Document ID: FEMA-2013-0015-0001
Agency: fema
Document Type: Rule
Title: Dispute Resolution Pilot Program for Public Assistance Appeals
Posted Date: 2013-08-16T04:00Z

[Federal Register Volume 78, Number 159 (Friday, August 16, 2013)]
[Rules and Regulations]
[Pages 49950-49963]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19887]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Part 206

[Docket ID: FEMA-2013-0015]
RIN 1660-AA79

Dispute Resolution Pilot Program for Public Assistance Appeals

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Final rule.

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SUMMARY: Section 1105 of the Sandy Recovery Improvement Act of 2013 
directs FEMA to establish a nationwide Dispute Resolution Pilot Program 
(DRPP) in order to facilitate an efficient recovery from major 
disasters, including arbitration by an independent review panel, to 
resolve disputes relating to Public Assistance projects. This final 
rule establishes an option for arbitration under the Public Assistance 
Program administered by the Federal Emergency Management Agency (FEMA). 
The option allows applicants to file for arbitration, instead of a 
second appeal under FEMA's current Public Assistance Program. The 
requests for review under the DRPP must be submitted by December 31, 
2015. This final rule provides the procedures and the standard of 
review that FEMA will apply under the arbitration option.

DATES: Effective Date: August 16, 2013.

FOR FURTHER INFORMATION CONTACT: William Roche, Infrastructure Branch 
Chief, Recovery Directorate, Federal Emergency Management Agency, 500 C 
Street SW., Washington, DC, 20472-3100, Phone: (202) 212-2340 or Email: 
william.roche@fema.dhs.gov.

SUPPLEMENTARY INFORMATION:

Table of Abbreviations

APA--Administrative Procedure Act
ARRA--American Recovery and Reinvestment Act of 2009
CFR--Code of Federal Regulations
DRPP--Dispute Resolution Pilot Program
EA--Environmental Assessment
EIS--Environmental Impact Statement
FEMA--Federal Emergency Management Agency
NEPA--National Environmental Policy Act of 1969
OMB--Office of Management and Budget
PRA--Paperwork Reduction Act of 1995
RFA--Regulatory Flexibility Act
SRIA--Sandy Recovery Improvement Act of 2013
Stafford Act--Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, as amended

Table of Contents

I. Executive Summary
    A. Purpose of the Regulatory Action
    1. Need for the Regulatory Action
    2. Legal Authority for the Regulatory Action
    B. Summary of the Major Provisions of the Regulatory Action
    C. Summary of Costs and Benefits
II. Background
    A. Sandy Recovery Improvement Act of 2013
    B. Public Assistance Process for Project Approval
    C. Public Assistance Appeal Process under 44 CFR 206.206
III. Discussion of the Rule
    A. Scope
    B. Definitions
    C. Applicability
    D. Governing Rules
    E. Limitations
    F. Request for Arbitration
    G. Administrative Record
    H. Submissions Related to Arbitration
    I. Selection of Panel
    J. Challenge of Arbitrator(s)
    K. Preliminary Administrative Conference
    L. Jurisdictional and Arbitrability Challenges
    M. Hearing
    N. Standard of Review
    O. Ex Parte Communications
    P. Decision
    Q. Costs
    R. Frivolous Requests
    S. Deadline
IV. Regulatory Analyses
    A. Administrative Procedure Act
    B. Executive Order 12866, Regulatory Planning and Review and 
Executive Order 13563, Improving Regulation and Regulatory Review
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Paperwork Reduction Act (PRA) of 1995
    F. National Environmental Policy Act (NEPA) of 1969
    G. Executive Order 13175, Consultation and Coordination With 
Indian Tribal Governments
    H. Executive Order 13132, Federalism
    I. Executive Order 12630, Taking of Private Property
    J. Executive Order 12898, Environmental Justice
    K. Executive Order 12988, Civil Justice Reform
    L. Executive Order 13045, Protection of Children From 
Environmental Health Risks and Safety Risks
    M. Congressional Review Act

I. Executive Summary

A. Purpose of the Regulatory Action

    This section provides a concise description of the major provisions 
in this final rule. The Federal Emergency Management Agency (FEMA) also 
provides a summary of the costs and benefits of this final rule in this 
section.

[[Page 49951]]

1. Need for the Regulatory Action
    FEMA currently authorizes a two-level appeal process for applicants 
that dispute a FEMA determination related to an application for Public 
Assistance. Under the Public Assistance Program, FEMA awards grants to 
State and local governments, Indian Tribal governments, and certain 
private nonprofit organizations (applicants) to assist them in 
responding to and recovering from Presidentially declared emergencies 
and major disasters. The final rule will add a new section at section 
206.10, to 44 CFR Part 206. This new section will provide the 
procedures under which an applicant may request the use of arbitration 
instead of a second appeal under FEMA's Public Assistance Program.
    In order to facilitate an efficient recovery from major disasters, 
section 1105 of the Sandy Recovery Improvement Act of 2013 (SRIA) 
directs FEMA to establish the Dispute Resolution Pilot Program (DRPP). 
This final rule pertains to SRIA's specific requirement that FEMA 
provide the option of arbitration by an independent review panel to 
Public Assistance applicants. Arbitration by an independent review 
panel will only be available for disputes related to disasters declared 
on or after October 30, 2012, in an amount equal to or greater than 
$1,000,000, for projects with a non-Federal cost share requirement 
(i.e.. the grantee/subgrantee have a State/Tribal/local cost share 
requirement), and for applicants that have completed a first appeal 
pursuant to 44 CFR 206.206. The arbitration decisions will be binding. 
The authority for section 1105 of SRIA sunsets on December 31, 2015; 
therefore, the requests for review under the DRPP must be submitted by 
December 31, 2015.
2. Legal Authority for the Regulatory Action
    Section 1105 of SRIA \1\ mandates that FEMA establish procedures 
under which an applicant seeking disaster assistance under FEMA's 
Public Assistance Program may request the use of alternative dispute 
resolution, including arbitration by an independent review panel, to 
resolve disputes related to eligibility for such disaster assistance. 
SRIA identifies this as the DRPP and provides a sunset provision 
prohibiting requests for arbitration after December 31, 2015. This 
final rule lays out the procedures for the binding arbitration 
requirement of the DRPP.
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    \1\ 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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B. Summary of the Major Provisions of the Regulatory Action

    This rule provides the procedures FEMA and the independent review 
panels will apply to requests for arbitration under the DRPP, including 
deadlines for filing the requests, where the requests must be filed, 
the documents each party must submit, the manner and timing by which 
the independent review panel will set up preliminary conferences and 
hearings, how the independent review panel will evaluate any 
jurisdictional challenges, a standard of review to be applied at the 
hearings, and the timing of the independent review panel's decisions.

C. Summary of Costs and Benefits

    As this rule provides the option for arbitration instead of a 
second appeal, it imposes no mandatory costs on the public. FEMA 
estimates an DRPP annual average net cost of $1,392,147 based on an 
estimated average 20 arbitration requests per year and costs associated 
with initial arbitration processing, preliminary administrative 
conferences, oral hearings, jurisdictional challenges, frivolous 
requests, and cost savings associated with second appeals not completed 
in favor of arbitration. This cost includes a $401,142 applicant net 
cost, $60,937 grantee net cost, and $930,068 FEMA net cost (including 
independent review panel costs).
    Benefits of this rule include providing flexibility for applicant 
recourse and a likely increase in applicant satisfaction through the 
use of an independent panel. It also institutes a streamlined process 
that clearly identifies areas/issues in dispute and encourages the use 
of arbitration when appropriate, thereby increasing the speed at which 
disputes are resolved. Furthermore, information from the pilot will 
help determine if arbitration should be provided as a permanent option 
in the future.
    FEMA uses the net annual average cost identified above to calculate 
an DRPP total cost of $3.5 million (undiscounted) for the 2.5 years of 
the pilot program. At a 7 percent discount rate, the total cost equals 
$3.2 million and $1.4 million annualized. The summary table below 
presents a summary of the benefits and costs of the rule.

                 Table 1--Comparison of Dispute Resolution Pilot Program Net Costs and Benefits
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                                                        7% Discount     3% Discount
              Year \1\                     Total            \2\             \3\                Benefits
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2013................................        $696,074        $696,074        $696,074  Provides flexibility for
                                                                                       applicant recourse and
                                                                                       likely increases
                                                                                       applicant satisfaction
                                                                                       through use of an
                                                                                       independent panel.
2014................................       1,392,147       1,301,072       1,351,599  Institutes a streamlined
                                                                                       process that clearly
                                                                                       identifies areas/issues
                                                                                       in dispute and encourages
                                                                                       use of arbitration, when
                                                                                       appropriate, thereby
                                                                                       increasing speed at which
                                                                                       disputes are resolved.
2015................................       1,392,147       1,215,955       1,312,232  Information from pilot
                                                                                       will help determine if
                                                                                       arbitration should be a
                                                                                       permanent option.
                                     ------------------------------------------------
    Total...........................       3,480,368       3,213,101       3,359,905
        Annualized..................  ..............       1,445,344       1,415,041
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\1\ Year 2013 only contains 6 months of activity; thus half the annual average cost. Also, as the rule is
  expected to be published in 2013; the associated discount equates to 1 which does not change 2013 dollar
  values.
\2\ 7% Discount = Total x (1/(1+0.07)-(year-2013)).
\3\ 3% Discount = Total x(1/(1+0.03)-(year-2013)).

