[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 
 
            PROMOTING PRIVATE SECTOR EMERGENCY PREPAREDNESS
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, NOVEMBER 1, 2005

                               __________

                           Serial No. 109-35

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Czinkota, Mr. Michael R., Ph.D., Professor, McDonough School of 
  Business, Georgetown University................................     4
Knight, Mr. Gary, Ph.D., College of Business, Florida State 
  University.....................................................     6
Livingstone, Mr. Neil C., Ph.D., Chief Executive Officer, 
  GlobalOptions, Inc.............................................     8
Scanlon, Mr. Barry, Senior Vice President, James Lee Witt 
  Associates, LLC................................................    11

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    26
    Velazquez, Hon. Nydia........................................    28
Prepared statements:
    Czinkota, Mr. Michael R., Ph.D., Professor, McDonough School 
      of Business, Georgetown University.........................    30
    Knight, Mr. Gary, Ph.D., College of Business, Florida State 
      University.................................................    50
    Livingstone, Mr. Neil C., Ph.D., Chief Executive Officer, 
      GlobalOptions, Inc.........................................    64
    Scanlon, Mr. Barry, Senior Vice President, James Lee Witt 
      Associates, LLC............................................    81

                                 (iii)

 
            PROMOTING PRIVATE SECTOR EMERGENCY PREPAREDNESS

                              ----------                              


                       TUESDAY, NOVEMBER 1, 2005

                   House of Representatives
                                Committee on Small Business
                                                     Washington, DC
    The Committee met, pursuant to call, at 2:00 p.m. in Room 
2360 of the Rayburn House Office Building. Hon. Donald Manzullo 
[Chairman of the Committee] presiding.
    Present: Representatives Manzullo, Akin, Sodrel, 
Christensen, and Bordallo.
    Chairman Manzullo. Good afternoon and welcome to this 
hearing on an important and unique topic. In the United States 
today business face considerable challenges on several fronts. 
These include burgeoning health care costs, high tax and 
regulatory burdens, and rising energy prices, to name a few. 
These obstacles are expected by those entering the current 
market place, and through ingenuity and persistence, they must 
be dealt with and overcome by all involved.
    Today however, this committee will focus on market 
challenges of a more unexpected variety. The direct and 
indirect effects that result from both natural and man-made 
disasters, including terrorism, can be economically 
devastating. As small businesses become part of national and 
international supply chains, even distant disasters can have 
very harmful consequences.
    The human costs resulting from such events are 
immeasurable. And every government agency and institution of 
civil society must vigorously play their part in responding to 
individual needs that arise in the wake of such events. As 
America continues to pursue more effective means of public and 
private sector responses to emergencies, it is also important 
to bring to light how these emergencies affect the livelihoods 
of businesses.
    The significance of emergency preparedness for businesses 
was just emphasized yesterday by the Secretary of Homeland 
Security, Michael Chertoff, as he called on businesses to 
invest in preparing their companies and employees for 
emergencies such as terrorism and hurricanes. The Ready 
Business campaign, which was initiated last year by DHS, is 
comprised of public service announcements aimed at educating 
small and medium sized businesses in emergency preparedness. 
This campaign was reiterated yesterday because the 
Administration recognizes the wide-ranging disparity between 
what is required presently of businesses for sufficient 
emergency preparedness and what is actually being done.
    The primary purpose of this hearing is to get a sense of 
the level of threat posed by potential emergencies to the 
business community. What are the current private sector 
responses to these emergent threats in contrast to the 
suggestions of experts in emergency preparedness? What 
preparedness measures can small businesses take, despite 
limited resource availability for such preparation? Finally, 
what can Congress do, however limited in scope, to encourage 
and facilitate more robust emergency preparedness by private 
sector firms in this country? For example, in the past, 
Congress passed a loan program to help small businesses deal 
with Y2K concerns. This year, the SBA proposes to increase the 
size of disaster mitigation loans.
    This Committee, the Administration, members of academia, 
and many in the business community realize how important this 
issue is, and I hope this hearing will provide clearer 
understanding of what businesses should prepare for, how they 
should implement this preparation, and suggestions for Congress 
on encouraging this type of activity in the private sector.
    I have been advised that our Ranking Member, Ms. Velazquez 
of New York missed her flight. And I would recognize for 
opening statement then Congresswoman Bordallo from Guam. Good 
to have you here.
    [Chairman Manzullo's opening statement may be found in the 
appendix.]
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    And before I have just a few opening remarks, I'd like to 
ask that our Ranking Member, Ms. Velazquez, her opening remarks 
be placed in the record.
    Chairman Manzullo. Without objection.
    [Ranking Member Velazquez's opening statement may be found 
in the appendix.]
    Ms. Bordallo. Mr. Chairman, first I want to thank you very 
much for having this hearing. Throughout our nation's history 
we have endured numerous natural and man-made disasters from 
earthquakes in California to the terrorist attacks of 9/11, to 
the recent hurricanes that plagued the Gulf Coast. Disaster 
preparedness for small businesses to me is an important topic. 
It is one of those issues that does not receive the attention 
they should until it is too late. Both terrorist attacks and 
natural disasters can have devastating affects on everyone, 
especially small businesses. They can ruin a lifetime of hard 
work in seconds. Terrorism on U.S. soil, unfortunately, has 
become a possibility for which every American, business owner 
or not, must plan. Natural disasters are no less threatening 
and require the same level of awareness of risk and advanced 
planning by business owners.
    I represent the territory Guam, and I will say at this 
point, Mr. Chairman, that we have disaster meetings bringing in 
every segment of the community quarterly; disaster or no 
disaster, we meet continually.
    The recent storms that devastated the Gulf Coast have 
brought the importance of disaster preparedness for businesses 
into sharper focus. Guam is no stranger to violent storms. 
Recent hurricanes, or we call them typhoons in the Pacific, of 
Katrina's destructive power strike Guam on a regular basis. I 
would say a super typhoon occurs every three years on Guam, 
sometimes more frequently.
    We have had super Typhoon Paka, December 1997. Typhoon 
Chataan, July 2002. Super Typhoon Pongsana, December 2002. To 
mention just a few, and these are typhoons with winds over 200 
miles an hour.
    We have built very well on Guam, all in concrete, so we do 
not have deaths.
    It certainly has devastated the business community, and 
many businesses have left the island and never reopen following 
these storms.
    So I look forward to your testimonies today. This issue of 
disaster preparedness and risk mitigation is of great interest 
to business owners on Guam and everywhere throughout the United 
States.
    Chairman Manzullo. Thank you.
    We have some time. Dr. Christensen, did you want to make an 
opening statement coming from the great territories of the 
Virgin Islands? Virgin Islands and Guam.
    Dr. Christensen. Yes. And as you know, we have had our 
share of hurricanes as well.
    I want to thank you for holding this hearing and welcome 
our panelists today.
    This weekend I had the opportunity to travel with the 
Subcommittee on Emergency Preparedness in response to Houston, 
Beaumont and Port Arthur, Texas. And one complaint that we 
heard over and over there, as we have heard in Louisiana and 
Mississippi, is that businesses are closing because of the slow 
response of the Small Business Administration, which is one of 
the issues that we would be looking at today.
    At this point in that area, and I am sure they are not 
alone in this, they are desperately asking at this point for 
bridge loans to carry them over until SBA finally comes through 
from FEMA. But, you know, we in the Virgin Islands are a 
project Impact site. And that was very, very helpful to us. The 
local businesses worked with the Emergency Management Council 
and it helped them to better prepare, to help themselves, to 
help their employees and to help the rest of the community in 
the event of a disaster. We fought it being discontinued, and 
today we are seeing the percussions of that ill-fated decision 
to close the program.
    Throughout Katrina and Rita most of us, and most of us do 
not have a clue what happened Ophelia. I have really been 
applauded by the loss of institutional expertise knowledge and 
experience that has had us reinventing the wheel in the middle 
of a catastrophe. And I would add, you know, spending dollars 
that we probably did not have to.
    The people in this country and the small businesses which 
employ people within our communities and keep the economies of 
those communities healthy deserve better. Private sector 
preparedness encompasses disaster planning, risk management, 
recovery preparedness and communications readiness. And this is 
really only possible through effective and meaningful dialogue 
among the stakeholders.
    Last week I had the opportunity to attend a briefing hosted 
by BENS, Business Executives for National Security, a business 
organization. And I really regret that we could not have a 
representative of BENS on the panel today. They represent 
owners of some of this nation's critical infrastructure, would 
have been able to make a meaningful contribution, I think, to 
the hearing. But they do remain open to the offer with their 
offer of expertise, not only for the Committee but to help 
communities close those gaps in homeland security that neither 
government or business can fill alone.
    And I am going to just shorten this and just say that when 
business and government do not work together, FEMA loses 
valuable time and wastes money when those relationships and the 
support from the local small businesses are not there in 
advance of the disaster. So dialogue such as the one conducted 
today will, hopefully, help at increasing and improving on this 
relationship. And therefore, our response and our recovery. And 
I look forward to hearing the testimony from the people before 
us this afternoon.
    Chairman Manzullo. Thank you, Doctor.
    Our first witness is Dr. Michael Czinkota, who is on the 
faculty of Marketing and International Business at McDonough 
School of Business at Georgetown University.
    We have a five minute clock here. Why don't you set it for 
6+ minutes because we do not have any votes coming up. All 
right. We will do it 6 minutes. We are not worried too much 
about the time.
    We look forward to your testimony.
    The complete written statements of all the witnesses will 
be made part of the record without objection.
    And Dr. Christensen, BENS, is it B-E-N-S?
    Dr. Christensen. Yes.
    Chairman Manzullo. If they want to submit a written 
statement, as long as it is not a book. If they could keep it 
within a reasonable amount of pages, we would be glad to make 
it part of the record.
    Dr. Czinkota? Czinkota, right?

