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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

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

RIC KELLER, Florida 

TED POE, Texas 

MICHAEL SODREL, Indiana 

JEFF FORTENBERRY, Nebraska 

MICHAEL FITZPATRICK, Pennsylvania 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

DANIEL LIPINSKI, Illinois 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

RAU ́ L GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

JOHN BARROW, Georgia 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

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) 

(1)

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. 

2

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 

3

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 orgaVerDate 0ct 09 2002 17:11 Jan 19, 2006 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\HEARINGS\24880.TXT MIKE
4

nization. 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. 

5

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 danVerDate 0ct 09 2002 17:11 Jan 19, 2006 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\HEARINGS\24880.TXT MIKE
6

gerous 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 

7

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 

8

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. 

9

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. 

10

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. 

11

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 

12

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. 

13

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 

14

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. 

15

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 

16

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. 

17

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. 

18

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. 

19

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. 

20

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. 

21

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. 

22

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, 

23

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. 

24

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? 

25

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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