEXAS TO UTILIZE THE FUNDS ALLOCATED UNDER THE FEDERAL-STATE DISASTER AGREEMENT TO REIMBURSE THE COUNTIES FOR EXPENSES ACTUALLY INCURRED IN THE PERFORMANCE OF ELIGIBLE DISASTER REHABILITATION EFFORTS UNDER THE DISASTER ACT, AS AMENDED. ***" THE STATE QUESTIONS THE USE BY OEP OF ITS (OEP'S) DAMAGE SURVEY REPORTS, STATING THAT WHILE THE CONTRACTOR BEGAN WORK SHORTLY AFTER THE DISASTER OCCURRED, THE FIRST GOVERNMENTAL INSPECTION TEAMS DID NOT ARRIVE UNTIL LATE OCTOBER 1967 - AFTER COMPLETION OF SUBSTANTIALLY ALL DEBRIS REMOVAL AND ROAD WORK BY THE CONTRACTOR - TO MAKE THE "DAMAGE SURVEY REPORTS" WHICH ARE TECHNICALLY REQUIRED BY OEP REGULATIONS AS THE BASIS FOR APPLICATIONS FOR FEDERAL ASSISTANCE. THE STATE DOUBTS:

"*** THE PROPRIETY OF UTILIZING AFTER THE FACT DAMAGE SURVEY ESTIMATES TO LIMIT THE AMOUNT OF REIMBURSEMENT FOR WORK PERFORMED AT THE EXPRESS INSTRUCTION OF REGIONAL OEP OFFICIALS *** (AND STATES THAT) EVEN ASSUMING THE PROPRIETY OF USING DAMAGE SURVEY ESTIMATES TO PERFORM WHAT IS ESSENTIALLY AN AUDITION FUNCTION, THE DAMAGE SURVEY ESTIMATES IN THIS INSTANCE WERE INCOMPLETE IN MANY RESPECTS, WERE OFTEN INCONSISTENT AS TO THE BASIS OF ESTIMATES."

HOWEVER, THE STATE'S BASIC CONTENTION IS THAT THE ENTIRE AMOUNT CLAIMED BY IT ON BEHALF OF THESE COUNTIES SHOULD BE PAID BY OEP, SINCE IT (OEP) HAS FAILED TO SHOW THAT ANY OF THE WORK CLAIMED BY THE COUNTIES - AND FULLY DOCUMENTED BY DETAILED RECORDS MAINTAINED BY THE COUNTIES AND THEIR CONTRACTORS - WAS INELIGIBLE OR NOT ACTUALLY PERFORMED -

"*** DESPITE REPEATED URGINGS OF THE STATE, THE COUNTIES AND THE CONTRACTOR THAT OEP PRESENT ANY EVIDENCE AS TO THE PERFORMANCE OF INELIGIBLE WORK, THE RECORD IN THIS CASE HAS REMAINED TOTALLY DEVOID OF ANY COMPETENT EVIDENCE TENDING TO SHOW THAT INELIGIBLE WORK WAS PERFORMED. *** THE OEP'S FACTUAL PRESENTATION AS TO INELIGIBILITY OF WORK HAS BEEN CONFINED TO VAGUE GENERAL ASSERTIONS THAT SOME 'INELIGIBLE DEBRIS CLEARANCE' OR 'QUESTIONABLE' ROAD WORK MAY HAVE BEEN PERFORMED. DESPITE THESE VAGUE ASSERTIONS, THE DIRECTOR HAS NOT ACTED TO DISALLOW A SINGLE LINE ITEM OF THE COUNTIES' CLAIMS ON THE BASIS OF INELIGIBILITY OF WORK. MOREOVER, ANY SUCH ACTION, IF TAKEN, WOULD BE UNSUPPORTED BY ANY COMPETENT EVIDENCE IN THE RECORD AND WOULD THUS BE INVALID AS ARBITRARY AND CAPRICIOUS, UNSUPPORTED BY EVIDENCE AND NOT IN ACCORD WITH FORMALITIES REQUIRED BY LAW."

THE STATE CONCLUDES THAT AFTER EXTENSIVE DELIBERATIONS OEP "APPARENTLY RECEDED FROM ALL ASSERTIONS THAT ANY SIGNIFICANT PORTION OF THE WORK PERFORMED WAS NOT ELIGIBLE FOR REIMBURSEMENT," AND THAT THE ISSUE IS NOT WHETHER THE WORK PERFORMED WAS ELIGIBLE, BUT WHAT IS THE TOTAL AMOUNT REIMBURSABLE TO THE COUNTIES BY REASON OF THE PERFORMANCE OF THE DISASTER RELIEF WORK.

AS TO THE STATUTES INVOLVED, THE STATE CONTENDS THAT OEP'S REGULATIONS ARE NOT IN ACCORDANCE WITH THE DISASTER RELIEF STATUTES WHICH REQUIRE OEP TO REIMBURSE APPLICANTS FOR EXPENSES ACTUALLY INCURRED.

IN SUPPORT OF THEIR POSITION, THE STATE EXPRESSES THE VIEW THAT SECTION 303 OF THE DISASTER RELIEF ACT OF 1970, PUB. L. 91-606, 84 STAT. 1744, DISPELS ANY DOUBT WITH RESPECT TO THE LEGAL RIGHT OF THE COUNTIES TO BE REIMBURSED FOR EXPENSES ACTUALLY INCURRED IN PERFORMING THE DISASTER RELIEF WORK IN QUESTION. SECTION 303 PROVIDES THAT:

"FUNDS ALLOCATED BEFORE THE DATE OF ENACTMENT OF THIS ACT UNDER A FEDERAL -STATE DISASTER AGREEMENT FOR THE RELIEF OF A MAJOR DISASTER AS DEFINED IN THE ACT OF SEPTEMBER 30, 1950 (PUBLIC LAW 875, 81ST CONGRESS), AND NOT EXPENDED ON THE DATE OF ENACTMENT OF THIS ACT MAY BE USED BY THE STATE TO MAKE PAYMENTS TO ANY PERSON FOR REIMBURSEMENT OF EXPENSES ACTUALLY INCURRED BY SUCH PERSON IN THE REMOVAL OF DEBRIS FROM COMMUNITY AREAS, BUT NOT TO EXCEED THE AMOUNT THAT SUCH DEBRIS EXPENSES EXCEED THE SALVAGE VALUE OF SUCH DEBRIS, OR IN OTHERWISE CARRYING OUT THE PURPOSES OF SUCH ACT OF SEPTEMBER 30, 1950, OR THIS ACT."

THE STATE'S POSITION IS THAT SECTION 303, WHICH WAS ADDED TO THE BILL BY THE HOUSE-SENATE CONFERENCE COMMITTEE, WAS ENACTED TO CLARIFY THE INTENT OF CONGRESS THAT IN CARRYING OUT THE DISASTER ASSISTANCE PROGRAM, OEP IS TO REIMBURSE STATES AND THEIR COUNTIES ON THE BASIS OF "EXPENSES ACTUALLY INCURRED," AND NOT ON THE BASIS OF A LATER DETERMINATION OF THE ELIGIBILITY OF THE WORK DONE.

IN FURTHER SUPPORT OF YOUR POSITION CONCERNING SECTION 303, YOU REFER TO A LETTER TO YOU DATED DECEMBER 23, 1970, FROM THE CHIEF COUNSEL OF THE HOUSE PUBLIC WORKS COMMITTEE, A LETTER DATED DECEMBER 4, 1970, FROM CONGRESSMAN JIM WRIGHT TO CONGRESSMAN ROBERT E. JONES, AND TO LETTERS DATED MAY 7, 1971, AND JUNE 2, 1971, RESPECTIVELY, TO THIS OFFICE FROM CONGRESSMAN JIM WRIGHT, WHO INTRODUCED SECTION 303 IN THE CONFERENCE COMMITTEE, AND SENATOR BIRCH BAYH, WHO ALSO SERVED ON THE CONFERENCE COMMITTEE. THESE LETTERS INDICATE THAT THE AUTHORS THEREOF FEEL THAT THE PROVISIONS OF SECTION 303 WERE INTENDED TO MAKE IT CLEAR THAT ACTUAL EXPENSES INCURRED IN RELIANCE ON THE FEDERAL-STATE DISASTER ASSISTANCE AGREEMENT, AND NOT SUBSEQUENT ESTIMATES, WOULD BE DETERMINATIVE OF THE AMOUNT OF REIMBURSEMENT TO WHICH THE CLAIMANT IS ENTITLED. CONGRESSMAN WRIGHT STATES THAT "THE SPECIFIC CONTROVERSY WITH WHICH I WAS MOST CONCERNED, IN ATTEMPTING TO MAKE THIS CLARIFICATION, WAS THAT INVOLVING CAMERON AND WILLACY COUNTIES IN THE STATE OF TEXAS."

