[Federal Register Volume 62, Number 121 (Tuesday, June 24, 1997)]
[Notices]
[Pages 34108-34110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16457]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration
[Docket No. 28939]


Policy and Guidance Regarding Benefit Cost Analysis for Airport 
Capacity Projects Requesting Discretionary Airport Improvement Program 
Grant Awards and Letters of Intent

AGENCY: Federal Aviation Administration; Department of Transportation.

ACTION: Notice of Policy; Request for Comments.

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SUMMARY: The Federal Aviation Administration (FAA) is issuing interim 
guidance for conducting airport benefit cost analysis (BCA) for 
capacity projects using Airport Improvement Program

[[Page 34109]]

(AIP) grants or Letters of Intent (LOI). The FAA is also modifying in 
two ways its policy requiring BCAs for capacity projects when applying 
for AIP grants or LOIs awarded for capacity projects at the discretion 
of the Secretary of Transportation. These modifications are (1) To 
clarify that it is the airport sponsors who are required to prepare and 
submit BCAs and (2) to lower the threshold of expected cost, above 
which BCAs are required, from $10 million to $5 million. The objective 
is to improve the effectiveness of AIP investments in meeting capacity 
needs of the national airport system.
    For all projects for which airport sponsors seek $5 million or more 
in AIP capacity discretionary funds, a completed BCA must accompany the 
application for grants commencing in Fiscal Year 1998. With regard to 
LOIs, a BCA must be completed for any request for a LOI to be issued in 
Fiscal Year 1997 and thereafter.
    The interim guidance follows the general structure used for all 
benefit cost assessments but has been extensively tailored for 
applicability to airport projects. The FAA invites airport sponsors and 
other interested parties to comment on the interim guidance. FAA will 
consider these comments in promulgating final BCA guidance for airport 
sponsors. Commenters are encouraged to base their observations on 
experience gained in using the interim guidance to actually evaluate 
projects.
    Airport sponsors and other interested parties may obtain copies of 
the interim ``FAA Airport Benefit-Cost Analysis'' by contacting either 
of the individuals named below under the heading For Further 
Information Contact.

DATES: Comments must be received by June 24, 1998. Effective date June 
24, 1997.

ADDRESSES: Comments should be mailed, in triplicate, to Federal 
Aviation Administration, Office of Chief Counsel, Attention: Rules 
Docket (AGC-200), Docket 28939, 800 Independence Avenue, SW., 
Washington, DC 20591.

FOR FURTHER INFORMATION CONTACT:
Ellis Ohnstad, Manager, Airports Financial Assistance Division (APP-
500), Federal Aviation Administration, 800 Independence, SW., 
Washington, DC 20591, (202) 267-3831; or Ward Keech, Policy and Systems 
Analysis Division (APO-200), Office of Aviation Policy and Plans, 
Federal Aviation Administration, 800 Independence, SW., Washington, DC 
20591, (202) 267-3321.

