What FEMA’s Small Project Threshold Increase Means to Communities and Nonprofits

By now, you have probably heard about FEMA’s decision to increase the Public Assistance (PA) Small Project threshold to $1M. In their press release, FEMA Administer Deanne Criswell states, “…by simplifying the application process, we will break down barriers and better meet the funding needs of small communities and our nonprofit partners.”

It's a big shift in FEMA PA program delivery. At Plexos, we support simplifying community recovery efforts and decreasing administrative burden for all stakeholders. And we believe there are benefits to this new rule, especially when managed proactively and strategically - especially for Work Completed under $1M.

However, our experience helping state, local, territorial, and tribal (SLTT) governments and private nonprofit (PNP) organizations across the country shows several ways in which FEMA’s decision could significantly affect a small community’s ability to implement a FEMA PA program.

Importantly, communities may not realize or fully understand key new policy differences between small and large projects. We are watching closely to understand how FEMA may continue to adjust their small and large project policies moving forward in light of these potential impacts.

In the meantime, here are just a few significant takeaways and questions about these changes that every community or nonprofit needs to consider:

1. Small Projects must be submitted within 60 days of the Recovery Scoping Meeting (RSM) – In the Final Rule, FEMA cited a 2020 analysis in which they concluded raising the Small Project threshold to $1M would account for 94.4% of all projects. However, per page 183 of the FEMA PAPPGv4, Applicant-prepared Small Projects must be submitted to FEMA within 60 days of the RSM. This timing is very tight for Applicants impacted by a major disaster. As we’ve seen, many do not even have the ability to identify all damages and complete the FEMA Damage Inventory (DI) within 60 days, never mind complete the significant documentation and submission burdens required for all projects under $1M.
2. Previous Means for Developing Accurate Cost Estimates May No Longer Be Allowed – FEMA uses a process called Cost Estimating Format (CEF) to develop accurate cost estimates to repair or replace damaged facilities. The CEF includes both the hard costs (base construction costs) and the soft costs required to complete a project. The soft costs include other required costs like General Requirements & Conditions, A/E fees, Contractor overhead and profit, etc. – all of which are required to complete a project. However, per FEMA PAPPG, page 187, and FEMA CEF for Large Projects Instructional Guide V2.1, page 1-4, CEF is only applied to Large Projects. Therefore, under the new rule (and consistent with past FEMA implementation procedures), FEMA may not allow these soft costs, despite their real-world necessity, to be included in the total grant amount.
3. No More Expedited Funding for Projects under $1M? – FEMA uses a process called Expedited Funding to help cash-strapped Applicants receive up to 50% of Emergency Work funding within 90 days of project submission. This is an incredibly important tool for Applicants – especially rural and underserved communities with low budgets which are historically disproportionately affected by disasters. Per page 184 of the PAPPG, Expedited Funding is only available for Large Projects. We’re watching to see if FEMA maintains this position, and if it would limit or potentially prohibit Applicants from utilizing this critical emergency cost recovery tool.
4. Section 428 PAAP Projects now must be over $1M – The Alternative Procedures process has historically provided significant flexibility of spending for applicants, decreased administrative burden in tracking costs, and allowed projects to be grouped together into one pot of funding. Now, FEMA policy states the process will only be available for projects over $1M (more than 7x the previous threshold). As read, FEMA sticking to this policy could mean ~94% of projects won’t be eligible to take advantage of the many benefits offered by the Alternative Procedures process.
5. States and Recipients May Shoulder More of the Administrative Burden – As established in the post-declaration Administrative Plan, the recipient is most often the state emergency management agency / department. Indiana, North Carolina, Ohio, Pennsylvania, and Arizona all voiced concerns and opposed this change - as described in their Final Rule comments. We foresee that recipients will experience increased cost overruns and underruns and increased burden to reconcile and audit these projects. Net Small Project Overrun (NSPO) appeals – a very time-consuming and burdensome process on all stakeholders - will also persist.

If managed proactively and strategically, this change may benefit SLTT governments – especially if FEMA continues to monitor the potential impacts mentioned above. However, recipients and subrecipients alike need to be aware of the significant consequences of this new FEMA direction.

Plexos Group supports SLTT governments across the country in managing federally funded grant programs such as BIL/IIJA, FEMA PA, HMGP, HUD CDBG-DR/MIT, and as well as implementing large-scale, complex infrastructure projects made possible through public and private funding.

Contact Us to learn more about how we can help your organization maximize federal funding programs, limit risk, maintain compliance with federal laws, and leverage Projexis™ technology to expedite your next project.