 STATEMENT OF MICHAEL CZINKOTA, McDONOUGH SCHOOL OF BUSINESS, 
                     GEORGETOWN UNIVERSITY

    Mr. Czinkota. Thank you, Mr. Chairman. Yes.
    Mr. Chairman, members of the Committee, I intend to talk 
about emergency preparedness in the context of terrorism, since 
that is the work we have conducted at the McDonough School of 
Business over the past years.
    Terrorists direct their attacks against businesses far more 
than against any other target. And when they strike what they 
intend to do is to disrupt the flow of supply and demand, and 
of course to change our way of life.
    Terrorism is the third most important concern to firms 
doing international business nowadays, after energy price and 
exchange rate volatility. And firms which we interviewed 
reported to have spent on average about $147,000 on terrorism 
preparedness and hired about five new employees to deal with 
the issue. Yet many corporations also tell us that their 
shareholders do not reward them for any investments into 
preparation against terrorism, and therefore they remain 
unprepared.
    With today's global competition firms no longer have the 
luxury of just aiming at survival in the face of an emergency. 
Rather, they have to offer continuity to their suppliers, to 
their customers and their clients in order to inspire 
confidence in the relationship. Flexibility allows them to 
recover much more quickly in the aftermath of terrorism's 
direct and indirect consequences.
    Now, preparedness, of course, is an overall concept that is 
key to any firm. For example, the benefits of contingency 
preparation became very evident to me at Georgetown University 
after Hurricane Katrina when students and faculty members from 
the New Orleans' area found continuity in our classrooms. But 
even relatively small and local events can cause major 
dislocations for companies. Suppliers can go out of business 
when if their facilities burn to the ground. Employees can be 
struck by illness or a labor dispute may ground shipments. To 
safeguard the investment of shareholders and the short 
viability of firms, managers must prepare contingency plans 
which respond to system shocks.
    We propose a model of the different levels of corporate 
readiness for international terrorism. The model might also 
help to evaluate policy approaches to preparedness in general. 
It links people, activities and society and identifies 
opportunities for improvement.
    We start with the terrorist threat or incident, which 
causes both direct and indirect effects. The direct effects, 
while very harsh at the moment, are far outweighed typically by 
the indirect effects which accumulate and take a long time.
    Those, in turn, trigger the actions of responders who can 
be either external or internal to the firm. These responders 
and the media shape the information, experience and perception 
of society and the firm. The consequences of creation of 
friction that limits the transactions of international 
business, such friction becomes particularly notable for 
stakeholders and logistics.
    The availability of resources and the firm's willingness to 
employ them results in a sequence of preparation stages. 
Managers start out being totally unprepared for the effects of 
terrorism on their firm and not willing to undertake any kind 
of investment. With sufficient input and prodding, managers may 
change their attitude but are still not ready for any action.
    Next, management grows concerned about terrorism and 
searches for inputs such as checklists or readiness audits.
    Then managers plan at a tactical and strategic level and 
integrate shareholders and stakeholders such as employees, 
suppliers, banks and legislators.
    Finally, management implements steps to prepare the firm 
for terrorism. Provisions are made, for example, for emergency 
relocation and employment of staff and to ensure that they get 
paid when the ATMs are down.
    We know that legislative preparation will be more 
advantageous than an overly reactive but unexamined response to 
a current emergency. Our model indicates three particular 
intervention areas: Information, resources and people.
    There needs to be a much wider dissemination of 
preparedness information and then integration of preparedness 
materials into our daily lives; college courses, high school 
curricula, textbooks. We always make sure that our children 
know how to check for dangerous traffic. They need to also be 
informed about terrorism and have an embedded sense for 
planning. Their preparedness might eventually lead to a 
national competitive advantage.
    Web-based training media should disseminate training, just 
like late night shows hawking the latest in weight reduction 
techniques, there should be co-opted media time to communicate 
terrorism preparation activities. Why not think of video games 
and the soap opera dealing with preparation for terrorism? 
After all, terrorism is global and its threat is more real than 
any reality show.
    Since many firms do not commit resources and their 
shareholders do not support spending on terrorism preparedness 
an incentive needs to be provided. Support can ease compliance 
with governmental rules or help firms pay for plans and 
preparation. For example, we should be aware that the cost of 
database management for matching one's customers and contacts 
with the prohibited persons list can be several thousand 
dollars a year. Such activities can be encouraged with funding 
or other fiscal measures.
    Finally, security measures have introduced great friction 
into international marketing which decreases the efficiency and 
effectiveness of international logistics. Supply train costs 
have increased substantially. Our survey respondents tell us 
that their international shipments now take an average of three 
days longer to arrive. Timing is crucial when it comes to 
international competitiveness, merchandise shelf life, product 
quality and payment receipt. The new delays are evaluated to be 
the equivalent of a 2.4 percent tariff increase on goods, which 
is as large as the current overall level of protective tariffs 
imposed by Japan.
    The gains from early preparation are high when compared to 
the costs. A capable response to firm disaster is of benefit to 
the public purse. If public order and processes fall apart, the 
Government will have to set things right at greater expense. 
Firms which stay in business, retain their employees and serve 
their customers can make a great difference in societal 
continuity. As the saying goes, ``You can pay now or pay 
later.``
    Thank you, Mr. Chairman. And I'll be of course, happy to 
answer any questions you may have.
    [Dr. Czinkota's testimony may be found in the appendix.]
    Chairman Manzullo. Thank you.
    Our next witness is Dr. Gary Knight, Associate Professor 
and Director of International Business Programs at Florida 
State University.
    Dr. Knight, I look forward to your testimony.