[[Page 49952]]

    II. Background

A. Sandy Recovery Improvement Act of 2013

    On January 29, 2013, President Obama signed into law the Sandy 
Recovery Improvement Act of 2013 \2\ (SRIA). The law authorizes several 
significant changes to the way the Federal Emergency Management Agency 
(FEMA) may deliver disaster assistance under a variety of programs. 
Section 1105 of SRIA directs FEMA to establish a nationwide Dispute 
Resolution Pilot Program (DRPP), including arbitration by an 
independent review panel to resolve disputes relating to Public 
Assistance projects, in order to facilitate an efficient recovery from 
major disasters. This final rule establishes the DRPP for arbitration 
by an independent review panel of second appeals. Arbitration by an 
independent review panel will only be available for disputes in an 
amount equal to or greater than $1,000,000, for projects with a non-
Federal cost share requirement (i.e., the grantee/subgrantee have a 
State/Tribal/local cost share requirement), and for applicants that 
have completed a first appeal pursuant to 44 CFR 206.206. The 
arbitration decisions will be binding upon the parties to the dispute 
as required by section 1105(b)(2) of SRIA. Applicants may choose to use 
for their second appeal either the DRPP or the review already offered 
under 44 CFR 206.206. Under section 1105 of SRIA, the authority to 
accept requests for arbitration pursuant to the DRPP sunsets on 
December 31, 2015; therefore, the requests for review under this 
Program must be submitted by December 31, 2015. However, pursuant to 
this rule, FEMA will continue to process and finalize any proper 
request made on or before December 31, 2015.
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    \2\ 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 process available under the DRPP is separate and 
distinct from the arbitration process established by the Arbitration 
for Public Assistance Determinations Related to Hurricanes Katrina and 
Rita (Disasters DR-1603, DR-1604, DR-1605, DR-1606, and DR-1607) final 
rule. See 74 FR 44761, Aug. 31, 2009, 44 CFR 206.209. The differences 
between the Hurricanes Katrina and Rita arbitration process and the 
DRPP include, but are not limited to: (1) The Hurricanes Katrina and 
Rita arbitration process is limited to just Hurricanes Katrina and Rita 
claims; (2) there is no sunset date for the Hurricanes Katrina and Rita 
arbitration process; (3) the amount in dispute for the Hurricanes 
Katrina and Rita arbitration process is $500,000, whereas the amount in 
dispute for the DRPP is $1,000,000; (4) there is no standard of review 
specified for the Hurricanes Katrina and Rita arbitration process, 
whereas the standard of review for the DRPP is arbitrary, capricious, 
or an abuse of discretion; (5) the Hurricanes Katrina and Rita 
arbitration process does not require the applicant to complete a first 
appeal under 44 CFR 206.206, whereas the DRPP does require the 
applicant to complete a first appeal; and (6) the DRPP limits the 
evidence to be presented to the administrative record that was 
established as of the first appeal, whereas the Hurricanes Katrina and 
Rita arbitration process does not limit the evidence that may be 
presented. Despite these differences, various aspects of the Katrina 
and Rita Arbitration Program provide insight into how the DRPP may 
operate, such as the frequency of in-person hearings, number of 
participants at preliminary administrative conferences and hearings, 
and time spent preparing arbitration materials. FEMA has used such 
information to help inform its economic analysis.

B. Public Assistance Process for Project Approval

    Under the Public Assistance Program, authorized by the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act \3\ (Stafford 
Act), FEMA awards grants to eligible applicants to assist them in 
responding to and recovering from Presidentially-declared emergencies 
and major disasters as quickly as possible. The grantee, as defined at 
44 CFR 206.201(e), 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 
grantee. 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 grantee for assistance under the 
State's grant.
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    \3\ 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 Public Assistance Program provides Federal funds for debris 
removal, emergency protective measures, and permanent restoration of 
infrastructure. When the President declares an emergency or major 
disaster declaration authorizing the Public Assistance Program, that 
presidential declaration automatically authorizes FEMA to accept 
applications from eligible applicants under the Public Assistance 
Program. To apply for a grant under the Public Assistance Program, the 
eligible applicant must submit a Request for Public Assistance to FEMA 
through the grantee, which is usually the State but may be an Indian 
Tribal government. An eligible applicant may use FF-009-0-49, to apply 
for public assistance. Upon award, the grantee notifies the applicant 
of the award, and the applicant becomes a subgrantee.
    Project Worksheets for large projects are developed by a FEMA 
Project Specialist, working with a grantee representative and the 
applicant, and are submitted directly to a FEMA Public Assistance Crew 
Leader for review and processing. A Project Worksheet 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, Project Worksheet 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 funds are made available to the grantee. The funds reside in a 
Federal account until drawn down by the grantee 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.
    At times an applicant/grantee or applicant may disagree with FEMA 
regarding a determination related to their request for Public 
Assistance. Such disagreements may include, for instance, whether an 
applicant, 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 
may appeal FEMA's determination. See 44 CFR 206.206.

C. Public Assistance Appeal Process Under 44 CFR 206.206

    Traditionally, under the appeals procedures in 44 CFR 206.206, an

[[Page 49953]]

eligible applicant 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 level appeal is to the FEMA Regional 
Administrator. The second level appeal is to the FEMA Assistant 
Administrator for Recovery.
    The applicant must file an appeal with the grantee within 60 days 
of the appellant's receipt of a notice from FEMA of the Federal 
determination that is being appealed. 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 the initial action by FEMA was 
inconsistent. The grantee reviews and evaluates the appeal 
documentation. The grantee then prepares a written recommendation on 
the merits of the appeal and forwards that recommendation to the FEMA 
Regional Administrator within 60 days of the grantee's receipt of the 
appeal from the applicant.
    The FEMA Regional Administrator reviews the appeal and takes one of 
two actions: (1) Renders a decision on the appeal and informs the 
grantee 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.
    If the FEMA Regional Administrator denies the appeal, the applicant 
may submit a second appeal. The applicant must submit the second appeal 
to the grantee within 60 days of receiving notice of the FEMA Regional 
Administrator's decision on the first appeal. The grantee must forward 
the second level appeal with a written recommendation to the FEMA 
Regional Administrator within 60 days of receiving the second appeal. 
The FEMA Regional Administrator will forward the second appeal for 
action to the FEMA Assistant Administrator for Recovery as soon as 
practicable.
    The FEMA Assistant Administrator for Recovery 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. Upon 
receipt of requested information from the applicant and any other 
requested reports, FEMA is required by regulation to render a decision 
on the second appeal within 90 days. As stated in 44 CFR 206.206(e)(3), 
this decision constitutes the final administrative decision of FEMA.

III. Discussion of the Rule

A. Scope

    The rule implements the DRPP program required by SRIA and sets out 
the Program's procedures, so that applicants may request the use of 
binding arbitration instead of the second administrative appeal process 
set out in 44 CFR 206.206.

B. Definitions

    FEMA defines the term administrative record introduced in section 
1105(b)(3)(D)(ii) of SRIA to make clear that the record which will be 
used during the arbitration process is based upon the documents and 
materials considered by the agency when making the first appeal 
determination.
    The term applicant is used throughout this regulation text and it 
refers to the definition in FEMA's regulations at 44 CFR 206.201(a).
    FEMA defines the term arbitration sponsor in order to clarify that 
there will be a third party administrator of the arbitration program 
that FEMA will select so that it may implement the binding arbitration 
provision introduced in section 1105(b)(1) of SRIA. As set out in 
section 1105(b)(3)(C), the sponsor must be:

    (i) an individual or entity unaffiliated with the dispute (which 
may include a Federal agency, an administrative law judge, or a 
reemployed annuitant who was an employee of the Federal Government) 
selected by the Administrator; and (ii) responsible for identifying 
and maintaining an adequate number of independent experts qualified 
to review and resolve disputes under [section 1105 of SRIA.]

    FEMA defines the term frivolous introduced in section 1105(b)(3)(F) 
of SRIA to set a standard for when an arbitration may be dismissed and 
costs awarded to FEMA from the applicant.
    The term grantee is used throughout this regulation text and it 
refers to the definition in FEMA's regulations at 44 CFR 206.201(e).
    FEMA defines the term legitimate amount in dispute introduced in 
section 1105(a)(2)(B) of SRIA to make clear that the $1,000,000 or more 
threshold for arbitrations will be based on the difference between the 
funding amount sought by the applicant as reimbursable under the Public 
Assistance Program for a project and the funding amount FEMA has 
determined eligible for a project and not to be based on some other 
amount, such as the total dollar value of the project including agreed 
upon costs.
    Non-Federal share means that the project is not 100% federally 
funded and the applicant or grantee bear a percentage of the costs 
pursuant to the cost sharing provisions established in the FEMA-State 
Agreement and the Stafford Act.
    FEMA defines notice to make clear that the phrase ``notice of 
determination'' contained in FEMA's regulations at 44 CFR 206.206 means 
deadlines must be calculated based upon the applicant initially 
receiving actual notice of the determination at issue regardless of 
whether the grantee receives notice simultaneously or the grantee 
forwards the notice to the applicant a second time.
    Panel means an independent review panel referenced in section 
1105(b)(1) of SRIA. A panel consists of three members who are qualified 
to review and resolve disputes under section 1105 of the SRIA.

