Fighting Fires for Profit

It was 2:57 P.M. in Scottsdale, Arizona last June 26, outside temperature 102°, when Chief Witzeman stuck his head in the door and said, "I think we've got a big one, if you'd like to go along!" In seconds we were on our way from Fire Station No. 1 to the scene of Scottsdale's first major fire of 1975—a Shell gas station on the corner of Camelback and Scottsdale Roads. Gasoline from a leaking Ford gas tank had been ignited by a mechanic's trouble light and exploded, resulting in a roaring blaze that was already shooting flames out the roof and sending forth a plume of black smoke that could be seen for miles. By the time we arrived in the chief's car, we could feel the intense heat out on the street through the car's closed windows.

Already on the scene and in action were three of the Department's big lime-yellow pumpers. Engine #21 had dropped off its portable 750-gallons-per-minute pump at one hydrant, then moved around the corner and down the block laying its massive four-inch hose line to a second hydrant where it hooked up the hose to its powerful 1250 gpm midship pump. The hose lines were connected, via quarter-turn quick-disconnect couplings, to a portable hydrant set down on the asphalt in front of the gas station, and several powerful streams of water were trained on the fire in short order. Within minutes several truckloads of Scottsdale Fire Wranglers arrived from their city public works jobs, pulling on their protective gear as they ran to help man the hose lines.

Forty-five minutes later the last of the flames was extinguished, and although the largely-wood station would have to be completely rebuilt, the fire had been prevented from reaching the gas pumps or the thousands of gallons of gasoline stored below ground, and had been confined solely to the premises of the gas station.

Just a routine operation by the Scottsdale Fire Department. Only in conventional fire fighting terms, the operation was anything but routine. Who ever heard of lime-yellow fire trucks, portable pumps, four-inch hose, quarter-turn quick-disconnect couplings, portable hydrants, or part-time Fire Wranglers? Moreover, who ever heard of a fire department that pays time-and-a-half for overtime, employs women as well as men, and motivates its employees with a profit-sharing plan? Profit-sharing?

Yet all of these things do exist in Scottsdale, because the Scottsdale Fire Department is operated by the Rural/Metro Fire Department, Inc.—America's largest and most successful fire protection company. And as fire protection goes, Rural/Metro is clearly a different breed of cat.

ECONOMICS

Scottsdale obtains its fire protection services on a contract basis from Rural/Metro. For 1974/1975, the most recent fiscal year, the contract cost amounted to $498,355. Other fire-related expenses added $142,322, for a total of $640,677, which amounted to $6.67 per capita. Comparable national average data for 1974/75 are not in yet, but the latest available data (1972/73) provide a useful comparison. For cities in the 50,000-100,000 population range, the average fire protection cost per capita was $24.39; in Scottsdale for that year it was $5.70, slightly less than one-fourth the national average. With costs like these, it is no wonder that the city has continued to contract with Rural/Metro for the past 23 years, and recently renewed its contract for five more years.

And Scottsdale is no unique case, where everything is fireproof. True, it's a relatively new city, incorporated only in 1952, and has relatively stringent building codes. But it is a diverse city that includes all types of residential areas (including high-rises and condominiums); large commercial districts, including major shopping centers, hotels, and convention centers; and a significant amount of light industry (including a major Motorola electronics plant). Thus, Scottsdale has many of the same potential fire loss problems as other modern, growing communities of nearly 100,000 people.

Scottsdale's city management is very proud of the city's unique approach to fire protection. They point with pride to the city's recognition by the National Commission on Productivity for eight significant innovations in fire fighting, by the Institute for Local Self Government in Berkeley, CA, by the New York City Rand Institute, and other nationally known organizations. They also receive high marks from the city's taxpayers for keeping the cost of fire service so reasonable, without sacrificing the city's relatively good (Class 5) fire insurance rating. On the other hand, should they ever become dissatisfied with the cost or quality of Rural/Metro's service, they have the option of not renewing the company's contract. Since the city owns the fire stations, they could invite other firms to bid for the contract, or could start their own conventional department any time they thought it made sense to do so.