     STATEMENT OF DR. GARY KNIGHT, FLORIDA STATE UNIVERSITY

    Mr. Knight. Thank you very much. I'm happy to be here.
    Terrorism has important implications for business, but the 
great majority of businesses in the U.S. are unprepared to meet 
such risks and relatively few firms have developed plans to 
deal with terrorism. Terrorism poses direct effects for 
businesses such as loss of life and property, but really most 
important are the indirect effects of terrorism; falling 
consumer demand, interruptions in supply chains, new policies 
and regulations enacted by governments in response to 
terrorism, and macroeconomic phenomena, such as falling stock 
markets.
    The indirect effects of terrorism are cumulative and long 
term. Congress has limited ability to do much about terrorism's 
direct effects, but Congress has a great ability to deal with 
terrorism's indirect effects. And in terms of indirect effects, 
terrorism is similar to other emergencies such as hurricanes, 
floods, epidemics and supply sharks.
    Small and medium enterprises, SMEs, are particularly 
vulnerable. They are companies, as you know, with less than 500 
employees and account for over 90 percent of U.S. firms. SMEs 
have far fewer financial and human resources than large firms. 
SMEs are the most vulnerable firms to the indirect effects of 
terrorism and other emergencies.
    This year we conducted a study of over 200 SMEs around the 
United States to better understand their relationship to 
terrorism and other emergencies. Results revealed that very few 
SMEs had responded to terrorism. Only a quarter had prepared a 
terrorism contingency plan. Less than 20 percent had included 
terrorism in developing business strategy. Only 12 percent said 
stakeholders in their firm reward company efforts to prepare 
for terrorism.
    We also compared the SMEs to larger firms, companies with 
more than 500 employees and we found that on average SMEs are 
generally substantially less prepared to deal with terrorism an 
other emergencies than large firms.
    Also, about 70 percent of respondents to our study were in 
the services sector with the rest being manufacturers which is 
a similar structure to the nation's economy where services 
account for about 80 percent of the U.S. economy. The services 
firms in our sample were more concerned about the affects of 
terrorism than manufacturing firms and had taken more steps to 
prepare for it. Overall however, in general, SMEs have 
responded little to terrorism or not at all. And there is 
relatively little stakeholders' support in these companies for 
such responses.
    Also, very important, is the psychological impact of 
disasters which can be more harmful to the nation's interests 
than the disasters themselves. For instance, the panic and fear 
of the Avian flu is likely to harm our nation more than the 
actual disease itself. There are systems in place now to deal 
with the immediate impacts of disasters from organizations such 
as FEMA, caring for the injured, rescuing people and so forth. 
But there are very few systems in place presently to deal with 
the economic impact of terrorism and other emergencies 
especially as regards small businesses. Yet the economic impact 
could be much more serious for our nation as we have witnessed 
to a great extent following 9/11.
    Let me now summarize a few of the specific policy ideas 
from my written testimony.
    First of all, I think that we need to strengthen the 
partnership between the private and public sectors. The private 
sector is a potential fighting force of managers, scientists 
and venture capitalists and doctors and a strong public private 
partnership helps each side compensate for any weaknesses or 
shortcomings of the other.
    We should also expand disaster recovery loans and loan 
guarantee programs. Perhaps the greatest problem that companies 
face follow an emergency is recovery. As Hurricane Katrina 
demonstrated, companies may be out of business for weeks or 
months or may go out of business altogether, and certainly they 
have no revenue during a long period of time. The problem can 
be addressed, at least in large part, via low interest loans 
and loans guarantees.
    As was already noted, the Small Business Administration 
already provides such loans, but the program needs to be 
greatly expanded and, frankly, marketed better to SMEs around 
the nation.
    We should also provide better intelligence to companies to 
assist them in preparing for and dealing with the aftermath of 
emergencies. Homeland Security, for instance, has a website 
that provides such information to the private sector. But it 
should be expanded and enhanced and especially as regards 
businesses. And perhaps there's a role for the Department of 
Commerce to pay here as well.
    We also need to encourage or continue to encourage free 
trade and economic development around the world. As the United 
States has done for over 50 years via the general agreement on 
tariffs and trades and the U.S. Trade Representative and so 
forth, we must continue to encourage and stipulate free trade 
and economic development around the world as it is the most 
effective means for alleviating poverty in developing 
countries. Poor countries with high unemployment rates are 
fertile ground for the recruitment of terrorists. The economic 
health and stability of poor countries depends on economic 
development that is stimulated by international trade.
    We must take the lead to ensure not just the safety and 
security of the nation, but also the economic well being of our 
nation and to so some extent the world at large.
    Thank you very much.
    [Dr. Knight's testimony may be found in the appendix.]
    Chairman Manzullo. Thank you, Doctor.
    My cousin used to teach piano at Florida State, James 
Stream.
    Mr. Knight. Piano?
    Chairman Manzullo. Piano. He was a concert pianist.
    Mr. Knight. Oh. Well, one of my very best friends is an 
opera singer at the University, so I'm sure they knew each. 
What is his name? James?
    Chairman Manzullo. Stream. S-T-R-E-A-M.
    Mr. Knight. Stream. Well, I'll ask about him when I get 
back.
    Chairman Manzullo. All right.
    Mr. Knight. I'm a big fan of piano.
    Chairman Manzullo. Very well. A little bit different than 
your area of discipline, but--
    Mr. Knight. Well, we are a liberal arts institutions.
    Chairman Manzullo. There you are. Great football team, too.
    Our next witness is Dr. Neil Livingstone, CEO of 
GlobalOptions, an international risk management and a business 
solutions company which has headquarters in the Washington, 
D.C. area. And Dr. Livingstone, we look forward to your 
testimony.

     STATEMENT OF NEIL C. LIVINGSTONE, GLOBALOPTIONS, INC.