C. Applicability

    The DRPP will only be available to applicants if the dispute is for 
Public Assistance funding provided under disasters declared on or after 
October 30, 2012. As required by section 1105(a)(2)(B) of SRIA, the 
legitimate amount in dispute must be equal to or greater than 
$1,000,000. The legitimate amount in dispute is determined based on the 
difference between the funding amount sought by the applicant as 
reimbursable under the Public Assistance Program for a project and the 
funding amount FEMA has determined eligible for a project. The dollar 
amount for the legitimate amount in dispute will be adjusted annually 
to reflect changes in the Consumer Price Index for all Urban Consumers 
published by the Department of Labor. FEMA will publish a Federal 
Register Notice to announce when the dollar amount for the legitimate 
amount in dispute has been adjusted.
    As required by section 1105(a)(2)(C) of SRIA, the project must have 
a cost-share such that the applicant and/or the grantee bear a portion 
of the costs. As required by section 1105(a)(2)(D) of SRIA, the 
applicant must have received a decision on a first appeal, and choose 
to file an arbitration instead of filing a second appeal pursuant to 44 
CFR 206.206. The DRPP is a voluntary program; as such, the applicant 
may still file a second appeal pursuant to 44 CFR 206.206. However, the 
applicant must make a choice: it may either file a second appeal 
pursuant to 44 CFR 206.206 or an arbitration pursuant to the DRPP, but 
may not pursue both options.

[[Page 49954]]

D. Governing Rules

    The governing rules are found within sections 403, 406, or 407 of 
the Stafford Act. Further, the dispute will be decided pursuant to 
FEMA's interpretations of those sections of the Stafford Act. These 
interpretations may include, but are not limited to, 44 CFR Part 13; 44 
CFR Part 206; the FEMA Public Assistance Guide (FEMA Publication 321); 
the FEMA Public Assistance Digest (FEMA Publication 322); policies 
published in the 9500 series related to FEMA's Public Assistance 
Program; any applicable Public Assistance guidance, fact sheets, or 
standard operating procedures; evidence of FEMA's practical 
applications of those policies to other applicants with similar 
requests for Public Assistance; and Federal caselaw interpreting FEMA's 
Public Assistance Program.

E. Limitations

    Arbitration is only available for any Public Assistance funding 
dispute arising from disasters declared on or after October 30, 2012. 
Further, arbitration procedures are only available if the applicant 
chooses to file an arbitration instead of filing a second appeal under 
44 CFR 206.206.
    Historically, FEMA has interpreted new statutory authorizations 
that lack retroactive language to apply to all disaster declarations 
occurring on or after the date of enactment. Section 1105 of SRIA, 
however, is included in an act expressly intended to improve recovery 
from Hurricane Sandy and it is likely that Congress intended FEMA to 
apply section 1105 of SRIA to disputes arising from the disasters 
declared for Hurricane Sandy (October 30, 2012), even if that disaster 
declaration has already occurred, and in future disasters. In addition, 
because arbitration is optional, applicants can continue to use 
previously promulgated procedures and would not be negatively impacted 
by this arbitration rule, even though the rule is being promulgated 
after the declaration has occurred.

F. Request for Arbitration

    To file a Request for Arbitration, an applicant must electronically 
submit the form to FEMA, the grantee, and the arbitration sponsor. FEMA 
will provide the applicants with the specific, required information to 
make such electronic submissions in the first appeal determination.

G. Administrative Record

    FEMA will provide a copy of the administrative record to the 
applicant, the grantee, and the arbitration sponsor, 15 calendar days 
after it receives the Request for Arbitration. The administrative 
record will constitute the whole of the evidence that may be considered 
by the panel when it makes a determination on the claim. This 
administrative record may include, but is not limited to, Project 
Worksheets (all versions) and supporting backup documentation, 
correspondence, photographs, and technical reports.

H. Submissions Related to Arbitration

    The grantee must submit the name and address of the grantee's 
chosen authorized representative(s) within 15 calendar days of receipt 
of the Request for Arbitration. The grantee may also include a written 
recommendation in support or opposition to the applicant's Request for 
Arbitration.
    The applicant will provide a statement of claim in order to clarify 
the disputed aspects of the first appeal determination. The applicant 
must cite to specific sections of the administrative record to clarify 
the issues, and specifically must identify which statutes, regulations, 
policies, or guidance support their claim.
    Within 30 calendar days of receipt of the applicant's statement of 
claim, FEMA will provide a memorandum in support of its position and 
the name and address of its authorized representative.

I. Selection of Panel

    As required by section 1105(b)(3)(C) of SRIA, FEMA will choose an 
arbitration sponsor that is unaffiliated with the dispute to ensure 
independence of the arbitration process. FEMA may select a sponsor that 
is a commercial entity through a competitive procurement process or it 
may select a sponsor from another Federal Agency or entity. This 
sponsor will be responsible for choosing the panel which will be 
comprised of three members who are qualified to review and resolve 
disputes under section 1105 of SRIA. The arbitrators must be neutral 
and independent and must not have had any prior involvement with the 
contested appeal.

J. Challenge of Arbitrator(s)

    SRIA specifically provides FEMA authority to establish independent 
review panels as part of its appeals process. As such, it is important 
to allow the parties to assess whether the selected arbitrators are 
impartial and independent.
    This paragraph sets forth the procedures by which a party may 
challenge the impartiality or independence of the arbitrators, if 
circumstances exist that give rise to justifiable doubt as to the 
arbitrator's impartiality or independence. The procedures are based on 
an industry standard. A party challenging an arbitrator will send 
notice stating the reasons for the challenge. The other party will have 
the right to respond to the challenge. The other party may agree to the 
challenge and in such circumstances the arbitration sponsor will 
appoint a replacement arbitrator. If the other party does not agree to 
the challenge and the challenged arbitrator does not withdraw, the 
decision on the challenge will be made by the arbitration sponsor. If 
the arbitration sponsor orders the withdrawal of the challenged 
arbitrator, the arbitrator sponsor will appoint a replacement 
arbitrator.

K. Preliminary Administrative Conference

    The preliminary conference will be held within 15 calendar days of 
receipt of FEMA's response to the applicant's statement of claim. The 
parties will have the opportunity to discuss the conduct of the 
hearing, such as whether there will be witnesses, the nature and 
duration of witness testimony, whether the parties will make additional 
statements, when the hearing will take place, and any preliminary 
requests, including a request for an in-person hearing. The panel will 
memorialize the preliminary conference in a scheduling order setting 
forth the agreements the parties reached and the deadlines the panel 
set during the preliminary conference.

L. Jurisdictional and Arbitrability Challenges

    The panel may consider jurisdictional and arbitrability challenges 
to the Request for Arbitration. Jurisdictional and arbitrability 
challenges include, but are not limited to, disputes over whether the 
Request for Arbitration is appropriately filed according to the scope 
(Section A), applicability (Section C), and limitations (Section E) of 
this section and whether the applicant has filed a timely Request for 
Arbitration. The panel may suspend the arbitration proceedings while it 
considers the challenge, and may dismiss the request prior to any 
hearing if the panel determines the challenge has merit.

M. Hearing

    This paragraph describes the hearings that may take place under 
this section and specifically allows for hearings in person or by 
teleconference, such that all parties may hear all other participants. 
The applicant selects whether the hearing is in-person or via

[[Page 49955]]

teleconference. The hearings should take place within 60 calendar days 
of the preliminary conference, schedules permitting, and the hearing 
may be postponed upon a showing of good cause such as unexpected 
unavailability of the authorized representative or witnesses, 
jurisdictional or arbitrability challenges, or challenges to the 
independence of the arbitrators. The witnesses may only present 
testimony related to issues that were previously included in the first 
appeal determination and may only refer to evidence already in the 
administrative record, per section 1105(b)(3)(D)(ii) of SRIA. A party 
may specifically request and arrange for a written transcript of the 
hearing at its own expense. The requesting party must also pay for a 
copy of the transcript for the Panel members. The non-requesting party 
may not object to a written transcript but may also request a copy of 
the transcript and will be responsible for paying for its own copy.

N. Standard of Review

    This paragraph sets forth the standard of review for the hearings. 
The panel will only set aside the agency determination if it is 
arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with law. In the case of a FEMA finding of material fact 
adverse to the applicant on the first appeal, the panel will only set 
aside or reverse such a finding if the finding was clearly erroneous.

O. Ex Parte Communications

    This paragraph prohibits ex parte communication between the panel 
and a party. This means that neither the applicant, the grantee, nor 
FEMA may communicate with an arbitrator without the participation of 
the other parties or their representatives. If a party violates this 
provision, the panel will direct the violating part to write a 
memorandum of the communication that will be included in the record. 
The panel will give the non-violating party an opportunity for 
rebuttal. The panel may require the party who engages in an 
unauthorized ex parte communication to show cause why the panel should 
continue the matter instead of finding in favor of the opposing party 
as a result of the improper conduct.

P. Decision

    The panel must issue a written and reasoned decision that sets 
forth the findings of fact and conclusions of law within 60 days of the 
hearing. If the applicant does not request a hearing, the panel must 
issue a written and reasoned decision within 60 calendar days of 
administrative conference. The majority decision of the panel will be 
in writing, signed by each member of the panel in agreement with the 
decision. A dissenting member may file a separate written dissent. The 
decision by the panel is binding and is not subject to judicial review, 
except as permitted by 9 U.S.C. 10 of the Federal Arbitration Act.

