FEMA contracting: What construction companies need to know

Almost five months have passed and Floridians are still feeling the damage caused by Hurricane Irma. The hurricane caused nearly $100 billion in damages after ravaging the sunshine state. Homeowners and/or homeowner associations seeking to repair and rebuild will be in the market for contractors to complete the work.

Much of the work will be financed by the Federal Emergency Management Agency. However, before considering projects financed by FEMA, contractors should understand their limitations.

Know who you are working for

FEMA does not enter into contracts directly with construction companies. Instead, they provide monetary relief to homeowners who must seek out a construction company or contractor themselves. Contractors should keep in mind that even though they are working for the homeowner, grants are governed by FEMA rules.

FEMA will provide up to $33,000 in disaster assistance funds to homeowners to cover repairs not covered by the homeowner’s insurance policy. The money is meant to be used to get the home back to a safe and sanitary condition only, not pre-disaster condition. Homeowners may have misconceptions about how much financial reimbursement they can expect to receive and contractors should review the scope of the repairs before starting the work. For instance, a FEMA grant may cover replacement countertops, but only for counters made of laminate rather than the granite counters the home had before.

Additional administrative requirements

The management of FEMA financed projects is outsourced to a third party vendor. The third party will inspect the work performed and authorize reimbursements. Contractors should be prepared for additional administrative work and in depth record keeping since the work is federally financed. All costs need to be recorded in compliance with the Truth In Negotiations Act.

Before entering into a FEMA financed contract, contractors should have an in depth discussion with the homeowner about what costs will be covered. For additional protection it is a good idea to include a clause spelling out the homeowner’s financial responsibility for any expenses not approved. Projects financed by FEMA can be lucrative since contractors are guaranteed payment as long as the work follows FEMA rules; just make sure to understand the limitations in advance to avoid unapproved repairs.