    Mr. Livingstone. Thank you, sir. It's a pleasure to be 
before this very important Committee and its very able 
membership.
    I was asked you by the Committee staff to take, shall we 
say, a micro approach as opposed to a macro approach and look 
at some specific recommendations, particularly in the 
technology area and also practical things that small business 
could do to better prepare for natural disasters and terrorist 
disasters. In this regard I think every small business fears 
being victimized by a tornado, an earthquake a hurricane or a 
terrorist event. As I note in my testimony, there were 707 
small businesses in the World Trade Center complex alone. Of 
the 14,000 businesses that were impacted by that one disaster, 
some as far away as Connecticut and New Jersey, over 5,000 were 
small businesses. So small businesses really don't have the 
capacity to do the things big business can do. The average 
small business doesn't have the large corporate reserves or 
borrowing power, they're not diversified like major companies 
are and so on.
    The SBA website, and the SBA is a fine organization but the 
website says, you know, it offers you advice, some of it rather 
gratuitous. Like guard against the loss of your customer base 
by diversifying your product lines, sales locations or target 
customers. If you could do that, you'd be a big business. And 
therefore, you know, most small business have three or fewer 
locations and they're usually in the same region. And if they 
could diversity or reach out to other areas to do business, I'm 
sure they'd so do. So we really have to deal with the world as 
it is rather than the world that we would like it to be. And 
that means that small businesses when they are impacted are 
likely to be impacted in their totality by whatever the natural 
disaster or other disaster is at that point.
    There are a variety of things that small business ought to 
do these days. And in trying to better defend themselves from 
the downsize of any type of natural disaster or the disaster. 
One of the things that I point out in my testimony that there 
are templates available on a number of websites and so on for 
crises management or business continuity plans. And this is a 
good way to start. And the Government makes these available, 
and they can be simply downloaded at no cost to them.
    SBA, the problem with the SBA is primarily a reactive 
agency. And if you guys could do something that would be, I 
think, most helpful is to make them proactive. And I think as 
Dr. Christensen said, that you know it's basically that an 
ounce of prevention is, as I think as well agree, worth a pound 
of cure. That this is where the Government is going to save 
money and this is where we're going to better protect people is 
to try to help small business prepare in advance of natural 
disasters rather than simply making loans and other types of 
financial aid to them in the aftermath.
    And I go around and I speak to a lot of conferences, help a 
lot of business organizations prepare. And the problem is that 
a lot of the software solutions today that you can get for, 
say, doing a risk for vulnerability assessment, which you 
really need to start with, those are very expensive. And I 
would say if SBA could buy that software, buy it once and make 
it available so it could be downloaded by small business on a 
self-help basis, that that would be extremely valuable so that 
they can begin to assess their own vulnerabilities and take 
steps to prepare and deal with those vulnerabilities.
    Obviously, there are other solutions in the technology 
area. Communications was a huge problem after 9/11. It was in 
Oklahoma City as well. It's been a problem after every natural 
disaster. Satellite phones now you can buy for a $1,000. You 
know, as business deduction I think we ought to encourage small 
business to have some type of capability to have communication 
after disasters. No one's cell phone, again, worked even in 
Washington, D.C. because the whole system was overloaded on 9/
11.
    Other things that they can do. We need to make sure that 
they have the capacity to have backup storage of vital assets 
and business data. Because that's what business continuity is 
all about. And I would even open federal facilities under some 
cases so that you can withdraw your vehicles and even some 
equipment. If you're going to be in a storm surge area, make it 
available so that that equipment can be stored at some federal 
facilities. Not even the police department on the recent Gulf 
Coast hurricanes that were right in the storm surge area moved 
their vehicles back. It wasn't just the buses in New Orleans 
that weren't redeployed; there were a lot of things that 
weren't redeployed.
    I also suggest that there are a variety of other things 
that are needed. And nothing is needed more than survival kits. 
You want a practical suggestion here, and I would invite the 
members of the Committee and staff to take a look at some of 
these survival kits. All cost under $1,000. And I've provided 
also to the Committee lists of the kits.
    The office kit has the large plastic container for storage, 
first aide kits, flashlights, NOAA weather radio with extra 
batteries, plastic bags for refuse, water, blankets, utility 
knife, hand held compass, meals ready to eat, duct tape, 
plastic sheeting towels, large bucket with a lid and toilet 
paper, whistles, extra car keys. We didn't include the cash we 
recommend here, but it should be in small bills. Changes of 
clothes, toiletries, extra eye glasses, prescription drugs, 
family documents and hand held radios.
    These are the kinds of things that are practical and we 
ought to be encouraging all small business and give them a 
limited deduction to have these kinds of things, as well as 
various types of car kits, travel kits for their employees so 
that they can get home and they can take care of their families 
because everyone wants to do that.
    And there are also home kits that we have put the items in 
here.
    So, again, I would be happy to take further questions. I've 
given a number of suggestions to the Committee, and would be 
happy to talk about those in greater detail. And I would invite 
you to take a look at these survival kits over here.
    Thank you very much.
    [Dr. Livingstone's testimony may be found in the appendix.]
    Chairman Manzullo. Do you have any spaghetti in there, Dr. 
Livingstone?
    Mr. Livingstone. You know, I don't know what those meals 
ready to eat have in them.
    Chairman Manzullo. All right.
    Mr. Livingstone. But, you know, if you're hungry I think 
most of us would be just happy to have a good hot meal.
    Chairman Manzullo. Appreciate your testimony.
    Mr. Livingstone. Thank you.
    Chairman Manzullo. That's one of the testimonies that's 
practical, too practical. And, unfortunately, just some of the 
simple things that you've discussed could really prevent a lot 
of angst if people in the Gulf had had at least their insulin 
in their pocket, or something simple like that, heart medicine, 
things could have been saved.
    The Committee will next hear from Dr. Barry Scanlon. He's 
Senior VP at James Lee Witt Associates, a crisis emergency 
management consulting firm based here in the Washington, D.C. 
area.
    We look forward to your testimony, Mr. Scanlon.

STATEMENT OF DR. BARRY SCANLON, JAMES LEE WITT ASSOCIATES, INC.