Q. Costs

    FEMA will pay the fees associated with the panel including 
arbitrator compensation, and the arbitration facility costs, if any. 
However each party will be responsible for its own expenses, including 
but not limited to: attorney's fees, expert witness fees, copying 
costs, and travel or other expenses associated with the parties and all 
witnesses attending the hearing. Any other expenses not listed in this 
paragraph will be paid by the party who incurred the expense.

R. Frivolous Requests

    The panel will deny any frivolous request, defined as the applicant 
knew or reasonably should have known that its actions lack an arguable 
basis in law, policy, or in fact. An example of a frivolous claim is 
one where FEMA has informed the applicant that specific information is 
required in order to prove the applicant's claim and the applicant 
failed to provide the information in the project formulation process or 
first appeal process. An applicant determined to have submitted a 
frivolous claim will be directed to pay the fees associated with the 
panel including arbitrator compensation, and the arbitration facility 
costs, if any, to prevent the inappropriate use of Federal funds for 
arbitrations for claims.

S. Deadline

    This section addresses the sunset provision in the SRIA which 
provides that an applicant cannot make a request for review by the 
panel under this section after December 31, 2015. However, pursuant to 
this rule, FEMA will continue to process and finalize any proper 
request made on or before December 31, 2015.

IV. Regulatory Analyses

A. Administrative Procedure Act

    The Administrative Procedure Act (APA) requires an agency to 
publish a rule for public comment prior to implementation. 5 U.S.C. 
553. The APA, however, provides an exception to the notice and comment 
requirements for rules of agency procedure or practice. 5 U.S.C. 
553(b)(3)(A).
    This final rule implements section 1105 of SRIA by detailing how a 
Public Assistance applicant may request arbitration instead of the 
currently offered second appeal. This final rule is a procedural rule 
because it is an agency rule of practice governing the conduct of 
proceedings. It establishes procedures for making an arbitration 
request and the procedures FEMA will follow in providing an arbitration 
decision. The rule does not affect eligibility under the Public 
Assistance Program; rather, it adds an option for review of Public 
Assistance determinations to expedite recovery efforts by providing 
greater flexibility within the Public Assistance Program. FEMA already 
provides for review determinations on public assistance grants through 
the appeal provisions of 44 CFR 206.206. This final rule simply 
provides an alternate procedure for seeking such a review of FEMA 
determinations.
    This does not confer any substantive rights, benefits, or 
obligations and only sets out the agency's procedure for how to 
voluntarily request an arbitration. Since this rule is procedural in 
nature, it is excepted from the notice and comment requirements under 5 
U.S.C. 553(b)(A). FEMA finds there is good cause not to require a 30-
day delayed effective date because delaying implementation of the rule 
by 30 days reduces the opportunity for applicants to fully participate 
in this time-limited pilot program. 5 U.S.C. 553(d)(3).

B. Executive Order 12866, Regulatory Planning and Review and Executive 
Order 13563, Improving Regulation and Regulatory Review

    FEMA has prepared and reviewed this rule under the provisions of 
Executive Order 12866, ``Regulatory Planning and Review'' (58 FR 51735, 
Oct. 4, 1993) as supplemented by Executive Order 13563, ``Improving 
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011). 
Executive Orders 13563 and 12866 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. 
This rule has not been designated a ``significant regulatory action,'' 
under section 3(f) of Executive Order 12866. Accordingly, the rule has 
not been reviewed by the Office of Management and Budget

[[Page 49956]]

(OMB). A Regulatory Evaluation with details and calculations related to 
the costs and benefits of the rule is available in the docket. A 
summary of the evaluation follows:
    This rule establishes the procedures for the DRPP which provides an 
option for applicants in the FEMA Public Assistance Program to file for 
arbitration when they want to dispute a FEMA eligibility determination 
that involves an amount in dispute greater than or equal to $1,000,000. 
Eligibility disputes are presently resolved through a two level 
administrative appeals process within FEMA, and arbitration will be an 
option to applicants instead of a second appeal. This rule is entirely 
voluntary. By statute, the DRPP will accept Requests for Arbitration 
until December 31, 2015.
    Traditionally, under the appeals procedures in 44 CFR 206.206, an 
eligible applicant 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 level appeal is to the FEMA Regional 
Administrator and the second level appeal is to the FEMA Assistant 
Administrator for Recovery. Typical appeals involve disputes regarding 
whether an applicant, 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. The first appeal 
process will be the same for all applicants. Under this rule, 
applicants who seek further review of the first appeal will have the 
option of choosing a second appeal or arbitration. The second appeal 
process is similar to the first appeal process, but constitutes a 
review of the first appeal, is considered at FEMA headquarters, and the 
decision on the second appeal is the final administrative decision of 
the Agency. Despite some similarities, arbitrations under the DRPP will 
include a few procedural differences to second appeals. Key differences 
include a formal process to interact with FEMA and provide explanatory 
information (e.g., statement of claim) as well as the opportunity to 
interact and present one's case to an independent panel. See Table 2 
for a comparison of the baseline second appeals process to the DRPP.

  Table 2--Comparison Between Second Appeal & Dispute Resolution Pilot
                                 Program
------------------------------------------------------------------------
                                  Second appeal          Arbitration
------------------------------------------------------------------------
Steps After First Appeal      Decision to request   Decision to request
 Decision.                     a 2nd appeal within   arbitration instead
                               60 days of            of a 2nd appeal
                               receiving notice of   within 15 days of
                               the Regional          receiving notice of
                               Administrator's       the Regional
                               decision.             Administrator's
                                                     decision.
Applicant File for 2nd        Appellant submits     Applicant files a
 Appeal.                       2nd appeal request    Request for
                               to the grantee;       Arbitration form
                               typically a letter    electronically to
                               which reiterates      FEMA, the grantee,
                               the information       and the arbitration
                               provided in the 1st   sponsor.
                               appeal.
Grantee Recommendation......  Grantee forwards 2nd  Grantee submits the
                               appeal with a         name and address of
                               written               an authorized
                               recommendation to     representative and
                               the FEMA Regional     may provide a
                               Administrator;        written
                               typically a letter    recommendation to
                               addressing any        FEMA, the grantee,
                               changes to previous   and the arbitration
                               recommendation.       sponsor.
Transmission to FEMA HQ.....  FEMA Regional         Transmission covered
                               Administrator         by simultaneous
                               reviews the           distribution
                               information           between applicant,
                               provided with the     grantee, FEMA, and
                               2nd appeal and        arbitration
                               forwards it with a    sponsor.
                               recommendation for
                               action to the FEMA
                               Assistant
                               Administrator.
------------------------------------------------------------------------
 Additional Dispute Resolution Pilot Program Steps  Administrative
                                                     record--FEMA
                                                     provides a copy of
                                                     all the documents
                                                     and materials
                                                     directly or
                                                     indirectly
                                                     considered by the
                                                     agency and relied
                                                     upon in making the
                                                     1st appeal
                                                     determination.
                                                    Appointment of
                                                     Panel--An
                                                     independent review
                                                     panel consisting of
                                                     three
                                                     Administrative Law
                                                     Judges.
                                                    Applicant statement
                                                     of claim--applicant
                                                     provides a
                                                     statement
                                                     clarifying the
                                                     disputed aspects of
                                                     the 1st appeal
                                                     determination and
                                                     support for their
                                                     claim.
                                                    FEMA response--FEMA
                                                     provides a
                                                     memorandum in
                                                     support of its
                                                     position and the
                                                     name and address of
                                                     its authorized
                                                     representative.
------------------------------------------------------------------------
Additional Info.............  FEMA Regional         The administrative
                               Administrator or      record will
                               FEMA Assistant        constitute the
                               Administrator may     whole of the
                               request additional    evidence that may
                               information if        be considered in
                               necessary. This may   order to make a
                               include independent   determination on
                               scientific or         the claim.
                               technical analysis
                               regarding the
                               subject matter of
                               the appeal.
FEMA Final Decision.........  FEMA Headquarters     Preliminary admin
                               reviews the appeal    conference--provide
                               and the FEMA          s opportunity to
                               Assistant             discuss the conduct
                               Administrator         of the hearing and
                               renders a decision    answer procedural
                               on the appeal and     questions.
                               informs the grantee  Hearing--presentatio
                               of the decision.      n of positions and
                                                     witnesses, as
                                                     appropriate, to an
                                                     independent panel
                                                     either in person or
                                                     by teleconference.
                                                    Panel decision--The
                                                     panel issues a
                                                     written and
                                                     reasoned decision
                                                     that sets forth the
                                                     findings of fact
                                                     and conclusions of
                                                     law.
------------------------------------------------------------------------

    To estimate second appeal applicants who may choose arbitration, 
FEMA uses disaster related second appeals received in FY 2011 and FY 
2012 with amounts in dispute greater than or equal to $1,000,000 
(adjusted for inflation).\4\

[[Page 49957]]

There were 23 second appeals in FY 2011 and 8 second appeals in FY 
2012. Based on this data, FEMA rounds up to estimate a range of 10 to 
30 second appeal applicants per year who may choose arbitration.
---------------------------------------------------------------------------

    \4\ Data on appeal dollar amounts are only available for FY11 
and FY12.
---------------------------------------------------------------------------

