[Federal Register Volume 59, Number 209 (Monday, October 31, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-26926] [[Page Unknown]] [Federal Register: October 31, 1994] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Policy Regarding Revision of Selection Criteria for Discretionary Airport Improvement Program Grant Awards AGENCY: Federal Aviation Administration; Department of Transportation. ACTION: Notice of policy. ----------------------------------------------------------------------- SUMMARY: The Federal Aviation Administration (FAA) is revising the process used to evaluate applications for Airport Improvement Program (AIP) grants awarded at the discretion at the discretion of the Secretary of Transportation. The new process represents an evolution of past practice. Airport safety and security projects will continue to be accorded the highest priority in AIP investments. They will be followed in order of priority by projects to preserve existing airport infrastructure; bring airports into compliance with standards (including noise mitigation); upgrade service; and increase airport system capacity. The changes described below are intended to assure uniform levels of airport system safety, quality, and performance for passengers, shippers, and aircraft operators throughout the Nation and to improve the effectiveness of AIP investments in meeting critical needs of the national airport system. Changes in the AIP grant award selection process are based on Executive Order 12893, ``Principles for Federal Infrastructure Investments,'' and guidance provided in Congressional hearings regarding the use of national priority and economic analysis in evaluating Federal investment in airport infrastructure. Revised procedures involve: establishment of national airport investment objectives; consistent ranking of grant applications among FAA regions by type of project; use of national threshold Priority System scores for award consideration; and application of benefit-cost analysis to any project intended to preserve or enhance capacity for which the total value of requested discretionary capacity grants is expected to equal or exceed $10 million over the life of the project. All procedural changes are consistent with existing statutory requirements for program administration and will be incorporated into FAA Order 5100.38A, ``Airport Improvement Program (AIP) Handbook.'' Applications of the procedures will be described by the FAA each year in its ``Annual Report of Accomplishments Under the Airport Improvement Program.'' The new criteria described in this policy apply to all new projects to be considered for AIP grant awards in FY 1995 and subsequent years. On a case-by-case basis, the FAA may apply the new criteria to ongoing projects approved for AIP grant awards in prior years. In addition to improvements in the discretionary AIP grant award selection process described herein, the effectiveness of Federal AIP investments will also be reinforced by implementation of a new policy on the issuance of Letters of Intent (LOI's). The FAA recognizes that, as experience is gained by using these procedures, additional improvements may be needed in the criteria used to evaluate applications for discretionary AIP grants. FOR FURTHER INFORMATION CONTACT: John Rodgers, Director, Office of Aviation Policy, Plans, and Management Analysis, Federal Aviation Administration, 800 Independence Avenue, S.W., Washington, DC 20591, (202) 267-3274; Paul Galis, Director, Office of Airport Planning and Programming, Federal Aviation Administration, 800 Independence Avenue, S.W., Washington, DC 20591, (202) 267-8775. SUPPLEMENTARY INFORMATION: The Secretary of Transportation and the Administrator of the FAA are charged with promoting and 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. The AIP was first authorized by 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 guidance for the award of grants-in-aid by formula and by discretionary authority granted 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 47115(d) specifies that in selecting projects for discretionary grants to preserve and enhance capacity at airports, ``the Secretary shall consider--(1) The effect the project will have on the overall national air transportation system capacity; (2) the project benefit and cost; and (3) the financial commitment from non- United States Government sources to preserve or enhance airport capacity.'' The FAA implemented guidance for administering the AIP in its Order 5100.38A, ``Airport Improvement Program (AIP) Handbook'' (October 24, 1989). Order 5100.38A defines a structured local airport planning process from which projects are identified and entered into the National Plan of Integrated Airport Systems (NPIAS). The NPIAS is the national airport system plan (submitted to Congress on a biennial basis) that identifies potential public-use airport development projects in the United States which are eligible for AIP assistance. The FAA uses a ranking process, titled the Priority System, to award discretionary grants to sponsors of eligible NPIAS projects for which AIP monies are sought. The Priority System assigns numerical values to airport projects based on the type of project and the size and role of the airport. Grants-in-aid are awarded to high priority projects, subject to funding availability (established in annual obligation limitations and program authorizations) and consideration of sponsor financial commitment. The process defined in Order 5100.38A has been used successfully to evaluate several thousand AIP grant