Alternative Determination of Cost-effectiveness for Certain Insured Repetitive Loss Properties
Applicability
In 2003, FEMA introduced a pilot program to allow a simplified, alternate, FEMA-approved methodology to conduct the Benefit-Cost Analysis (BCA) for certain repetitively flooded properties currently insured under the National Flood Insurance Program (NFIP). This continuing effort is designed to support the mitigation of certain NFIP-insured structures by providing a framework that allows States, Tribal governments and local community applicants to use NFIP-provided data to determine the "benefits" portion of the Benefit Cost Analysis (BCA) to demonstrate cost-effectiveness of proposed mitigation projects. This alternate methodology applies to all FEMA Mitigation Grant Programs including: Hazard Mitigation Grant Program, Flood Mitigation Assistance, Pre-Disaster Mitigation, Repetitive Flood Claims, and Severe Repetitive Loss, and Supplemental Mitigation Grants. Applicants requesting mitigation funds may use this alternative cost-effectiveness methodology and data for any project meeting the guidelines described in the applicable governing statutes and program guidance.
Maximizing Benefits
FEMA encourages all applicants to demonstrate the maximum benefits for all mitigation projects. Keep in mind that using the “potential future damages avoided” value for eligible NFIP repetitive loss properties will not account for all possible avoided damages. It only accounts for those benefits directly related to building and contents damages avoided. Additional benefits often included in the traditional BCA approach such as other physical damage, calculated in acquisition projects, or displacement costs and disruption time costs are not accounted for in the “potential future damages avoided” calculation.
Applicants can either forego this alternative methodology and perform a traditional BCA for these properties, or maximize the benefits by adding the net present value of benefits from additional considerations to the “potential future damages avoided” value. However, the additional benefits must not duplicate the avoided insured structural and content damages, including any insurance deductibles, which are represented by the “potential future damages avoided” value. The resulting total value of the benefits calculated should be divided by the total project cost to determine a BCR for the project.
Not all eligible properties will be cost-effective to mitigate when applying the alternative methodology. FEMA encourages all applicants to demonstrate maximum benefits by using the approved approach that results in the highest benefit to cost ratio for all submitted mitigation projects.
FY 2008 Guidance
A current data set for use with the alternative methodology was released on December 28, 2007. This data set is effective until December 31, 2008, or until superseded by an updated data set. Please contact your FEMA Region for a copy of your applicable alternative methodology data set.
For additional guidance regarding how to use the updated alternate cost-effectiveness methodology to determine the cost effectiveness of mitigation projects, please see the FY 2008 Alternative Determination of Cost-effectiveness for Certain Insured Repetitive Loss Properties in the FEMA Library.
Last Modified: Friday, 22-Feb-2008 08:57:58 EST
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