Benefit-cost model of residential fire sprinkler systems

Abstract

This paper develops and applies decision models for evaluating the economic efficiency of providing fire loss mitigation in houses through the use of a new technology: fast-response sprinkler systems. A model is developed for calculating present value net benefits as they would accrue to an owneroccupant or an owner of a rental house who installs a sprinkler system. Costs and benefits of owning a system are estimated for selected hypothetical cases pertaining to a new, single-family dwelling in the United States. The estimates are then used to illustrate the model. Minimum or maximum values that key decision variables must take in order for sprinkler systems to be cost effective in the selected applications are calculated through break-even analysis. Related models are developed for evaluating the economic merits of sprinkler systems from the standpoint of developers and local governments. Implications for the research and building communities are discussed.

Benefit-cost analysis of residential fire sprinkler systems

“…The benefit-cost analysis in this report is consistent with ASTM E 1074-06: Practice for Measuring Net Benefits for Investments in Buildings and Building Systems, and it is meant to provide a current benefitcost analysis of residential fire sprinkler systems, updating NBS Technical Note 1203: A BenefitCost Model of Residential Fire Sprinkler Systems, published in 1984. In 1984 suggested that sprinkler systems were not cost-effective, perhaps explaining the relatively small number of houses equipped with fire sprinklers today, even while fire professionals maintain that such systems protect lives and property from fire.…”

“…But, while there is growing recognition of the ability of residential sprinkler systems to protect life and property from fires, less than 1 % of all existing one-and two-family dwellings involved in a structure fire in 2005 had a sprinkler system. Although residential sprinkler systems protect lives and property from fire, earlier research suggested that sprinkler systems were not cost-effective (Ruegg and Fuller 1984;Juas and Mattsson 1994). This might partly explain the dearth of fire sprinkler systems in residential dwellings.…”

“…While the earlier study described and estimated life-cycle costs of installing fire sprinkler systems in residential housing, the current study conducts a benefit-cost analysis of residential sprinklers, using the expected benefits and costs, in present value dollars, associated with the installation of a multipurpose network fire sprinkler system in new construction. Both reports provide a current analysis of the cost-effectiveness of installing residential fire sprinkler systems, updating a prior National Bureau of Standards (NBS) publication, A Benefit-Cost Model of Residential Fire Sprinkler Systems (Ruegg and Fuller 1984).…”

“…One approach that is considered to be consistent with economic theory, and which was used in a 1984 sprinkler study performed by NBS (Ruegg and Fuller 1984), is based on the willingness-topay concept. Willingness-to-pay values are computed according to how much decision makers are willing to invest to reduce their risk of death or injury by a certain fraction.…”

“…The average direct property loss was found to be $21 990 per fire for dwellings only equipped with smoke alarms. Because insurance is assumed to cover 80 % of any property loss (Ruegg and Fuller 1984), the uninsured direct property loss, responsible to the owner, was then $4398 per fire. Thus the reduction in uninsured direct property damages yields a present value benefit of $80 to residents in dwellings with smoke alarms and a sprinkler system.…”