IN REBUTTAL OEP REFERS TO THE ONLY PERTINENT STATEMENT IN THE CONFERENCE REPORT (HOUSE REPORT NO. 91-1752, DATED DECEMBER 15, 1970) WITH RESPECT TO SECTION 303, WHICH READS, IN PERTINENT PART, AS FOLLOWS:

"THE INCLUSION OF THIS PROVISION IS FOR EMPHASIS ONLY. IT IS NOT IN ANY WAY TO BE CONSTRUED AS INDICATING THAT FUNDS HERETOFORE AUTHORIZED FOR EXPENDITURE OR THAT AGREEMENTS, CONTRACTS, CLAIMS, OR OTHER OBLIGATIONS OF ANY KIND PRESENTLY IN BEING ARE IN ANY WAY TO BE AFFECTED BY THE ENACTMENT OF THIS ACT."

OEP STATES THAT ITS AGREEMENT WITH THE STATE PROVIDES THAT THE ONLY FUNDS ALLOCATED WITH RESPECT TO THESE COUNTIES WERE FOR ELIGIBLE COSTS INCURRED AND, AS STATED ON PAGE 2 OF OEP CIRCULAR 4000.5A, REFERRED TO IN THE PROJECT APPLICATION, "FEDERAL FINANCIAL ASSISTANCE WILL BE LIMITED TO THAT PORTION OF THE COST DETERMINED BY OEP AS MEETING OEP CRITERIA." ACCORDINGLY, AND AS INDICATED BY THE CONFERENCE REPORT, OEP FEELS THE GOVERNMENT'S RIGHTS AND LIABILITIES UNDER THE AGREEMENT WITH THE STATE OF TEXAS ARE NOT AFFECTED BY THE ADOPTION OF SECTION 303.

IN FURTHER SUPPORT OF ITS POSITION, OEP STATES THAT IT DOES NOT BELIEVE THAT CONGRESS INTENDED TO AUTHORIZE THESE CLAIMS BY THE ENACTMENT OF SECTION 303, ESPECIALLY SINCE THE MATTER WAS BROUGHT BEFORE AND APPARENTLY REJECTED BY THE SENATE, THROUGH THE INTRODUCTION BY SENATOR RALPH YARBOROUGH OF AN AMENDMENT TO THE BILL WHICH WAS LATER ENACTED INTO THE DISASTER RELIEF ACT OF 1970. OEP STATES THAT "THE DISCUSSION IN THE CONGRESSIONAL RECORD OF SEPTEMBER 9, 1970, REVEALS THAT THERE WAS STRONG OPPOSITION TO ANY FURTHER PAYMENTS WITH REGARD TO THIS CLAIM." OEP SINGLES OUT IN PARTICULAR STATEMENTS MADE BY SENATOR DOLE IN OPPOSITION TO SENATOR YARBOROUGH'S AMENDMENT, WHICH AMENDMENT, HE STATED, "WOULD ELIMINATE ALL CONTROL BY THE FEDERAL GOVERNMENT IN THE ADMINISTRATION OF THE DISASTER ACT SINCE IT WOULD NULLIFY ALL CRITERIA, RULES AND REGULATIONS AND AUTHORIZE PAYMENT OF ALL OBLIGATIONS INCURRED AT THE PLEASURE OF THE STATES AND LOCAL GOVERNMENTS." SENATOR DOLE ALSO POINTED OUT THAT THIS WOULD ALLOW OTHER APPLICANTS, WHO HAVE HAD THEIR CERTIFIED COSTS REDUCED BY OEP AUDIT, TO REASSERT THEIR CLAIMS FOR FULL PAYMENT. THE FACE OF OPPOSITION TO HIS AMENDMENT, SENATOR YARBOROUGH FIRST MODIFIED HIS BROADLY STATED AMENDMENT SO THAT IT WOULD APPLY, IN EFFECT, ONLY TO THE SUBJECT CLAIMS, THEN WITHDREW THE AMENDMENT COMPLETELY. SUBSEQUENTLY REOFFERED THE AMENDMENT, WHICH WAS THEN APPARENTLY REJECTED BY A VOICE VOTE. SEE 116 CONG. REC. 31052 - 31063.

WE HAVE CAREFULLY REVIEWED THE LANGUAGE AND LEGISLATIVE HISTORY OF SECTION 303. ON THE ONE HAND, AND IN SUPPORT OF THE STATE'S POSITION, WE NOTE THAT THE LANGUAGE AS ENACTED IS NOT TOTALLY DISSIMILAR TO THE AMENDMENT OFFERED BY SENATOR YARBOROUGH WITH REGARD TO THESE CLAIMS. MOREOVER, THE LANGUAGE OF THE SECTION TENDS TO INDICATE THAT CONGRESS WISHED TO HAVE OEP MAKE PAYMENTS ON THE BASIS OF THE EXPENSES ACTUALLY INCURRED. ALSO, AS NOTED ABOVE, CONGRESSMAN WRIGHT AND SENATOR BAYH HAVE WRITTEN TO INDICATE THAT IT WAS THEIR UNDERSTANDING THAT SECTION 303 WAS INTENDED TO MAKE CLEAR THAT REIMBURSEMENT UNDER THE DISASTER RELIEF ACT OF 1970, AT LEAST WITH REGARD TO THESE AND SIMILARLY SITUATED CLAIMS, WAS TO BE MADE ON THE BASIS OF ACTUAL EXPENSES INCURRED AND NOT ON THE BASIS OF SUBSEQUENT ESTIMATES. HOWEVER, WITH REGARD TO THESE LETTERS, THE STATEMENTS OF INDIVIDUAL LEGISLATORS, MADE IN LETTERS WRITTEN BEFORE OR AFTER PASSAGE OF A STATUTE ARE GENERALLY NOT CONSIDERED SUFFICIENTLY REPRESENTATIVE TO INDICATE THE COLLECTIVE INTENT OF THE ENACTING BODY AND, AS A GENERAL RULE, WOULD NOT NECESSARILY BE CONTROLLING IN CONSTRUING A STATUTE. CF. STATE WHOLESALE GROCERS V. GREAT ATLANTIC & PACIFIC TEA CO., 154 F. SUPP. 471 (1957).

ON THE OTHER HAND, AND IN SUPPORT OF OEP'S POSITION, WE NOTE THAT THE STATEMENT OF THE MANAGERS ON THE PART OF THE HOUSE INCLUDED IN THE CONFERENCE REPORT, WHICH IS WIDELY RECOGNIZED AS EVIDENCE OF LEGISLATIVE INTENT UNLESS CONTROVERTED DURING CONGRESSIONAL CONSIDERATION OF SUCH REPORT, STATES CLEARLY THAT SECTION 303 IS INTENDED FOR EMPHASIS ONLY AND THAT CONTRACTS AND AGREEMENTS ALREADY ENTERED INTO ARE NOT IN ANY WAY TO BE AFFECTED, NOR ARE EXISTING CLAIMS. AS PREVIOUSLY NOTED, OEP STATES THAT ITS AGREEMENT WITH THE STATE OF TEXAS PROVIDES FOR REIMBURSING THOSE COSTS DETERMINED ELIGIBLE IN ACCORDANCE WITH OEP REGULATIONS AND GUIDELINES AND NOT THROUGH THE PAYMENT OF EXPENSES ACTUALLY INCURRED. THERE IS NOTHING IN THE 1970 ACT OR ITS LEGISLATIVE HISTORY TO INDICATE THAT THE CONGRESS INTENDED TO REQUIRE OEP TO CHANGE ITS EXISTING REGULATIONS, PROCEDURES, AND ELIGIBILITY CRITERIA. MOREOVER, IN THE LIGHT OF THE LONGSTANDING OEP REGULATIONS, GIVING THE STATUTE THE INTERPRETATION URGED BY THE STATE WOULD APPEAR TO REQUIRE OEP TO ADOPT A STANDARD FOR REIMBURSEMENT WITH REGARD TO THOSE CASES COVERED BY SECTION 303 - WHERE THERE WERE FUNDS ALLOCATED, BUT NOT EXPENDED, BY DECEMBER 31, 1970, UNDER A FEDERAL STATE DISASTER ASSISTANCE AGREEMENT - DIFFERENT THAN THE STANDARD NORMALLY APPLIED BY OEP. AGAIN, THERE IS NOTHING IN THE LEGISLATIVE HISTORY TO INDICATE THAT THIS WAS THE INTENT OF SECTION 303.