COST EFFECTIVENESS

Because Rural/Metro operates as a profit-making company, it has strong incentives to be efficient, or cost-effective. This has meant systematically examining the traditional methods of fighting fires and figuring out how to do more with less. Even a cursory examination of the economics of fire fighting makes clear that by far the largest cost—about 90 percent, on the average—is that of personnel. Moreover, in all but the largest big city fire departments, most of the personnel cost consists of paying people to sit around waiting for something to happen. And these days, at union-inflated pay scales, that amounts to an awful lot of money. As Chief Lou Witzeman puts it, "At $300 per month, the mayor could afford to let us spend two hours a day fighting a fire, two hours a day training, two hours cleaning things up, and the rest of the (24-hour) day standing around waiting to serve. At $900 to $1200 a month, they can't afford professional heroes."

Consequently, Rural/Metro has tackled the manpower problem head-on. First of all, they have revived and modernized the time-honored concept of using volunteers, to supplement the full-time firefighter. In earlier times (and even today in numerous small towns across the country), the volunteer fire department was an important community institution, something people were proud to join and excited to participate in. This kind of volunteer spirit is hard to retain in our large urban and suburban communities, spread out over tens and sometimes hundreds of square miles. Further, in metropolitan areas the potential fire hazards are much greater, requiring a higher degree of specialized knowledge and training than most volunteer departments are capable of. Hence, it was necessary to develop a modernized version of the volunteer concept.

The result was Scottsdale's Fire Wranglers. Not volunteers, these people are more correctly called paid reservists. They are city employees, ranging from custodians to mechanics to city engineers, who are paid to be on-call one week out of four. During his on-call week, a Wrangler carries with him at all times a portable radio paging unit, that can summon him in the event of a fire. On-duty Wranglers are required to respond to all structure fire alarms in the city, using either their own vehicles, a city vehicle (if on duty in or near one), or a pumper located at the City Yard especially for Wranglers. They must pass the same stringent selection procedures as regular fire fighters, and undergo a rigorous training program. For this, they receive a monthly retainer of $25 to $67.50 (depending on rank and seniority) plus $5.28 per hour for time spent in training and responding to calls.

In practice, the Wrangler program has worked very well. Chief Witzeman estimates that the Wranglers are thoroughly proficient in from two-thirds to three-fourths of the fireground tasks that can be done by a full-time fire fighter. Department records show that the average number of Wranglers responding to an alarm exceeds the number officially on duty, indicating the high level of enthusiasm shown by the participants. Further, the use of Wranglers for 38 percent of the force provides the added benefit of a younger group of fire fighters who are more willing to take risks than older men with families and responsibilities, looking forward to retirement. When a Wrangler tires of fire fighting, or decides the risk is excessive, he simply quits, to be replaced by a younger person (from the usually long waiting list of applicants). Since he is not a full-time Fire Department employee, there are no fringe benefits or retirement costs to pay, another bonus for the taxpayers.

Besides the use of a mix of full-time and part-time people, the company utilizes a number of other "manpower multiplication" techniques to reduce the need for excessive staffing. Traditional fire departments try to staff up for the worst-case conflagration, which may only occur once every year or two. In Scottsdale, the company staffs primarily for "normal" response levels, but makes provision for bringing in supplemental people when they're really needed. First, some of the off-duty fire fighters are provided with paging units, so that they can respond to major fires even though not on duty. Second, since the company serves a number of adjacent areas outside Scottsdale, it can call on a large number of additional on-duty personnel, trained to the same standards and using the same types of equipment, but not paid for by Scottsdale's taxpayers. (This is another advantage of a private company over government fire departments; even though government departments frequently render "mutual aid," their equipment, procedures, radio frequencies, training, and even terminology are often very different, leading to significant coordination problems.)

INNOVATIONS

Furthermore, the company has developed a number of technological innovations that reduce the number of personnel needed to perform a given function. For example, the company has pioneered the use of attack trucks—smaller, lighter, and more maneuverable than regular pumpers—which respond with pumpers to most fires. For the 75 percent of the cases in which the incident is minor, the attack truck (with its onboard water tank, pump, and hose) can handle the job alone, permitting the pumper and its crew to return to "available" status. If the incident is major, the faster attack truck can usually get there first, carrying an officer who can size up the situation before the others arrive, to better organize the placement of pumpers and hose lines, thereby saving valuable time and making more efficient use of the fire fighters.

Another innovation is the Snail—a tread-mounted, remote-controlled "robot fireman" which can drag a 2 1/2-inch hose line into areas too hot (up to 700°) or too dangerous for fire fighters to enter. The Snail, which cost only $3000 to build, is controlled by one man, but does the work of four. Yet another innovation, like the Snail developed by the company with its own funds and people, is a remote-control hydrant valve. Still under development, this device would permit a fire hydrant to be turned on and off by radio control, thereby making it unnecessary for a fire fighter to be stationed at the hydrant.

