Time Value of Capability: Expenditures vs. Savings

by Charles Eaneff

The business of domestic preparedness seems to be a likely priority in 2017, and the relationship between the time value of state and local capabilities and federal disaster relief policies are sure to evolve. For public safety professionals – including police, fire, emergency medical, and emergency management services – the time value of capability is fundamentally the same as the time value of money.

Charles Eaneff headshotGiven a choice of investing $1 million today or the same amount in five years, individuals, investors, and public safety decision makers would likely choose investing now so that return on investment can begin immediately and be worth more than $1 million in five years. Key in this calculation is identifying investments that appreciate, rather than depreciate over time, and that the item purchased, or capability, costs more later. This is a basic premise of hazard mitigation.

Mitigating Future Costs

The Federal Emergency Management Agency (FEMA) is evaluating benefits of the time value of hazard mitigation capability through “disaster deductibles,” insisting states make investments in time-valued capability before a disaster as one method of reducing national disaster cost. Depending on its administration, and state return on capability (investment), this could either directly transfer cost to a state, or result in local, state, federal, and national disaster cost reduction. In a December 2016 interview, FEMA Administrator Craig Fugate explained that, as states take actions to buy down future risk, incentives to mitigate that future risk could be part of a disaster deductible system. Further, the administrator observed that, “There is a direct cause and effect between land use and building codes and disaster declarations.” This is the business of public safety, including emergency management.

Fire, law enforcement, emergency medical, building, and health departments – along with insurance companies at the local, state, and national levels – encourage, incentivize, and mandate public and private capability routinely and successfully to reduce future public and private expenditures for response/recovery. FEMA proposes a variation of this model, in part based on the economic experience hazard mitigation projects. The FEMA Hazard Mitigation Grant Program requires that a grant project’s potential savings must be more than the cost of implementing the project. A 2005 report by the Multihazard Mitigation Council estimated that the actual return on investment for every $1 spent on hazard mitigation is $4 in future costs.

Although the current conversation regarding disaster deductibles involves FEMA recognition of the time value of state and local investments in capabilities that provide a national benefit in the form of reduced future disaster expenditures, public safety leaders across disciplines make decisions about the time value of capability routinely and consistently, building it into both strategic and tactical decision making. Joseph Pfeifer, assistant chief for the New York City Fire Department, and Ophelia Roman, former manager in Deloitte’s Crisis Management Practice, provide an overview of one version of time and capability integration in the December 2016 issue of Homeland Security Affairs.

Time Value of Capability: Expenditures vs. Savings

Example: Active Shooters

As described by Administrator Fugate, there are robust examples of the time value of capability in fire prevention and emergency management mitigation, but a very public and currently evolving example is in law enforcement. Using this same understanding of the time value of capability described in the October 2016 DomPrep Journal topic of “Active Shooter,” it is possible to calculate the time value of the tourniquet and individual first aid kit capability recommended by authors. In 1999, the capability to successfully engage active shooters largely resided in Special Weapons And Tactics (SWAT) teams, but the active shooter threat showed that the time value of SWAT capability was very low for active shooters. In response, law enforcement moved active shooter capability to patrol through policy, training, and equipment investments, adding capability in the timeframe of maximum response value. The FBI 2013-2015 analysis of 40 active shooter incidents found officer-involved shooting(s) in 14 of the active shooter incidents and 14 wounded officers, 4 fatally. Not every shooting resulted in officer wounding, but some had multiple officers wounded or killed.

Stop the Bleed,” and similar state, local, and federal initiatives are now focused on moving hemorrhage control capability up the capability timeline to every law enforcement officer. Law enforcement officers need the capability to keep themselves alive until the emergency medical services (EMS) system can get to them, but it is not practical without personal and partner hemorrhage control capability. The national EMS hemorrhage control capability was too low in the three-minute period following a shooting where properly applied hemorrhage control can have maximum value. By adding law enforcement to the national hemorrhage control capability through policy, training, and equipment, capability is effectively increasing at the time of maximum value.

Tourniquets and law enforcement trauma packs have just begun adoption by the 765,000 state and local law enforcement officers, but some minimum time value calculations can be made based on early reporting, even though new reports of officers saving their own lives, their partners’ lives, or community members are becoming routine. A 9 September 2016 article published in U.S. News & World Report revealed that, in the past five years, Denver law enforcement saved 11 people with tourniquets. Although establishing the value of life is controversial, each year the Department of Transportation, FEMA, and Office of Management and Budget establish a “value of a statistical life” (VSL) to assess the economics of fatality prevention. For 2016, the VSL was $9.6 million. Additionally, direct federal expenditures from the current Bureau of Justice Assistance Public Safety Officers’ Benefits Program (line of duty deaths) is $343,589 for the families of fallen officers.

Tourniquets are the exact type of time-valued capability the business of emergency management can, and does, support. For example, the time value of a tourniquet in a police utility pocket is less than $30 (Amazon will deliver one for less than that), but once successfully deployed to save a life, the used tourniquet has appreciated to $9.6 million (VSL). For the five-year useful life of the Denver law enforcement tourniquets, the return on investment (lives saved) was $105.6 million (five officer and six civilian saves at $9.6 million each). If this were a hazard mitigation grant project, that return would have justified a tourniquet delivered to the home of every state and local law enforcement officer in the United States, with over $80 million left over to invest in helmets and improved outer tactical vests to prevent officer gunshot wounds in the first place. Even counting just the direct federal Public Safety Officers’ Benefits Program expenditure, the five law enforcement lives saved by Denver reduced federal cost by over $1.7 million or over 57,000 tourniquets. Law enforcement emergency medical capability is not just a smart practice, given the time value of this capability, it is a smart business decision for federal, state, and local leadership.

The business of domestic preparedness will be a priority in 2017, and state and local investments that provide a national return on investment are critical components of the disaster deductible proposal, which may be recast and expanded as capability credits, since almost no one wants to pay deductibles, but most want credits.

Chuck Eaneff is a consultant focused on the integration of the public’s safety and the homeland’s security and a subject matter expert for the Naval Postgraduate School Center for Homeland Defense and Security Mobile Education Team. He was formerly the deputy director of law enforcement for FEMA and the acting executive director of the DHS Office of State and Local Law Enforcement, the office responsible for the formulation and coordination of national-level policy relating to law enforcement’s role in preventing acts of terrorism and the department’s primary liaison with state, local, and tribal law enforcement. Prior to accepting the position at FEMA, he was a Naval Postgraduate School, Center for Homeland Defense and Security Distinguished Fellow. Retired as deputy director of the Sunnyvale Department of Public Safety in California (a fully integrated public safety agency providing police, fire, emergency management, and EMS services for a community of approximately 133,000 in the heart of the Silicon Valley), he had the unique opportunity to lead both fire services and police services, reporting to directors of public safety. He can be reached at