[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]
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