Rural/Metro makes its dollars go further when it comes to equipment, as well. The company is a licensed manufacturer of fire apparatus, building pumpers and attack trucks both for its own use and for sale to other fire departments. This enables it to obtain its equipment for about half the price of commercial, overly-chromed engines, while also incorporating important design innovations. One of the company's most important innovations is Engine 21, mentioned at the beginning of this article. This engine was designed from the ground up, "as if we had never seen a fire truck, but knew water in the proper quantities at the proper pressure would put out fire." Unique in the industry, Engine 21 carries a portable pump that can either be dropped off at one hydrant, while the truck continues on to a second hydrant (thereby acting as two pumpers in one) or be connected in series with the truck's midship pump to produce an amazing 2200 gpm. This truck was built by Rural/Metro for only $25,000 (ask your local fire department what they pay for conventional single-pump, 1000 gpm pumpers; don't believe them if they tell you less than $40,000).

Engine 21 makes use of four-inch hose exclusively, rather than the 2 1/2-inch size most common in the fire service. Four-inch hose permits fewer men to deliver a quantity of water to a fire; it has also permitted fire hydrant spacing in residential areas twice as great as usual practice, at considerable savings to the taxpayers. To save valuable time at fires, all the four-inch hose is equipped with quarter-turn quick-disconnect couplings instead of conventional male-female threaded couplings. Four-inch hose and quarter-turn couplings are beginning to be used by other American fire departments, but originally Rural/Metro had to import both from Germany, since no demand for them existed from America's progressive government fire departments.

QUALITY OF SERVICE

The result of all these innovations is that the Scottsdale Fire Department serves the entire 96,000-population city with a full-time staff of only 41 fire fighters and 10 other personnel (plus the 25 on-call Wranglers), compared with the national average of 118 full-time, paid fire department employees for cities of 50-100,000 population. Critics will (and do!) retort that Scottsdale therefore "obviously" must be receiving cut-rate, shoddy fire protection. There are two generally accepted ways to measure the quality of fire protection received by an area: by checking its fire insurance rating and by tracking its per capita fire losses over a period of years. On both counts, Scottsdale's fire service receives high marks. Over the past 12 years, the per capita fire loss in Scottsdale has averaged $4.44 per year. The national average over this period was in the $12 range.

Fire insurance rates are based on a detailed grading system administered by the Insurance Services Office (ISO), a non-profit organization which serves the insurance industry. On the average, once every seven years ISO sends a team to grade each community, evaluating its water supply, fire department, fire alarm system, structural conditions, etc. Based on each community's total of deficiency points, it is assigned to one of ten rating classifications, with Class 1 being the best (fewest deficiencies) and Class 10 the worst. Fire insurance rates, in general, increase as the area's classification number goes up. For some types of property, however, the rates vary little or not at all between certain classes. Scottsdale, like many modern communities, is rated Class 5 by ISO. For residential properties in the West, the rates for homeowners policies are the same in Classes 1 through 5, rising to a higher level for Classes 6 through 8, and higher again for Class 9 and Class 10. Thus, for Scottsdale homeowners, there would be no benefit in paying higher taxes to improve the fire department enough to achieve a Class 4 or Class 3 rating. Going to Class 4 would benefit commercial and industrial property owners, but again, not enough to offset the higher cost of the fire department. Thus, cost-effectiveness criteria have been used deliberately to settle on Class 5 as a reasonable rating, and therefore, as an acceptable measure of the quality of the Department's service.

IMPLICATIONS

By now it should be clear that there's a definite answer to the question, "What difference does it make whether fire protection is provided by government or by a private company?" The answer is made clear by Rural/Metro's amazing cost figures, manpower policies, and technological innovations. To be sure, Rural/Metro is but a single case. Its performance does not prove that every private fire department would be a model of efficiency, or that no government department could innovate. However, when you look at the incentives facing a government fire department—ready access to tax revenues regardless of performance, the civil service personnel mentality, and bureaucratic devotion to ever larger budgets and numbers of employees as a measure of status relative to other agencies in the city—and compare them with the incentives facing a private company, the answer is pretty plain. A private firm just cannot afford to waste money on chrome-plated, over-designed pumpers or worst-case on-duty manning policies. It has to seek a return on its investment and it must continually face the possibility of non-renewal of its contract. Consequently, Rural/Metro's performance (given the fact that it has survived and prospered for 28 years) is really quite understandable, and not at all surprising. As Witzeman puts it, "We have the greatest incentive in the world to innovate, to pioneer, to analyze every little step: sheer survival."

