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General Overview
The use of a Benefit Cost Analysis (BCA) provides a quantitative method for assessing the potential benefits a project or action offers as it relates to the potential costs associated with the project. The primary objective of the BCA is to determine whether or not a proposed project provides a net benefit to the aviation public.
On December 15, 1999, the FAA issued policy on the use of BCA as it relates to capacity projects that require AIP discretionary funds. The BCA requirement is triggered when the total AIP request for discretionary funds for a capacity project is greater than $5 million. The FAA also has the authority to require a BCA on any project requesting Federal funds. The policy does provide for certain exemptions such as reconstruction projects.
The FAA has issued guidance on the preparation of a BCA. Sponsors are encouraged to developed all BCAs in accordance with the document titled "FAA Airport Benefit-Cost Analysis Guidance" dated December 15, 1999. Sponsors are encouraged to incorporate a benefit cost analysis within their master planning efforts. If this cannot be accomplished, the BCA shall be prepared and submitted as a part of the request for funds.
Objectives of BCA
Benefit-cost analyses submitted to FAA should provide information that allows FAA to determine if:
- There is adequate information indicating the need for, and consequences of, the proposed project or action;
- Potential benefits to society (usually defined by FAA as the aviation public) justify
potential costs (recognizing that not all benefits and costs can be described in monetary or even in quantitative terms); - The proposed project or action will maximize net benefits to society; and
- Data used in the BCA are the best reasonably obtainable technical, economic, and other information.
BCA Process
The BCA process typically consists of the following steps:
- Define project objectives
- Specify assumptions about future airport conditions
- Identify the base case (no investment scenario)
- Identify and screen all reasonable alternatives to meet objectives
- Determine appropriate evaluation period
- Establish reasonable level of effort for analysis
- Identify, quantify, and evaluate benefits and costs of alternatives relative to base case
- Measure impact of alternatives on airport usage
- Compare benefits and costs of alternatives
- Evaluate variability of benefit-cost estimates
- Perform distributional assessment when warranted; and
- Make recommendation of best course of action
Resources
- Airport Benefit-Cost Analysis Guidance (PDF)
- Airway Planning Standard Number One (PDF) - FAA Order 7031.2c
- Estimating the Regional Economic Significance of Airports (PDF, 1.67 MB)
- FAA Policy and Final Guidance Regarding Benefit-Cost Analysis on Airport Capacity Projects for FAA Decisions on AIP Discretionary Grants and Letters of Intent (PDF) - (December 15, 1999)
- Planning Information Needed for FAA Headquarters Review of Benefit Cost Analysis (BCA) (PDF) - (March 31, 2006)
- Principles for Federal Infrastructure Investments (Executive Order 12893) (PDF) - (January 26, 1994)
Contacts
| Name/Title | Division | Phone |
|---|---|---|
| Robert Samis Economist |
Systems and Policy Analysis Division (APO-200) | (202) 267-9449 |
| Dennis Walsh Program Analyst |
Financial Analysis and PFC Branch (APP-510) | (202) 493-4890 |
