Miss. Code. tit. 11, pt. 6, ch. 5, app 11-6-5-A

Current through January 14, 2025

Appendix 11-6-5-A - Determination of Eligible and Allowable Costs

A. General

Eligible costs are those costs in which WPCELF loan participation is authorized pursuant to applicable statute. Allowable costs are eligible costs that meet the following general criteria in addition to any specific identification as an allowable cost within Appendix A:

(1) Be necessary and reasonable for the proper and efficient administration and construction of the project, be allocable to the project, and not be a general expense required to carry out the overall responsibilities of the loan recipient.

(2) Be authorized or not prohibited under state or local laws or regulations.

(3) Conform to any limitations or exclusions set forth in state laws, or other governing limitations as to types or amounts of cost items.

(4) Be consistent with policies, regulations, and procedures that apply uniformly to both state assisted and other activities of the loan recipient.

(5) Be accorded consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances.

(6) Not be allocable to, or included as, a cost of any other federally or state financed program in either the current, prior, or future period.

(7) Be determined allowable by the Department after review of necessary books, records and other documents related to the costs. Failure to cooperate with the Department regarding access to project records or refusal to provide such records when requested by the Department may result in such costs being determined unallowable for WPCELF participation.

(8) Be within the scope of the project and budget period as described in the loan agreement.

(9) Be determined without regard to any previous federal grant, WPCELF or WPCRLF loan funding provided for facilities to be replaced, upgraded, or rehabilitated, except as described in Rule 5.2.D.(6) of these regulations.

(10) Be within the scope of projects that meet the definition of an emergency and are allowed under Rule 5.2.B. of these regulations.

(11) Be procured in accordance with Appendix B.

B. Construction

(1) Allowable costs include:

(a) The costs of contracts for construction work on the project, including prime contracts, subcontracts and the direct purchase of equipment, materials and supplies by the loan recipient.

Eligible items in the project may include treatment works (which includes wastewater treatment, interceptors, collectors, and other items; see the definitions), nonpoint source management programs, and estuary conservation and management plans.

(b) Collectors, including conventional gravity, small diameter gravity, pressure, and vacuum systems.

For wastewater collection projects which provide sewers to existing buildings, service lines between the public sewer and the point five (5) feet from the outside wall of existing residences and public buildings are allowable. Service lines between the public sewer and the property line of existing businesses are allowable.

(c) The costs of sewer system rehabilitation (including rehabilitation of allowable service lines) necessary to eliminate or prevent bypasses or overflows, or to provide proper operation of the treatment works.

(d) The cost of treatment works capacity adequate to transport and treat infiltration/inflow that will remain in the system.

(e) Treatment works which serve industrial or commercial users when such works are publicly owned.

(f) Reserve capacity within a design period of up to twenty years (forty years for interceptors, including pump stations and force mains serving as interceptors).

(g) Construction of nonpoint source pollution control projects and estuary improvements projects.

On such projects which are also designed to provide for drainage, flood control, or any purposes other than control of pollutants or estuary improvements, only the portion of the project needed for emergency control of pollutants or estuary improvements is allowable.

(h) Construction of treatment and transportation facilities for control of pollutant discharges from a separate or combined storm sewer system. On such projects which are also designed to provide for drainage, flood control, or any purposes other than control of pollutants, only the portion of the project needed for control of pollutants is allowable.

(i) The cost associated with the preparation of the project site before, during and, to the extent provided in the loan agreement, after construction. These costs include:

i. The cost of demolition of existing structures on the project site if construction cannot be undertaken without such demolition. Demolition of existing structures on the project site when not required for constructing the project, will be considered to be an allowable cost only if the existing structures constitute a real and present hazard to safety, public health, or water quality which can best be abated by the removal of the existing structures.

ii. The cost of removal, relocation or replacement of utilities, provided the loan recipient is legally obligated to pay for such by law.

iii. The cost of restoring streets and rights-of-way to their original condition. The need for such restoration must result directly from the construction and is generally limited to repaving the width of trench.