The fact that Rural/Metro has retained the contract for Scottsdale's fire protection since 1952 is certainly one indication of the company's success. But if the company were confined merely to Scottsdale, its performance might not appear to be all that remarkable. After all, critics could always allege that the people of Scottsdale were stupid or naive, or that the company had bought off the local politicians in order to keep the contract. But the fact is that Rural/Metro's approach to fire protection has been gaining increasing acceptance all across southern Arizona. The company added three stations in 1971, five in 1972, seven in 1973, and eight in 1974. As of 1976 the company is providing fire protection to 13 Arizona communities—in seven on a contract basis and in the other six to individual subscribers. (Rural/Metro also provides contract police service to one city, contract security patrol service to five new towns, and ambulance service to five communities.) The company's annual dollar volume since 1970 has been increasing at a nearly exponential rate, going from $650,000 in 1970 to over $3 million in 1975. Thus, by the ultimate test of the marketplace, private enterprise fire protection is a roaring success. Yet another indication of the company's success is a string of offers to buy it out from some of the nation's largest firms.

All of which should be good news for cities teetering on the brink of fiscal collapse, and for their hard-pressed taxpayers. For here is a proven method of slashing the costs of one of the most labor-intensive, high-cost public services, without sacrificing quality. Nevertheless, it is one thing to identify a better way to do things, but something else again to try to put it into practice. In the large American cities where the fiscal crunch is greatest, the existing fire departments are firmly entrenched in the political power structure and most today have strong unions (cf. New York City) which will firmly resist any fundamental change from the status quo, especially one that involves slashing labor costs. A similar situation, though perhaps less intense, exists in most cities with long-established fire departments. Where, then, does private enterprise fire protection offer the greatest immediate potential?

MARKET PROSPECTS

America is still a growing country, especially in the South and the West. Large percentages of most southern and western counties are still unincorporated, and contain isolated homes, small unincorporated communities, and both large and small new developments. Most of these areas do not have established government fire departments. Some are served by volunteer departments, others (in some states but not in others) receive a minimal level of service from a county fire department or from a state or Federal forest service, and still others have no fire protection whatsoever. It is areas such as this that offer the most attractive immediate prospects for private enterprise fire protection.

Indeed, it is precisely these types of areas that Rural/Metro has successfully and profitably served. The company's general pattern has been to offer individual subscriber service in the sparsely-settled areas, building up its clientele as the area grows. If the area's residents decide to organize a fire district, or to incorporate, Rural/Metro is then in an excellent position to offer contract service to the new political entity. (Several such areas in Arizona, such as Paradise Valley, have incorporated without going to contract service, since the residents were satisfied with Rural/Metro's individual subscriber service.) The building of large-scale master-planned developments (e.g., Leisure World, Sun City, Fountain Hills) by such firms as Del Webb has offered yet another market for Rural/Metro. In most of these new Arizona communities, the developer has contracted with the company for fire and security services, until such time as the community is large enough to form a fire district or local government. The developer thereby safeguards his investment in the community by ensuring that professional fire and security protection is provided, even when the number of residents is small.

Another market for contract fire protection is cities and fire districts that presently contract with an external government fire department. Such contracting exists in cities in at least five states other than Arizona: California, Minnesota, Ohio, Pennsylvania, and Virginia. If fire districts and towns smaller than 10,000 were also considered, the number could well run into thousands. These cities and districts typically contract for service from an adjacent city or county fire department, on a year-to-year basis. Consequently, just like a newly incorporated city, they have no long-term obligation to continue purchasing fire protection from the same source, and could readily switch to private enterprise service, should such be offered. The existing fire department, or its union, may complain mightily about the loss of "its" customers, but there is nothing it can do to prevent the change.

Eventually, contract fire protection may come to established cities with entrenched government departments. As these cities' administrators search desperately for ways to avoid bankruptcy, the growing success of contract fire service in new cities will be harder and harder for them to evade. Taxpayer organizations will start asking why such proven methods can't be adopted, despite the self-serving pleas of the bureaucracy and the unions. And sooner or later, some mayors and city managers will decide to take the plunge. For, as Louis Witzeman puts it, cities and their taxpayers can no longer afford professional heroes.

