[Federal Register Volume 64, Number 240 (Wednesday, December 15, 1999)]
[Notices]
[Pages 70107-70112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32172]



[[Page 70107]]

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DEPARTMENT OF TRANSPORTATION


Federal Aviation Administration Policy and Final Guidance 
Regarding Benefit Cost Analysis (BCA) on Airport Capacity Projects for 
FAA Decisions on Airport Improvement Program (AIP) Discretionary Grants 
and Letters of Intent (LOI)

AGENCY: Federal Aviation Administration; Department of Transportation.

ACTION: Notice of Modification of Policy; Comments and Responses, Final 
Guidance.

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SUMMARY: On June 24, 1997, the FAA issued an interim policy notice 
requiring airport sponsors to submit BCAs when requesting AIP grants or 
LOIs to be awarded for capacity projects at the discretion of the 
Secretary of Transportation. The FAA now is (1) Providing a more 
precise definition of airport capacity projects, (2) Issuing the final 
policy, and (3) Responding to comments requested on June 24, 1997, on 
(a) Dollar thresholds for requiring BCA, (b) The interim guidance for 
preparing BCAs, and (c) Preparation of FAA forecasts of operations and 
enplanements.
    Definition of airport capacity projects. For the purpose of this 
BCA policy, airport capacity projects are those projects that (1) 
Preserve an infrastructure, (2) Improve upon an existing 
infrastructure, or (3) Create new infrastructure. Capacity projects 
include airside projects such as runways, taxiways, and aprons but may 
also include terminal buildings, ground transportation, and other 
landside projects. Normally, airport capacity projects are located at 
large air carrier airports where there is existing or projected 
airfield capacity delay. However, there are also cases they will be 
located at smaller airports. For the purpose of this BCA policy, 
airport capacity projects include those projects that significantly 
change the character of a runway such that the runway is capable of 
being used by larger or heavier aircraft or such that approach minima 
are lowered. The BCA policy also covers those projects which will 
upgrade airport facilities to meet higher design standards and which 
will allow new classes or aircraft to use the airport. The BCA policy 
is not applicable to those projects undertaken solely for the objective 
of safety, security, conformance with FAA standards, or environmental 
mitigation.
    Modification of Policy. The policy for AIP grants, issued on June 
24, 1997, was that, for all capacity projects for which an airport 
sponsor seeks $5 million or more in AIP discretionary funds, commencing 
in Fiscal Year 1998, a completed BCA must accompany the grant 
application. The policy for LOIs was that a BCA must be completed for 
any request for a LOI to be issued in Fiscal Year 1997 and thereafter.
    FAA, in the modifications of policy issued in this Federal Register 
Notice, has modified the previous policy to: (1) Exempt certain 
reconstruction projects, (2) Provide supporting guidance that will 
assist sponsors in identifying exempt projects, and (3) Clarify the 
applicability of the BCA guidance to general aviation airports.
    Responses to Comments Requested on June 24, 1997. On June 24, 1997, 
the FAA established a docket and invited airport sponsors and other 
interested parties to comment on: (1) The dollar threshold for AIP 
grants and LOIs above which a BCA must be performed, (2) The interim 
BCA guidance issued on June 24, 1997, and (3) Generation of FAA 
forecasts of enplanements and operations. The docket was open for one 
year and closed on June 24, 1998. The comments and FAA's responses can 
be found below under the heading ``Supplemental Information.'' The FAA 
has modified its interim guidance based on comments received and is now 
issuing its final guidance for conducting AIP BCAs.

DATE: Effective date of the modified policy is December 15, 1999

ADDRESSES: Copies of the final guidance for conducting BCAs can be 
obtained from two offices in the Federal Aviation Administration, 800 
Independence Avenue, SW., Washington, DC 20591. These are the Office of 
Airport Planning and Programming, Airports Financial Assistance 
Division (AAP-500); or the Office of Aviation Policy and Plans, Systems 
and Policy Analysis Division (APO-200). An electronic copy of the 
guidance will be posed on the FAA's Airport Division website at http://
www.faa.gov/arp/arphon.htm as well as the Office of Aviation Policy and 
Plan's website at http://api/hq.faa.gov/apo__home.htm within 14 days of 
publication of this notice.

