Chapter Seven: Budgeting and Financing of Flood Mitigation Projects
Learning Goals
By the end of this chapter, you will be able to:
- Understand how to develop preliminary cost estimates for flood mitigation projects.
- Recognize the importance of securing project financing and the process of evaluating construction bids.
Introduction
Developing accurate preliminary cost estimates is essential to the success of a flood mitigation project because it allows project planners to estimate expenses and secure the funding needed for the project. Alongside cost estimation, securing project financing and evaluating construction bids are critical steps. Financing provides the financial resources to begin and sustain the project, while a careful bid evaluation process ensures that quality contractors are selected within budgetary limits. Together, these steps contribute to a streamlined planning phase and support the successful completion of flood mitigation projects.
Preliminary Cost Estimates for Flood Mitigation Projects
A preliminary cost estimate is a rough estimate of the cost of the project at hand that is calculated in the early stages of planning that includes all anticipated expenses such as materials, labor, equipment etc. For flood mitigation projects the estimates may include the cost of constructing levees, floodwalls or other protective infrastructure as well as wetland restoration or green infrastructure. Cost estimation also considers site preparation, permitting, and long-term maintenance. By accurately estimating costs at this stage, project planners can make informed decisions about resource allocation and identify any potential budget challenges early on.
Incorporating FEMA’s Pre-Calculated Benefit Values
In 2013, FEMA’s Hazard Mitigation Assistance (HMA) Division conducted a large-scale analysis, which established average benefit values of $276,000 for structure acquisitions and $175,000 for elevations. These values were updated in a 2021 memorandum, with inflation-adjusted amounts set at $323,000 for acquisitions and $205,000 for elevations (and mitigation reconstruction). These pre-calculated benefit values provide a streamlined method for demonstrating the cost-effectiveness of projects in Special Flood Hazard Areas (SFHAs).
For acquisitions or elevations within SFHAs, where the project costs fall at or below these thresholds, projects are considered cost-effective, reducing the need for a comprehensive benefit-cost analysis. When multiple structures are involved, the average cost across all structures must meet these criteria. This approach simplifies the evaluation process, conserving time and resources and allowing faster project initiation.
Application Requirements
To qualify for FEMA’s pre-calculated benefits, applicants must submit a clear map delineating each structure’s footprint in relation to the SFHA, using Flood Insurance Rate Map (FIRM) data or the best available data. If any portion of a structure lies within the SFHA, the structure can use the pre-calculated benefit value for cost-effectiveness. Structures can also qualify based on Lowest Floor Elevation (LFE) and Base Flood Elevation (BFE) data. For eligible projects, no further detailed cost-effectiveness analysis is needed, provided the documentation meets FEMA requirements.
Project Financing and Construction Bids
Securing financing for flood mitigation projects is essential for proper execution of the project. Financing for these projects can come from many different sources ranging from federal grants such as FEMA’s Hazard Mitigation Assistance that was previously mentioned, state funding, private investors and local governments. Once the project funding is secured the project will enter the bidding phase where construction bids are solicited through contractors and are evaluated to see which bid aligns with budget requirements. Bids are assessed based on factors such as cost, experience, geographical preference and timelines. If multiple bids are proposed then the project team can compare bids to one another, compare prior contract prices for similar goods or services, consult published price lists or market indexes and use market research for similar items.
Conclusion
This chapter emphasizes the foundational steps in preparing flood mitigation projects, from initial cost estimates to securing financing and evaluating construction bids. Accurate preliminary cost estimates are vital, providing a roadmap for resource allocation and helping to identify budgetary needs early in the planning process. FEMA’s pre-calculated benefit values add an efficient, standardized approach to assessing cost-effectiveness for certain flood-prone areas, reducing the need for complex analyses and enabling projects to proceed faster. With financing in place, a thorough bid evaluation ensures that qualified contractors are selected, prioritizing both affordability and quality. Together, these steps create a comprehensive framework that supports effective flood mitigation efforts, ensuring that projects are well-planned, responsibly funded, and equipped to meet community needs.
Review Questions
- What is a preliminary cost estimate, and why is it important?
- What are the updated pre-calculated benefit values for acquisitions and elevations?
- What are common sources of financing for flood mitigation projects?
Bibliography and Links
https://www.kreo.net/news-2d-takeoff/what-is-preliminary-estimate
https://www.fema.gov/sites/default/files/documents/fema_PDAT-field-manual_102021.pdf