    Mr. Scanlon. Thank you, Chairman Manzullo, members of the 
Committee.
    I appreciate the opportunity to come before you today to 
share my thoughts on private sector emergency preparedness, 
which come from my experiences serving as Director of Corporate 
Affairs at the Federal Emergency Management Agency as well as a 
partner at James Lee Witt, Associates, a public safety and 
crises management firm founded by former Director Witt.
    I also want to thank and commend the Chairman and the 
Committee for its continuing focus on how to better improve 
private sector preparedness.
    I would like to convey some of my ideas and lessons that we 
learned from my personal experiences at FEMA and from the 
experiences of Mr. Witt and some of my colleagues through 340 
federal disasters during the 1990's, as well as some of our 
more recent experiences assisting Governor Blanco and the 
people of Louisiana as they work to recover from Hurricanes 
from Katrina and Rita.
    At FEMA I saw up close the devastation of disasters. I 
traveled around the country as a disaster assistance employee 
to many states: California, Alabama, Louisiana, the Virgin 
Islands and Guam. I didn't get to go to Guam, but many folks in 
our firm have.
    Chairman Manzullo. Excuse me, but the Congresswoman wants 
to invite you personally--
    Mr. Scanlon. I accept.
    Chairman Manzullo. --to come to Guam. We were there in the 
first week of August and what a beautiful area there. She does 
a lot of bragging about Guam.
    Mr. Scanlon. Yes, it's warranted.
    During most disasters the private sector, in our 
experience, is rarely considered when priorities are set or 
when actions are taken. Further communication and information 
sharing with the private sector is virtually nonexistent within 
the federal, state and local disaster response efforts leading 
to an under utilization of the cooperation influence and 
resources that the private sector can bring to bear.
    Also at FEMA I was privileged to lead an effort called 
Project Impact, which was started by Director Witt to bring 
together the public and private sectors to work on emergency 
preparedness. We found it to be very successful. We started 
with seven pilot communities. And after 2+ years we had 250 
communities around the country and about 2500 corporate sector 
partners, many of whom, obviously, undertook efforts of their 
own to make their businesses more prepared.
    The impetus for Project Impact came from Director Witt's 
and the agency's desire to end what was called the damage 
repair/damage report cycle where we would go to the same 
communities over and over again who wanted to try and mitigate 
their losses. And interestingly, Project Impact was the first 
program ever funded by Congress that provided money for 
mitigation and prevention before a disaster. It was tied to any 
particular disaster. And much like the SBA programs that exist 
now, there's an opportunity to try and start some programs that 
aren't connected to a particular disaster.
    In the Project Impact process we learned that the private 
sector was very willing to be a part of the process and, in 
fact, wanted to see that the communities that they were 
operating in were taking steps to better improve their 
preparedness and response efforts. Because, of course, the 
private sector would benefit from those.
    In the last five years since we left FEMA we've been part 
of many projects that have been designed to bridge the gap 
between the public and private sectors. And we've helped to 
design the preparedness campaign here in the national capitol 
region. We've also been involved with the Illinois Terrorism 
Task Force which has brought together the public and private 
sectors, as well as working closely with utilities like PEPCO 
holdings here in the nation's Capitol, as well as nuclear 
facilities around the United States designed to bring together 
the companies and the communities in which they operate in in 
finding better ways to be prepared and to respond.
    Each of these projects has shown the real gap that still 
exists, but it also shows the real potential for collaboration 
and improvement in the future.
    Moving forward, I would respectfully like to present four 
idea or thoughts that you could or should consider while 
developing your agenda for future actions. Some of these could 
be done legislatively and some by the responsible agencies.
    The first is in any of the efforts that you undertake that 
you do so within the all-hazards approach. This was something 
that was adopted by Director Witt and in partnership with state 
and local governments throughout the 1990's. And I think it's 
something that's been diminished the last few years. Doing this 
will hold two very important aspects for success.
    The first is that it will increase the level of 
participation by business. Businesses are much likely to be 
affected by small business interruption than by a large or 
catastrophic disaster. So if they are preparing indeed for 
anything, they will be prepared for anything.
    The second is improving the effectiveness of the 
preparedness actions that they take. Again, no business knows 
what crises they're going to face. And if they're prepared for 
all sorts of disasters or crises, be it a blackout or a large 
hurricane, they'll be better prepared.
    A second thought is to establish a public/private 
preparedness initiative. Essentially reestablishing Project 
Impact, perhaps with a small business focus. It could be done 
within the Department of Homeland Security or within SBA. There 
were a lot of positive aspects to Project Impact. The first was 
that it was grassroots based. It was communities dealing with 
their local businesses. There were some federal money involved, 
but in the end it turned out mostly to be seed money and was 
greatly increased by efforts in the private sector.
    The third recommendation that I have is to establish an 
emergency support function for business. As you may know, 
within the federal response plan and the national response plan 
agencies like the Department of Transportation or the U.S. Army 
Corps of Engineers are responsible for transportation or public 
works in the wake of a disaster. No one's at the table with the 
responsibility of what's happening to the private sector, be it 
dealing with the Business Roundtable or the U.S. Chamber of 
Commerce for large business and critical infrastructure or even 
to the smaller scale dealing with the local Chambers of 
Commerce throughout the country. When we led Project Impact, 
and I started in seven pilot communities, the local Chambers of 
Commerce were the best partners. They brought in their most 
proactive members and most successful members. And that's 
something that there really needs to be an ESF for business.
    The fourth recommendation is one that you've had before you 
in previous hearings and earlier today, and that I would like 
to second, which is strengthening or even expanding some of the 
SBA programs and even looking at a public/private partnership 
with local banks that I know has been presented before you that 
could move things quicker.
    One thing related to this in closing, and I again 
appreciate the opportunity to appear today, I attached the 
testimony of my boss James Lee Witt from March of last year 
where he discussed his concerns with what was going on and the 
concerns that were raised to him from state and local emergency 
managers that the FEMA that they were dealing with is no longer 
there. And I think we've all seen some of that recently. And I 
would ask the members as they consider this and other programs 
on other committees and within the House as a whole that you 
look to make FEMA again fully staffed, fully funded and an 
independent agency that responds directly to the President.
    Thank you, Mr. Chairman.
    [Dr. Scanlon's testimony may be found in the appendix.]
    Chairman Manzullo. Thank you.
    Sort of an intellectual discussion of how businesses 
prepare for emergencies coming from an academic and, obviously, 
a practical application. I appreciate it very much.
    My question is more general. It may sound cynical, but it 
is not. Well, it is true. It is true. Let me give it a sound 
here.
    I do not know how businesses, aside from the obvious things 
such as backup on your data system and things of that nature, 
can really prepare for not so much the disasters that come 
along, but for the acts of terrorism. I do not know how much 
money you can spend. My brother just left the restaurant 
business after 41 years. And when you take a look at the food 
that comes into this country, about 3:00 in the morning I ate a 
kiwi that came from New Zealand. New Zealand is a great 
country. I know John Wood quite well, the Ambassador. Look at 
garlic coming from China, which is horrible. You might as well 
eat marbles, it is just terrible. And produce coming from all 
over the world. You wonder if every one of those items is 
examined? The answer is no. It is physically impossible to do 
that.
    We have not even talked about food safety. It is obviously 
a huge part of what you do because it is, obviously, part of 
the food chain and water quality, etcetera. But I just do not 
know in how many directions. We exchange security for freedom 
in this country. You can do a modicum of security, for example, 
when you get on your airplane your constitutional rights end, 
and that is okay with me because you are trapped. And then 
nobody has the right to carry a firearm on an aircraft unless 
you are an Air Marshall.
    But I do not know where you start on this, what the 
threshold is or how you address small business people and say, 
you know,``You guys are just not prepared.'' Does anybody 
understand my question here? Somebody want to take a stab at 
it?
    Go ahead, Mr. Livingstone.
    Mr. Livingstone. Well, if I could, Mr. Chairman. I 
understand your question completely. My firm deals with helping 
business prepare all over the world. And one of the things that 
we believe is that the Government has certain responsibilities 
and food inspection is one of those. We have responded to cases 
before where we have had tampering of food supplies in other 
countries before it got here to the United States. And that is 
something that concerns all of us. And so I think there a 
variety of things that the Government has the primacy, and the 
primary responsibility.
    What business has is the responsibility of protecting its 
employees, its share value, the jobs and taxes that it provides 
to the community and so on. And I think that can best be done 
by taking steps to essentially make them more impervious to the 
downsides of any type of disaster, particularly terrorism.
    Take the World Trade Center for example. One of the firms 
that had exercised evacuation planning and had a good 
evacuation plan where they took it seriously and they took time 
out of their billable hours that, you know, drive all firms 
that are in the service business and they actually exercised 
this kind of planning and preparation.
    Chairman Manzullo. Fire drill like in school?
    Mr. Livingstone. Like a fire drill.
    Chairman Manzullo. Yes.
    Mr. Livingstone. They saved every member of their firms. 
Other firms were not so successful. And similarly those firms 