(2) Unallowable costs include:

(a) Construction and construction related costs which are incurred after the Department-determined allowable contract completion date (including allowable time extension change orders), unless approved by the Department pursuant to Rule 5.3.C.(6)(c) of these regulations.

(b) Treatment works which serve federal users exclusively, or almost exclusively.

(c) Bonus payments for completion of construction before a contractual completion date unless required by state law.

(d) The cost of additional insurance (e.g., for a specific project) beyond that normally carried by the contractor.

C. Equipment, Materials and Supplies

(1) Allowable costs include:

(a) The cost of a reasonable inventory of laboratory chemicals and supplies necessary to initiate plant operations and laboratory items necessary to conduct tests required for plant operation.

(b) The costs for purchase and/or transportation of biological seeding materials required for expeditiously initiating the treatment process operation.

(c) The cost of shop equipment installed at the treatment works necessary to the operation of the works. The need will depend on the specific item, its frequency of expected use, and the size and complexity of the treatment facility. Undoubtedly, larger treatment facilities will have a greater need for installed shop equipment than smaller ones. Where the proposed items of equipment are inappropriate to the size and/or complexity of the treatment works, the Department may determine that the proposed equipment is unallowable.

(d) The costs of necessary and reasonable safety equipment, provided the equipment meets applicable federal, state, local or industry safety requirements.

(e) The costs of necessary and reasonable collection system maintenance equipment.

(f) The cost of mobile equipment necessary for the operation of the overall wastewater treatment facility, transmission of wastewater or sludge, or for the maintenance of equipment. These items include:

i. Portable stand-by generators.

ii. Large portable emergency pumps to provide "pump-around" capability in the event of pump station failure or pipeline breaks.

iii. Sludge or septage tankers, trailers, and other vehicles having as their sole purpose the transportation of liquid or dewatered wastes from the collector point (including individual or onsite systems) to the treatment facility or disposal site.

iv. Tillage, planting and harvesting equipment that is documented as necessary and reasonable for producing the crops which are an integral part of the land treatment process, and other vehicles demonstrated necessary to the facility and approved in advance by the Department.

Mobile equipment necessary for the operation of the overall wastewater treatment facility may also include vehicles necessary for the daily removal and disposal of grit. While vehicles used for other purposes (e.g., sludge tanks or trailers) would normally serve this purpose, large facilities may have a sufficient need to justify a separate vehicle to be used solely for the transportation and disposal of grit. Additionally, for projects which involve the landspreading of sludge as the method of ultimate sludge disposal, the necessary vehicles and equipment for proper sludge application.

(g) Replacement parts identified and approved in advance by the Department as necessary to assure uninterrupted operation of the facility, provided they are critical parts or major systems components which are:

i. not immediately available and/or whose procurement involves an extended "lead-time," or

ii. identified as critical by the equipment supplier(s), or

iii. critical but not included in the inventory provided by the equipment supplier(s).

(h) Flow metering devices used for billing purposes. The costs of constructing or installing flow metering devices and appurtenances used for billing intergovernmental and major user flows are allowable costs. Meters constructed or installed for the primary purpose of billing individual residential, commercial, public or industrial users are not allowable.

(i) The cost of furnishings, office equipment, and maintenance equipment dedicated solely to the pollution control project. Necessary and reasonable office furnishings and equipment include chairs, desks, file cabinets, typewriters, coffee tables, telephones, office supplies, calculators, copiers, book cases, shelves and lamps. Ordinary site and building maintenance equipment such as lawnmowers, rakes, shovels, brooms, picks, hedge trimmers, and other such equipment. Hand tools such as screw drivers, pliers, socket wrenches, electric drills or saws, etc.

(j) Computers. Computers, display monitors, and computer software which are designed into the control system for the daily operation of the treatment works.

Computers are also allowable if they are to be used for the operational control and analysis of the treatment works. Examples of such allowable uses include the scheduling of equipment maintenance and replacement, the operation of the loan recipient's pretreatment program, including the scheduling of tests to verify industrial compliance with pretreatment requirements, and for accounting and billing services.