FOR FURTHER INFORMATION CONTACT: Barry Molar, Manager, Financial 
Assistance Division (APP-500), Office of Airport Planning and 
Programming, Federal Aviation Administration, 800 Independence Avenue, 
SW., Washington DC 20591, (202) 267-3831; or Ward Keech, Manager, 
Policy and Systems Analysis Division (APO-200), Office of Aviation 
Policy and Plans, Federal Aviation Administration, 800 Independence 
Avenue, SW., Washington, DC 20591, (202) 267-3312.

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.

A. Background to the Policy

    AIP was first authorized in the Airport and Airway Improvement Act 
of 1982 (the AAIA) and was recodified as Title 49, United States Code, 
chapter 471, subchapter I, sections 47101 et seq., (Recodification), in 
1994. The Recodification provides authority and direction for the award 
of formula and discretionary grants-in-aid for airport improvement and 
planning by the Secretary. Section 47115 of the Recodification 
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 benefits and 
costs of the projects.
    The FAA revised the prior award process in 1994 to include the 
preparation of a BCA for capacity projects that were expected to exceed 
$10 million in AIP discretionary spending. Those analyses were 
frequently prepared by FAA staff in consultation with project sponsors. 
Factors leading to the requirement for BCA 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 from 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 
sought 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

[[Page 70108]]

demonstrating that a project's benefits exceeded 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 requests 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 that 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 a BCA would be required for any discretionary grant 
application for a capacity project 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,'' [59 FR 4233] 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 
discretionary grant awards in FY 1995 and subsequent years.
    Application of a 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 was intended to assure 
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.
    In the Federal Register, Vol. 62, No. 121, June 24, 1997, the FAA 
issued a notice of policy, ``Policy and Guidance Regarding Benefit Cost 
Analysis for Airport Capacity Projects Requesting Discretionary Airport 
Improvement Program Grant Awards and Letters of Intent'' (62 FR 34108). 
This policy lowered the dollar threshold requirement to $5 million for 
AIP discretionary grants and continued the existing policy of 
subjecting all LOIs to the BCA regardless of dollar value.
    The policy also transferred responsibility for performing the BCA 
from the FAA to the sponsor. Initially, FAA staff conducted the BCA to 
ensure the consistent application of BCA methodologies among different 
projects, but experience with airport capacity project BCAs since 
October 31, 1994, showed that the BCA is most effective if accomplished 
early in the airport planning process by the airport sponsor. This 
change in timing and responsibility 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 options.
    The policy left the time at which a BCA is prepared to the 
discretion of the sponsor, but encouraged preparation during master 
planning, in conjunction with environmental studies, or during project 
formulation. Costs attributable t6o preparing the BCA were identified 
as 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 the airport development project in which the costs were 
incurred.
    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; and/or the FAA may perform an 
independent BCA of the project.
    The interim ``FAA Airport Benefit-Cost Analysis Guidance'' was 
designed to enable airport sponsors to apply uniform standards in their 
analysis of capacity projects. Also, the shift of responsibility for 
the BCA to the sponsor was intended to increase the airport sponsor's 
acceptance of the BCA as one of several useful tools, not merely as a 
requirement imposed from outside.
    This interim BCA guidance followed the standard structure of all 
benefit cost analyses. Steps including the following: (1) Defining the 
project objective, (2) Specifying assumptions, (3) Identifying a base 
case and its alternatives, (4) Determining the evaluation period, (5) 
Determining the effort to be expended in the analysis, (6) Assessing 
benefits and costs, (7) Comparing results of alternatives performing 
sensitivity analyses, and (8) Making an informed recommendation.
    The FAA requested 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 
solicited comments on the guidance itself: selection of alternatives, 
proposed methodology, use of sensitivity analysis, and similar 
technical issues in the guidance. The FAA also invited comments on the 
new dollar threshold for the BCA requirement for the project cost above 
which a BCA must be performed and comments on FAA forecasts on 
enplanements and operations.
    The policy stated that there are certain BCA items on which the FAA 
is not allowed discretion and, therefore, on which the FAA did not 
invite comments, namely, (1) The discount rate, (2) The value of life, 
(3) The value of injury, and (4) The value of time.
    The revised procedures described in the June 24, 1997, policy 
applied 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.