that pre-deploy smoke masks. I got one the other day that a 
sample that a firm sent me, is now $12. It looks like a pretty 
good smoke mask. And if you are in a high rise building that 
can make the difference between life and death. It is all these 
little things that we are talking about with our chests over 
there and things like that. It is preparation, it is 
essentially having communications, it is essentially 
encouraging small business to do the things that they can do 
for themselves so that they do not become burdens on the 
Government later on.
    Two-thirds of all the businesses in Hurricane Andrew that 
remained closed for three days never reopened again. Think of 
that blow to the tax base, to the jobs, to things of that 
nature. And we are going to see that again because of the Gulf 
hurricanes as well.
    So I would say that in summary that if the Government can 
provide better informational resources, and I think we would 
both agree on that. Do those things that are out of the reach 
of small business. If there is a template for doing a 
vulnerable assessment of their business and those things cost 
too much, let the SBA provide those and let anyone download 
those kinds of informational resources. That is what the 
government does so well.
    Chairman Manzullo. But maybe we should look less to the 
government. There is a big lesson in all of this.
    I had in my office a couple of years ago the fellows that 
represented the automobile insurers from the State of Illinois. 
And with three teenage drivers, you have a distinct interest in 
making sure that your kids are safe, especially driving in 
Northern Illinois is very challenging; icy roads, country roads 
with uncontrolled intersections, gravel with a high crown.
    I said ``Has it ever dawned on the insurance industry to 
offer skilled emergency driving courses for kids?'' I 
understand in places in Colorado when a car goes off a 
shoulder, you know, get the kids out there. Teach them hands on 
how to do that. And you wonder about the role of the insurance 
companies. I know insurance companies are involved big time in 
fire prevention; seminars, hints to the householders and things 
of that nature.
    But I look at government's response and I think the place 
to really start, you have to start with an awareness, right, 
Doctor? Perhaps something as simple as teaching your employees 
to do a fire drill.
    Okay. My time is up.
    Congresswoman Bordallo?
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Listening to the witnesses here, I think you all had 
mentioned strengthening the partnership between the public and 
the private sector. I certainly agree with that.
    In our disaster team in Guam, I always have to bring up my 
territory because we are so far out and many times forgotten, 
we have a Chamber of Commerce representative on that team. And 
we meet periodically. I think that is something, too.
    For example, here in Congress, in case of an emergency here 
we have to vacate our buildings. We have a rep in our offices.
    Chairman Manzullo. We know where we go.
    Ms. Bordallo. Yes. The first time we ever had a drill, we 
all knew where we were to go. I was supposed to go down there 
by Tortilla Coast. Well, the second time we had an emergency, 
the police were directing us in all the different directions. 
So I think it has to be continuity that has got to be involved. 
Once we get something set up, whatever it is, it is got to be 
continued. It is like with anything else.
    Homeland Security. Now I do a lot of traveling. At first 
they were very, very conscientious. Now sometimes they are 
talking while your bags are going through the x-ray machines. 
And, you know, it is just human nature. You have got to keep it 
up. So you mentioned, you all mentioned that, and I think that 
is a very good point.
    Another thing is I think the reason that small businesses 
or rather any business, big or small, are left out of the loop 
here is because people tend to think the general public, the 
federal and the state officials, they have got money, they can 
take care of themselves. They have got the employees. They can 
get back on their feet. I think that is the general, you know, 
consensus of the public. I may be wrong. But I know back home 
they always feel well businesses, you know, they are the ones 
that have got all the money and the influence and they can 
build up themselves and get back on their feet, as I said 
earlier.
    But these are some of the problems that we are up against. 
And I want to know right now can any of you answer the level of 
coordination that exists today between the local, municipal and 
state first responders and local small businesses?
    Mr. Scanlon. Well, I would say in our experiences it is 
geographically dependent and it is really a case by case basis. 
In some areas it does not exist at all and in other areas, you 
know, as you said in the Virgin Islands or in Guam there is 
actually a lot of activity. And in Southern Florida, Broward 
County and other counties down there, actually have both 
Broward County and Collier County have an ESF for business like 
we have discussed. So they have, Motorola and other companies 
were active that when there is a disaster coming into Broward 
County they are in the EOC, and they are not necessarily 
helping make decisions, but at least they are able to let their 
corporate brethren know what is going on.
    Ms. Bordallo. Yes.
    Mr. Scanlon. Because while the first decision that needs to 
be made is for public health and safety by any emergency 
manager, if there is other steps that could be taken, which 
roads to clear first or other efforts like that that could help 
the corporate community respond, you know I think that is a 
positive.
    Ms. Bordallo. Yes. I thought your recommendations, Mr. 
Scanlon, were good. And I guess we just got a lot of work ahead 
of us. But we have got to include businesses in these disaster 
whether it is a terrorist attack or a hurricane or a typhoon or 
whatever. And I think the Chamber of Commerce is the key here. 
They should send representatives to our disaster groups, our 
teams.
    And I think you very much for your testimony. I thought it 
was very good.
    Thank you.
    Chairman Manzullo. Mr. Akin?
    Mr. Akin. Thank you, Mr. Chairman.
    I figure things are getting a little bit sleepy this 
afternoon, so I got to toss out a good question. Do you think 
it is really a good policy for the Federal Government to have 
flood insurance to encourage people to build in areas that are 
going to flood? Is that a good thing? I mean, we got a lot of 
small business that are sitting below sea level or whatever it 
is. Is that a good policy? Are we really being compassionate to 
do that or are we really making a mistake in that?
    A second question that is a little less obnoxious, maybe 
would be did you ever think of emergency preparedness planning 
including encouraging employees to have houses that have a 
certain amount of food or water or things like that in the 
homes so that your employees are in a secure position?
    Two questions.
    Mr. Czinkota. Well, if I may, I will address the second 
one.
    Mr. Akin. A wise--
    Mr. Czinkota. I think one principle problem which has not 
been address sufficiently is the issue of expectations. What 
can one reasonably expect to have, for example, Government be 
providing? And I think in many instances there are totally 
unreasonable expectations because Government cannot and 
probably should not provide everything. And along the same 
lines there should be reasonable expectations as to what can we 
do for ourselves. What is the investment we should do into our 
own resilience to be ready to weather at least short term 
immediate effects, and that includes the insulin in the pocket 
and it includes having a little bit of food at home.
    Of course, the other problem is we see in the media the 
focus on the very poor who may not have the resources to invest 
even in medium sized resilience inventory. But companies, if a 
company is not able to invest, let us say, a $1,000 to have 
some minimum preparation, then there is a problem at the 
corporate level. But at the same time, there are distinct 
things that companies in collaboration with Government should 
prepare for and Government should think about in terms of 
indirect effects. Let me give you two examples.
    If a company has no idea what an escape route might be or 
where I can get alternate supplies, and has never thought about 
that, then of course it will be surprised by any shift. I am 
very happy to report, for example, with us a Georgetown 
University we were able after the hurricane in New Orleans to 
bring 80 students from the region and absorb them into our 
teaching without any charge because there had been plans in 
place beforehand what happens if there is a significant 
disruption nationally in terms of teaching capacity of some 
institutions. Obviously, we could not accommodate everyone. But 
82, that's not bad. And, again, their home institutions 
received their tuition, we do not receive it. But that is 
solely was we were able to do that because there was some 
planning and preparation. And unless one does that, it is not 
going to happen by itself.
    Mr. Livingstone. Could I just add something to that, sir, 
as well.
    Mr. Akin. Sure you can.
    Mr. Livingstone. I think it is a terrific suggestion that 
you have made, and I know you were not here for my testimony, 
but there is a home kit over there. And there is at least one 
firm in the area that has bought all of its employees home 
survival kits as well as a car survival kit. Because we even 
have to look at those kinds of emergencies like a chemical and/
or biological, even a radiological attack, which I have 
testified about before other committees up here, in which case 
you may be caught in your car. You may caught in a traffic 
situation. And we have worked with the District of Columbia on 
evacuation routes.
    The District is one of the most difficult cities in the 
United States to evacuate because we have a lot of bridges 
here. And so people are going to have major problems reuniting 
with their families. And they need to have some survival gear 
in their car.
    I am a Montanan. We always carried survival gear for fear 
you would have a breakdown in the winter up in our part of the 
country. But most people do not carry survival gear. So there 
is a home set over there. There is also a car kit and things 
like that. And we think that is one of the really responsible 
things that business can do to work with its employees.
    Mr. Akin. I see my time is just about up, and nobody has 
wanted to talk about federal flood insurance. I am so surprised 
that nobody really wanted to discuss it. Don is the one that 
puts us up to these things.
    Thank you very much for your thoughts.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you, Congressman Akin.
    Dr. Christensen, what hurricane did you suffer through 
about four years ago?
    Dr. Christensen. Well, we had '89 Hugo was the biggie and 
'95 Marilyn was a biggie. We have had small ones in between.
    Chairman Manzullo. Yes.
    Dr. Christensen. But we have learned from them and we have 
built better and stronger in our homes. And we did Project 
Impact that helped our businesses to become more resilient. And 