The cost of computer software specifically designed for the operation and maintenance of the treatment works is also allowable for loan participation. This includes the cost of developing unique operating programs for the specific loan funded project.

(2) Unallowable costs include:

(a) The costs of equipment or material procured in violation of Appendix B.

(b) The cost of vehicles for the transportation of the loan recipient's employees, including buses, trucks, cars, motorcycles, golf carts, bicycles, etc.

(c) Items of routine "programmed" maintenance such as ordinary piping, air filters, couplings, hoses, belts, etc.

(d) Radios, televisions, VCRs, camcorders, and other items of a similar nature.

(e) Large stocks of laboratory and other chemicals and supplies above a reasonable inventory necessary to initiate plant operations.

D. Change Orders

(1) Change order costs are allowable provided they are:

(a) Necessary and reasonable.

(b) Within the scope of the project.

(c) Not caused by the loan recipient's mismanagement.

(d) Not caused by the loan recipient's vicarious liability for the improper actions of others.

(e) In conformance with the WPCELF regulations.

(2) Provided the above requirements are met, the following are examples of allowable change orders.

(a) Construction costs resulting from defects in the plans, design drawings and specifications, or other contract documents only to the extent that the costs would have been incurred if the contract documents on which the bids were based had been free of the defects, and excluding the costs of any rework, delay, acceleration or disruption caused by such defects.

Additional costs to correct defects (i.e., errors and omissions in the contract documents) and other costs caused by the impact of such defects on other portions of the project, are not allowable. For example, if the construction drawings had omitted return sludge piping from the secondary clarifiers to the aeration tanks and the engineer or contractor detected this before construction was undertaken, the cost of a change order to include the piping would be an allowable cost, because:

i. the piping would have been included in the original bid,

ii. no additional construction or rework was required (beyond what would have been required if the work had originally been included), and

iii. there was no cost impact on other portions of the project (since construction work had not begun).

If this omission had been realized after substantial construction work had been completed, and therefore required rework, delay, or additional work beyond that which would have been required by defect free drawings, the cost of the piping would still have been allowable, but the additional cost of rework or delay would have been unallowable.

The additional cost is measured as the difference between the cost which would have been included in the bid based on defect free drawings and the actual cost of the change order. For example, if a concrete tank had been constructed and was later found to be at an incorrect elevation due to an error in the design drawings and if it was necessary to demolish the tank and reconstruct it at the correct elevation, the entire change order would be unallowable, except for differences in excavation costs. If additional excavation was required to enable the tank to be constructed at the correct elevation (i.e., the incorrect elevation was too high), the cost of the additional excavation would be allowable. However, if too much excavation had been undertaken and fill was required to enable the tank to be constructed at the correct elevation (i.e., the incorrect elevation was too low), both the entire change order and the cost of the unnecessary excavation would be unallowable.

Regardless of the allowability or unallowability of construction costs to correct errors and omissions, in no case are additional engineering, legal, inspection, or other costs allowable, except for the cost of inspecting allowable construction work, to the extent that such inspection costs would have been incurred to inspect the same construction if such construction had originally been included in defect-free drawings.

(b) Equitable adjustments for differing site conditions.

E. Professional Services

The term professional services refers to engineering, legal, administrative, and similar services. Should any costs for such professional services be incurred prior to loan award, such costs will be allowable provided the loan recipient has requested and obtained Department approval of such costs and the loan agreement budget period includes the time period during which these costs are incurred.

(1) Allowable costs include:

(a) Pre-award costs. These costs include all engineering and other costs that are incurred in applying for the loan, including, but not necessarily limited to:

i. Public notification and public hearings.

ii. Preparing the plans, specifications, and contract documents.

iii. Preparing the draft user charge ordinance and draft user charge system.

iv. Preparing interlocal agreements necessary for the project.

v. Surveys and all other work needed to obtain clearance or permits from all intergovernmental review agencies.

vi. Preparing the loan application, applications for permits required by federal, state or local laws, regulations or procedures.

vii. Compliance with the requirements of the Mississippi Real Property Acquisition Policies Law, if required.