B. Modifications of Policy

    As a result of experience gained reviewing airport sponsor BCAs, 
effective on December 15, 1999, the FAA has modified its policy as 
follows:

1. Exemption of Reconstruction Projects at Large and Medium Hub 
Airports

    Large and medium hub airports are those airports which enplane at 
least 0.25% of the national enplanements each year. Reconstruction 
projects are defined as projects which preserve, repair, or restore the 
functional integrity of airfield pavement areas. The FAA's AIP BCA 
policy required BCAs for all airport capacity projects, including 
reconstruction projects, for which a sponsor was seeking $5 million or 
more in AIP discretionary funds. However, the FAA has determined that 
reconstruction or rehabilitation of critical airfield structures, i.e., 
runways and associated facilities, such as taxiways and aprons serving 
the runways at large and medium hub airports, is cost-beneficial and 
does not require the quantification of benefits (associated with 
continued operation of

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existing critical structures) to aid in AIP project selection. 
Therefore, the BCA policy is modified to exempt reconstruction projects 
at large and medium hub size airports, except as may be required by 
paragraph B.3. below. This exemption applies to sponsors requesting a 
discretionary grant in excess of $5 million and/or LOI.
    The above exemption does not apply to a reconstruction project that 
is linked to other capacity projects and which would not have been 
undertaken in the absence of the other capacity projects. For example, 
a project to construct a new runway or a project to convert an existing 
taxiway into a temporary runway would not be exempt if it would not 
have been proposed based on its own merits. If the above new runway or 
taxiway project meets the AIP discretionary threshold of $5 million, it 
will require a BCA. On the other hand, a reconstruction of an 
associated taxiway, being done for that reason alone, is strictly a 
reconstruction project and is exempt from the BCA requirement.

2. Exemption of Reconstruction Projects at Small Airports

    Small airports (small-hub, non-hub, commercial service, and general 
aviation) are those airports which enplane less than 0.25% of the 
national enplanements each year. At small airports, the AIP BCA policy 
is modified to exempt reconstruction projects for primary runways and 
associated facilities, such as taxiways and aprons serving the primary 
runway. The FAA has determined that reconstruction or rehabilitation of 
these critical airfield structures is cost-beneficial and does not 
require the quantification of benefits (associated with continued 
operation of existing critical structures) to aid AIP project 
selection. This exemption applies to sponsors requesting discretionary 
AIP funds in excess of $5 million and/or LOIs.
    FAA may require a BCA for reconstruction projects for little used 
facilities at small airports, e.g., crosswind runways serving less than 
20% of operations. This type of project generally costs much less than 
$5 million and, therefore, would not trigger the BCA requirement. 
However, in those cases that exceed $5 million, FAA may require that 
the sponsor demonstrate in a BCA that the avoidance of loss of air 
service for that particular runway generates net benefits relative to 
the base case. In determining the $5 million threshold at which a BCA 
is required, the airport sponsor would include the AIP-funded costs of 
the total project, including paving, drainage, grading, marking, etc. 
The base case would assume escalating operating and maintenance costs 
for the aged facility followed by the cost of closing the facility at 
some point when additional maintenance is no longer cost-effective.

3. Application of the Policy to a Costly or Extraordinary 
Reconstruction Project

    Notwithstanding paragraphs B.1. and B.2. above, FAA may in some 
cases require a BCA on an especially costly or extraordinary 
reconstruction project. For instance, if a proposed project's estimated 
costs are distinctly high as compared to other typical reconstruction 
projects for that area, the FAA may require the sponsor to conduct a 
formal BCA for the purposes of establishing that the reconstruction 
project is a cost-beneficial means of retaining the capacity benefits 
of the facility proposed for reconstruction.

