Developing Cost-Effective Resource Allocation Strategies to Enhance Community Resilience

Objective - By 2028, publish decision support tools and materials for engagement with end-user communities, professional organizations, and government agencies that provide comprehensive valuations of community resilience planning (monetary and non-monetary)—for both built and natural infrastructure – accounting for impacts of disruptive events and persistent stressors, including accounting for uncertainties of future events, risk perceptions, and measurement of the co-benefits and co-costs from resilience planning actions. 

What is the new technical idea?  

To support decision making through comprehensive valuations and assessments of community resilience planning (monetary and other resources)—for both built and natural infrastructure – through the development of tools and methods that evaluate the socioeconomic impacts of disruptive events and persistent stressors, including accounting for uncertainties of future events, risk perceptions, and measurement of the co-benefits and co-costs from resilience planning actions.

Advancements in measurement science are needed to estimate the socioeconomic impact associated with community resilience planning for hazards and persistent stressors, especially those that limit economic and social functions which built and natural infrastructure serve. Currently, disaster-related loss (damage) estimates are available, although they tend to focus on direct losses only and are highly aggregated; these estimates often fail to consider down-stream, indirect, and sustained effects, such as business interruption, which can be large and have a significant effect on the short- and long-term stability of a local or regional economy. 

Estimates of the cost of prevention, protection, and mitigation of hazards and potential disaster events, as well as the expenditures required during the response and recovery phases, are not well understood. Likewise, the value of adaptation to long-term stressors is often missing or limited to ex ante evaluation estimates.

A flexible methodology to value the socioeconomic impacts, avoided costs, and expected benefits is needed to evaluate the return-on-investment of community resource allocation decisions made to reduce future economic damages from disturbances and disasters, while recognizing the need to achieve balance with other community goals, accounting for uncertainty and incorporating behavioral influences on decision-making, such as risk profiles and learning over time. Additionally, most benefit-cost assessments are conducted ex ante and there is inherent tension with ex post valuation once a project is completed. The two are not often compared to help develop improved cost estimates for future resilience planning processes. 

The current NIST-developed methodology, as described in the guidance document (‘Economic Decision Guide’ (NIST SP1197) has been further developed and translated into ASTM ‘standard guides’ and was accepted by ASTM subcommittee E06.81 (Performance of Buildings - Building Economics).  The methodology has also been implemented in the “EDGe$ (Economic Decision Guide Software) Online Tool. However, this methodology must continue to evolve to more clearly address place-based estimates of the value of enhanced mitigation and adaptation practices at the community-levels, associated with proposed projects. To this point, the Community-informed Decisions for Equitable, Cost-effective, and Inclusive Disaster Resilience planning (Co-DECIDR) framework is planned, which allows for use of the pre-existing EDGe$ App (or the EDG process), while considering other non-economic net-benefits of significance to a community’s resilience planning. Co-DECIDR is envisioned as a hybrid framework to help community planners navigate through complex multi-criteria decision analysis (MCDA) in a general sense; this may include other NIST Community Resilience Planning Tools, such as NIST ARC. Co-DECIDR is planned to enable collaborative planning teams to perform trade-off analysis and decide between alternatives that reduce their social and physical vulnerabilities with their limited economic resources, while taking into account the interdependencies between physical infrastructure, social institutions, and potentially other systems (e.g., natural infrastructure).

There is an increased need to incorporate risk and risk preferences of communities into EDGe$ and community resilience planning more generally. The risk of hazard events is being updated and increasing over time, so community-based preferences over risk is an important piece of community resilience planning and understanding the impact of risk is vital for codes and standards in the community resilience space. Understanding the socioeconomic drivers of how communities react to risk will help inform the NIST Alternatives for Resilient Communities (ARC) methodology as well as EDGe$.

Additionally, understanding how compound and complex events impact community resilience planning is extremely important for codes and standards work. In order to begin to explore risk and compound events in community resilience planning, we will host a workshop to address the following questions as a starting point for our work in this space. What are emerging techniques that address the multi-objective, complex, and deeply uncertain nature of climate risk management, while recognizing that equity and justice are central to effective adaptation and resilience efforts? How should robust adaptation and resilience planning take into account equity and justice (spatially and temporally), recognizing local preferences (e.g., locally developed plans), and identify signposts to monitor and contingent actions if signposts are observed (e.g. adaptive management pathways), within the cultural context of communities?

We propose the application of Community-informed Decisions for Equitable, Cost-effective, and Inclusive Disaster Resilience planning (Co-DECIDR): a hybrid framework to help community planners navigate through the complex multi-criteria decision analysis (MCDA). Co-DECIDR enables collaborative planning teams (who do not necessary possess expertise/resources for conducting MCDA) to perform trade-off analysis and decide between alternatives that reduce their social and physical vulnerabilities with their limited economic resources, while taking into account the interdependencies between physical infrastructure, social institutions, and natural ecosystems. To address these complexities, Co-DECIDR combines a participatory fuzzy cognitive mapping (FCM) approach with standard economic methodology for benefit-cost analysis (BCA). To facilitate the implementation of the Co-DECIDR framework, we recommend a hybrid use of two publicly available, easy-to-use online tools: (1) Mental Modeler; and (2) Economic Decision Guide Software (EDGe$). The initial case study looks at food security and resilience planning for extreme weather in Flint, Michigan.