(b) The costs of services incurred during the advertisement, award and construction of a project to insure that it is built in conformance with the design drawings and specifications. These services are primarily engineering and construction management services provided during the advertisement, award and construction of the project, including inspection services, materials testing (e.g., concrete strength, soil compaction, etc.) required by the specifications, inspecting and expediting the delivery of equipment and material purchased directly by the loan recipient, review of shop drawings and record drawings, preparing change orders, payment processing, etc.

(c) The costs of legal, engineering, and other services incurred by the loan recipient in deciding procurement protests and defending their decisions in protest appeals under Appendix H are allowable regardless of the outcome of the protest, provided there was not an attempt by the loan recipient to violate or circumvent state purchase laws.

(d) The cost of development of an operation and maintenance manual.

(e) Start-up services for onsite training of operating personnel in operation and control of specific treatment processes, laboratory procedures, and maintenance and records management, provided these costs are incurred prior to the end of the 30 day period established in Rule 5.3.D.(2) of these regulations.

(f) Administrative services associated with the construction of the project and administering the WCPELF loan.

(g) Professional liability insurance premiums for a provider of professional services are allowable only for insurance which the provider maintains in connection with the general conduct of its business. The types and extent of coverage must be in accordance with sound business practice, and the rates and premiums must be reasonable under the circumstances. The maintenance of professional liability insurance is a sound business practice, and the premiums are allowable, but only as part of an indirect cost agreement.

(h) The cost of services, other than engineering services during construction, such as railway or highway flagmen, or utility or highway inspectors, required during the construction of the project, are allowable provided that:

i. The entity responsible for the affected railway, highway, or utility requires such services for all parties conducting similar types of work, regardless of the source of construction funding for the project, or the services are required by law.

ii. The project work requiring such services is allowable, and is included in the scope of the approved project.

iii. The cost of such services has not been included in the construction contractor's bid price.

iv. The cost of such services is incurred directly by the loan recipient.

v. The cost is reasonable.

(2) Unallowable costs include:

(a) Except as provided in Appendix A, Section D.(2)(a), engineering services or other services necessary to correct defects in design drawings and specifications, or other subagreement documents.

(b) Public Liaison Services.

(c) The cost of local travel (i.e., commuting expenses) between living quarters and the construction site for persons working at the site.

(d) Acquisition of unallowable real property.

(e) The cost of insurance (e.g., for a specific project), beyond that normally carried by the professional services firm.

F. Claims

(1) Allowable costs, provided the costs are properly documented, incurred and requested prior to the end of the 30 day period established by Rule 5.3.D.(2) of these regulations include:

(a) Change orders to the construction contract as a result of settlements, arbitration awards, or court judgments, to the extent that they would have been allowable had there not been a claim.

(b) The costs of legal, engineering, and other services incurred by the loan recipient in deciding procurement protests and defending their decisions in protest appeals under Appendix H are allowable regardless of the outcome of the protest, provided there was not an attempt by the loan recipient to violate or circumvent state purchase laws.

(c) The costs of assessing the merits of, negotiating, or defending against a claim against the loan recipient are allowable, regardless of the outcome, provided that the matter under dispute is not the result of fraudulent or illegal actions, or mismanagement, on the part of the loan recipient.

(d) Alterations in construction, engineering, legal, etc. contracts as a result of settlements, arbitration awards, or court judgments are allowable to the same extent that they would have been allowable had there not been a claim.

(2) Unallowable costs include:

(a) Claims arising from work outside the scope of the loan.

(b) Claims resulting from fraudulent or illegal activities.

(c) Claims resulting from mismanagement by the loan recipient.

(d) Claims resulting from the loan recipient's vicarious liability for the improper action(s) of others.

(e) The cost of settlements, arbitration awards or court judgments over and beyond the allowable costs had there not been a claim, as established in these regulations.

G. Mitigation

(1) Allowable costs include:

(a) Costs necessary to mitigate only direct, adverse, physical impacts resulting from construction of the project.