4. Application of the Policy to Facility Upgrade Projects and the 
Distinction Between Reconstruction Projects and a Facility Upgrade

    Exemption of a reconstruction project from the requirement for a 
BCA does not exempt other projects that are associated with the 
reconstruction, such as upgrades for runway strengthening or widening. 
The following guidelines apply:
    a. An upgrade of a runway is defined as any strengthening of the 
runway that significantly changes the character of the runway and 
results in a 1.5 Day-Night Average Sound Level (DNL) or greater 
increase in noise over any noise sensitive area located within the 65 
DNL contour. [DNL is the energy-averaged sound level metric used by the 
aviation industry to determine the impact of noise.] The definition of 
upgrade above is consistent with the National Environmental Policy Act 
(NEPA) requirements for an environmental analysis pursuant to FAA Order 
5050.4A, Airport Environmental Handbook, para. 22 (1985).
    b. Upgrade projects also include capacity projects, such as runway 
lengthening or widening, undertaken to bring airport facilities up to 
higher design standards which will permit new classes of aircraft to 
use the airport.
    c. FAA has determined that the AIP portion of total project cost, 
not just the AIP cost attributed only to the upgrade portion of the 
project, establishes the threshold, above which a BCA is required for a 
discretionary grant. Total project cost is defined, in this instance, 
as reconstruction cost plus upgrade cost. A BCA is required for an 
upgrade project if AIP discretionary funds exceed $5 M for the total 
project even if AIP discretionary for the upgrade on a ``stand-alone'' 
basis is less than $5 M.

5. Clarification of Which Costs Trigger a BCA Requirement

    The BCA requirement is triggered when the total AIP request for 
discretionary funds for a capacity project is greater than $5 million. 
Total costs attributable to the project include, but are not limited 
to, land acquisition, site preparation, environmental mitigation 
requirements, noise mitigation costs, engineering, and construction.

6. Application of the Policy to General Aviation (GA) Airports

    FAA has determined that the BCA has proven useful in assessing the 
investment potential of a capacity project at commercial service 
airports. FAA has also determined that the BCA is effective in the 
evaluation of the potential establishment of commercial service and/or 
cargo operations at a GA airport.
    However, the FAA has had no experience yet in evaluating the BCA 
guidance document's applicability where an airport will continue to 
serve only GA operations and where an airport sponsor is seeking $5 
million or more for a capacity project. Until and unless experience 
shows BCA not to be useful or the BCA guidance document not to be 
applicable at airports with only GA operations, FAA will require the 
sponsor to fully demonstrate its direct aviation related benefits and 
will review them on a case-by-case basis. Benefits must be attributable 
to direct aviation-related factors. Benefits must be quantified based 
on data that can be easily obtained and certified and that can be 
consistently applied, e.g., a reliever airport's contribution to delay 
reduction at a primary airport, where delay reduction can be 
demonstrated and measured. Benefits that can be ascribed to local 
economic improvements, but are not aviation-related benefits, will not 
be considered as allowable benefits.
    FAA is considering developing standard guidance for the application 
of the BCA requirement to GA airports. In order to do this, we need to 
be able to quantify the benefits of GA activity. Accordingly, the FAA 
is willing to receive input on developing methodology to identify and 
measure these benefits.

C. Responses to Comments Requested on June 24, 1997

    The June 24, 1997, policy requested comments on (1) the dollar 
threshold for AIP grants above which a BCA must be

[[Page 70110]]

performed; (2) the interim BCA guidance issued on that same date; and 
(3) preparation of FAA forecasts of enplanements and operations. 
Although the final guidance is not part of this Federal Register 
Notice, information pertaining to obtaining this document is listed 
under the ADDRESSES Section mentioned earlier in this notice.