IN VIEW OF THE EXPLANATION OF SECTION 303 IN THE CONFERENCE REPORT, WHICH CONSTITUTES THE MOST PERTINENT IF NOT THE ONLY PREENACTMENT LEGISLATIVE HISTORY EXISTING ON THE SUBJECT SECTION, AND IN VIEW OF THE FAR-REACHING EFFECT WHICH CONSTRUING THIS SECTION IN THE MANNER URGED BY THE STATE WOULD HAVE (I.E., NULLIFICATION OF EXISTING OEP REGULATIONS, PROCEDURES AND CRITERIA), IT WOULD NOT BE UNREASONABLE TO CONCLUDE, AS DID OEP, THAT THE SECTION WAS MEANT FOR EMPHASIS ONLY AND WAS NOT INTENDED TO REQUIRE REIMBURSEMENT OF COSTS ON A BASIS OTHER THAN THAT PREVIOUSLY, AND CONSISTENTLY, USED BY THE AGENCY.

IN ANY EVENT, IT IS CLEAR THAT UNDER SECTION 303 ONLY THOSE FUNDS ALLOCATED - BEFORE THE ENACTMENT OF PUB. LAW 91-606 - UNDER THE PARTICULAR FEDERAL-STATE DISASTER AGREEMENT INVOLVED AND NOT EXPENDED PRIOR TO SUCH ENACTMENT DATE MAY BE USED TO MAKE ANY REIMBURSEMENTS THEREUNDER AND OEP STATES THAT NO SUCH FUNDS ARE AVAILABLE. IN THIS REGARD, OEP STATES THAT AS OF THE DATE OF ENACTMENT (DECEMBER 31, 1970), $10 MILLION HAD BEEN ALLOCATED BY OEP UNDER THE SUBJECT AGREEMENT, AND ITS SUPPLEMENTS, COVERING HURRICAN BEULAH. OF THAT SUM ONLY ABOUT $300,000 HAD NOT BEEN OBLIGATED AS OF DECEMBER 31, 1970, AND SINCE THAT DATE, OEP HAS OBLIGATED THE REMAINDER OF THE SUM ALLOCATED. ACCORDINGLY, OEP CONCLUDES THAT EVEN IF THIS OFFICE WERE TO DETERMINE THAT SECTION 303 REQUIRED THE PAYMENT OF THE ACTUALLY INCURRED EXPENSES OF THE COUNTIES, SINCE SECTION 303 EXPRESSLY APPLIES ONLY TO FUNDS ALLOCATED UNDER "A FEDERAL-STATE DISASTER AGREEMENT" BY THE DATE OF THE ENACTMENT OF THE DISASTER RELIEF ACT OF 1970 AND SINCE ALL THOSE FUNDS HAVE ALREADY BEEN OBLIGATED, NO FUNDS REMAIN AVAILABLE FOR USE UNDER SECTION 303.

IN REBUTTAL, THE STATE TAKES THE POSITION THAT "THE LANGUAGE OF SECTION 303 WOULD APPLY TO ALL FUNDS ALLOCATED PRIOR TO DECEMBER 31, 1970, UNDER ANY FEDERAL-STATE DISASTER AGREEMENT TO WHICH THE STATE OF TEXAS WAS A PARTY." HOWEVER, IN OUR VIEW THE LANGUAGE OF SECTION 303 CLEARLY APPLIES ONLY TO FUNDS ALLOCATED UNDER A PARTICULAR DISASTER AGREEMENT AND THE REALLOCATION OF FUNDS AMONG OTHER FEDERAL-STATE DISASTER AGREEMENTS TO WHICH A STATE MAY HAVE BEEN A PARTY TO WAS NOT CONTEMPLATED IN THE ENACTMENT OF THE SUBJECT SECTION.

THE STATE FURTHER STATES THAT SECTION 303 "DOES NOT PRECLUDE THE USE OF OTHER DISASTER RELIEF FUNDS, SHOULD FUNDS AVAILABLE BEFORE DECEMBER 31, 1970, BECOME EXHAUSTED. WHETHER OR NOT SUCH FUNDS HAVE BEEN EXHAUSTED WE SEE NO LEGAL OBJECTION TO THE USE OF FUNDS APPROPRIATED TO CARRY OUT DISASTER RELIEF PURPOSES UNDER THIS OR OTHER ACTS." HOWEVER, WE MUST POINT OUT THAT SECTION 303'S APPLICATION IS EXPLICITLY LIMITED TO THOSE FUNDS ALLOCATED BUT NOT EXPENDED PRIOR TO DECEMBER 31, 1970, UNDER A FEDERAL-STATE DISASTER AGREEMENT AND THAT NO OTHER FUNDS ARE AFFECTED BY THIS SECTION. ACCORDINGLY, BASED ON OEP'S STATEMENT THAT ALL FUNDS ALLOCATED TO THE SUBJECT FEDERAL-STATE DISASTER AGREEMENT PRIOR TO DECEMBER 31, 1970, HAVE BEEN OBLIGATED, THERE WOULD BE NO FUNDS AVAILABLE FOR USE UNDER SECTION 303 TO SETTLE THE INSTANT CLAIMS.

OEP'S POSITION

OEP DISAGREES WITH THE STATE'S VIEW THAT IT IS REQUIRED BY THE APPLICABLE DISASTER RELIEF STATUTES AND ITS CONTRACT WITH THE STATE TO REIMBURSE THE APPLICANTS ON THE BASIS OF ACTUAL COSTS INCURRED. OEP FEELS THAT THE USE OF ITS OWN DAMAGE SURVEY REPORTS, THE BOVAY REPORT, AND THE REPORTS AND RECORDS OF THE OTHER FEDERAL AND STATE AGENCIES INVOLVED IN THE DISASTER RELIEF EFFORTS, AS THE PRIMARY INDICES OF THE WORK FOR WHICH THE COUNTIES COULD BE REIMBURSED, COUPLED IN THIS CASE WITH A REVIEW OF THE CONTRACTOR'S RECORDS, IS IN ACCORDANCE WITH THE APPLICABLE OEP REGULATIONS AND PROCEDURES. OEP INFORMALLY ADVISES THAT ITS PRACTICE, PURSUANT TO ITS REGULATIONS, IN ALL DISASTERS OCCURRING SINCE THE ENACTMENT OF PUBLIC LAW 81-875 IN 1950 HAS BEEN TO ADVISE STATE AND LOCAL GOVERNMENTS TO PERFORM EMERGENCY WORK THAT THEY FELT WAS URGENT AND FILE PROJECT APPLICATIONS AS SOON AS THEY COULD. SUCH WORK IS THEN INSPECTED AND SURVEYED AS SOON AS POSSIBLE BY THE FEDERAL GOVERNMENT AND ELIGIBLE WORK IS APPROVED FOR REIMBURSEMENT. OEP EMPHASIZES THAT IN SUCH SITUATIONS THE COUNTIES ARE PRIMARILY RESPONSIBLE FOR SUPERVISING THEIR CONTRACTORS. OEP FURTHER ADVISES THAT THIS PROCEDURE IS NOT ONLY PRACTICAL BUT ALSO WELL RECEIVED BY APPLICANTS, WITH THE MAJOR PROBLEMS OCCURRING IN CASES INVOLVING CONTRACTORS UNDER CONTINGENCY CONTRACTS.