    FEMA uses its experience from arbitrations statutorily mandated 
(section 601 of the American Recovery and Reinvestment Act of 2009, 
Public Law 111-5, 123 Stat. 115 (Feb. 17, 2009, 26 U.S.C. 1 note)) and 
codified in 44 CFR 206.209 for the Hurricanes Katrina and Rita 
disasters to help inform many of its estimates. In particular, FEMA's 
experiences related to Mississippi arbitrations--where the relevant 
Public Assistance Program is almost completed, the issues encountered 
have involved all phases of disaster operations, and the disputes are 
comparable to what FEMA historically encounters--has been particularly 
useful in informing our estimates. To calculate the DRPP costs, FEMA 
estimates average annual costs associated with all aspects of the 
arbitration process, including initial arbitration processing, 
preliminary administrative conferences, oral hearings, jurisdictional 
challenges, and frivolous requests.
    Initial arbitration processing costs largely include time spent by 
applicants, grantees, and FEMA developing and providing process 
documentation. Using the existing second appeal information collection 
(1660-0017) as a guide, FEMA estimates an applicant will spend 1 hour 
of a State government management employee's time (or equivalent) 
submitting a Request for Arbitration and a grantee will spend 2 hours 
of a State government management employee's time (or equivalent) 
providing a recommendation. In addition, based on its experience from 
Hurricane Katrina and Rita Mississippi arbitrations, FEMA estimates 
that an applicant's authorized representative will spend approximately 
40 hours composing the statement of claim. Also based on Hurricane 
Katrina and Rita Mississippi arbitration experience, FEMA estimates the 
equivalent of a General Service (GS) 11 employee located in Washington, 
DC will spend 2 hours processing the aforementioned material and the 
equivalent of a GS 14 employee located in Washington, DC will spend 40 
hours composing its memorandum of response. The estimated number of 
arbitration requests and associated wage rates are applied to the hour 
estimates for an average annual cost of $131,659.\5\ The benefits of 
the initial arbitration process include a formal process which further 
clarifies the area and issues in dispute, as well as articulating each 
party's position.
---------------------------------------------------------------------------

    \5\ See the Regulatory Evaluation available in the docket for 
additional details and calculations used to develop this and other 
cost estimates summarized in this rule.
---------------------------------------------------------------------------

    FEMA anticipates that all Requests for Arbitration will require a 
preliminary administrative conference with the selected panel. 
Preliminary administrative conference costs include applicant, grantee, 
and FEMA participant time spent preparing for the conference plus time 
actually in conference. The number of participants is a key cost 
contributor. Based on Hurricane Katrina and Rita Mississippi 
arbitrations, FEMA estimates conferences will last 1 hour and each 
participant will spend 2 hours preparing for the conference. Also based 
on Hurricane Katrina and Rita Mississippi arbitrations, FEMA estimates 
an average of 3 applicant participants (authorized representative), 2 
grantee participants (State government management employee), and 3 FEMA 
participants (GS 14 (2 from Washington, DC)). The estimated number of 
conferences and associated wage rates are applied to the hour estimates 
and the number of participants for an average annual cost of $34,198. 
The benefits of a preliminary administrative conference include 
addressing any prehearing questions and matters, including conduct of 
the arbitration, clarification of the disputed issues, request for 
disqualification of an arbitrator (if applicable), and any other 
preliminary matters.
    Based on the Hurricane Katrina and Rita Mississippi arbitrations, 
FEMA estimates that 60 percent (9/15 = 0.6) of all Requests for 
Arbitration will result in oral hearings, and, last 2 days. Oral 
hearing costs include applicant, grantee, and FEMA participant time 
preparing for the hearing plus time actually spent in the hearing. The 
number of participants is a key cost contributor. Based on Hurricane 
Katrina and Rita Mississippi arbitrations, FEMA estimates an average of 
5 applicant participants (2 authorized representatives plus 3 witnesses 
(State government management employee)), 1 grantee participant (State 
government management employee), and 6 FEMA participants (GS14 (1 from 
Washington, DC)). Furthermore, based on experience from Hurricanes 
Katrina and Rita Mississippi arbitrations, FEMA estimates that all 
participants will appear in-person.
    The FEMA employees who typically decide second appeals and the 
litigators who will defend the Agency will be based out of FEMA's 
Washington, DC office. The closest facility the arbitration sponsor 
maintains near Washington, DC is in Baltimore, MD. Further, based on 
the current disaster activity, FEMA anticipates that a significant 
number of arbitration requests that will be eligible for the DRPP will 
arise out of FEMA Region II (NY, NJ, PR, VI). In addition, the 
arbitration sponsor's New York facility is larger and will hold more 
participants, if necessary. Therefore, FEMA anticipates that half of 
the oral hearings will take place in New York, New York and half in 
Baltimore, MD. As such, FEMA also accounts for travel to New York and 
to Baltimore including airfare (round trip), lodging for 3 nights, 
meals and incidentals for 4 days, and travel time (2 days) per 
traveling participant. The meals and incidental expenses are comprised 
of 2 days of the oral hearing plus 2 days for the travel time, so the 
total is 4 days. Application of the estimated number of hearings to the 
associated wage rates, hour estimates, number of participants, and 
travel costs, and transcript costs results in an average annual cost of 
$698,177. Benefits of an oral hearing include the opportunity to enter 
into a dialogue with FEMA and present one's case to an independent 
panel, who will make a decision that is more likely to be accepted. 
FEMA expects presentation of an applicant's views and positions in a 
neutral forum will solidify the finding and reduce requests for 
reconsideration (despite first and second appeal limitations in 
regulations) and the solicitation of involvement from other entities at 
the local, State, or Federal level to advocate on behalf of an 
applicant regarding an unsatisfactory final determination.
    Under this rule, jurisdictional or arbitrability challenges may be 
raised at any time and are typically addressed independently of an oral 
hearing. Such challenges include disputes over whether the Request for 
Arbitration is appropriately filed according to the scope, 
applicability, and limitations put forth by this rule and whether the 
applicant has filed a timely Request for Arbitration. Based on 
Hurricane Katrina and Rita Mississippi arbitrations, FEMA estimates a 
13-percent likelihood of such challenges.\6\ Although time to address 
such matters will vary, FEMA's Response and Recovery Legal Division 
Litigation Branch estimates an applicant will spend on average 15 hours 
reviewing and responding to a challenge

[[Page 49958]]

per presenter (2 authorized representatives), plus 1 hour of applicant 
and grantee (1 State government management employee) time per 
participant for resolution. In addition, FEMA's Response and Recovery 
Legal Division Litigation Branch estimates an average of 25 hours of 
FEMA presenter time (2 GS 14 (1 from Washington, DC)) per challenge. 
Application of the associated wage rates results in an annual average 
challenge cost of $15,729. A benefit of allowing jurisdictional and 
arbitrability challenges is that it encourages the use of the 
arbitration process when appropriate and provides the ability to stop 
or adjust an arbitration if it is not appropriate or did not follow the 
proper process.
---------------------------------------------------------------------------

    \6\ Hurricane Katrina and Rita arbitration data shows 2 
challenges from the 15 Mississippi arbitrations related to 
jurisdiction and arbitrability, which is about 13 percent (2/15 x 
100 = 13.33).
---------------------------------------------------------------------------

    Frivolous requests for arbitration, as determined by the panel, 
will be denied and the applicant will be required to pay reasonable 
costs to FEMA relating to the review by the panel, including fees and 
expenses. Such costs will be assessed on a case-by-case basis. FEMA 
assumes the cost to address such requests is comparable to 
jurisdictional challenges--16 hours of an applicant's presenter(s) time 
(2 authorized representatives), 1 hour of a grantee's participant time 
(1 State government management employee), and 25 hours of FEMA's 
presenter time (2 GS14 (1 from Washington, DC)) on average. Based on 
experience from Hurricane Katrina and Rita arbitrations, FEMA estimates 
the potential for such claims is 1 out of 40 (2.5 percent). Application 
of the associated wage rates results in an annual average frivolous 
request cost of $3,024. This provision discourages the use of the 
arbitration when inappropriate, by penalizing the filing of requests 
without merit.
    In addition, FEMA estimates cost savings associated with avoided 
second appeals for applicants, grantees, and FEMA, because arbitration 
must be selected instead of a second appeal. Based on FEMA's existing 
Public Assistance Program Information Collection Request (1660-0017), 
FEMA estimates a second appeal request takes a State government 
management employee approximately 2 hours and a grantee recommendation 
takes a State government management employee approximately 1 hour. In 
addition, FEMA's Recovery Office estimates that additional information 
will be necessary approximately 33 percent of the time (\1/3\ = 0.3333) 
and will take applicants, on average, 1 hour to locate, copy, and 
provide the information to FEMA. FEMA also estimates processing second 
appeals takes approximately 40 hours of a GS 13 employee's time 
(located in Washington, DC), 20 hours of a GS 15 employee's time 
(located in Washington, DC), and 3 hours of an Senior Executive Service 
(SES) employee's time. Therefore, cost savings due to avoided second 
appeals include 2.33 hours of applicant time, 1 hour of grantee time, 
and 63 hours of FEMA time. Application of the estimated number of 
arbitration requests and associated wage rates, results in an annual 
average cost savings of $90,640.
    Furthermore, FEMA would incur costs associated with providing 
panels through an arbitration sponsor. Consistent with section 
1105(b)(3)(C) of SRIA, FEMA intends to have arbitration services 
provided by the U.S. Coast Guard's Administrative Law Judge (ALJ) 
Program. Based on the prior costs of cases handled by the Coast Guard 
ALJ Program, FEMA estimates that the cost of arbitration services will 
be approximately $600,000 annually.
    The Dispute Resolution Pilot Program total annual average cost 
equals $1,392,147. See Table 3 for details.

