Repair vs. Replacement (50 Percent Rule)
FEMA will restore an eligible facility to its pre-disaster design. Restoration is divided into two categories: repair or replacement. [See FEMA Policy 9524.4, Eligibility of Facilities for Replacement (the 50% Rule).] The following calculation, known as the "50 Percent Rule," is used to determine whether replacement is eligible:
IF (Repair Cost / Replacement Cost) < 50% THEN only the repair cost is eligible
IF (Repair Cost / Replacement Cost) > 50% THEN the replacement cost is eligible
Repair Cost includes only those repairs, including non-emergency mold remediation, associated with the damaged components and the codes and standards that apply to the repair of the damaged components. This cost does not include upgrades of other components triggered by codes and standards, design, demolition of the entire facility, site work, or applicable project management costs, even though such costs may be eligible for Public Assistance. The cost of contents and hazard mitigation measures is not included in the repair cost.
Replacement Cost includes the costs for all work necessary to provide a new facility of the same size or design capacity and function as the damaged facility in accordance with current codes and standards. The replacement cost does not include demolition, site work, and applicable project management costs, even though these costs may be eligible for Public Assistance.
Note that the design capacity of the facility, either as originally designed or as modified by later design, governs the extent of eligible work when a facility is being replaced. If a facility was being used in excess of its design capacity, that factor does not increase the eligible capacity of a replacement facility. Note also that the 50 Percent Rule applies to the overall facility. It is not to be used to calculate replacement of the facility's individual components, e.g., equipment, a roof, a wall, or mechanical system. Consult CEF guidance when using the CEF to calculate the 50% threshold. Multiple buildings on a campus are analyzed individually.