requests each year and annually award as many as 1,500 grants-in-aid. Most of these grants-in-aid are for amounts of less than one million dollars. However, recent developments have led the FAA to revise the existing award process. These developments include: the need to improve the effectiveness of Federal airport infrastructure investments in light of an expected lack of growth 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. After steady growth in the late 1980's and early 1990's, Federal AIP budgets are projected to remain at or near current levels for the next several years. At the same time, the cost and number of major airport capacity projects is expected to increase significantly to accommodate forecast growth in the volume of aircraft operations. Effective Federal investment of discretionary AIP funds will become increasingly important. Executive Order 12893 is intended to promote more effective infrastructure investments. The Order instructs agencies to conduct systematic economic analysis of these investments. The Order permits consideration of market and non-market benefits and costs in the economic analysis. In addition, it directs that benefits and costs be quantified and monetized to the maximum extent practicable and appropriately discounted over the full life-cycle of each project. In May 1993, the House Appropriations Subcommittee on Transportation released a report identifying investment criteria that the subcommittee believes should be established for evaluating the merits of infrastructure investments in transportation. The report recommended analysis of project life-cycle costs and benefits. One set of criteria was formulated for each transportation mode, including air transportation. Similarly, the General Accounting Office (GAO) has testified to Congress that the FAA needs to better target AIP funds to the needs of the system. To improve the effectiveness of AIP investment decisions, the FAA will immediately implement a number of revisions to the project selection criteria identified in Order 5100.38A. These changes are limited to the evaluation of applications for discretionary AIP grants. They are designed to strengthen those features of the current award process that enable the prompt and fair evaluation of large numbers of grant applications, but at the same time permit the FAA to establish investment priorities and conduct economic evaluations of projects that require disproportionately large amounts of discretionary capacity funds. The new criteria described in this policy apply to all new projects to be considered for AIP grant awards in FY 1995 and subsequent years. On a case-by-case basis, the FAA may apply the new criteria to ongoing projects approved for AIP grant awards in prior years. Several of the changes that the FAA is implementing are administrative, designed to ensure accountable and consistent applications of the Priority System to all competing airport project proposals. The FAA will establish specific national performance goals at the beginning of each fiscal year. In FY 1995, the goals relate to five factors of the airport system: safety; security; infrastructure preservation; capacity; and environmental compatibility. Performance targets with regard to capacity-enhancing development at congested airports, good pavement conditions at airports, and relocation or insulation of homes and public buildings currently located in 75 DNL noise zones are now under development. Specific time frames for accomplishing these and other goals will be established in conjunction with an evaluation of the current airport system now being conducted. Establishment of specific numerical goals ensures that essential improvements are being implemented in a systematic and measurable manner. Under new guidance, AIP-eligible projects in all FAA regions must be consistently ranked according to the Priority System and must meet national threshold scores to be considered for AIP discretionary funding. These threshold scores will be determined by comparing the value of total grant applications to the amount of money available for discretionary grants at the national level (based on annual obligation limitations and program authorization requirements). These reforms will assure uniform levels of airport system safety, quality, and performance for passengers, shippers, and aircraft operators throughout the Nation. The FAA will strengthen its selection criteria by the application of benefit-cost analysis (BCA) to projects intended to preserve or enhance capacity for which sponsors are seeking large amounts of AIP discretionary funds. Included would be projects to add new capacity or reconstruct existing capacity. Grant award will be contingent on demonstrating that a project's benefits will exceed its costs. Initially, FAA staff will conduct the BCA to ensure the consistent application of BCA methodologies among different projects. Until further notice, application of BCA will be limited to those capacity projects for which the total value of requested discretionary capacity grants is expected to equal or exceed $10 million over the life of the project. This limit assures that costs likely to be incurred in preparing a BCA are reasonable with respect to the value of the application(s) being evaluated. The $10 million threshold is also the same value at which the FAA must notify Congress prior to the issuance of LOI awards. The FAA will amend Order 5100.38A to incorporate the criteria described in this notice of policy. The FAA will also publish summary information about the application