1. A Summary of Changes to the BCA Guidance Based on Comments Received 
by FAA

    a. The comments requested on the June 24, 1997, policy were mixed 
regarding the threshold values for requiring BCA for discretionary 
funds. The FAA made no changes to the threshold values based on the 
comments received. [As part of its own internal review, as discussed in 
B.1. through B.6. above, certain exemptions to the BCA policy were 
made.] The FAA also received several comments on aspects of the policy 
other than the dollar threshold.
    b. Although there were few comments on the interim guidance itself, 
the FAA has made changes to its final guidance as a result of the 
comments and FAA's further experience. The most substantive two changes 
are:
    i. ``Section 12. Adjustments of Benefits and Costs for Induced 
Demand'' has been made an optional analysis. If an airport sponsor 
believes that it can credibly accomplish this analysis and doing so 
will help its case, then the airport sponsor is encouraged to do the 
induced demand analysis. The FAA has moved the section on Induced 
Demand from Section 12 to Appendix C in the final guidance.
    ii. In ``Section 10.4.1.3. Demand Adjustment for Exponential Delay 
Growth,'' the cap on average delay has been increased from 15 minutes 
to 20 minutes.
    c. There were no comments regarding FAA forecasting of enplanements 
and operations.

2. More Detailed Information on Comments Received on the June 24, 1997, 
Policy

a. Comments on the Dollar Threshold Above Which BCA Is Required and on 
Other Aspects of the Policy
    i. One commentor wrote that the BCA policy will improve financial 
discipline and should be extended to cover additional projects, 
particularly those funded by Passenger Facility Charges (PFCs).
    The FAA partially concurs. The FAA agrees that the BCA policy will 
improve financial discipline and that a BCA is an effective tool for 
assessing those projects currently covered by the policy, i.e., 
discretionary grants for capacity projects and LOIs. While the FAA does 
not plan on expanding the use of the BCA to other AIP projects, we will 
continue to refine, and as necessary, expand our use of investment 
tools.
    However, the FAA doe not foresee that the policy will be extended 
to PFCs. Executive Order 12893 is the principal basis for applying the 
BCA requirement. The principles to which the Executive Order refers 
apply only to Federal spending for infrastructure programs, i.e., 
direct spending and grants. PFCs are not considered Federal direct 
spending or grants, and are therefore not covered under the Executive 
Order to the policy. For a project to be funded by PFC revenues, the 
project must be an eligible airport-related project, must accomplish 
the PFC objectives established under 49 USC 40117(d)(2), and must be 
supported with adequate justification. However, a public agency is not 
precluded from submitting a BCA to support its case for adequate 
justification.
    There is not at this time, nor does the FAA foresee, a regulatory 
requirement for the FAA or an applicant to conduct BCA as part of the 
PFC application and review process. Consequently, the FAA has not 
issued, and does not foresee issuing, a policy requiring BCA for PFC 
projects. Such a policy would, most probably, require an amendment to 
the PFC regulation including a formal notice and comment period in the 
Federal Register.
    ii. One commentor indicated that BCA ought to be made a work 
element in each new master plan.
    The FAA concurs with this concept. The FAA currently recommends use 
of a BCA during the alternatives analysis of planning studies for 
planned development, the scope and time of which is suitable for BCA. 
This will help ensure that all project requirements are completed 
concurrently so as to facilitate timely project approvals. The FAA is 
looking at ways to institutionalize BCA in master planning, including 
making the BCA a required work item in any appropriate master plan 
funded with AIP grants.
    iii. Three commentors wrote that the BCA policy is, or could be 
construed to be, inappropriate, too extensive, or will not, or may not, 
return value at least equal to the effort involved.
    The FAA non-concurs.
    There were several aspects to this comment.
    (1) BCA should be limited to short term projects. BCA should be 
applied to any capacity project that exceeds the dollar thresholds, 
whether that project is short term or long term. The FAA agrees that 
there are more unknowns associated with long term projects just because 
of the longer time horizon. However, this uncertainty potentially 
enhances the value of applying an analytical tools such as a BCA to 
help in making decisions.
    Furthermore, the FAA believes that a BCA should be done early 
enough in the alternatives selection process so that no feasible 
alternative has been included or excluded without considering its 
economic impact. However, the FAA also believes that it does not make 
sense to complete a BCA on projects for which there is no serious 
commitment for implementation. As stated in FAA's response to Comment 
C.2.a.ii. above, the FAA is examining ways to institutionalize early 
BCA within the master planning process, and currently is recommending 
early BCA for projects that are within five years of requesting AIP 
discretionary funds from FAA.
    The FAA also believes that, even if the project falls within this 
five year window, the father away it is from the implementation date, 
the less precise and detailed the BCA has to be. The BCA guidance 
document makes provision for BCAs of different levels of generality in 
``Section 9: Level of Effort.'' However, the FAA notes that, when a 
project is submitted to the FAA for AIP discretionary funding, it must 
be accompanied by a valid BCA that has addressed a full range of 
alternatives.
    (2) The required scope of the BCA implied by the interim guidance 
document is excessive. The interim guidance document has an extensive 
list of possible work elements and these should be honed to a practical 
minimum in specific airport BCAs.
    The FAA believes that ``Section 9: Level of Effort'' in the 
guidance already provides that the BCA scope should be consistent with 
factors such as the complexity of project, its projected timing, and 
the consequences of an incorrect decision.
    (3) The policy itself is excessive and inappropriate. The FAA 
believes a BCA prepared in conjunction with a master plan or 
environmental analysis is neither excessive nore inappropriate because 
it provides the FAA with the information necessary to justify and 
defend allocating limited AIP discretionary funds on capacity projects.
    The FAA has designed the policy to apply only to AIP discretionary 
funding for capacity projects over which FAA has discretion as to 
whether it will or will not fund the projects. The FAA believes that it 
requires knowledge of a project's alternatives and its benefits and 
costs before AIP discretionary funds