                        Table 3--Summary of Annual Average Costs and Benefits by Category
----------------------------------------------------------------------------------------------------------------
                                                                             Annual
            Categories              Applicant     Grantee        FEMA       average             Benefit
                                                                              cost
----------------------------------------------------------------------------------------------------------------
Initial Arbitration..............      $71,357       $2,170      $58,132     $131,659  Clearly identifies the
                                                                                        areas/issues in dispute
                                                                                        and each party's
                                                                                        position.
Preliminary Administrative             $15,811       $6,510      $11,877      $34,198  Addresses prehearing
 Conference.                                                                            questions, sets
                                                                                        schedule, and resolves
                                                                                        an annual average of 40
                                                                                        percent or 8 cases.
Oral Hearing.....................     $307,789      $53,174     $337,214     $698,177  Provides opportunity to
                                                                                        state one's case and
                                                                                        interact with FEMA in
                                                                                        coming to a decision
                                                                                        which contributes to it
                                                                                        being accepted as final.
Jurisdictional Challenges........       $7,308         $141       $8,280      $15,729  Encourages use of
                                                                                        arbitration process when
                                                                                        appropriate and provides
                                                                                        ability to stop or
                                                                                        adjust arbitration if
                                                                                        not appropriate.
Frivolous Requests...............       $1,405          $27       $1,592       $3,024  Encourages use of
                                                                                        arbitration process when
                                                                                        appropriate by
                                                                                        penalizing the filing of
                                                                                        requests without merit.
Second Appeal Cost Savings.......      -$2,528      -$1,085     -$87,027     -$90,640  Accounts for costs
                                                                                        otherwise spent on
                                                                                        second appeals.
Arbitration Sponsor..............          N/A          N/A     $600,000     $600,000  Independent panel
                                                                                        decision improves
                                                                                        perception of
                                                                                        objectivity and adds to
                                                                                        acceptance of decision.
Overarching......................          N/A          N/A          N/A          N/A  Increases flexibility for
                                                                                        applicant recourse,
                                                                                        speed at which disputes
                                                                                        are resolved, and
                                                                                        provides information
                                                                                        that can be used to
                                                                                        determine if arbitration
                                                                                        should be a permanent
                                                                                        option.
                                  ----------------------------------------------------
    Total........................     $401,142      $60,937     $930,068   $1,392,147
----------------------------------------------------------------------------------------------------------------

    Based on the Dispute Resolution Pilot Program annual average costs 
above, FEMA calculates a total pilot program cost of $3,480,368 over 
the DRPP's duration: $3,213,101 discounted at 7 percent ($1,445,344 
annualized) and $3,359,905 discounted at 3 percent ($1,415,041 
annualized). See Table 4 for details.

[[Page 49959]]

                                                  Table 4--Dispute Resolution Pilot Program Total Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            7% Discount     3% Discount
                        Year \1\                             Applicant        Grantee          FEMA            Total            \2\             \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013....................................................        $200,571         $30,469        $465,034        $696,074        $696,074        $696,074
2014....................................................         401,142          60,937         930,068       1,392,147       1,301,072       1,351,599
2015....................................................         401,142          60,937         930,068       1,392,147       1,215,955       1,312,232
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       1,002,855         152,343       2,325,170       3,480,368       3,213,101       3,359,905
        Annualized......................................  ..............  ..............  ..............  ..............       1,445,344       1,415,041
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Year 2013 only contains 6 months of activity; thus half the annual average cost. Also, as the rule is expected to be published in 2013; the
  associated discount equates to 1 which does not change 2013 dollar values.
\2\ 7% Discount = Total x (1/(1 + 0.07) - (year-2013).
\3\ 3% Discount = Total x (1/(1 + 0.03) - (year-2013).

    The anticipated overarching benefits of the pilot include increased 
flexibility and the perception of objectivity, which likely increases 
acceptance of final decisions. In addition, the time to resolve 
disputes may be faster than the current second appeal process. For 
instance, when comparing maximum process step timeframes for second 
appeals (44 CFR 206.206) and maximum process step timelines identified 
in this rule, the total number of days for arbitration with an oral 
hearing (225 days) versus a second appeal with one additional 
information request (270 days) is 45 days faster (270 days-225 days = 
45 days). Furthermore, the information gathered from the pilot will 
inform the Comptroller General's recommendation to Congress on whether 
an arbitration program should be implemented permanently. See Table 5 
for a comparison of pilot program net costs and benefits.

                 Table 5--Comparison of Dispute Resolution Pilot Program Net Costs and Benefits
----------------------------------------------------------------------------------------------------------------
                                                       7% Discount     3% Discount
              Year \1\                    Total            \2\             \3\                 Benefits
----------------------------------------------------------------------------------------------------------------
2013...............................        $696,074        $696,074        $696,074  Provides flexibility for
                                                                                      applicant recourse and
                                                                                      likely increases applicant
                                                                                      satisfaction through use
                                                                                      of an independent panel.
2014...............................       1,392,147       1,301,072       1,351,599  Institutes a streamlined
                                                                                      process that clearly
                                                                                      identifies areas/issues in
                                                                                      dispute and encourages use
                                                                                      of arbitration, when
                                                                                      appropriate, thereby
                                                                                      increasing speed at which
                                                                                      disputes are resolved.
2015...............................       1,392,147       1,215,955       1,312,232  Information from pilot will
                                                                                      help determine if
                                                                                      arbitration should be a
                                                                                      permanent option.
                                    ------------------------------------------------
    Total..........................       3,480,368       3,213,101       3,359,905
        Annualized.................                       1,445,344       1,415,041
----------------------------------------------------------------------------------------------------------------
\1\ Year 2013 only contains 6 months of activity; thus half the annual average cost. Also, as the rule is
  expected to be published in 2013; the associated discount equates to 1 which does not change 2013 dollar
  values.
\2\ 7% Discount = Total x (1/(1 + 0.07) - (year-2013)).
\3\ 3% Discount = Total x (1/(1 + 0.03) - (year-2013)).

    While the provision of arbitration by a panel is statutorily 
mandated, based on the subsequent analysis, FEMA believes that the 
benefits of the rule justify the costs.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), and 
section 213(a) of the Small Business Regulatory Enforcement Fairness 
Act of 1996, Public Law 104-121, 110 Stat. 847, 858-9 (Mar. 29, 1996) 
(5 U.S.C. 601 note) require that special consideration be given to the 
effects of proposed regulations on small entities. The RFA mandates 
that an agency conduct an RFA analysis when an agency is ``required by 
section 553 . . . to publish general notice of proposed rulemaking for 
any proposed rule.'' 5 U.S.C. 603(a). An RFA analysis is not required 
when a rule is exempt from notice and comment rulemaking under 5 U.S.C. 
553(b). FEMA has determined that this rule is exempt from notice and 
comment rulemaking because it is a rule of agency procedure. See 5 
U.S.C. 553(b)(3)(A). Therefore, an RFA analysis under 5 U.S.C. 603 is 
not required for this rule.
    As previously discussed, this rule establishes the procedures for a 
Dispute Resolution Pilot Program at 44 CFR 206.210, which provides an 
option for applicants in the FEMA Public Assistance Program to file for 
arbitration when they want to dispute a FEMA eligibility determination 
that involves an amount in dispute greater than or equal to $1,000,000. 
This rule is entirely voluntary and has no mandatory costs to affected 
applicants.

D. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, 109 
Stat. 48 (Mar. 22, 1995) (2 U.S.C. 1501 et seq.), requires Federal 
agencies to assess the effects of their discretionary regulatory 
actions that may result in the expenditure by a State, local, or Tribal 
government, in the aggregate, or by the private sector of $100,000,000 
or more in any one year. As the final rule would not have an impact 
greater than $100,000,000 or more in any one year, it is not an 
unfunded Federal mandate.

E. Paperwork Reduction Act (PRA) of 1995

    As required by the Paperwork Reduction Act of 1995 (PRA), Public 
Law 104-13, 109 Stat. 163, (May 22, 1995) (44 U.S.C. 3501 et seq.), an 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless the collection of 
information displays a valid control number. The information collection 
in this rule is approved by OMB under control number 1660-0017, Public 
Assistance Program.