of the grant selection process in its ``Annual Report of Accomplishments Under the Airport Improvement Program.'' This report will help to keep interested parties informed of the FAA's progress in implementing the reforms described in this policy statement. The FAA is committed to continuous improvement of its selection criteria. As the FAA gains experience with applying national priorities and BCA to airport projects, it will consider additional refinements of its selection criteria. These refinements may include: adjustment of the $10 million threshold value for BCA (perhaps establishing different thresholds dependent on type of project or airport size); application of BCA to discretionary projects other than capacity projects; publication of detailed guidance on appropriate BCA methodologies; and assignment of some or all BCA responsibilities to project sponsors (subject to FAA review). The FAA's effort to improve the effectiveness of its investments in the airport system will be reinforced by a new policy in which the FAA will apply BCA to LOI applications. The FAA will also estimate anticipated aggregate benefits and costs of AIP authorization requests beginning with FY 1996. The FAA will be responsive to concerns of Congress, State and local governments, airlines, airports, interest groups, and the public as it improves its selection criteria. To facilitate interaction with these groups, the FAA has initiated an outreach process to solicit advice from interested parties and experts in airport investment. At the FAA's request, the Research, Engineering, and Development Advisory Committee established a working group on selection criteria. The working group produced a report which was made available to the FAA in early 1994 and which influenced the development of this policy. Future outreach activities will include a conference under the auspices of the Transportation Research Board (scheduled for October 27, 1994); informal meetings between the FAA and interested parties; and systematic assessment of comments received by the FAA in the course of its administration of the revised selection process. Policy Regarding Revision of Selection Criteria for Discretionary Airport Improvement Program Grant Awards Introduction The process by which the FAA selects airport projects for Federal funding is defined in Order 5100.38A, ``Airport Improvement Program (AIP) Handbook.'' The following developments have contributed to the need to revise this process with respect to grants awarded at the discretion of the Secretary of Transportation: the need to improve the effectiveness of Federal airport infrastructure investments in light of an expected lack of growth 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 investment criteria. The following selection criteria for discretionary AIP grant awards comply with statutory requirements. They retain the basic processes of FAA Order 5100.38A while implementing new requirements designed to improve performance and effectiveness. The new criteria described in this policy apply to all new projects to be considered for AIP grant awards in FY 1995 and subsequent years. On a case-by-case basis, the FAA may apply the new criteria to ongoing projects approved for AIP grant awards in prior years. As appropriate, the FAA will make additional adjustments to the selection process. Preliminary Project Selection Screen 1. Projects must conform to several basic eligibility requirements before they will be considered for AIP funding. 1.1 A sponsor of a public use airport is eligible to apply for AIP grants if the airport meets at least one of the criteria for inclusion in the National Plan of Integrated Airport systems (NPIAS). These criteria are specified in Order 5090.3B, ``Field Formulation of the National Plan of Integrated Airport Systems (NPIAS)'' (September 9, 1985), and are summarized as follows: 1.1.1 The airport enplanes (or is forecast to enplane within 10 years) 2,500 or more revenue passengers per year and receives scheduled passenger service; 1.1.2 The airport handles at least 25,000 itinerant operations, or 35,000 local operations, of general aviation aircraft per year and relieves a congested airport with at least 250,000 annual enplaned passengers; 1.1.3 The airport has (or is forecast to have within 5 years) at least 10 based aircraft, is publicly owned, and is located 30 minutes or more (average ground travel time) from the nearest alternative airport eligible for AIP funds (special conditions apply to heliports); 1.1.4 The airport serves as a scheduled mail stop of an air carrier transporting mail pursuant to a contract with the U.S. Postal Service; 1.1.5 The airport serves as a permanent base for the Air National Guard or a reserve component of the U.S. Armed Forces; or 1.1.6 The airport meets a significant national interest (established by special written justification or by a benefit-cost analysis). 1.2 Airport sponsors must also satisfy statutory and administrative application and grant condition requirements, including environmental review, public hearings where applicable, airport layout plan and airspace approval, and financial capability. Proposed airport projects should be supported by comprehensive master planning studies. A full exposition of these and other requirements is provided in Chapter 3, ``Project Eligibility, Allowable Costs, and Donations,'' of Order 5100.38A. 1.3 Airports meeting the above criteria are eligible and their sponsors may apply for AIP discretionary grants. AIP funds apportioned to sponsors by formula in accordance with statutory criteria will be granted for eligible work. Prioritization of Projects Seeking Discretionary Grants 2. Projects meeting the eligibility requirements in section 1 above are ranked for funding priority. 