(b) The costs of reasonable site screening necessary to comply with facilities plans, and necessary to screen adjacent properties.

(c) The cost of groundwater monitoring facilities necessary to determine the possibility of groundwater deterioration, depletion or modification resulting from construction of the project.

The extent of the allowable costs for groundwater monitoring facilities is decided on a case-by-case basis, and depends on the size and complexity of the project and the present and potential future use of the groundwater.

(2) Unallowable costs include:

(a) The costs of solutions to aesthetic problems, including design details which require expensive construction techniques and architectural features and hardware, that are unreasonable or substantially higher in cost than approvable alternatives and that neither enhance the function or appearance of the treatment works nor reflect regional architectural tradition.

(b) The cost of land acquired for the mitigation of adverse environmental effects identified pursuant to an environmental review.

H. Publicly Owned Onsite Systems

(1) Allowable costs include:

(a) The cost of major rehabilitation, upgrading, enlarging, and installation of onsite systems.

Major rehabilitation may include, as an allowable cost, the demolition and removal of an existing privately or publicly owned onsite system.

(b) Collection or service lines to an offsite treatment unit which serves a cluster of buildings.

(c) The cost of restoring individual system construction sites to their original condition.

(2) Unallowable costs include:

(a) Those portions of treatment works which have surface discharges from individual residences or clusters, unless each discharge has a valid NPDES permit.

(b) Modification to physical structure of homes, commercial buildings, or any other structures which are not a part of the public treatment works project.

(c) Wastewater generating fixtures such as commodes, sinks, tubs, and drains.

(I) Real Property and Existing Improvements

(1) Allowable costs include:

(a) The cost of land that will be part of the project, acquired in accordance with the Mississippi Real Property Acquisition Policies Law in fee simple title or by easement. Except as allowed under Section I.(2) below, such land must be acquired at fair market value based on an appraisal or a condemnation proceeding, unless the purchase price of a parcel is $10,000 or less. These costs include:

i. The cost of a reasonable amount of land acquired for the construction of treatment works, considering the need for buffer areas, berms, and dikes. Buffer areas may be designed as part of the project to conform with Mississippi Environmental Quality Permit Board regulations, to screen sites from public view, to control public access, and to improve aesthetics.

ii. The cost of land acquired for composting or temporary storage of compost residues which result from wastewater treatment.

iii. Where properties are only partially acquired for project purposes, necessary compensation of property owners for the reduced value of their remaining land.

(b) The cost of acquiring all or part of an existing publicly or privately owned wastewater treatment works and necessary land for a consolidation project, provided all of the following criteria are met:

i. The acquisition, in and of itself, considered apart from any upgrade, expansion or rehabilitation, provides new pollution control benefits;

ii. The primary purpose of the acquisition is not the reduction, elimination, or redistribution of public or private debt; and

iii. The acquisition does not circumvent federal, state or local requirements.

(2) Unallowable costs include:

For parcels costing over $10,000, any amount paid by the loan recipient for allowable land in excess of fair market value, based on an appraisal or any condemnation proceeding. For parcels costing over $10,000, an amount other than the determination of fair market value may be found allowable through an administrative settlement if the loan recipient provides sufficient written documentation to the Department that it is reasonable, prudent and in the public interest, such as when negotiated purchase is unsuccessful and condemnation action may entail a long delay or excessive costs. Documentation may include evidence of purchase negotiations, real property sales data, estimated court settlement and legal costs based on previous condemnation proceedings.

J. Miscellaneous Costs

(1) Allowable costs include:

(a) The costs the loan recipient incurs for equipment, material and supplies necessary for the construction project.

(b) Unless otherwise specified in these regulations, the costs of meeting specific legal requirements directly applicable to the project.

(c) Costs for necessary non-local travel directly related to accomplishment of project objectives, such as costs of loan recipient employees attending training workshops/seminars that are necessary to provide instruction in administrative, fiscal or contracting procedures required to complete the construction of the treatment works. Travel not directly related to a specific project, such as travel to professional meetings, symposia, technology transfer seminars, lectures, etc., may be recovered only under an indirect cost agreement.