[[Page 70111]]

are awarded for a project. Given that no specific airport is entitled 
to these funds, it is entirely reasonable that airport sponsors, if 
they wish to request these funds, provide FAA with the information it 
needs to assure itself that it has made a good decision.
    Additionally, the selection criteria for capacity projects 
requesting AIP discretionary funding require a project level BCA per 
Executive Order 12893, Sec. 2(a)(2) which states ``Benefits and costs 
should be measured and appropriately discounted over the full life 
cycle of each project.''
    (4) The dollar threshold for discretionary grants for capacity 
projects and LOIs is too low. The FAA disagrees. The dollar threshold 
has been examined and set to capture those projects that are likely to 
be capacity enhancing. The dollar threshold is consistent with the 
types of projects that raised the greatest congressional concerns over 
how FAA selected projects for AIP funding, which led to the BCA 
requirement. The FAA has already refined the requirement to exempt 
projects undertaken solely for the objective of safety, security, 
conformance with FAA standards, or environmental mitigation. FAA has 
further narrowed the application to exempt certain reconstruction 
projects. The FAA notes that no dollar value was established in 
Executive Order 12893 for the project level requirements. At present, 
the FAA is satisfied with the threshold and has no intention to raise 
or lower the level.
    (5) The policy is burdensome. There is no reason the policy will be 
burdensome if the airport sponsor tailors the scope of the BCA to the 
project. The FAA expects airport sponsors to make only that case which 
is necessary to convince the FAA that an FAA decision to fund a 
specific capacity project at an airport will produce aviation benefits 
greater than the costs invested in the project and that the manner used 
to achieve the development objective is the most economically 
efficient. We encourage sponsors to contact FAA in advance of 
initiating a BCA to obtain guidance and assistance, if necessary, in 
applying the appropriate level of effort to this guidance.
    (6) The policy constitutes the promulgation of a regulation. The 
BCA requirement applies only to capacity projects, and only for those 
capacity projects for which discretionary funds or LOIs are sought from 
the FAA. The only mandatory requirement is that the BCA adequately 
convinces the FAA that awarding an AIP discretionary grant or LOI is a 
good investment, i.e., is a cost effective investment for achieving the 
project objectives. Because the decisions to award AIP discretionary 
grants or LOIs are matters for FAA discretion, the FAA may establish 
criteria for their award as policies, and need not follow the 
procedures for rulemaking in the Administration Procedures Act.
    (7) The policy creates an additional basis for objection to 
capacity projects. The FAA believes that most capacity related projects 
that meet the criteria for a BCA are likely to generate opposition from 
at least one stakeholder or stakeholder group. Therefore, the BCA, 
master plan, and environmental documentation must be consistent and 
defensible. As discussed above, it is appropriate that the BCA be 
prepared in conjunction with other airport planning or environmental 
studies. While the BCA data and conclusions may provide project 
opponents with additional material on which to comment, the FAA has not 
experienced this result since the first BCA requirements were 
established in 1994. However, the FAA will track any such activity 
resulting from the BCA process and will consider an appropriate 
response at that time. See also our response to the comments in 
C.2.a.iv. immediately below.
    iv. Two commentors indicated that the BCA review process should be 