[[Page 49960]]

F. National Environmental Policy Act (NEPA) of 1969

    Section 102 of the National Environmental Policy Act of 1969 
(NEPA), Public Law 91-190, 83 Stat. 852 (Jan. 1, 1970) (42 U.S.C. 4321 
et seq.) requires agencies to consider the impacts in their decision-
making on the quality of the human environment. The Council on 
Environmental Quality's procedures for implementing NEPA, 40 CFR 1500 
through 1508, require Federal agencies to prepare Environmental Impact 
Statements (EIS) for major Federal actions significantly affecting the 
quality of the human environment. Each agency can develop categorical 
exclusions to cover actions that typically do not trigger significant 
impacts to the human environment individually or cumulatively. Agencies 
develop environmental assessments (EA) to evaluate those actions that 
do not fit an agency's categorical exclusion and for which the need for 
an EIS is not readily apparent. At the end of the EA process the agency 
will determine whether to make a Finding of No Significant Impact or 
whether to initiate the EIS process.
    Rulemaking is a major Federal action subject to NEPA. The List of 
exclusion categories at 44 CFR 10.8(d)(2)(ii) excludes the preparation, 
revision, and adoption of regulations from the preparation of an EA or 
EIS, where the rule relates to actions that qualify for categorical 
exclusions.
    Action taken or assistance provided under sections 403, 406, and 
407 of the Stafford Act are statutorily excluded from NEPA and the 
preparation of EIS and EA by section 316 of the Stafford Act. 42 U.S.C. 
5159; 44 CFR 10.8(c). NEPA implementing regulations governing FEMA 
activities at 44 CFR 10.8(d)(2)(ii) categorically exclude the 
preparation, revision, and adoption of regulations from the preparation 
of an EA or EIS, where the rule relates to actions that qualify for 
categorical exclusions. Action taken or assistance provided under 
sections 403 and 407 of the Stafford Act are categorically excluded 
under 44 CFR 10.8(d)(2)(xix). This final rule establishes an option for 
arbitration under FEMA's Public Assistance Program. Arbitration is an 
administrative action for FEMA's Public Assistance Program. Therefore, 
the activity this rule applies to meets FEMA's Categorical Exclusion in 
44 CFR 10.8(d)(2)(i). Because no other extraordinary circumstances have 
been identified, this rule does not require the preparation of either 
an EA or an EIS as defined by NEPA.

G. Executive Order 13175, Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, ``Consultation and Coordination With Indian 
Tribal Governments,'' 65 FR 67249, Nov. 9, 2000, applies to agency 
regulations that have Tribal implications, that is, regulations that 
have substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian Tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian Tribes. Under this Executive Order, to the extent 
practicable and permitted by law, no agency will promulgate any 
regulation that has Tribal implications, that imposes substantial 
direct compliance costs on Indian Tribal governments, and that is not 
required by statute, unless funds necessary to pay the direct costs 
incurred by the Indian Tribal government or the Tribe in complying with 
the regulation are provided by the Federal Government, or the agency 
consults with Tribal officials.
    Indian Tribes have the same opportunity to participate in the DRPP 
as other eligible applicants; however, given the participation criteria 
of the DRPP and its voluntary nature, FEMA estimates only 10 to 30 
requests for arbitration, per year, until the DRPP sunsets. As such, 
FEMA anticipates a very small number, if any Indian Tribes, will 
participate in the voluntary DRPP before it sunsets. As a result, FEMA 
does not expect the DRPP to have a substantial direct effect on one or 
more Indian tribes or impose direct compliance costs on Indian Tribal 
governments. Additionally, since FEMA anticipates a very small number, 
if any Indian Tribes will participate in the voluntary DRPP, FEMA does 
not expect the regulations to have substantial direct effects on the 
relationship between the Federal Government and Indian Tribes or on the 
distribution of power and responsibilities between the Federal 
Government and Indian Tribes. Therefore, FEMA finds that this final 
rule complies with Executive Order 13175.

H. Executive Order 13132, Federalism

    A rule has implications for federalism under Executive Order 13132, 
``Federalism'' (64 FR 43255, Aug. 10, 1999), if it has a substantial 
direct effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. FEMA has 
analyzed this final rule under Executive Order 13132 and determined 
that it does not have implications for federalism.

I. Executive Order 12630, Taking of Private Property

    This rule will not effect a taking of private property or otherwise 
have taking implications under Executive Order 12630, ``Governmental 
Actions and Interference With Constitutionally Protected Property 
Rights'' (53 FR 8859, Mar. 18, 1988).

J. Executive Order 12898, Environmental Justice

    Under Executive Order 12898, as amended, ``Federal Actions To 
Address Environmental Justice in Minority Populations and Low-Income 
Populations'' (59 FR 7629, Feb. 16, 1994), FEMA incorporates 
environmental justice into its policies and programs. Executive Order 
12898 requires each Federal agency to conduct its programs, policies, 
and activities that substantially affect human health or the 
environment in a manner that ensures that those programs, policies, and 
activities do not have the effect of excluding persons from 
participation in, denying persons the benefit of, or subjecting persons 
to discrimination because of their race, color, or national origin or 
income level.
    Implementation of section 1105 of SRIA will facilitate an efficient 
recovery from major disasters, including arbitration by an independent 
review panel, to resolve disputes relating to Public Assistance 
projects. This rulemaking deals only with Public Assistance projects, 
which provide for Federal funds for debris removal, emergency 
protective measures, and permanent restoration of infrastructure does 
not provide Federal funds directly to persons. Accordingly, this 
rulemaking does not implicate the Executive Order's provisions related 
to discrimination.
    No action that FEMA can anticipate under this rule will have a 
disproportionately high and adverse human health or environmental 
effect on any segment of the population.

K. Executive Order 12988, Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, ``Civil Justice Reform'' (61 FR 4729, Feb. 7, 
1996), to minimize litigation, eliminate ambiguity, and reduce burden.

[[Page 49961]]

L. Executive Order 13045, Protection of Children From Environmental 
Health Risks and Safety Risks

    This rule will not create environmental health risks or safety 
risks for children under Executive Order 13045, ``Protection of 
Children From Environmental Health Risks and Safety Risks'' (62 FR 
19885, Apr. 23, 1997).

M. Congressional Review Act

    FEMA has sent this final rule to the Congress and to the Government 
Accountability Office under the Congressional Review of Agency 
Rulemaking Act, (``Congressional Review Act''), Public Law 104-121, 110 
Stat. 873 (Mar. 29, 1996) (5 U.S.C. 804). This rule is not a ``major 
rule'' within the meaning of the Congressional Review Act.

List of Subjects in 44 CFR Part 206

    Administrative practice and procedure, Coastal zone, Community 
facilities, Disaster assistance, Fire prevention, Grant programs-
housing and community development, Housing, Insurance, 
Intergovernmental relations, Loan programs--housing and community 
development, Natural resources, Penalties, Reporting and recordkeeping 
requirements.

    For the reasons discussed in the preamble, the Federal Emergency 
Management Agency amends 44 CFR part 206, subpart G, as follows:

PART 206--FEDERAL DISASTER ASSISTANCE

0
1. The authority citation for part 206 is revised to read as follows:

    Authority: Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, 42 U.S.C. 5121 through 5207; Homeland Security Act 
of 2002, 6 U.S.C. 101 et seq.; Department of Homeland Security 
Delegation 9001.1; sec. 1105, Pub. L. 113-2, 127 Stat. 43 (42 U.S.C. 
5189a note).

0
2. Add Sec.  206.210 to read as follows:

Sec.  206.210  Dispute Resolution Pilot Program.

    (a) Scope. Pursuant to section 1105 of the Sandy Recovery 
Improvement Act of 2013, Public Law 113-2, this section establishes 
procedures for a Dispute Resolution Pilot Program under which an 
applicant or subgrantee (hereinafter ``applicant'' for purposes of this 
section) may request the use of binding arbitration by a panel to 
resolve disputes arising under section 403, 406, or 407 of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5170b, 5172, 5173).
    (b) Definitions. In this section, the following definitions apply:
    Administrative record means all the documents and materials 
directly or indirectly considered by the agency and relied upon in 
making the first appeal determination pursuant to Sec.  206.206. This 
record may include, but is not limited to, Project Worksheets (all 
versions) and supporting backup documentation, correspondence, 
photographs, and technical reports.
    Applicant is used throughout this regulation text and refers to the 
definition in FEMA's regulations at 44 CFR 206.201(a).
    Arbitration sponsor means the entity or entities FEMA selects to 
administer the arbitrations requested under this rule.
    Frivolous means the applicant knew or reasonably should have known 
that its actions lack an arguable basis in law, policy, or in fact.
    Grantee is used throughout this regulation text and it refers to 
the definition in FEMA's regulations at 44 CFR 206.201(e).
    Legitimate amount in dispute means the difference between the 
amount of grant funding sought by the applicant for a project as 
reimbursable under the Public Assistance Program and the amount of 
grant funding which FEMA has determined eligible for a project under 
the Public Assistance Program.
    Non-Federal share means that the project is not 100% federally 
funded and the applicant or grantee bear a percentage of the costs 
pursuant to the cost sharing provisions established in the FEMA-State 
Agreement and the Stafford Act;
    Notice means actual notice that is transmitted to and received by a 
representative of the applicant either via regular mail, facsimile, or 
electronic transmission. The notice may be transmitted simultaneously 
to the grantee and the applicant.
    Panel means an independent review panel referenced in section 
1105(b)(1) of SRIA. A panel consists of three members who are qualified 
to review and resolve disputes under section 1105 of the SRIA.
    (c) Applicability. This section applies to an applicant that wants 
to request arbitration of a determination FEMA has previously made on 
an applicant's application for Public Assistance for disasters declared 
on or after October 30, 2012. The following criteria apply:
    (1) The legitimate amount in dispute is equal to or greater than 
$1,000,000, which sum the FEMA Administrator will adjust annually via a 
Federal Register Notice to reflect changes in the Consumer Price Index 
for all Urban Consumers published by the Department of Labor;
    (2) The applicant bears a non-Federal share of the cost; and,
    (3) The applicant has received a decision on a first appeal, but 
not a decision on a second appeal, pursuant to Sec.  206.206.
    (d) Governing rules. The arbitration will be governed by applicable 
requirements in section 403, 406, or 407 of the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170b, 5172, 
5173) and the interpretations of those sections of the Stafford Act.
    (e) Limitations--(1) Date of disaster. FEMA can only consider an 
applicant's Request for Arbitration of a public assistance grant for 
disasters declared on or after October 30, 2012.
    (2) Election of remedies. An applicant can only request arbitration 
under this section if the applicant has not previously filed a second 
appeal under Sec.  206.206. If an applicant requests arbitration under 
this section, the applicant waives the option of filing a second appeal 
under Sec.  206.206.
    (3) Final agency action under Sec.  206.206. Arbitration under this 
section is not available for any request submitted by an applicant for 
which FEMA issued a final agency action in the form of a decision on a 
second appeal pursuant to Sec.  206.206.
    (f) Request for Arbitration. (1) An applicant who is dissatisfied 
with a decision on a first appeal may initiate binding arbitration by 
submitting a Request for Arbitration simultaneously to the grantee, the 
arbitration sponsor and FEMA.
    (2) An applicant must submit the Request for Arbitration no later 
than 15 calendar days of applicant's receipt of notice of the first 
appeal decision that is the subject of the arbitration request.
    (g) Administrative record. Within 15 calendar days of receipt of 
the Request for Arbitration, FEMA will simultaneously provide a copy of 
the administrative record to the arbitration sponsor, the applicant and 
the grantee.
    (h) Submissions related to arbitration--(1) Grantee recommendation.
    (i) Within 15 calendar days of receipt of the Request for 
Arbitration, the grantee must forward to FEMA the name and address of 
the grantee's authorized representative.
    (ii) The grantee may submit a written recommendation in support or 
opposition of the applicant's claim via electronic submission 
simultaneously to the applicant, the arbitration sponsor, and FEMA.
    (2) Applicant statement of claim. (i) Within 30 calendar days of 
applicant's receipt of the administrative record, the