2.1 FAA regional offices rank all grant applications according to the Priority System defined in Chapter 3 or Order 5100.38A. Projects are scored and ranked in the Priority System based on type of project and airport size (lowest overall scores have highest priority). Development project types include (in descending order of priority): Special Programs (safety and security items required by regulation or congressional mandate); reconstruction (infrastructure preservation); standards (including noise mitigation); upgrade; new capacity; and new airport construction. Airport size classes include (in descending order of priority): primary airports and relievers in large and medium hubs; primary airports and relievers outside of large and medium hubs; commercial service airports other than primary airports; and noncommercial airports. Priority System scores by project type and airport role and size are shown in Figure 1. 2.2 On an annual basis, the FAA will establish performance goals for the AIP. In FY 1995, goals will be related to five factors of the airport system: Safety; security; infrastructure preservation; capacity; and environmental compatibility. 2.3 The FAA will ensure consistent application of current and future selection criteria at the regional FAA office level. 2.4 FAA headquarters will use threshold Priority System scores to ensure that only the highest priority projects from a national perspective are funded. Figure 1--Priority System Matrix Primary in large Primary outside or medium hub large or medium Commercial and its hub and its service other Noncommercial relievers or relievers or than primary or less than 20 noncommercial noncommercial 50- noncommercial 20- based aircraft 100 or more 100 based 50 based or less than based aircraft aircraft or 20- aircraft or 8- 8,000 itinerant or 40,000 or 40,000 itinerant 20,000 itinerant operations more itinerant operations operations operations (W) (X) (Y) (Z) ---------------------------------------------------------------------------------------------------------------- Planning Categories: Initial Study for Existing Airport.. 1 2 3 4 Study for New Airport............... 1 2 3 4 Complete/Continue Phased Projects... 1 2 3 3 Periodic Update..................... 2 3 4 4 Supplemental Grant for Ongoing Study 2 2 2 2 Development Categories: Special Programs (e.g., Safety)..... 1 1 1 1 Reconstruction...................... 2 2 3 7 Standards (includes Noise Mitigation)........................ 2 3 4 9 Upgrade............................. 3 4 5 10 New Capacity........................ 3 4 5 12 New Airport Capacity................ 3 5 7 12 New Airport Community............... 5 6 7 12 Add-on Factors (No Add-on Factors for Special Programs): +1=Primary landing surface and associated taxiway, approaches. +2=Aprons, secondary landing surface and associated taxiway, approaches. +3=Fundamental configuration or for noise compatibility in DNL 75 dB. +4=CFR maintenance facilities, electronic navaids, AWOS, snow removal equipment/storage buildings. +5=Primary access roads, noise compatibility (DNL 65-74), terminal buildings. +6=Snow abrasive/chemical storage buildings. +7=Other (such as service roads, secondary access roads, noise compatibility projects outside DNL 65 dB, fencing, etc.). Note: The Priority System conforms to the following hierarchy of general goals: (1) Support airport safety and security; (2) Carry out statutory policy and regulatory direction; (3) Encourage airport/planning agencies to plan for improvements; (4) Preserve existing infrastructure; (5) Bring airports into compliance with FAA design criteria; and (6) Add new capacity. Benefit-Cost Analysis of Discretionary Capacity Projects 3. To ensure that AIP monies are invested wisely, the FAA will apply benefit-cost analysis (BCA) to eligible high priority projects intended to preserve or enhance capacity for which the total value of requested discretionary capacity grants is expected to equal or exceed $10 million over the life of the project. Included would be projects to add new capacity or reconstruct existing capacity. 3.1 For each such project at or above the $10 million threshold, the FAA will simulate traffic flow at the existing airport to determine the hours of annual flight delay that would be prevented by the capacity project in question. Most reductions in delay attributable to capacity projects can be measured at the project airport level. 3.2 The FAA may utilize assessments of broader system delay reduction when investments at an airport are intended to relieve congestion at neighboring airports or when there is the likelihood that capacity improvements at a project airport will contribute significantly to delay reductions elsewhere in the regional or national system. The FAA will continue to improve its modeling procedures and capabilities to capture more fully the effects of projects on the national air transportation system. 3.3 Capacity benefits expected to result from the proposed project will be quantified using methodology developed for the FAA's Airport Capacity Design Team studies. Annual delay savings will be modeled for three airport activity levels: current operations levels; intermediate- term operations levels (5 to 10 years out); and long-term operations levels (10 to 20 years out). Delay savings will be measured in hours and converted to monetary terms using aircraft operating costs and the value of air passenger time. Benefits for years in which activity levels fall between these three reference levels will be estimated through interpolation. Data on future activity levels will be taken from the FAA Terminal Area Forecast or an FAA-approved forecast in the Airport Master Plan or Draft/Final Environmental Impact Statement (whichever is most recent). 