Benefit Cost Analysis
Central Regional Airports Division
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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 associated costs. The primary objective of a BCA is to determine whether a proposed project provides a net benefit to the aviation public.
On October 21, 2011, the FAA issued Federal Register notice 76 FR 65769 Modifications to Benefit Cost Analysis (BCA) Threshold (PDF). Under this notice, the FAA modified the threshold requirement for when a Sponsor must conduct a Benefit Cost Analysis for capacity projects requiring discretionary funding. The current threshold is now $ 10 million of discretionary funds.
We encourage Sponsors to incorporate the BCA task within their master planning efforts. If this is not feasible, the Sponsor can prepare a project specific BCA as part of project formulation.
Objectives of BCA
The information included in a Sponsor's benefit-cost analyses should allow the FAA to determine whether:
- 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;
- Data used in the BCA represents the best reasonably technical, economic, and related information that is available.
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
- FAA Airport Benefit-Cost Analysis Guidance (PDF)
- Addendum to FAA Airport Benefit-Cost Analysis Guidance (PDF) - June 14, 2010
- Airway Planning Standard Number One (INFORMATION) - FAA Order 7031.2c
- Economic Analysis of Investment and Regulatory Decisions (PDF)