Another important consideration for community resilience planning is the comparison between actions that can be taken by an individual and actions that are taken at a community level. The impact of the level of the decision making greatly impacts both the potential set of options as well as an individual’s preference for different alternatives. Some individuals may prefer community level resilience planning, while others may prefer individual level resilience planning. Understanding the economic tradeoffs that individuals are making over individual and community-based resilience planning is important for decision makers who are designing community resilience programs as well as for creating codes and standards that align with economic incentives. To our knowledge, this is a largely unexplored comparison. The impact of risk at the community and individual level is an important piece of understanding the preferences that individuals have over resilience planning for themselves as well as for their communities.

Additionally, benefit cost analysis can be used in other domains as well as community resilience. Recently, our team has begun to collaborate with the functional recovery team to share what we have learned in benefit cost analysis of community resilience that can be applied to the domain of functional recovery. We will continue to work to align community resilience efforts and functional recovery efforts to the extent that is possible.

The activities and milestones in this project will be complementary to: (1) the “NIST Community Resilience Planning Guide for Buildings and Infrastructure Systems,” (2) The NIST Alternatives for Resilient Communities (ARC) methodologic approach, (3) other NIST community resilience program activities, and (4) the NIST-funded Center of Excellence’s efforts to develop community resilience models that incorporate community economics. 

What is the research plan? 

The research plan comprises four major research activities and two activities focused around delivering standard practices and usable tools to researchers and community stakeholders. 

The four major research activities include: (1) measure direct disturbance and disaster-related costs and potential comparison of ex ante and ex post values; (2) measure (acute) disaster losses and those associated with persistent stressors, focusing on major indirect losses, such as business interruption, and distributional effects—through the use of both data gathered through surveys, interviews, and behavioral economic experiments, as well as secondary data sources; (3) quantification and documentation of the uncertainty and risk profiles that affect economic decisions, and understanding how uncertainty and risk should be communicated to decision makers; and (4) measure the ‘resilience dividend,’ the (non-disaster related) community co-benefits from investing in disaster resilience, and provide tractable guidance to communities on approaches to assessing the net co-benefits associated with resilience planning.

The two major activities to deliver usable tools (based on the research activities described above) include: (1) the creation and acceptance of standard practices and associated appendices to formalize, publish, and make available an economic toolkit facilitating decision making for communities and (2) the creation and publication of formal data collection tools and methods that are usable by researchers and community stakeholders.

The methodology for measuring economic impact of community resilience planning is organized around the performance metric of ‘cost plus loss’ minimization – i.e., the economically optimal level of investment in prevention, mitigation, and adaptation activities to reduce future disturbance and disaster-related losses and reductions to sustainable growth, as well as related expenditures that minimize the combined investment cost plus the value of expected losses.  Also, the methodology considers various constraints placed on this minimization requirement given other community objectives (e.g., to minimize loss of life, achieve equity). The methodology encompasses uncertainty around values and can incorporate risk-taking strategies and discounting preferences.

Measuring the economic impact associated with resilience planning requires a better understanding of the ‘costs’ and indirect ‘losses’ (direct losses are better documented to date).  A full accounting of the major cost elements is needed. On the loss side, a better understanding of the cascading indirect losses is needed (e.g., a systems approach to community-wide losses). Though these values differ across communities, it is viable to provide best practice guidance and generally accepted accounting standards (GAAPs) that communities may follow to generate such value inputs to the NIST standard socioeconomic valuation processes.

With the addition of experimental design, this project expects to yield significant insights as to barriers to community resilience planning that extend beyond financial constraints and help frame the economics of community resilience planning in an increasingly tangible manner to those stakeholders involved in such planning processes. Deeper understanding of planned versus actualized behaviors towards community resilience is needed to effectively learn from repeat and compound hazard events.

Finally, measuring the ‘resilience dividend’ is needed to articulate the business case for resilience planning. To date, the use of computable general equilibrium (CGE) modeling has been employed to explore this issue by the Applied Economics Office (AEO); in FY22 the results of this modeling effort as applied to Cedar Rapids, Iowa will be further communicated and potential generalizations to other communities will be determined and leveraged by the COE and other research partners. 

The EDGe$ Tool, which supports community resilience planning to facilitate cost-effective resource allocation and to minimize the economic impact of hazards and potential disaster events, will be tested with community data. Continued development of the EDGe$ Tool incorporated increased uncertainty parameters and improved graphic interfaces in FY21; additional plans to extend the tool in FY22 will be based on stakeholder input and feedback, and continued related research, including efforts on business continuity, the ‘resilience dividend,’ and risk perception will be conducted.

Standards approved by ASTM currently describe the approach for measuring the economic impact for communities by identifying the relevant costs and losses needed, as well as the economic tools, to make sound financial decisions. An associated ASCE Manual of Practice was developed in FY21 and NIST Standard Practice Guides will be developed in FY22 and in out-years to provide GAAPs.

There are ongoing collaborations and research efforts that support the research plan:

• There is continued engagement with user communities for EDGe$ 1.0 that provide feedback on its use for applied and academic use as well as insights as to the most relevant advancements/changes to the methodology.
• Joint efforts with the NIST COE to assess longitudinal effects from Hurricanes Matthew and Florence in Lumberton, NC provide context for the assessment of business interruption and support a use case that links the NIST ARC and NIST EDGe$ methodologies.
• On-going research efforts between NIST and NOAA allows for understanding variations in losses from business interruption across locations and disaster types, especially complex events.
• The NIST collaboration with COCA/SARP (Coastal and Ocean Climate Applications / Sectoral Applications Research Program) and East Carolina University will allow for testing of EDGe$ and GAAP drafts with community planners and Emergency Managers in rural North Carolina.
• Quick response COVID-19 research begun in FY 20 and continued through FY22; it will be extended to look at learning from resilience and recovery, partnering with other academic researchers.