OEP NOTES THAT IT IS A WELL-ESTABLISHED RULE THAT TO SUSTAIN ADMINISTRATIVE REGULATIONS AND PRACTICES IT IS NOT NECESSARY FOR THE REVIEWING BODY TO FIND THE AGENCY CONSTRUCTION OF A STATUTE TO BE THE ONLY REASONABLE ONE OR EVEN THAT IT IS THE CONSTRUCTION WHICH THE REVIEWING BODY WOULD HAVE GIVEN THE STATUTE IF IT HAD INTERPRETED IT IN THE FIRST INSTANCE, BUT THAT THE REVIEWING BODY NEED ONLY FIND A RATIONAL BASIS FOR THE ADMINISTRATIVE REGULATION. SEE, FOR EXAMPLE, PORT AUTHORITY OF THE CITY OF SAINT PAUL V. UNITED STATES, 432 F.2D 455 (1970). OEP CONTENDS THAT ITS REGULATIONS WHICH PROVIDE FOR PAYMENT OF EXPENSES CONTAINED IN APPROVED PROJECT APPLICATIONS, AS DETERMINED THROUGH ITS OWN DAMAGE SURVEY REPORTS, HAVE A RATIONAL BASIS AND SHOULD BE UPHELD. THE BASIS FOR OEP'S REGULATIONS APPARENTLY LIES IN ITS DESIRE TO DETERMINE - INDEPENDENTLY FROM THE COST FIGURES PRESENTED BY APPLICANTS - THE AMOUNT OF REIMBURSABLE WORK PERFORMED. OEP FEELS THAT REIMBURSEMENT OF APPLICANTS ON THE BASIS OF THE COSTS THEY CERTIFY AS ACTUALLY HAVING BEEN INCURRED WOULD ELIMINATE ALL CONTROL BY THE FEDERAL GOVERNMENT IN THE ADMINISTRATION OF THE DISASTER RELIEF ACT, SINCE THAT PRACTICE COULD NULLIFY ALL CRITERIA, RULES AND REGULATIONS, AND AUTHORIZE PAYMENT OF ALL OBLIGATIONS INCURRED AT THE PLEASURE OF THE STATE AND LOCAL GOVERNMENTS WHERE OEP COULD NOT MEET THE BURDEN OF OVERCOMING THE PRESUMPTION OF CORRECTNESS OF THE AMOUNTS CLAIMED AND THUS COULD NOT ESTABLISH ABSOLUTELY THAT THE COSTS WERE INELIGIBLE.

MOREOVER, OEP DISAGREES WITH YOUR CONTENTION THAT SINCE, UNDER THE EMERGENCY CONDITIONS, THE REQUIREMENTS FOR PREPERFORMANCE COST ESTIMATES (I.E., DAMAGE SURVEY REPORTS) AND PRIOR OEP APPROVAL OF PROJECT APPLICATIONS WERE WAIVED AND SINCE THE COUNTIES WERE ADVISED THAT THEY COULD COMMENCE EMERGENCY WORK, OEP INCURRED A CONTRACTUAL OBLIGATION TO PAY THOSE EXPENSES ACTUALLY INCURRED IN THE PERFORMANCE OF ELIGIBLE WORK. AS NOTED PREVIOUSLY, OEP ADVISES THAT IT HAS BEEN ITS PRACTICE SINCE THE ENACTMENT OF PUBLIC LAW 81-875 IN 1950 TO ADVISE STATE AND LOCAL GOVERNMENTS TO PERFORM URGENT EMERGENCY WORK AND TO FILE PROJECT APPLICATIONS AS SOON AS POSSIBLE AND THAT OEP, AS IT DID IN THE INSTANT SITUATION, RESERVES THE RIGHT TO INSPECT AND SURVEY THE WORK PERFORMED AND TO DETERMINE WHICH WORK IS ELIGIBLE FOR REIMBURSEMENT FROM THE DISASTER RELIEF FUNDS ALLOCATED.

IN RESPONSE TO THE STATE'S CONTENTION THAT THE PROPRIETY OF USING AFTER- THE-FACT DAMAGE SURVEY ESTIMATES IS QUESTIONABLE, SINCE THE FIRST GOVERNMENTAL INSPECTION TEAMS DID NOT ARRIVE ON THE SCENE UNTIL LATE OCTOBER 1967, OEP INFORMALLY ADVISES US THAT THERE WERE SOME FEDERAL PERSONNEL MAKING PRELIMINARY SURVEYS IN THE DISASTER AREA IMMEDIATELY AFTER THE DISASTER AND THAT THE PERSONNEL WHO BEGAN THE ACTUAL DETAILED DAMAGE SURVEYS ON OCTOBER 10, 1967, WERE FAMILIAR WITH CONDITIONS AS THEY THEN EXISTED (I.E., AS THEY EXISTED IMMEDIATELY FOLLOWING THE DISASTER). OEP ALSO ADVISES THAT THE FEDERAL ESTIMATORS CONSULTED WITH STATE AND LOCAL OFFICIALS IN PREPARING THEIR ESTIMATES AND THAT WHILE THE ESTIMATORS DO NOT NORMALLY REVIEW THE APPLICANT'S COST RECORDS, IN THIS CASE OEP DID CONSIDER THE CONTRACTOR'S RECORDS, MADE AVAILABLE TO THE OEP REGIONAL DIRECTOR, IN REVIEWING THE DAMAGE SURVEY REPORTS. OEP FURTHER STATES THAT IN ITS VIEW THE APPROPRIATE USE OF THE DAMAGE SURVEY REPORTS IS TO PROVIDE AN ESTIMATE OF THE NATURE AND EXTENT OF THE WORK ELIGIBLE FOR FEDERAL DISASTER ASSISTANCE. THE REPORTS ARE NOT USED TO PERFORM AUDITING FUNCTIONS, AS CONTENDED BY THE STATE, BUT RATHER ARE USED TO REVIEW THE AMOUNTS THAT COULD BE JUSTIFIED FOR THE PURPOSE OF OBLIGATING FEDERAL FUNDS.

IN RESPONSE TO THE STATE'S CONTENTION THAT NO SUBSTANTIAL INELIGIBLE WORK WAS PERFORMED, OEP AGREES THAT THERE WAS NEVER A QUESTION THAT SOME WORK ELIGIBLE FOR FEDERAL DISASTER ASSISTANCE WAS PERFORMED. HOWEVER, IT STATES THAT THE EXTENT AND EXACT NATURE OF THIS WORK HAS BEEN THE SUBJECT OF CONSIDERABLE DISCUSSION AND INVESTIGATION IN PROCESSING THE STATE'S CLAIMS. OEP STATES THAT ON NUMEROUS OCCASIONS COUNTY OFFICIALS WERE ADVISED OF INELIGIBLE WORK BEING PERFORMED AND THAT THE SUPERVISION BY THE LOCAL OFFICIALS OF THE WORK BEING PERFORMED BY THEIR CONTRACTORS WAS QUESTIONED. OEP FURTHER DISAGREES WITH YOUR POSITION THAT IT MADE ONLY VAGUE ASSERTIONS OF INELIGIBLE WORK AND THAT IT FAILED TO CITE SPECIFIC INSTANCES. THE AGENCY SUPPORTS ITS POSITION BY THE INCLUSION IN ITS REPORT OF MEMORANDA FROM BOTH ITS OWN AND STATE EMPLOYEES NOT ONLY SHOWING THAT INELIGIBLE WORK WAS BEING PERFORMED, AND THAT COUNTY OFFICIALS, AS WELL AS THE CONTRACTOR, WERE ADVISED ABOUT INELIGIBLE WORK, BUT ALSO TENDING TO SHOW THAT THE COUNTIES WERE UNCOOPERATIVE AND FAILED TO HEED ADVICE GIVEN BY FEDERAL AND STATE OFFICIALS. FOR EXAMPLE, A MEMORANDUM DATED NOVEMBER 18, 1967, TO THE THEN GOVERNOR OF TEXAS, FROM A STATE EMPLOYEE, STATES, IN PART:

"A SURVEY OF THE COUNTY ON OCTOBER 27TH CONDUCTED BY (OEP AND STATE OFFICIALS) INDICATED THAT NUMEROUS INELIGIBLE COUNTY ROADS WERE NOT ONLY BEING COVERED WITH CALICHE BUT ROADS WERE ACTUALLY BEING CONSTRUCTED OF THIS MATERIAL BY GEORGE CONSOLIDATED.

"*** IT WAS AGREED THAT THE STATE WOULD BE NOTIFIED THAT ALL WORK UNDER CATEGORIES A, B, AND C BE IMMEDIATELY STOPPED UNTIL ELIGIBLE WORK COULD BE CLEARLY IDENTIFIED AND AUTHORIZED IN ORDER TO AVOID FURTHER EXPENDITURES FOR WHICH THE COUNTY COULD NOT BE REIMBURSED BY THE OFFICE OF EMERGENCY PLANNING. ***

"ON OCTOBER 28, 1967 GOVERNOR CONNALLY RELAYED THIS MESSAGE BY TELEGRAM TO JUDGE DANCY.