SUPPLEMENTARY INFORMATION: The Secretary of Transportation and the 
Administrator of the FAA are charged with maintaining a national 
aviation system that operates safely and efficiently. The Federal 
Government pursues this objective in part by investing Federal funds, 
via AIP grants-in-aid, in modern airport facilities sufficient to 
handle current and future air traffic and by facilitating local 
investment in such facilities.
    AIP was first authorized in the Airport and Airway Improvement Act 
of 1982 (the AAIA). On July 5, 1994, the President signed Public Law 
103-272, Codification of Certain U.S. Transportation Laws as Title 49, 
United States Code (the Codification), which now contains the statutory 
authority for the AIP (the AIAA was repealed by enactment of the 
Codification). The Codification provides authority and direction for 
the award of formula and discretionary grants-in-aid-by the Secretary. 
Section 47115 of the Codification authorizes the Secretary to make AIP 
discretionary funds available in a manner that the Secretary considers 
most appropriate for carrying out the purposes of chapter 471, 
subchapter 1, of the Codification (i.e., airport improvement). Section 
47110(e) establishes authority for the Secretary to issue LOIs. Section 
47115(d) specifies that, in selecting projects for discretionary grants 
or LOIs to preserve and enhance capacity at airports, the Secretary 
must consider the projects' benefits and costs.
    The FAA revised the prior award process in 1994 to include the 
preparation of BCA for discretionary capacity projects the costs of 
which were expected to exceed $10 million. Those analyses were 
frequently prepared by FAA staff in consultation with project sponsors. 
Factors leading to that change included the need to improve the 
effectiveness of Federal airport infrastructure investments in light of 
a decline in Federal AIP budgets; issuance of Executive Order 12893, 
``Principles for Federal Infrastructure Investments'' (January 26, 
1994); and guidance form Congress citing the need for economic airport 
investment criteria.
    Under the 1994 criteria, the FAA required the application of BCA to 
projects intended to preserve or enhance capacity for which sponsors 
seek large amounts of AIP discretionary funds. Projects to add new 
capacity or reconstruct existing capacity were included under the 
policy. LOIs and discretionary grant awards over $10 million became 
contingent on demonstrating that a project's benefits exceed its costs.
    In the Federal Register, Vol. 59, No. 209, October 31, 1994, the 
FAA issued two notices of policy. The first, ``Policy for Letter of 
Intent Approvals Under the Airport Improvement Program'' [59 FR 54482], 
clarified the FAA's policies on reviewing and analyzing request for 
LOIs under the AIP or successor programs. The notice stated that the 
FAA will consider three factors in reviewing requests for LOIs; the 
project's effect on overall national air transportation system 
capacity; project benefit and cost; and the airport sponsor's financial 
commitment to the project. The notice further stated that the project 
must have present value benefits which exceed present value costs for 
LOI consideration. The policy was applicable to any request for LOI 
under AIP at primary or reliever airports for airside development 
projects with significant capacity benefits. It was intended to 
maximize the system-wide impact of capacity projects.
    The other notice, ``Policy Regarding Revision of Selection Criteria 
for Discretionary Airport Improvement Program Grant Awards'' [59 FR 
54484], stated that benefit-cost analysis would be required for any 
discretionary capacity grant application which was expected to equal or 
exceed $10 million over the life of the project. The policy was 
undertaken to implement Executive Order 12893, ``Principles for Federal 
Infrastructure Investments,'' and guidance provided in Congressional 
hearings regarding the use of economic analysis in evaluating Federal 
investment in airport infrastructure. The new policy was applicable to 
all new projects to be considered for AIP grant awards in FY 1995 and 
subsequent years.
    Application of BCA for discretionary AIP grants was limited to 
those capacity projects for which the total value of requested 
discretionary capacity grants was expected to equal or exceed $10 
million over the life of the project. This limit assured that costs 
likely to be incurred in preparing a BCA were reasonable with respect 
to the value of the applications being evaluated. The $10 million 
threshold was also the same value at which the FAA must notify Congress 
prior to the issuance of LOI awards.
    Initially, FAA staff conducted the BCA to ensure the consistent 
application of BCA methodologies among different projects, but the LOI 
policy published in the October 31, 1994, Federal Register stated ``the 
FAA may revise this policy.'' The discretionary AIP grant policy 
published on the same date also stated that future refinements would 
consider ``assignment of some or all BCA responsibilities to project 
sponsors

[[Page 34110]]