I really cannot over-emphasize the importance of what we are 
talking about today, that public/private partnership and that 
preparedness that needs to be in place. It not only helps the 
businesses to maintain some continuity of service and income, 
but it also saves the Government money. And that money can then 
be put back into helping.
    We heard a story at this BENS breakfast that Homeland 
Security had where this probably was not a small business, but 
business in either Katrina or Rita offered communication 
trailers. They offered four free communication trailers. And 
FEMA could not figure out how to use them. They could not 
accept them. And they came back a couple of weeks later and 
said we cannot use the free ones, but we will buy 10. You know, 
the preparation in advance. And I think when we look at what we 
have spent after Katrina and Rita, we are going to find that 
there was a lot of wasted because the preparation was not 
really there.
    Let me see if I can get in a couple of questions. I am 
going to start with I know the Chairman practiced your name 
before he came.
    Mr. Czinkota. Czinkota.
    Dr. Christensen. Czinkota. And Dr. Knight as well.
    I am going through a thing with my charter boat industry at 
home right this minute because of some security regulations and 
the businesses are really afraid some of them are going to have 
to close if we cannot get it resolved. So talking about the 
security measures and the delays being an equivalent of a 2.4 
percent tariff rate on goods, you know we have to find a way to 
strike a balance. And I do not know if you have any ideas.
    I mean, do you think that we have overreached and what can 
we do to bring this balance between security and allowing 
commerce to continue? Do you think security is overreached?
    Chairman Manzullo.
    Mr. Czinkota. Well, it certainly is an important problem. 
And in many instances I must say we find that problems of that 
nature pop up as unintended consequences.
    Dr. Christensen. Yes.
    Mr. Czinkota. So if nobody really wanted that to happen but 
here we are and all of a sudden here are these delays.
    Dr. Christensen. Is it another consultation?
    Mr. Czinkota. What that means, of course, is that 
especially when it comes to regulatory actions, it is better to 
fully consider what they mean rather than quickly respond to a 
momentary emergency. And then I think there is also, and this 
is difficult for anyone who implements these things, there is a 
need to after a while to step back and say what have I wrought, 
what does this really do and is it as intended. Because for 
example, we all know that it is important to control how many 
people or which people come into the United States.
    Dr. Christensen. Right.
    Mr. Czinkota. But it may seem that on occasion some of 
these controls have been too harsh and as a result there may be 
a lot of people who should be coming, let us say from a 
business perspective they come to inspect goods, to buy 
merchandise, but they cannot come or they will not come because 
it is too onerous for them.
    Dr. Christensen. Yes.
    Mr. Czinkota. Now these things one ought to take second 
looks at that rather than sticking slaveriously to this is what 
it is going to be and think about could there be a trusted 
travelers program, trusted business person's program.
    So, yes, that should take place.
    Mr. Knight. I agree with Professor Czinkota about the 
notion of untended consequences. Of course, any proposed 
legislation should undergo cost benefit analysis, thorough cost 
benefit analysis to ascertain what will be the costs and the 
benefits. And we, obviously, want the benefits to greatly 
exceed the costs, especially as far as burdens on the economy 
and on the business sector are concerned.
    But I would also say that I want to reemphasize the 
importance of recovery from disasters.
    Dr. Christensen. Absolutely.
    Mr. Knight. And we need to interject emergencies as much as 
possible, but it is hard to intradict a Hurricane Katrina and 
it is hard to stop it out there in the ocean. And so we need to 
emphasize facilitate in this country an infrastructure whereby, 
especially small businesses, resource constrained small 
businesses can recovery as quickly as possible from disasters 
in order to ensure the integrity of our economy in general.
    Dr. Christensen. Well, I wish--could I just ask one short 
question, please.
    Chairman Manzullo. Sure.
    Dr. Christensen. Mr. Scanlon, there is some discussion 
about the role of the Government versus the role of the 
business. In your experience in Project Impact do you think 
that it can work just with the provision of the technical 
assistance to the businesses? It would not really cost the 
Government a lot to institute that program again.
    Mr. Scanlon. Yes. I do not think there needs to be, you 
know, a tremendous amount of federal funding. You know, with 
$25 million we got--we started Project Impact with, I think, $2 
million with seven communities. And in places like Seattle they 
got a million dollars eventually and I think they raised from 
the private sector $8 million. So there was a return on that 
and it spoke to Congressman Akin's question of how to encourage 
your own employees where people like Washington Mutual or 
Fannie Mae joined with us in Seattle to have a loan program for 
businesses who are involved in Project Impact that they would 
get below market loans to do seismic retrofitting.
    So, you know, it is just to be a coordinator, if you will, 
or to start the process. And in many areas they just took it 
and ran from there. I do not think that there needs to be even 
grants. I think, perhaps, as Dr. Livingstone spoke about having 
the software, perhaps, or other things that could be done by 
the SBA or others. But I do not think that there needs to be 
grants or those sort of things. It is more just providing the 
impetus and bringing the partnership together with the public 
and private sectors.
    Dr. Christensen. Thank you.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Congressman Sodrel?
    Mr. Sodrel. Thank you, Mr. Chairman.
    I got here a little late so I did not get in all the 
testimony. But when I listened to the discussion about how we 
get information to small businesses, it seems to me there are 
two ways of doing that. One is provide it on the website, let 
them come to you. But have we considered going through trade 
associations? Because the challenges faced by each of these 
businesses is in some respects similar, but in other respects 
it is completely different.
    You know, it occurs to me we have a National Restaurant 
Association, American Bus Association, you know an association 
that represents practically every segment of small business. 
And that might be a way to push information down instead of 
wait for somebody to ask for. If we had some system of 
contacting those various trade associations and making 
recommendations for individual industries and asking them at 
their national conventions or seminars, you know, to add that 
to the list of things that you want to talk about when you get 
people from your industry together.
    Any comments on that? I mean, has anybody tried that or do 
you think that would be helpful?
    Mr. Czinkota. Sir, I could not agree more with your 
comments. First of all, in terms of resource constraints, to 
reach out to multipliers who then touch many other people is, 
of course, one of the essences of public/private sector 
collaboration. Because the public sector can perhaps put 
together or acquire the software, but then the distribution 
itself is what the private sector can be of great help.
    But it is also I think one of perspective. Right now, at 
least, I find whether I talk to my students, whether I talk 
with firms, that the terrorism issue is sort of a sideline or 
the disruption issue is sort of well it happens to others, 
hopefully. That's sort of the generic reaction.
    And what I find absolutely amazing. Here, everybody sits 
and watches these reality TV shows and we have ``Boston Legal`` 
and we have these crime shows and so on. What makes the economy 
really go is what companies do, what businesses do with their 
international stuff. And to my line I'm waiting everyday to see 
a new program where we have, I call it as my acronym is IMDC, 
international marketing in D.C. That's important for society 
and we should bring that closer to people as part of their 
regular thinking, as part of their regular appreciation of what 
makes the world go around in terms of investments and 
activities.
    Mr. Livingstone. And if I could add to that, after the 1993 
attack on the World Trade Center, which was unsuccessful at 
dropping the towers but was carried out also by Muslim 
fundamentalists at the time, the International Parking 
Congress, just to name one organization then devoted seminars 
at its annual meeting to basically dealing with the issue of 
security of underground parking areas. I think that this is 
where, Mr. Chairman, as you were talking about insurance 
companies as well, this is where we need to get the partnership 
with the insurance companies to make it in their interest to do 
it. And, similarly, with the terrorism insurance requirements 
that we have today. All of these things that we can encourage 
business to do, what is in its in own self-interest in some 
cases. And I think many of the trade organizations are the way 
to go about some of this information dissemination.
    Mr. Knight. If I could add a little bit more. I absolutely 
agree that I think the first response should be at the local 
level. Local entities understand their own needs best. You 
know, in thinking of terms of trade associations, Chambers of 
Commerce, the local Red Cross branches, local agencies, local 
firms, life insurance companies.
    But I would add that I think that there probably is a 
coordinating role for the Federal Government in disseminating 
information and getting these different entities to work 
together on the same sheet of music in dealing with crises. And 
most crises do tend to have a major local component to them. 
And so it certainly makes sense to push a lot of the 
responsibility for dealing with, especially the aftermath of 
crises, and also the preparation of crises down to the local 
level. And it's also more cost effective, frankly, to do it 
that way.
    Thank you.
    Mr. Sodrel. Just to add on it. There is an organization of 
associations, I think it is the American Society of Association 
Executives or something where kind of the umbrella 
organization.
    The other thing that occurs to me, if you could encourage 
these folks to have some mutual assistance agreements to try to 
get small business back up and running. I mean, if the American 
Restaurant Association, for example, would be willing to help 
another member in another community or if communities were 
paired up or sister communities or something, you know, where 
they could bring some assets to bare to try to get the small 
business back up and running, a self help if you will. But at 
least organized or suggested from the outside.
    Thank you, Mr. Chairman.
    Ms. Bordallo. Thank you, Mr. Chairman.
    I have a question for Dr. Knight. You suggested I think in 
your testimony that the Federal Government should take a more 