"MAY WE POINT OUT TO THE GOVERNOR THAT MORE TIME AND EFFORT HAS BEEN EXPENDED WITH THE COMMISSIONERS OF THIS COUNTY THAN WITH ALL THE OTHER TWENTY-EIGHT COUNTIES COMBINED. THE COMMISSIONERS FOR CAMERON COUNTY HAVE REFUSED, FROM THE VERY BEGINNING, TO ACCEPT ADVICE FROM STATE AND FEDERAL PERSONNEL WORKING IN THE PROGRAM. THEY HAVE CONTINUOUSLY EMPLOYED THE EVASIVE DELAYING TECHNIQUE WITH A SMOKE SCREEN AROUND EVERY CATEGORY OF WORK ELIGIBLE UNDER THIS LAW. THEY HAVE PUBLICLY ACCUSED EVERYONE FROM THE FEDERAL OFFICE OF EMERGENCY PLANNING AND THE GOVERNOR OF TEXAS TO THE ENGINEERS FROM THE AGENCIES OF MISLEADING THEM AND GIVING ERRONEOUS INFORMATION."

AFTER MUCH DISCUSSION WITH THE AGENCY, IT HAS BECOME APPARENT TO US THAT THE STATE AND THE AGENCY HAVE APPLIED DIFFERENT MEANINGS TO THE WORD "INELIGIBLE." THE STATE HAS GENERALLY CONSIDERED OEP TO BE USING THAT WORD FOR TYPES OF WORK WHICH COULD NOT BE REIMBURSED UNDER ANY CIRCUMSTANCES, SUCH AS THE REPAIR OF PRIVATE PROPERTY. OEP, ON THE OTHER HAND, HAS BEEN USING THE TERM "INELIGIBLE" FOR THOSE TYPES OF COSTS INCURRED WHICH IT, FOR A VARIETY OF REASONS, DID NOT FEEL COULD BE REIMBURSED. THUS, IN THE AGENCY'S VIEW, INELIGIBLE WORK CONSISTS, AMONG OTHER THINGS, OF WORK WHICH IS OUTSIDE THE SCOPE OF THE KIND OF WORK WHICH CAN BE REIMBURSED; WORK WHICH IS CHARGED AT UNREASONABLE EQUIPMENT OR LABOR RATES; AND WORK WHICH THE AGENCY FEELS SHOULD HAVE BEEN PERFORMED ON A HIGHER EFFICIENCY LEVEL.

IT IS OUR UNDERSTANDING THAT IT IS THIS LATTER FACTOR (I.E., THE EFFICIENCY OF THE CONTRACTOR'S WORK) WHICH ACCOUNTS FOR THE MAJOR DIFFERENCES BETWEEN THE AMOUNTS CLAIMED AND THE AMOUNTS ALLOWED BY THE AGENCY. FOR EXAMPLE, OEP STATES THAT THE GREATEST DIFFERENCE ($279,234) EXISTS WITH REGARD TO DEBRIS REMOVAL CARRIED OUT IN CAMERON COUNTY. OEP STATES:

"*** SOME REASONS FOR THIS DIFFERENCE ARE THE EXCESSIVE NUMBER OF HOURS CLAIMED FOR LABOR, SUPERVISION, AND TRUCKS. WITH PROPER SUPERVISION BY THE COUNTY WE BELIEVE THAT THE ELIGIBLE DEBRIS REMOVAL COULD HAVE BEEN ACCOMPLISHED IN A NUMBER OF HOURS ESTIMATED BY BOVAY ENGINEERS, INC., A TEXAS CONSULTING FIRM WHICH WAS HIRED BY OEP TO PROVIDE OUTSIDE ASSISTANCE IN DETERMINING A FAIR AND REASONABLE COST FOR THE ELIGIBLE WORK ACCOMPLISHED. THESE ESTIMATES ARE IN REASONABLE AGREEMENT WITH CORPS OF ENGINEER ESTIMATES BASED ON THE ORIGINAL DAMAGE SURVEYS AND SUBSEQUENTLY REVIEWED BY THE GALVESTON DISTRICT. ***"

OEP FURTHER STATES THAT WITH REGARD TO THE DIFFERENCES BETWEEN LABOR, TRUCKS, EQUIPMENT AND SUPERVISION BY NUMBER OF HOURS AND RATE CLAIMED BY THE STATE AND AS ALLOWED BY OEP, "NO JUSTIFICATION HAS EVER BEEN PROVIDED BY THE LOCAL APPLICANTS OR THE CONTRACTOR FOR THESE DISCREPANCIES EXCEPT THAT ADDITIONAL DEBRIS MUST HAVE BEEN REMOVED."

OEP FURTHER STATES THAT USING THE QUANTITY OF DEBRIS ESTIMATED BY IT TO HAVE BEEN REMOVED FROM CAMERON COUNTY DURING OCTOBER 1967, THE AMOUNT APPROVED BY OEP FOR SUCH WORK BY GEORGE CONSOLIDATED BREAKS DOWN TO APPROXIMATELY $3.65 PER CUBIC YARD AND THAT THE AMOUNTS CLAIMED BY CAMERON COUNTY BREAKS DOWN TO APPROXIMATELY $7.00 PER CUBIC YARD. OEP POINTS OUT THAT DEBRIS REMOVAL FOLLOWING HURRICANE CELIA IN 1970 WAS ACCOMPLISHED AT AN AVERAGE COST OF $2.56 PER CUBIC YARD AND THAT AS A RESULT OF THE MAY 1972 FLOODING NEAR NEW BRAUNFELS, TEXAS, THE CORPS OF ENGINEERS HAS AWARDED A CONTRACT FOR ELIGIBLE DEBRIS REMOVAL AT $1.75 PER CUBIC YARD. OEP STATES:

"THESE LOWER COSTS OF DEBRIS REMOVAL HAVE OCCURRED DESPITE THE FACT THAT LABOR AND EQUIPMENT COSTS HAVE GONE UP SUBSTANTIALLY SINCE HURRICANE BEULAH IN 1967."

THE STATE REBUTS THESE ARGUMENTS ON TWO GROUNDS: FIRST, THAT IT IS DIFFICULT, IF NOT IMPOSSIBLE, TO ESTIMATE ACCURATELY THE AMOUNT OF DEBRIS REMOVED IN ORDER TO DETERMINE COST PER CUBIC YARD AND, SECOND, THAT THE COST OF DEBRIS REMOVAL BETWEEN VARIOUS DISASTERS, AND BETWEEN VARIOUS PLACES WITHIN ANY GIVEN DISASTER, MAY BE QUITE DIFFERENT. OEP FURTHER STATES THAT MOST OF THE REMAINING DIFFERENCES IN CAMERON COUNTY CAN BE FOUND IN ROAD WORK ON PADRE ISLAND WHERE OEP FEELS THE CONTRACTOR MADE INEFFICIENT USE OF THE TRUCKS AT HIS DISPOSAL. THE CONTRACTOR DENIES THIS ALLEGATION.

OEP CONCLUDES THAT THE CLAIMS OF CAMERON AND WILLACY COUNTIES HAVE BEEN GIVEN MORE ATTENTION THAN ANY OTHER CLAIMS IN THE HISTORY OF THE FEDERAL DISASTER ASSISTANCE PROGRAM AND THAT IT BELIEVES THAT THE COUNTIES THROUGH THE STATE HAVE RECEIVED FULL REIMBURSEMENT FOR ALL WORK PERFORMED BY OR FOR THEM WHICH COULD HAVE BEEN FOUND ELIGIBLE UNDER THE INSTANT CIRCUMSTANCES.

THE BOVAY REPORT

AS NOTED HERETOFORE, BOTH THE STATE AND OEP CITE THE BOVAY REPORT TO SUPPORT THEIR CONTENTIONS THAT THEIR VIEW IS REASONABLE AND CORRECT.