(d) Cost of royalties for the use of, or rights in, a patented process or product. Reasonable royalties associated with the procurement of the right to use, or the rights in, a patented product, apparatus, or process are allowable costs, provided that they are:

i. necessary,

ii. based on a published fee schedule or on reasonable fees charged to other users under similar conditions.

Periodic payment of royalties for the right to operate under a patent are considered operating costs, and are unallowable for loan participation.

(e) Buildings

Allowable costs for buildings include those portions of the building which are directly related to the project, including buildings housing equipment and unit processes, laboratories, employee locker rooms, workshop areas, storage facilities for operational supplies, spare parts and equipment, necessary lavatory facilities, operator office space, etc. Those portions of an administration building which are not necessary for the daily operation and maintenance of the project are unallowable costs, including portions of the building used for public works functions (other than wastewater treatment), general accounting functions, conference rooms with associated audio-visual equipment, or other general uses not necessary for the operation of the project. Where larger facilities include conference rooms to be used exclusively for training of employees, such space is allowable if reasonable, and if approved by the Department as part of the loan award.

Where unallowable building space is included in an otherwise allowable administration building, the allowable cost is determined by using the ratio of allowable floor space divided by the total floor space in the building. The costs of buildings and portions of buildings which are unallowable are to be deducted from the allowable project construction costs for loan computation purposes. Costs associated with unallowable buildings and portions of buildings (e.g., landscaping, driveways, parking spaces, electrical service, and other utility costs) are also unallowable, and must be deducted proportionately from the allowable construction costs.

(f) Facilities For Income Generation from Processed Sludges and Crops Facilities which have the potential for generating project income to offset O&M costs are allowable if they are necessary to provide stabilized and processed sludges which are to be managed for income generation, or crops which are grown for sale as an integral part of the wastewater land treatment or sludge utilization process.

Facilities and equipment built for processing crops grown on land to which sludge or wastewater has been applied may be an allowable cost if the recipient has all financial interest in the crop and if those facilities are necessary and reasonable to prepare the crop for prompt delivery to its market. Crop processing facilities could involve grain drying or fermenting.

Facilities built for processing crops or sludge into marketable products such as compost or heat-dried pellets may be allowable if those facilities are necessary and reasonable to cost-effectively prepare the product for prompt delivery to its market. Processing facilities could include the drying and pelletizing operation when this approach has been selected to stabilize the product. Facilities to store the marketable products to get more favorable prices, to transport the product for sale to a market, or to optimize marketing of the product, such as bagging operations, are also allowable.

(g) Any administration fee charged to the loan recipient.

(2) Unallowable costs include:

(a) Ordinary operating expenses of the loan recipient including salaries and expenses of the loan recipient's employees and elected and appointed officials and preparation of routine financial reports and studies.

(b) Administrative, engineering and legal activities associated with the establishment of special departments, agencies, commissions, regions, districts or other units of government.

(c) Approval, preparation, issuance and sale of bonds or other forms of indebtedness required to finance the project and the interest on them.

(d) Personal injury compensation or damages arising out of the project.

(e) Fines and penalties due to violations of, or failure to comply with, federal, state or local laws, regulations or procedures, and related legal expenses.

(f) Costs outside the scope or budget period of the approved project.

(g) Costs for which payment has been or will be received from another state or federal source.

(h) Operation and maintenance costs of the treatment works.

(i) Lease payments.

K. Project Income From Bid Bond Forfeitures, Liquidated Damages, and Interest on WPCELF Loan Payments:

(1) Bid bond forfeitures shall have no effect on the determination of allowable and unallowable costs. The loan recipient shall make the determination of whether or not a bid bond will be forfeited.

(2) Liquidated damages shall have no effect on the determination of allowable and unallowable costs, except as required by Rule 5.3.C.(6)(c) of these regulations.

(3) Interest income on WPCELF payments to loan recipients shall have no effect on the determination of allowable and unallowable costs.

Miss. Code. tit. 11, pt. 6, ch. 5, app 11-6-5-A