[[Page 49962]]

applicant must submit a written arbitration statement of claim that 
makes the circumstances of the dispute clear. The written arbitration 
statement of claim must include sufficient detail and citation to 
supporting documents from the administrative record and specific 
section references, so that the circumstances of the dispute are clear.
    (ii) The applicant will only include issues directly raised and 
decided in the first appeal and will also cite to applicable statutes, 
regulations, policies, or guidance in support of their claim.
    (iii) The applicant must provide the written statement of claim via 
electronic submission simultaneously to FEMA, the grantee, and the 
arbitration sponsor.
    (3) FEMA response. Within 30 calendar days of receipt of the 
applicant's statement of claim, FEMA will submit a memorandum in 
support of its position and the name and address of its authorized 
representative via electronic submission simultaneously to the 
arbitration sponsor, the grantee, and the applicant.
    (i) Selection of panel. The arbitration sponsor will select the 
panel. All arbitrators must be neutral, independent, and impartial.
    (j) Challenge of arbitrator(s). Any arbitrator may be challenged by 
a party, if circumstances exist that give rise to justifiable doubt as 
to the arbitrator's impartiality or independence.
    (1) A party challenging an arbitrator will send notice stating the 
reasons for the challenge within 15 calendar days after being notified 
of that arbitrator's appointment or after becoming aware of the 
circumstances that give rise to the party's justifiable doubt as to 
that arbitrator's impartiality or independence.
    (2) When an arbitrator has been challenged by a party, the other 
party will have the right to respond to the challenge within 15 
calendar days after receipt of the notice of the challenge.
    (3) The other party may agree to the challenge and in such 
circumstances the arbitration sponsor will appoint a replacement 
arbitrator. If the other party does not agree to the challenge and the 
challenged arbitrator does not withdraw, the decision on the challenge 
will be made by the arbitration sponsor. If the arbitration sponsor 
orders the withdrawal of the challenged arbitrator, the arbitrator 
sponsor will appoint a replacement arbitrator.
    (k) Preliminary administrative conference. The panel will hold a 
preliminary administrative conference with the parties and/or 
representatives of the parties within 15 calendar days of the panel's 
receipt of FEMA's response to the applicant's statement of claim. The 
panel and the parties will discuss the future conduct of the 
arbitration, including clarification of the disputed issues, request 
for disqualification of an arbitrator (if applicable), and any other 
preliminary matters. The panel will provide the parties with the 
opportunity to request a hearing and, if requested,
    (1) A party must request a hearing to the panel no later than the 
time of the preliminary administrative conference.
    (2) If a hearing is requested, the panel will set the date and 
place of any hearing and set a deadline for the parties to exchange 
witness lists. Within 10 calendar days of the preliminary conference, 
the independent review panel will issue a scheduling order which 
memorializes the matters heard at the conference and the upcoming 
deadlines.
    (l) Jurisdictional and arbitrability challenges. Any party may 
raise a jurisdictional or arbitrability challenge at any time during 
the arbitration.
    (1) When jurisdiction or arbitrability has been challenged by a 
party, the other party will have the right to respond to the challenge 
within 15 calendar days after receipt of the notice of the challenge.
    (2) The panel may suspend or continue the arbitration proceedings 
during the pendency of the challenge. The panel must rule upon the 
challenge prior to any hearing in the matter and will dismiss any 
matter that is untimely or outside the panel's jurisdiction. The 
panel's dismissal will be with prejudice and there will be no further 
arbitration of the issue giving rise to the Request for Arbitration.
    (m) Hearing--(1) Request for hearing. The panel will provide the 
applicant and FEMA with an opportunity to make an oral presentation on 
the substance of the applicant's claim, by telephone conference, or 
other means during which all parties may simultaneously hear all other 
participants.
    (2) Location of hearing. If an in-person hearing is requested and 
authorized by the panel, it will be held at a hearing facility of the 
panel's choosing.
    (3) Conduct of hearing. Each party must present its position at the 
hearing through oral presentations by witnesses the party has 
identified pursuant to the deadline and terms established by the panel. 
The presentations will only relate to those issues raised and decided 
in the first appeal and only reference documents included in the 
administrative record.
    (4) Time limits. The panel should hold the hearing within 60 
calendar days of the preliminary conference.
    (5) Postponement or continuance. The panel may postpone or continue 
a hearing upon agreement of the parties, or upon request of a party for 
good cause shown. Within 10 calendar days of the date the panel grants 
a party's request for postponement or continuance, the panel will 
notify the parties of the rescheduled date of the hearing.
    (6) Transcript of the hearing. A party may specifically request and 
arrange for a written transcript of the hearing at its own expense.
    (n) Standard of review. The panel will only set aside the agency 
determination if it is arbitrary, capricious, an abuse of discretion, 
or otherwise not in accordance with law. In the case of a FEMA finding 
of material fact adverse to the applicant on the first appeal, the 
panel will only set aside or reverse such a finding if the finding was 
clearly erroneous.
    (o) Ex parte communications. No party will have any ex parte 
communication with the arbitrators unless the parties agree otherwise. 
If a party violates this provision, the panel will ensure that a 
memorandum of the communication is included in the record and that an 
opportunity for rebuttal is allowed. The panel may require the party 
who engages in an unauthorized ex parte communication, to show cause 
why the issue should not be resolved against it for the improper 
conduct.
    (p) Decision--(1) Time limits.
    (i) The panel will issue a written decision within 60 calendar days 
from the conclusion of the hearing.
    (ii) If a hearing was not requested and approved, the panel will 
issue a written decision within 60 calendar days from the preliminary 
administrative conference.
    (2) Form and content. The panel will issue a reasoned decision that 
includes findings of fact and conclusions of law that will set forth 
the reasons for the decision, with citations to the record or testimony 
taken during the hearing under this section which support the panel's 
disposition of a decision. The majority decision of the panel will be 
in writing, signed by each member of the panel in agreement with the 
decision. A dissenting member of the panel may issue a separate written 
dissent that will set forth the reasons for the dissent.
    (3) Finality of decision. A decision of the majority of the panel 
will constitute a final decision, binding on all parties, but will not 
be binding precedent for any future arbitration hearings or FEMA 
administrative decisions. Final decisions are not subject to further 
administrative review. Final decisions are not subject to judicial 
review, except as permitted by 9 U.S.C. 10.

[[Page 49963]]

    (4) Delivery of decision. The panel will deliver its decision via 
simultaneous electronic submission to each party or its authorized 
representative.
    (q) Costs--(1) Fees. FEMA will pay all fees associated with the 
independent review panel, including arbitrator compensation, and the 
arbitration facility costs.
    (2) Expenses. Expenses for each party will be paid by the party who 
incurred the expense.
    (r) Frivolous requests. If, upon notification by FEMA, or on its 
own initiative the panel determines the applicant's Request for 
Arbitration to be frivolous, the panel will deny the Request for 
Arbitration and direct the applicant to reimburse FEMA for reasonable 
costs FEMA incurred, including fees and expenses.
    (s) Deadline. FEMA cannot consider an applicant's request for 
review by a panel under this section if the request is made after 
December 31, 2015. However, pursuant to this rule, FEMA will continue 
to process and finalize any proper request made on or before December 
31, 2015.

    Dated: August 8, 2013.
W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2013-19887 Filed 8-15-13; 8:45 am]
BILLING CODE 9111-23-P