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  • Writer's pictureDELTAWRX

Cost Allocation for Emergency Communications Centers: Part 1. The Process is Paramount

This post is part of a two-part series that provides high level recommendations for how emergency communications centers can and should allocate their costs to dispatched agencies and communities. When assisting clients in this area, we often take a deep dive into analyzing and planning each of the steps presented in this post.

Cost Allocation Process

Communications centers servicing multiple public safety agencies are inevitably faced with deciding how to allocate costs among the agencies they service. Given the variations in agencies served, as well as the diversity of circumstances that come into play, the notion of a one-size-fits-all cost allocation formula is a myth. So how, then, should a communications center go about allocating its costs? The process for determining the optimal cost allocation formula is equally as important as the outcome, and we offer the following six steps as a guide.

Step One: Determine who should be involved in the decision

An inclusive decision-making process improves trust in and buy-in to the outcomes. It can also improve the quality of the decision by bringing more ideas into consideration. Regardless of who is involved in the decision-making process, it should be clear that, while each is representing individual or collective agency interests, the ultimate decision must be made to optimize outcomes for the serviced communities as a whole.

Step Two: Determine the principles for allocation

Transparency, fairness and ease of understanding should drive any process of allocating costs. Other principles, however, will determine which costs and factors are considered in an allocation formula. Examples of other principles include:

  • Avoiding incentives to decrease officer-initiated activity

  • Encouraging interoperability

  • Offering agencies with few calls for service a lower rate, or service free of charge

  • Encouraging communities with more resources to assist communities with fewer resources

  • Enabling member agencies that have contributed assets to pay a lower rate than subscriber agencies

These are only a few examples. The decision-making body should determine the specific principles important to the impacted communities and that should drive the determination of the cost allocation formula.

Step Three: Determine the basis for allocating costs

A transparent basis for allocating costs will increase trust in and buy-in to the PSAP’s cost allocation process. As such, the first step is identifying revenues sources as well as the costs for various operational components. The amount to be allocated will be the costs less any revenue offsets, which are distributed to the operational components according to a predetermined proportion.

Step Four: Determine factors to include in the cost allocation formula

Based on the principles agreed upon in Step Two, the decision-making body will need to identify factors to include in the cost allocation formula, and then identify metrics for measuring the factors as well as the relative weight to assign to each factor (see our upcoming post on Cost Allocation Factors).

Step Five: Test the formula

Before accepting the formula, the decision-making body should test the formula to make sure that costs are allocated fairly and according to the principles. Testing can involve developing a simple spreadsheet showing the costs for each agency given the agreed-upon formula, or a more complicated examination that provides a sensitivity analysis incorporating alternative factors.

Step Six: Agree on a process for reviewing the allocation

Following this process should result in a cost allocation formula that is sustainable over the long term. It is always possible that changes in local politics, funding philosophies, community characteristics or the economic landscape will require revisions to the formula. Building in a process for periodic review of the allocation formula will provide a mechanism for adjustments to compensate for past errors as well as for future changes.

DELTAWRX is a management consulting firm that is dedicated to serving public safety agencies and local government entities. We have broad experience advising communications centers around the country on strategic planning efforts, consolidation studies, staffing analyses, cost allocation strategies and Computer Aided Dispatch application and other technology procurements. For questions about this topic, or to learn more about DELTAWRX’s experience advising emergency communications centers, please contact us here. Stay tuned for Monica’s upcoming post on cost allocation factors.

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