made more visible to the public.
    The FAA non-concurs.
    There were two aspects to this comment:
    (1) There should be public comment on BCAs as part of the funding 
approval process. The FAA does not wish to extend the existing review 
and evaluation period for awarding project grants and LOIs and is 
concerned that a separate public comment process, outside the planning 
and environmental process, would do so. The FAA recognizes that there 
is merit in evaluating input from knowledgeable groups other than 
airport sponsors, but BCA is only one of several requirements which FAA 
must consider which are not announced separately for public review and 
comment. Inasmuch as there are other opportunities for interested 
parties to provide input on the value of projects, including user 
consultation on AIP applications, the FAA does not believe it necessary 
to require public comment on a sponsor's BCA.
    (2) The BCA review process should be identified in the BCA guidance 
document. The BCA document should identify whether BCA projects at 
different airports will be ranked on the basis of BCA results, whether 
BCA results are treated as ``pass-fail'' and what others factors are 
taken into account in the FAA review and prioritizing process. Based on 
more than five years experience preparing and reviewing BCAs, the FAA 
has found that each BCA has to be treated on a case-by-case basis, 
often with several rounds of consultation between airport sponsors, 
their consultants, and several different FAA offices. These reviews can 
extend over several years, or be accomplished within a few weeks, 
depending on project complexity and the experience of the airport 
sponsor and its consultants with BCA. Thus, except in the broadest 
generalities, the FAA is not able to identify a specific review 
process.
    Nevertheless, the FAA can state that it has no present intention of 
ranking different airports' projects on the basis of their benefit-cost 
ratios or net present values. However, the FAA will not limit BCA to 
``pass-fail'' among alternative projects at a given airport. The FAA is 
interested in knowing that AIP discretionary funds are being used in an 
optimal way at a given airport, not just that a specific project proves 
to have benefits greater than its costs.
    The other factors used in deciding LOIs have already been 
identified in Federal Register, Vol. 62, No. 121, June 24, 1997 [62 FR 
34108]. They are the project's effect on overall national air 
transportation system capacity and the airport sponsor's financial 
commitment to the project. The FAA prefers not to include in the BCA 
guidance these other factors which are used to decide whether a project 
seeking an LOI is funded or not because they are not part of the BCA. 
Further information on FAA's Priority System describing how FAA ranks 
its allocation of AIP funding can be found in four Federal Register 
Notices. Two were issued in Vol. 59, No. 209, October 31, 1994, 
``Policy for Letter of Intent Approvals Under the Airport Improvement 
Program'' (59 FR 54482) and ``Policy Regarding Revision of Selection 
Criteria for Discretionary Airport Improvement Program Grant Awards'' 
(59 FR 54484). The third was issued in Vol. 61, No. 104, May 29, 1996, 
``Notice of Airport Capital Improvement Program National Priority 
System; Opportunity to Comment'' (61 FR 26947). The fourth was in Vol. 
62, No. 164, August 25, 1997, ``Airport Capital Improvement Program; 
National Priority System'' (62 FR 45007).
    v. One commentor indicated that the docket for comments on the BCA 
guidance should be reopened and the policy reviewed in three years.
    The FAA partially concurs. The FAA will take under consideration 
the advisability of reopening the docket and reviewing FAA BCA 
implementation in the future.