THE STATE CONTENDS THAT IF THE RAW COST FIGURES PROVIDED BY BOVAY ARE ADJUSTED BY INCLUSION OF A REASONABLE CONTINGENCY FACTOR TO TAKE INTO ACCOUNT THE EMERGENCY CONDITIONS UNDER WHICH THE WORK WAS PERFORMED, BY ADOPTION OF A REALISTIC ALLOWANCE AS TO THE QUANTITY OF ROAD SURFACING MATERIAL USED, AND BY ADDING A REASONABLE FACTOR TO COVER OVERHEAD AND PROFIT, THE ADJUSTED BOVAY COST FIGURES WILL EQUAL OR EXCEED THE COSTS ACTUALLY INCURRED BY THE COUNTIES, THUS DOCUMENTING THE REASONABLENESS AND APPROPRIATENESS OF THE AMOUNTS CLAIMED BY THE COUNTIES. THE STATE CONTENDS THAT SUCH ADJUSTMENTS ARE NECESSARY BECAUSE "WHEN IT APPEARED LIKELY THAT THE 'BOVAY REPORT' WOULD DOCUMENT THE REASONABLENESS OF THE COUNTIES' CLAIMS," OEP IMPOSED "ARBITRARY RESTRICTIONS ON BOVAY'S DISCRETION IN DETERMINING THE SCOPE OF WORK PERFORMED BY THE COUNTIES." THE REBUTTAL CONTAINS A DISCUSSION OF FOUR PROVISIONS IN OEP'S INSTRUCTIONS TO BOVAY WHICH IT IS CONTENDED REPRESENT ARBITRARY ACTION ON THE PART OF THE AGENCY.

FOR EXAMPLE, REFERENCE IS MADE TO SECTION 2(B) OF OEP'S INSTRUCTIONS TO BOVAY WHICH, WITHOUT DISCLOSING THE BASIS FOR ITS ACTION, "ARBITRARILY DIRECTED BOVAY" FOR THE PURPOSES OF ITS ESTIMATES TO REDUCE THE MILES CLAIMED TO HAVE BEEN CLEARED. THAT INSTRUCTION READS IN PERTINENT PART:

"(B) YOU SHOULD MAKE ALLOWANCE FOR ALL ADDITIONAL COUNTY ROADS AND CANAL ROADS INDICATED AS CLEARED ***. HOWEVER, YOU SHOULD CONSIDER DEDUCTING AN APPROPRIATE PERCENTAGE OF AREAS OR ROADS, SCHOOL GROUNDS, AND OTHER AREAS WHICH YOU ESTIMATE WERE NOT COVERED BY DEBRIS. THE CORPS OF ENGINEERS AND OUR STAFF HAVE ESTIMATED THAT ABOUT 20 PERCENT OF THE ROAD MILEAGE TABULATED HEREIN WAS NOT COVERED BY ANY DEBRIS. IF YOU DIFFER SIGNIFICANTLY WITH THIS PERCENTAGE, PLEASE DISCUSS THIS MATTER FURTHER WITH US." ANOTHER EXAMPLE CITED IS SECTION 2(A) OF OEP'S INSTRUCTIONS WHICH PROVIDES:

"(A) THE TEXAS STATE HIGHWAY DEPARTMENT INITIALLY CLEARED ALL STATE HIGHWAYS AND OTHER ROADS ON THE FEDERAL AID SYSTEM. THEREFORE, IT IS FELT THAT WHILE ALL STATE HIGHWAYS AND FARM ROADS INDICATED AS CLEARED SHOULD BE CONSIDERED, AN APPROPRIATE REDUCTION IN THE NUMBER OF LOADS/MILE (PERHAPS 50 PERCENT) SHOULD BE MADE FOR THE WORK WHICH WAS DONE BY THE HIGHWAY DEPARTMENT."

THE REBUTTAL REPORT CONTENDS THAT THE LATTER INSTRUCTION WAS ARBITRARY IN THAT THERE IS NO EXPLANATION FOR THE 50 PERCENT REDUCTION. ALSO, THE REBUTTAL REPORT STATES THAT ANY STATE WORK PERFORMED "WAS LIMITED TO 'SECOND-PASS CLEANUP' OF DEBRIS" AND THAT OTHERWISE THE COUNTIES' CONTRACTOR CLEARED THE ROADS CLAIMED "WITHOUT SUBSTANTIAL ASSISTANCE FROM STATE FORCES."

OEP REPORTS THAT BOVAY WAS HIRED TO ASSIST OEP'S STAFF PERSONNEL IN EVALUATING THE STATE'S APPEAL TO THE OEP DIRECTOR AND THAT OEP NEVER INTENDED TO RELY EXCLUSIVELY UPON, OR BE BOUND BY, THE BOVAY RECOMMENDATIONS. OEP HAS ALSO INFORMALLY STATED THAT IN ITS VIEW THE CONTINGENCY FACTOR OF 25 PERCENT ADDED TO THE ESTIMATE FOR REMOVAL OF DEBRIS AND THE 10 PERCENT INCREASE FACTOR FOR ALL OTHER COST DUE TO THE EMERGENCY CONDITIONS, BOTH OF WHICH BOVAY INCLUDED IN ITS REPORT, WAS SUFFICIENT TO TAKE INTO ACCOUNT THE EMERGENCY CONDITIONS UNDER WHICH THE WORK WAS PERFORMED. OEP ALSO REPORTS THAT BOVAY MADE CERTAIN ERRORS IN ITS REPORT FOR WHICH OEP HAD TO ADJUST. FOR EXAMPLE, OEP STATES THAT IT FOUND:

"BOVAY HAD CREDITED GEORGE CONSOLIDATED, INC., WITH SOME WORK THAT ACTUALLY HAD BEEN PERFORMED BY THE COUNTIES, AND BECAUSE THE MANNER IN WHICH ADDITIONAL INFORMATION HAS BEEN PROVIDED BY THE COUNTIES, SOME WORK INCLUDED IN THEIR SUPPLEMENTAL REPORT HAD ALREADY BEEN COVERED IN THE ORIGINAL REPORT."

AS A RESULT, THE AMOUNTS ESTIMATED BY BOVAY WERE ADJUSTED DOWNWARD BY OEP. OEP POINTS OUT THAT IT ADDED A 25 PERCENT FACTOR FOR OVERHEAD AND PROFIT TO THE ADJUSTED AMOUNT. IT STATES THAT BASED ON THE BOVAY REPORT, AS WELL AS A COMPLETE REVIEW OF ALL OTHER INFORMATION AVAILABLE TO OEP, THE OEP DIRECTOR APPROVED ADDITIONAL AMOUNTS OF $321,353 AND $127,525 FOR CAMERON AND WILLACY COUNTIES, RESPECTIVELY.

WE ARE NOT IN A POSITION TO DISPUTE THE ACCURACY OF THE FACTUAL FINDINGS AND SPECIFIC REDUCTIONS MADE BY OEP IN ITS DISALLOWANCE OF SOME OF THE AMOUNTS RECOMMENDED BY BOVAY, NOR CAN WE SAY THAT OEP ACTED IMPROPERLY IN REFUSING TO RELY EXCLUSIVELY ON, OR BE BOUND BY, THE BOVAY REPORT. ALSO, IN REGARD TO THE ALLEGEDLY ARBITRARY DIRECTIONS GIVEN BY OEP TO BOVAY, SINCE BOVAY WAS HIRED TO ASSIST OEP'S STAFF, AND NOT TO ARBITRATE THE DISPUTE, WE CANNOT SAY THAT OEP'S INFORMING BOVAY OF ITS TENTATIVE CONCLUSIONS WAS IMPROPER, ESPECIALLY SINCE IT APPEARS FROM THE OEP INSTRUCTIONS THAT BOVAY WAS GIVEN SUFFICIENT LEEWAY TO REACH DIFFERING CONCLUSIONS.

CONCLUSIONS

AS NOTED ABOVE, THE STATE'S BASIC CONTENTION IS, IN ESSENCE, THAT OEP IS REQUIRED BY THE APPLICABLE STATUTES, INCLUDING SECTION 303 OF PUB. L. 91- 606, TO REIMBURSE IT - AND THROUGH IT THE COUNTIES AND THEIR CONTRACTORS - FOR THE ACTUAL EXPENSES INCURRED IN ELIGIBLE DEBRIS REMOVAL EXCEPT TO THE EXTENT THAT OEP REBUTS THE PRIMA FACIE EVIDENCE OF ELIGIBLE WORK PERFORMED AS RECORDED IN THE DAILY WORK REPORTS OF THE COUNTIES AND THEIR CONTRACTORS.