active role in educating small business owners about emergency 
planning. Now, what kinds of training programs would you 
suggest be run and which federal entity do you think should be 
responsible for such a program?
    Mr. Knight. Well, first of all, I could point to the 
example of, for instance, the International Trade 
Administration of the Department of Commerce has done an 
excellent job of training programs for SMEs that are interested 
in international business and exporting and so forth. And, in 
fact, I used to work in the private sector years ago in an SME 
as the export manager of a company and I participated in some 
of those programs. And the ITA offered programs at major cities 
at relatively accessible cities throughout the nation in a very 
coordinated effort. And I thought it was very good. And it was 
also very cost effective, I felt.
    And I feel that there could be a similar role for the 
Department of Commerce and/or one of its agencies, possibly 
Homeland Security although probably Commerce is more qualified 
in this area to develop similar programs of training of 
business continuity planning, of checking for security 
weaknesses in company's value chains of analysis of security 
issues and preparedness issues, dealing with emergencies as 
they're occurring, dealing with the aftermath of emergencies. 
There is all kinds of training programs that are possible, and 
they exist already out there in the private sector. And perhaps 
there could be some sort of private/public coordination, 
partnership, in developing a little more systematic approach 
with the Federal Government having a little more of a 
coordinating role through the Department of Commerce in 
developing these programs, marketing these programs, frankly. 
You know, aggressively letting SMEs throughout the nation know 
that these programs are available. And perhaps even 
incentivizing companies. I do not know what it would be through 
tax incentives or something of that nature to go and 
participate in these kinds of programs.
    Because I think as others have said either, we need to 
develop in this country a culture of preparedness, a culture of 
preparedness. And, frankly, I think of the example of Israel, 
for example, of a country that has developed this tremendous 
culture of preparedness and they have, obviously, a lot more 
experience with various crises than we do. But I think that if 
we had this kind of culture or mentality of preparedness in the 
nation, encouraged through a more systematic educational 
effort, in part coordinated through the Federal Government, I 
think we would be in a much better position to recover from 
crises.
    Ms. Bordallo. I guess we always think it is going to happen 
to the other person.
    Mr. Scanlon, do you feel, too, the Department of Commerce 
would be the most ideal department?
    Mr. Scanlon. Well, I think that you may want to look at it 
may be a combination of agencies. But I think much like the 
respective or the recommendation at looking at having an 
emergency support function for business, that they should be 
tied with whoever is doing the training and helping with 
preparedness. Much as we oppose separating preparedness from 
response from FEMA and DHS, I would oppose it for businesses. 
Whoever is helping them prepare should be interlocked with them 
in helping them respond.
    Ms. Bordallo. Yes. Any other comments?
    Mr. Czinkota. Well, perhaps. Let me just add what is 
terrible important and our research has shown that is it is not 
just sufficient to provide information. We have to 
understanding doing so what is that firms need.
    So, for example, a manager who is totally unprepared, 
totally uninformed, you give that person some checklists, some 
ideas to raise the concern; that's great. But you do the same 
thing for a manager who is looking for true implementation. How 
do I get my firm ready and then all he gets is a pamphlet with 
some general ideas, that's a waste of effort. And that actually 
results in the trust in the communication or information going 
down. So, ah, this is just another Government wasted effort.
    So what that means it is not just from a Government 
perspective to provide information,but to understand processes 
and to provide the right information to the right people so to 
truly help them forward. So it shouldn't just be an agency 
which says here is a brochure.
    Ms. Bordallo. But I think that is a way we have to start. 
Because if you are going to go into all the different needs, 
you know, then it becomes very complicated. I think we have to 
start out with a basis and take it from there. Then there are 
other needs. I agree with you. Everybody needs different 
information to prepare. Is that not what you are saying?
    Mr. Czinkota. Well, different level of information.
    Ms. Bordallo. Yes.
    Mr. Czinkota. I mean, obviously there's specificity of the 
information always will come down to the individual company. 
But in terms of how in depth do I go makes a real difference. 
And, of course, the issue is also if I just reactively sit 
there and wait for them to come to me and pick up a brochure.
    We have such wonderful technology today. For example, some 
agencies are still conducting any training by doing sort of the 
city tour and then on this date you can come to this place and 
participate in training. What happened to webcasts? We have 
great technology available to reach out and let people do 
things at their own terms. And especially business owners. They 
do not necessarily have time this Thursday from 8:00 to 10:00. 
They should be able to do this at their time, and we have the 
technology for it.
    Ms. Bordallo. But there are still many small businesses in 
our country I feel that really do not have the technology 
available in their little businesses and some of them are not 
knowledgeable on how to use it. So we have to keep that in 
mind, too.
    I am just thinking, you know, the more complicated you get 
in Government, the more the program will fall apart later on 
down the road. So to start with a basis if the Department of 
Commerce is the Department, then maybe that is the way to go. I 
mean we have to think it over, you know. I just wanted an idea 
from you. So thank you very much.
    Thank you.
    Chairman Manzullo. I have a comment here. Mr. Scanlon, 
going over your bio. I saw that you were in the Banking 
Committee Conference on the National Flood Insurance Reform 
Act.
    Mr. Scanlon. I was, indeed.
    Chairman Manzullo. It is a good thing Mr. Akin had not read 
that in your bio.
    This has been a very interesting hearing. We have had the 
delight of not having to respond to bells because of voting. 
What I see here is four people that have incredible backgrounds 
in the private sector. In fact, Dr. Livingstone, you could 
probably be advisor to the next James Bond movie, maybe you 
are. Maybe you are James Bond. But, I mean, hostage recovery. I 
might have my 19 year old sophomore who is looking for an 
interesting life to sit down and talk to you. Maybe you could 
give him about 27 different lives with the roles and the hats 
that you played.
    And, Dr. Knight, working with an export facility. When are 
you going back to Tallahassee?
    Mr. Knight. Well, I am supposed to go back tomorrow. I am 
teaching on Thursday.
    Chairman Manzullo. Well, okay, because I wonder if you 
could stick around after the hearing. I am going to Japan the 
first week of January to check out some new manufacturing 
processes. I spend about 75 percent of my time working on 
manufacturing issues. I notice that you speak fluent Japanese 
and French.
    Dr. Czinkota also a tremendous academic background and work 
in the private sector.
    I think that if there is one conclusion that I can glean 
from four outstanding witnesses is the fact that the threshold 
level of the need to prepare for most businesses is almost 
nonexistent. Even with the repeated distress signals from the 
President and the Governor and Governor Bush now down in 
Florida for people to evacuate or to go to higher ground, it 
just does not seem to set in. I do not know how do you start 
with people that just refuse to listen and think that it is not 
going to happen to them? Is there any answer to that?
    Dr. Livingstone, what you said about the company having 
enough sense to have a fire drill. That does not cost any 
money. Sure, you are down a little bit, but you know people 
take a break anyway. But in terms of the practicality that 
saved, how many lives in that? How many people worked in that 
company?
    Mr. Livingstone. I think over 500.
    Chairman Manzullo. Yes. And not one life was lost.
    Mr. Livingstone. Correct.
    Chairman Manzullo. In all of that? Somewhere along the line 
people have to accept the fact that they are responsible for 
their own fate, not that they have to determine it. That is why 
you have government, at times. But I do not know how you go 
about teaching people that it is absolutely necessary. But we 
finally have, I guess it's a go bag or an escape bag my wife 
put in one of our three vans. But how do I know that van is 
going to be there? How do I know that my daughter is not going 
to have the van with the escape bag in it at school?
    Mr. Livingstone. Well, I think that the answer to this is 
really that people have been seeing on television is a pretty 
good incentive to take some basic steps.
    Chairman Manzullo. But did it help the people in Florida? 
They saw what happened to people in Katrina.
    Mr. Livingstone. Well, let us hope that they are beginning 
to get the message. You know, I have worked with the states for 
over 20 years in teaching emergency preparedness and training 
first responders and so on. I think we have made, and thanks I 
think particularly under the leadership of James Lee Witt, I 
think FEMA made tremendous progress in reaching out, involving 
communities in all of the disaster preparedness areas. We have 
got a long way to go. And not to cast dispersions, but I think 
we have to have the right kind of professionals there. And if 
we can just talk about it for a second. This is an agency has 
been for both parties, a political dumping ground for many 
years. I think Mr. Witt was the first person, and I am a member 
of the other party but I roundly commended his performance 
there. And I think we have to look to have the right kind of 
professionals that can show leadership and go around the 
country and do the kinds of things that are going to inspire 
businesses and people and get out of just the professional 
areas, but start speaking to the major business groups, start 
working with the insurance companies, start working with people 
and saying look, you got to take preparedness. And I think that 
is also a job of the SBA. As I said, more proactive effort than 
simply reactive effort.
    And, you know, if we look at what we were 25 years ago, we 
have made substantial progress. And there are some states that 
just do a terrific job in some of these areas. Unfortunately, 
it is not always the states that have the most disasters. So I 
think that is where we need real improvement.
    Chairman Manzullo. Well, again, thank you for your 
testimony.
    This hearing is adjourned.
    [Whereupon, at 3:27 p.m., the Committee was adjourned.]

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