[[Page 70112]]

b. Comments on the Guidance Itself
    i. Two commentors made specific recommendations on methodology in 
the BCA guidance regarding the structure of the base case, increasing 
the cap on average delay, estimation of landside delay, and explicitly 
identifying in the BCA guidance those items which cannot be revised 
(i.e., discount rate, values of live, injury, and time)
    The FAA partially concurs.
    There are four aspects to this comment:
    (1) The base case should be realistic and meet project objectives. 
The FAA believes that the interim BCA guidance on the role of the base 
case should not be changed. The base case represents best practices at 
the airport short of a major initiative. As such, the base case may not 
accomplish, or fully accomplish, the specific objective(s) of a major 
initiative (project), such as to reduce delay from current levels. 
Rather, the base case may at best hold average delay at a constant 
level per operation or cause it not to worsen as severely as it would 
in a ``do nothing'' approach. Similarly, an objective such as 
accommodating larger and more efficient aircraft at the airport may not 
be possible short of a major pavement initiative. Thus, the base case 
should not be held to the standard of ``meeting'' objectives of a major 
initiative.
    To prevent future confusion, the second sentence of Section 6 in 
the interim guidance will be replaced with the following: ``Ideally, 
the reference point should be the optimal cause of action compatible 
with the specified project objectives that would be pursued in the 
absence of a major initiative. However, in most instances, the base 
case will not fully meet the objectives specified for the potential 
project.''
    (2) The cap on average delay should be increased from 15 minutes to 
20 minutes and methods should be discussed to assess additional 
benefits for those alternatives which do accommodate demand. The FAA 
has reviewed actual delay data at one of the nation's largest and most 
delayed airports. Based on that data, the FAA agrees that the cap on 
average delay should be increased from 15 minutes to 20 minutes and has 
changed the BCA guidance to reflect this. Capping delay applies to all 
alternatives under consideration which otherwise would exceed the cap.
    The BCA guidance is very extensive and considers all benefits for 
which the FAA has identified a credible method for measurement. 
However, if there are benefits that the BCA guidance does not cover, 
the airport sponsor has wide latitude in including them in its BCA. The 
FAA is willing to consider any credible methods for assessing 
additional aviation related benefits and is willing to consider 
modifying the BCA guidance to include these methods.
    (3) Methods of estimating landslide delay may lead to suboptimal 
decisions. The FAA is willing to consider any reasonable approach for 
quantifying landside delay issues, including passenger convenience, and 
modifying the BCA guidance to include these methods.
    Typically, discretionary funding for terminal buildings is limited 
to non-hub primary and non-primary commercial service airports. In all 
likelihood, a BCA for a terminal building project at such an airport 
would not cover work items such as people-mover systems, consequently 
passenger transit time versus passenger walking distances would not be 
evaluated. However, in some cases, particularly where an airside 
facility such as an apron or taxiway is an integral part of a terminal 
improvement, a BCA of integrated terminal facility may be a necessary 
component of the BCA to support AIP funding of the apron or taxiway. In 
this case, the FAA would be willing to consider any reasonable approach 
to quantifying passenger convenience associated with a moving sidewalk 
or other facilities to enhance passenger flows.
    (4) Those items which cannot be revised (i.e., discount rate, 
values of life, injury, and time) should be explicitly identified in 
the BCA guidance. A paragraph has been added to ``Section 5: 
Assumptions'' identifying those items which cannot be revised.
    ii. Two commentors indicated that treatment of ``induced demand'' 
should be dropped from the guidance or its inclusion made optional.
    The FAA concurs. ``Section 12: Adjustment of Benefits and Costs for 
Induced Demand'' has been made optional and moved to Appendix C of the 
BCA guidance.
c. Comments on FAA Forecasts of Enplanements and Operations
    The FAA received no comments on FAA forecasts of enplanements and 
operations. However, the FAA notes that sponsors must use consistent 
forecast data in all planning and environmental studies of the project, 
including the BCA.

    Issued in Washington, DC, on November 24, 1999.
Catherine M. Lang,
Director, Office of Airport Planning and Programming.
John M. Rodgers,
Director, Office of Aviation Policy and Plans.
[FR Doc. 99-32172 Filed 12-14-99; 8:45 am]
BILLING CODE 4910-13-M