Fire protection is a business: it requires the allocation of scarce resources—personnel and equipment—to provide specific services at the minimum overall, long-term cost. It requires cost accounting, planning, and rational decision-making, and it can be done at a profit. The sooner city managers and mayors recognize this, and act accordingly, the better off our cities and their taxpayers will be.

Editor Robert Poole does consulting work in the area of public safety services and recently conducted a feasibility study of contract fire service for a California fire district. He holds two engineering degrees from M.I.T.

CREEPING CAPITALISM IN DENMARK, TOO

Contract and subscription fire fighting are not unique to Arizona. For 70 years the Falck Company has provided rescue and fire fighting service to individuals and municipalities in Denmark. Today the company operates from 132 stations throughout all of Denmark, and employs 3300 full-time rescue men, 1200 part-time firefighters, and 400 administrative personnel. Its fleet includes 1000 ambulances, 700 wreckers, 300 fire engines, 100 ladder trucks, 100 rescue cars, and 800 trailer and miscellaneous vehicles.

The company began in 1906 with a single station to perform rescue work at fires on a subscription basis, and soon expanded into the ambulance business. After World War I, the number of stations was increased and an auto towing subscription service (much like our own American Automobile Association) was created. For 10 crowns a year, Falck would assist a motorist with any kind of automobile breakdown. In 1926 a new Danish law called for standardized municipal fire departments; however, since Falck was already well accepted in the fire business, the law made provision for contracting out the service to companies such as Falck, for an annual contract payment based on the population of the city. By 1940, Falck was providing contract fire protection to half of Denmark.

As Falck's network of fire stations grew, it developed an extensive ambulance business as well. Here again, the laws allowed municipalities to contract the service or to provide it themselves, and many chose the former course. Today, 271 out of Denmark's 279 municipalities contract with Falck for their basic ambulance service. About two-thirds of all ambulance service is paid for out of public (tax) revenues. Most of the remaining ambulance business is also provided by Falck, by means of private subscription contracts. Such a contract provides all types of conveyance a subscriber may need which cannot be obtained from publicly-funded sources—e.g., transport of a subscriber to his home if he gets ill while on vacation, conveyance of longterm hospital patients home for weekend' visits, delivery of prescriptions from pharmacies, etc. Between road service and ambulance subscriptions, some 850,000 families and corporations subscribe to Falck services.

The bulk of Falck's income, some 70 percent, comes from fire fighting contracts and subscriptions. Falck responds to some 30,000 fire calls per year, serving half of all Denmark. Ninety of the 132 Falck stations house fire engines, and 25 others serve as backup fire stations. Like the Scottsdale, Arizona private fire department, Falck operates with a core group of full-time, paid rescue men, who are able to respond in less than one minute, supplemented by a part-time staff notified by radio and/or telephone, who respond within five minutes. The company points out that one advantage of choosing Falck for fire protection is its ability to draw on a large staff of other rescue men, all of whom have standardized training in firefighting, first aid, salvage, etc.

Falck's road service and wrecker operations are so comprehensive that the company has displaced the government's highway patrol cars; "their duty has been taken over by the red Falck wreckers." About half of Denmark's 1.3 million car owners subscribe to Falck's road service, and the company answers 975,000 road service calls per year. It goes out of its way to serve subscribers, even to providing first aid kits for home and car, and refilling them free of charge upon request. In addition, Falck's network of 132 stations provides hourly reports on highway conditions during winter months, which are broadcast over the Danish Broadcasting Service on both radio and TV news programs.

Falck's search for subscription customers extends even to Denmark's farmers: for an annual fee, the company provides an animal rescue service, which answers 30,000 calls a year. The company also provides coastal rescues using high-speed launches, diving and salvage operations, an aerial ambulance service, and a variety of other related services.

In yet another parallel with Arizona's Rural/Metro Fire Department, Falck recently began to build its own equipment. In 1971 it acquired one of its principal suppliers of wreckers and trucks, the H.F. Nielsen Machine Factory, Ltd. The firm is hard at work turning out vehicles (46 in 1973) for the parent company's far-flung operations.

Falck is a splendid example of the creative possibilities of private enterprise engaged in "public service" activities frequently considered the sole province of government. If such an enterprise can prosper in socialist Denmark, how much greater opportunities may exist in semi-capitalist America?