It is beneficial to pursue discretionary cost-effective 406 hazard mitigation funding. FEMA will review the BCA for proposed mitigation projects submitted under FEMA’s grant programs. That review will determine whether the information provided in the application demonstrates:
Computing many of the benefits and costs of a project is a straightforward process, but others are more difficult to measure. Therefore, some basic principles are needed as a guide.
To determine the BCA feasibility of a project, all of its aspects—both positive and negative—must be expressed in terms of a common unit. The most convenient unit is dollars. This means that all benefits and costs of a project should always be measured in terms of their equivalent monetary value.
FEMA has developed software, written materials and training that help simplify the process. A BCA Toolkit covering a range of major natural hazards is available at www.fema.gov/benefit-cost-analysis.
Applicants must use FEMA-approved methodologies and software to “… all benefits and costs of a project should always be measured in terms of their equivalent monetary value.” demonstrate the cost effectiveness of their projects. This ensures that the calculations and methods are standardized, facilitating the review process. Most federal agencies will follow similar methodologies and will require the same level of detail represented in the FEMA BCA Toolkit.
All BCA data entries must be documented in the project description or scope of work. That documentation should include the source of the data (title, author, date) and a thorough description of the project and how the proposed action will mitigate future damages.
The data must be from a credible source. These include federal, state, county, regional or local agencies and/or qualified professionals such as engineers, architects and surveyors.
Mitigation project costs should be fully documented and supported with cost estimates from appropriate sources. For a BCA, the mitigation project costs should always be the total project mitigation cost before reductions of anticipated insurance proceeds and never be only the federal share. Mitigation project costs must include anticipated maintenance costs.
BCA is a net present value calculation that takes into account the useful life of mitigation projects and the time value of money. The amount of goods that can be purchased with a given amount of money decreases over time. Therefore, for all FEMA projects, the Office of Management and Budget (OMB) has a mandated discount rate of 7 percent that must be used for performing BCAs.