3.4 The FAA will collect data specific to airport/terminal airspace. Required data will include (but will not be limited to): the approved Airport Layout Plan; type of aircraft operations; fleet mix; peak-hour airfield mix by class; runway occupancy times; percentages of aircraft exiting at each taxiway; noise, obstruction, terrain, departure, and arrival constraints; air traffic arrival and departure streams; minimum vectoring altitudes; aircraft separation by aircraft type; length of and approach speeds on common approaches by aircraft type and weather; converging and/or parallel runway arrival and departure dependencies; and the different runway use configurations in the various wind and weather conditions. 3.5 The FAA will consider project capacity and operational efficiency benefits other than delay reduction. Benefits that cannot be quantified will be considered in a qualitative sense. In the future, the FAA may broaden the scope of its capacity benefit measure to include value of producer and consumer surplus (or another measure of benefits). Adoption of new measures of capacity benefits will depend on development of methodologies for accurately quantifying these benefits. 3.6 The FAA will measure total costs of project panning, construction, land acquisition, and operations and maintenance over a 20 year project life. Where appropriate, the FAA will include costs to airlines and the public due to operating delays caused by construction of the project and any costs to the community stemming from environmental impacts resulting from the project. 3.7 Project benefits and costs will be compared using standard discounted cash flow techniques as enunciated by the Office of Management and Budget in Circular No. A-94, ``Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs.'' Circular No. A- 94 currently mandates a discount rate of 7 percent in real terms. 3.8 On an annual basis, the FAA will re-evaluate the threshold value for total discretionary capacity grants at or above which a capacity project must subjected to BCA. Greater experience and improved modeling capabilities may allow the threshold to be reduced to capture a greater number of discretionary capacity projects. Different thresholds could be established for airport size categories identified in the Priority System. 3.9 In the future, the FAA will look to expand the application to BCA to non-capacity projects funded through discretionary funds. The FAA will consider the publication of detailed guidance on appropriate BCA methodologies and the assignment of some or all BCA responsibilities to project sponsors (subject to FAA review). Implementation of Selection Criteria 4. The FAA will publish materials describing the implementation of the revised selection criteria. 4.1 By December 1995, the FAA will issue an amended Order 5100.38A that will incorporate the selection criteria described in this notice of policy. 4.2 The FAA will incorporate information describing its AIP grant award decisions into its ``Annual Report of Accomplishments Under the Airport Improvement Program.'' The report will explain the application of project selection criteria. The first annual report including project selection information will be published by April 1, 1995. Other AIP Selection Criteria Initiatives 5. The FAA's effort to improve the effectiveness of its investments in the airport system will be reinforced by other agency initiatives. 5.1 Concurrently with the issuance of this notice, the FAA is issuing a new policy on Letters of Intent (LOI) which will become effective in FY 1995. Under this new policy: LOI's will be limited to airside development projects which significantly enhance systemwide airport capacity; BCA will be applied to all LOI's; and the FAA will consider the financial commitment of the project sponsor to the project to be financed by the LOI. 5.2 Consistent with Executive Order 12893, ``Principles for Federal Infrastructure Investments,'' the FAA will estimate anticipated aggregate benefits and costs of AIP authorization requests beginning with FY 1996. Outreach Program 6. The FAA has established an outreach program to solicit advice from Congress, State and local governments, airports, airlines, interest groups, and the public on how to improve AIP selection criteria. 6.1 The FAA will arrange for the Transportation Research Board to host an industry/academia/government symposium to solicit comments on the FAA's AIP project selection process and the use of BCA. The symposium will take place in Washington, DC, on October 27, 1994. A summary of the symposium proceedings will be available to interested parties upon request to the individuals named under the heading ``For Further Information Contact:''. 6.2 The FAA will host informal meetings as requested with interested parties on the application of the new selection criteria to airport projects. 6.3 The FAA will conduct a systematic assessment of and be responsive to comments it receives in the course of its administration of the revised selection process. Issued in Washington, DC on October 26, 1994. Cynthia D. Rich, Assistant Administrator for Airports. [FR Doc. 94-26926 Filed 10-26-94; 2:23 pm] BILLING CODE 4910-13-M