ON THE OTHER HAND, OEP'S BASIC POSITION IS, IN ESSENCE, THAT THE USE OF ITS OWN DAMAGE SURVEY REPORTS AND THE REPORTS AND RECORDS OF THE OTHER FEDERAL AND STATE AGENCIES INVOLVED IN THE DISASTER RELIEF EFFORTS AS THE PRIMARY INDICES OF THE WORK FOR WHICH THE COUNTIES COULD BE REIMBURSED, COUPLED IN THIS CASE WITH THE BOVAY REPORT AND THE REVIEW OF THE CONTRACTOR'S RECORDS, IS IN ACCORDANCE WITH THE APPLICABLE STATUTES AND AGENCY REGULATIONS AND PROCEDURES. OEP STATES THAT ITS REGULATIONS ENABLE IT TO PERFORM INDEPENDENT REVIEWS OF WORK PERFORMED AND TO DETERMINE, ON THE BASIS OF THE BEST INDEPENDENT EVIDENCE AVAILABLE, THE AMOUNT AND COST OF ELIGIBLE WORK PERFORMED. OEP FEELS THAT SUCH AN INDEPENDENT REVIEW IS THE BEST MEANS BY WHICH THE OEP DIRECTOR CAN BE ASSURED THAT FUNDS UNDER HIS CONTROL ARE EXPENDED IN A LAWFUL MANNER.

IN RESPONSE TO THE STATE'S CONTENTION THAT THE DAILY WORK RECORDS REPRESENT THE BEST EVIDENCE OF THE TYPE AND AMOUNT OF WORK PERFORMED, OEP, IN ITS REPORT OF JUNE 30, 1972, STATES:

"IN ORDER TO ACCEPT THE DAILY WORK REPORTS SUBMITTED BY THE CONTRACTOR AS THE BEST EVIDENCE OF ELIGIBLE WORK PERFORMED AND TO MAKE PAYMENT ON THAT BASIS WOULD REQUIRE ACCEPTANCE OF THE FOLLOWING ASSUMPTIONS:

"1) THE CONTRACTOR PERFORMED NO WORK THAT WAS INELIGIBLE.

"2) THE CONTRACTOR PERFORMED ALL WORK IN AS EFFICIENT AND WORKMANLIKE MANNER AS WAS POSSIBLE UNDER THE CONDITIONS THAT EXISTED AT THE TIME OF THE DISASTER.

"3) THE DAILY WORK REPORTS THEMSELVES WERE ACCURATE AND THE DESCRIPTION OF THE WORK WHICH IS GIVEN IS ADEQUATE TO ENABLE SOMEONE TO DETERMINE THE LOCATION AND AMOUNTS OF WORK PERFORMED.

"4) THE FEDERAL/STATE ESTIMATES AND THE SUBSEQUENT REVIEW AND COST ESTIMATES BY BOVAY ENGINEERS WERE NOT RELIABLE AND OEP POLICIES AND PRACTICES FOR DETERMINING ELIGIBLE WORK WERE NOT APPLICABLE TO THESE TWO CLAIMS, DESPITE SUCCESSFUL USAGE IN HUNDREDS OF CLAIMS PROCESSED SINCE 1950. OF 157 APPLICANTS IN THE DECLARED MAJOR DISASTER, HURRICANE BEULAH, ONLY CAMERON AND WILLACY COUNTIES HAD ANY PROBLEMS."

OEP CONCLUDES THAT FOR REASONS PREVIOUSLY DISCUSSED, NONE OF THE ABOVE ASSUMPTIONS ARE APPLICABLE IN THIS CASE AND THAT, THEREFORE, IT IS IMPOSSIBLE FOR IT TO ACCEPT THE DAILY WORK RECORDS AS EVIDENCE SUPPORTING PAYMENT IN LIEU OF REGULAR OEP DETERMINATIONS OF ELIGIBLE WORK.

IT IS A WELL-ESTABLISHED RULE THAT LONGSTANDING ADMINISTRATIVE REGULATIONS, PRACTICES AND PROCEDURES - AND OEP ADVISES THAT THESE HAVE BEEN IN EFFECT SINCE 1950 - WHEN DERIVED FROM A CONSISTENT INTERPRETATION OF THE STATUTES WHICH THE AGENCY IS RESPONSIBLE FOR ADMINISTERING, ARE ENTITLED TO GREAT WEIGHT AND SHOULD NOT BE OVERTURNED IN THE ABSENCE OF A CLEAR SHOWING THAT THEY ARE UNREASONABLE OR WITHOUT A RATIONAL BASIS. FURTHER, WE HAVE FOUND NOTHING IN THE LEGISLATIVE HISTORIES OF EITHER THE DISASTER RELIEF ACT OF 1970 OR PREVIOUS DISASTER RELIEF ACTS TO INDICATE A MANDATE BY THE CONGRESS THAT OEP REIMBURSE EXPENSES ON THE BASIS ASSERTED BY THE STATE. IN THIS REGARD, AND AS EXPLAINED FULLY ABOVE, IN VIEW OF THE EXPLANATION IN THE CONFERENCE REPORT OF SECTION 303 OF THE 1970 DISASTER RELIEF STATUTE, IT WOULD NOT BE UNREASONABLE TO CONCLUDE, AS DID OEP, THAT THE SECTION WAS MEANT FOR EMPHASIS ONLY, THAT IT IS NOT TO BE CONSTRUED AS AFFECTING CLAIMS "OF ANY KIND PRESENTLY IN BEING," AND THAT, HENCE, IT WAS NOT INTENDED TO REQUIRE REIMBURSEMENT OF COSTS ON A BASIS OTHER THAN THAT PREVIOUSLY, AND CONSISTENTLY, USED BY OEP. ALSO, AS INDICATED ABOVE, EVEN IF SECTION 303 BE CONSTRUED AS OTHERWISE AUTHORIZING REIMBURSEMENT, IT COULD NOT BE USED AS A BASIS FOR PAYMENT IN THE INSTANT CASE, SINCE ALL THE FUNDS ALLOCATED UNDER THE DISASTER RELIEF AGREEMENT INVOLVED HERE HAVE BEEN OBLIGATED.

IN CONCLUSION, WE HAVE REVIEWED THE APPLICABLE OEP REGULATIONS, PRACTICES, AND PROCEDURES WHICH AUTHORIZE THE AGENCY TO USE THE BEST INDEPENDENT ESTIMATE TO DETERMINE THE REASONABLE COST OF PERFORMING ELIGIBLE WORK AND TO ADJUST AS NECESSARY, EITHER UPWARD OR DOWNWARD, THE ESTIMATED AMOUNTS ON THE BASIS OF UPDATED INFORMATION IT RECEIVES FROM FEDERAL AND STATE SOURCES AS WELL AS ACCEPTABLE INFORMATION FROM THE APPLICANTS. THIS PROCEDURE IS DESIGNED TO ENABLE THE AGENCY TO DETERMINE THE REASONABLE COST OF PERFORMING THE NECESSARY WORK AND TO AVOID REIMBURSING ACTUAL COSTS WHICH WERE INCURRED IN AN UNREASONABLE AND UNNECESSARY MANNER. EVEN THOUGH THIS LEAVES OEP WITH A GREAT DEAL OF DISCRETION, WE FEEL THIS IS NOT AN UNREASONABLE APPROACH AND WE CANNOT SAY THAT OEP'S REGULATIONS, PRACTICES, AND PROCEDURES ARE IMPROPER OR WITHOUT A RATIONAL BASIS.

AS TO WHETHER THE REGULATIONS WERE OR SHOULD HAVE BEEN WAIVED AND PAYMENT MADE ON THE BASIS OF THE EXPENSES ACTUALLY INCURRED BECAUSE THE COUNTIES INVOLVED WERE TOLD THAT THEY COULD COMMENCE EMERGENCY WORK IMMEDIATELY AND FILE PROJECT APPLICATIONS AS SOON AS POSSIBLE THEREAFTER, IT APPEARS THAT THE PROCEDURE USED BY OEP IN THIS CASE WAS NO DIFFERENT FROM THE PROCEDURE IT HAS USED IN ALL SIMILAR SITUATIONS SINCE 1950. MOREOVER, IT APPEARS FROM OEP'S REPORT TO US THAT OEP REPEATEDLY EMPHASIZED TO THE COUNTIES THAT ONLY THOSE COSTS DETERMINED TO BE ELIGIBLE BY OEP IN ACCORDANCE WITH ITS NORMAL ELIGIBILITY CRITERIA WOULD BE REIMBURSED. THEREFORE, WE CANNOT SAY THAT THE USUAL OEP PROCEDURES WERE, OR SHOULD HAVE BEEN, WAIVED IN THE INSTANT CIRCUMSTANCES.