(subject to FAA review).'' Experience with airport capacity project BCA 
since the time of the published policies (October 31, 1994), has led 
FAA to believe that for BCA to be effective it has to be accomplished 
early in the airport planning process by the airport sponsor. This 
enables the airport sponsor to use the BCA in the alternatives 
selection process at a time when the BCA still has value. If the BCA is 
delayed until just before the airport sponsor requests discretionary 
AIP funds, many alternatives may not be considered because the planning 
process will have progressed to the point of excluding previously 
feasible pathways.
    While the time at which a BCA is prepared is left to the discretion 
of the sponsor, appropriate occasions are during master planning, in 
conjunction with environmental studies, or during project formulation. 
Costs attributable to preparing the BCA are allowable costs in airport 
planning (including environmental analysis) projects and, like other 
project formulation costs such as for engineering and design, may be 
reimbursed in conjunction with a grant for a subsequent project.
    With the information included in the interim ``FAA Airport Benefit-
Cost Analysis Guidance,'' airport sponsors will be able to apply 
uniform standards in their analysis of capacity projects. Also, by 
proposing that the airport sponsor perform the BCA, the FAA believes 
that the airport sponsor is more likely to accept the BCA as one of 
several useful tools, not merely as a requirement imposed from outside.
    To establish some uniformity among analyses, the FAA prepared 
interim ``FAA Airport Benefit-Cost Analysis Guidance,'' the document on 
which we now are soliciting comments. This interim guidance follows the 
standard structure of all benefit cost analysis. It consists of: 
defining the project objective; specifying assumptions; identifying a 
base case and its alternatives; determining the evaluation period; 
determining the effort to be expended in the analysis; assessing 
benefits and costs; comparing results of alternatives; performing 
sensitivity analyses; and making an informed recommendation. The 
interim guidance tailors each of these steps in the BCA process to the 
specific situation of airports and expresses FAA expectations, 
experience, and lessons learned for each step.
    The FAA is requesting that airport sponsors and other interested 
parties comment on the interim guidance so that the final guidance will 
be as useful as possible to airport sponsors in performing BCA. The FAA 
is soliciting comments on the guidance itself: selection of 
alternatives, proposed methodology, use of sensitivity analysis, and 
similar technical issues in the guidance. The FAA invites comments on 
the new $5 million threshold for the project cost above which a BCA 
must be performed. Additionally, the FAA is inviting comments on the 
preparation of forecasts of enplanements and operations which are 
included in the official FAA forecasts. The official FAA forecasts use 
an annual structured process which allows for input from airports and 
other interested non-FAA parties. This annul process allows for the 
modification of forecasts to reflect changing conditions and the FAA 
specifically requests comments and airport sponsor participation in 
this review process.
    There are certain BCA items on which the FAA is not allowed 
discretion and, therefore, on which we are not inviting comments, 
namely, (1) Tdiscount rate, (2) the value of life, (3) the value of 
injury, and (4) the value of time.
    The revised policies for performing BCA are: airport sponsors are 
encouraged to perform BCA during the development of the airport master 
plans, in conjunction with environmental studies, or concurrently with 
other project formulation activities. When not feasible to include BCA 
during these activities, airport sponsors are responsible for 
conducting a BCA on a supplemental basis and submitting it to the FAA. 
The FAA is responsible for reviewing the BCA as part of the evaluation 
process of the AIP request; the FAA may request further detail on the 
BCA; the FAA may perform an independent BCA of the project.
    That revised procedures described in this policy apply to any 
request for an LOI to be issued in Fiscal Year 1997 and thereafter, and 
to all new airport capacity projects requesting discretionary AIP grant 
awards in excess of $5 million beginning in Fiscal Year 1998. FAA is 
reducing the threshold at which a BCA is required to $5 million from 
$10 million for three reasons. First, the Executive Order 12893 
requires Federal agencies to apply BCA to all projects, and revising 
the previous policy threshold will move the agency further toward the 
goal established by the Executive Order. Second, in its 1994 notice of 
policy which announced the BCA requirement, FAA noted that, after 
evaluating its experience with the BCA process, it would consider 
establishing a lower threshold. FAA has concluded there is no technical 
reason the threshold cannot be reduced. Finally, the FAA has considered 
the additional workload created by reducing the threshold and found 
that only a small increase in workload would result. For these reasons, 
the FAA has concluded that it is reasonable to establish the new 
threshold at $5 million. The interim guidance should be used by airport 
sponsors when preparing BCAs for proposed projects which are subject to 
the BCA requirement.
    Airport sponsors should use the interim ``FAA Airport Benefit-Cost 
Analysis Guidance'' when preparing BCAs for proposed projects. The FAA 
recognizes that, as experience is gained by using these procedures, 
additional improvements and modifications may be needed to be made in 
the criteria used to evaluate applications for LOIs and discretionary 
AIP grants. FAA intends to use this experience and comments received on 
the interim guidance in formulating a final guidance document. The 
period for comments extends for a period of one year from the date this 
notice is published in the Federal Register. After that time, the 
comments from airport sponsors and other interested parties will be 
considered, the guidance will be modified to incorporate those comments 
which will improve it, and the guidance will then be made final. The 
interim guidance will remain in effect throughout this period.
    The FAA recognizes that airport sponsors have not yet had an 
opportunity to comment on the interim guidance and that project 
applicants will be reviewed, in part on associated BCAs. As a result, 
until the guidance is made final, the FAA will consider any 
supplemental material which the airport sponsor believes should be 
considered in evaluating LOI and discretionary AIP grant applications.

    Issued in Washington, DC on June 18, 1997.
Paul Galis,
Director, Office of Airport Planning and Programming.

John Rodgers,
Director, Office of Aviation Policy and Plans.
[FR Doc. 97-16457 Filed 6-23-97; 8:45 am]
BILLING CODE 4910-13-M