Proper Benefit Cost Analysis Key in Mitigation Grant Application

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Loss of Function Impact

TYPE OF FACILITY LOSS OF FUNCTION IMPACT DATA INPUTS

BUILDING (residential, Displacement costs • Displacement time commercial, public) • Rent for temporary quarters • Other monthly costs • One-time costs

BUILDING (residential Rental income losses • Displacement time and commercial) • Monthly rent

BUILDING (commercial) Business income losses • Functional downtime Wage losses • Net business income per month • Wages and benefits per month

BUILDING (residential) Disruption costs • Disruption time • Economic value per person per hour

BUILDING (public, Loss of public services • Functional downtime ordinary services) • Operating budget

BUILDING (public, Economic impact of loss • Functional downtime critical services) of public service • Operating budget • Continuity premium*

UTILITIES Economic impact of loss • Functional downtime of public services • Economic impact per capita per day

ROADS AND BRIDGES Economic impact of road • Functional downtime and bridge closures • Delay or detour time • Daily traffic load • Economic value per person per hour

SOURCE : FEMA’s “What is a Benefit” Guidance on Benefit Cost Analysis of Hazard Mitigation Projects Draft Rev 2—May 2001

Revised Methodology of Existing Benefits

The methodology for calculating residential displacement costs has changed from a standard per-square-foot value, per month, to the lodging and meals per diem rates for the community as determined by the General Services Administration (GSA) or Department of Defense. The non-residential displacement costs methodology is unchanged.

• 1) Physical Damages are probably the easiest category to understand. For buildings, contents, infrastructure, vehicles and equipment that are damaged, the monetary damages are simply the costs to repair or replace the damaged property. Avoided physical damages are expressed in dollars. Damages are often expressed as a percentage of the replacement value of the damaged item.
• 2) Loss of Function pertains to losses and costs that are incurred when facilities are damaged to the point that normal function of the facility is disrupted. For critical community operations, the loss of function is often the most severe impact of a hazard event. Therefore, it is critically important to measure the potential losses and benefits correctly. (See adjoining chart.) For the loss of function category, historical data and professional judgment are used to develop damage estimates. The loss-of-function impact of a disaster on a community often goes far beyond the physical damages alone. It encompasses the losses, costs and direct economic impact that occur when physical damages are severe enough to interrupt the function of a facility. Types of losses have varying impacts, depending on the type of facility being evaluated. Some sub-categories of the loss-of-function impact are more difficult to understand and calculate than obvious physical...

*Continuity premium is a multiplier on the ordinary value of services that applies to services critical to immediate disaster response and recovery.