Cover: The Cost of Cost-Effectiveness

The Cost of Cost-Effectiveness

Expanding Equity in Federal Emergency Management Agency Hazard Mitigation Assistance Grants

Published Feb 15, 2023

by Benjamin M. Miller, Noreen Clancy, Douglas C. Ligor, Geoffrey Kirkwood, David Metz, Steven Koller, Stephanie Stewart

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Research Question

  1. How could the BCA process be simplified to be more inclusive of lower-resourced communities?

The Federal Emergency Management Agency (FEMA) operates multiple hazard mitigation assistance (HMA) grant programs as a way to promote a national culture of preparedness and public safety, mitigate the consequences that disasters have for communities and infrastructure, and reduce future draws on the Disaster Relief Fund. The Robert T. Stafford Disaster Relief and Emergency Assistance Act requires FEMA to ensure that these mitigation activities are cost-effective. To determine cost-effectiveness, FEMA currently requires any project seeking HMA grants to include a benefit–cost analysis (BCA), implemented in accordance with Office of Management and Budget Circular A-94. Applicants for mitigation grants have provided extensive feedback that the BCA process is cumbersome and that finding the right data to include in the calculations of costs and benefits is difficult. FEMA is concerned that the administrative burdens and the costs of application processes could discourage subapplicants with fewer resources from applying or place them at a disadvantage in developing quality applications. Furthermore, two 2021 executive orders direct federal agencies to achieve greater equity and fairness in allocating federal resources. Two HMA grant programs have been selected as pilot programs for the corresponding federalwide Justice40 Initiative. The authors found that FEMA's dual goals of equity and simplicity occasionally compete, that FEMA has the authority to implement recommended changes, and that FEMA's approach to BCA differs from those of other federal entities. The authors identify nine changes that FEMA could implement to address the inequities introduced by the use of BCA in the HMA grant process.

Key Findings

  • FEMA's dual goals of equity and simplicity occasionally compete.
  • FEMA has the authority to implement recommended changes.
  • FEMA's approach to BCA differs from those of other federal entities.

Recommendations

  • Replace the BCA with a simpler measure of cost-effectiveness.
  • Establish a minimum cost threshold or other criteria for a full BCA.
  • Allow applicants to include alternative discount rates.
  • Consider broader types of benefits.
  • Apply distributional weights to benefit and cost calculations.
  • Incorporate BCA and ratios more clearly into the award decision.
  • Change FEMA large project notification reporting practices.
  • Precisely specify benefiting areas.
  • Encourage applicants to solicit subapplications from disadvantaged communities.

This research was sponsored by FEMA and conducted in the Disaster Management and Resilience Program of RAND's Homeland Security Research Division, which operates the Homeland Security Operational Analysis Center (HSOAC).

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.