AS TO WHETHER THE STATE HAS ESTABLISHED ANY AMOUNT IN EXCESS OF OEP'S FINAL ALLOWANCES THAT WE COULD ALLOW, WE MUST POINT OUT THAT THIS OFFICE IS NOT EQUIPPED TO RESOLVE THE NUMEROUS FACTUAL DISPUTES EXISTING IN THIS CASE BETWEEN THE STATE AND OEP WITH REGARD TO THE ELIGIBILITY OF SPECIFIC WORK PERFORMED, THE EFFICIENCY WITH WHICH THE CONTRACTOR DID OR SHOULD HAVE PERFORMED HIS WORK, OR THE REASONABLENESS OF THE CHARGES FOR ELIGIBLE WORK PERFORMED. IN THIS REGARD WE ARE IN AGREEMENT WITH OEP THAT AN AUDIT BY THIS OFFICE OR AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT OF THE CONTRACTOR'S DAILY WORK RECORDS WOULD NOT ESTABLISH THE REASONABLE REIMBURSABLE COSTS OF THE WORK PERFORMED. ACCORDINGLY, IN THE ABSENCE OF A CLEAR SHOWING OF ARBITRARINESS OR CAPRICIOUSNESS ON THE PART OF OEP, WE ARE REQUIRED TO BASE OUR DETERMINATIONS ON THE FACTS AS REPORTED BY THE AGENCY.

IN THIS REGARD WHILE THE STATE HAS ALLEGED ARBITRARINESS ON THE PART OF OEP, IN VIEW OF THE FACT THAT OEP REPORTS THAT ITS PERSONNEL, ALONG WITH EMPLOYEES OF OTHER FEDERAL AGENCIES INCLUDING THE CORPS OF ENGINEERS AND THE FEDERAL HIGHWAY ADMINISTRATION, OBSERVED INELIGIBLE WORK BEING PERFORMED; IN VIEW OF CONTEMPORANEOUS STATEMENTS BY STATE EMPLOYEES THAT INELIGIBLE WORK WAS PERFORMED AND THAT THE COUNTIES WERE NOT FULLY COOPERATIVE AND THE STATE'S INITIAL ACQUIESCENCE IN THE FINDINGS CONTAINED IN THE DAMAGE SURVEY REPORTS; IN VIEW OF OEP'S HIRING OF BOVAY TO ASSIST IT IN REEVALUATING THE CLAIMS; IN VIEW OF OEP'S REPORTED REVIEW OF THE CONTRACTORS' RECORDS AND A STATEMENT THAT IT HAS GIVEN MORE CONSIDERATION TO THESE CLAIMS THAN TO ANY OTHER IN THE HISTORY OF THE FEDERAL DISASTER ASSISTANCE PROGRAM; AND IN VIEW OF ITS FINAL APPROVAL OF AMOUNTS ALMOST $500,000 MORE THAN IT ORIGINALLY ALLOWED, IT DOES NOT APPEAR THAT IT CAN BE SAID THAT OEP ACTED ARBITRARILY IN THE MATTER.

THEREFORE, AND SINCE WE CANNOT OBJECT TO THE METHOD EMPLOYED BY OEP TO DETERMINE THE AMOUNT OF REIMBURSABLE WORK PERFORMED AND THE REASONABLE COST THEREOF, WE MUST ACCEPT THE FINAL OEP DETERMINATIONS AS CORRECT. STATED IN LONGWILL V. UNITED STATES, 17 CT. CLS. 288, 291, IT IS THE DUTY OF THE ACCOUNTING OFFICERS TO REJECT ALL CLAIMS TO WHICH THEY BELIEVE THERE MAY BE SUBSTANTIAL DEFENSES IN LAW, OR AS TO THE VALIDITY OF WHICH THEY ARE IN DOUBT. SEE ALSO CHARLES V. UNITED STATES, 19 CT. CLS. 316. ACCORDINGLY, WE FIND NO BASIS ON WHICH WE COULD ALLOW THE STATE'S CLAIMS.

MERITORIOUS CLAIMS ACT

IF WE DETERMINE THE CLAIMS OF WILLACY AND CAMERON COUNTIES MAY NOT LAWFULLY BE ADJUSTED UNDER 31 U.S.C. 71, YOU REQUEST THAT WE SUBMIT TO THE CONGRESS A SPECIAL REPORT AND RECOMMENDATION PURSUANT TO 31 U.S.C. 236. THE STATUTE REFERRED TO, COMMONLY KNOWN AS THE MERITORIOUS CLAIMS ACT, PROVIDES THAT WHENEVER A CLAIM IS FILED IN THIS OFFICE AGAINST THE UNITED STATES THAT "MAY NOT LAWFULLY BE ADJUSTED BY THE USE OF AN APPROPRIATION HERETOFORE MADE, BUT WHICH CLAIM OR DEMAND IN THE JUDGMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES CONTAINS SUCH ELEMENTS OF LEGAL LIABILITY OR EQUITY AS TO BE DESERVING OF THE CONSIDERATION OF THE CONGRESS, HE SHALL SUBMIT THE SAME TO THE CONGRESS BY SUCH REPORT CONTAINING THE MATERIAL FACTS AND HIS RECOMMENDATION THEREON."

OEP OPPOSES SUCH A REFERRAL TO CONGRESS ON TWO GROUNDS. FIRST, IT FEELS THAT THE STATE OF TEXAS HAS NOT PRESENTED A VALID CLAIM. SECOND, IT FEELS THAT THE MATTER HAS ALREADY BEEN BROUGHT TO THE ATTENTION OF THE CONGRESS AND THAT FURTHER CONGRESSIONAL REVIEW OF THE MATTER WOULD NOT BE WARRANTED. THE STATE DISAGREES WITH BOTH GROUNDS.

THE GENERAL ACCOUNTING OFFICE HAS SUBMITTED REPORTS AND RECOMMENDATIONS TO THE CONGRESS UNDER THE SUBJECT ACT ONLY IN THOSE CASES WHERE THE FACTS INVOLVED CLEARLY ESTABLISHED SUCH ELEMENTS OF LEGAL LIABILITY OR EQUITY THAT WE FELT THEY UNDOUBTEDLY DESERVED CONSIDERATION BY THE CONGRESS. WHEN REVIEWING A CASE TO DETERMINE WHETHER TO SUBMIT SUCH A REPORT, WE HAVE CONSISTENTLY ACCEPTED THE FACTS AS REPORTED BY THE ADMINISTRATIVE AGENCY ALTHOUGH THEY ARE NOT NORMALLY IN DISPUTE IN SUCH CASES.

IN THE INSTANT CASE, WE HAVE FOUND NO LEGAL BASIS TO OBJECT TO THE METHOD EMPLOYED BY OEP TO DETERMINE THE WORK, AND COSTS THEREOF, ELIGIBLE FOR REIMBURSEMENT. UNDER THE FACTS AS REPORTED BY THE AGENCY ALL ELIGIBLE EXPENSES MUST BE CONSIDERED AS HAVING BEEN PAID AND, HENCE, NOTHING REMAINS TO REPORT TO THE CONGRESS.

FURTHER, IN VIEW OF THE DISPUTE BETWEEN THE COUNTIES AND OEP OVER THE FACTS INVOLVED - WHICH AS INDICATED ABOVE WE ARE NOT EQUIPPED TO RESOLVE - WE CANNOT SAY THE CLAIMS PRESENTED TO US CONTAIN SUCH ELEMENTS OF LEGAL LIABILITY OR EQUITY THAT WE WOULD BE WARRANTED IN SUBMITTING THEM TO THE CONGRESS FOR ITS CONSIDERATION. IN THIS REGARD, WE NOTE THAT THESE CLAIMS HAVE, IN EFFECT, ALREADY BEEN BROUGHT TO THE ATTENTION OF THE CONGRESS THROUGH THE DISCUSSION AND APPARENT REJECTION OF SENATOR YARBOROUGH'S AMENDMENT TO S. 3619, AND WE DO NOT FEEL IT APPROPRIATE FOR US TO BRING THESE CLAIMS TO THE ATTENTION OF CONGRESS AGAIN SINCE WE ARE NOT IN A POSITION TO MAKE A RECOMMENDATION THEREON. WE REGRET THAT WE COULD NOT REACH A DETERMINATION MORE FAVORABLE TO THE CLAIMS PRESENTED ON BEHALF OF THE COUNTIES OF WILLACY AND CAMERON.