Proper Benefit Cost Analysis Key in Mitigation Grant Application


Since each data element of the BCA that affects the numerical BCR must be fully and carefully documented, it is recommended that standard FEMA methodology and default values be used when they apply. Some data inputs may be based on national or typical values, while many are project-specific and must be documented with local data.

The base year of costs for all damages used in the BCA must be identified and be consistent with any technical data provided. The base year for mitigation project costs refers to the year that the cost estimate was developed.

The level of protection— also known as the effectiveness of the project —must be included. The level of protection is important because it shows when residual damage would occur.

The project’s useful life (length of time that the mitigation project will provide protection) must be consistent with FEMA’s standards, which are explained in the BCA Toolkit. In determining cost-effective mitigation projects, applicants are also encouraged to consider the idea of “risk”when identifying and analyzing projects. Risk is simply the threat to the property, infrastructure and people in terms of dollars. It depends on the type, frequency and severity of natural hazards, as well as the vulnerability of the infrastructure and people.

Calculating Benefits and Costs

For every mitigation project, benefits are calculated by estimating future damages and losses under two scenarios —with and without undertaking the project.

There are two aspects of calculating benefits that are particularly important to keep in mind. First, mitigation projects might reduce future damages and losses —but not completely eliminate them. Acquisition of the property is the only type of mitigation project that completely eliminates future damages and losses.

Second, for every mitigation project, the greater the damages and losses are before mitigation, the greater the potential benefits become.

The benefits considered in BCAs include benefits to the community, not just the government entity or funding source. The OMB’s Advisory Circular A-94, Guidelines and Discount Rates for Benefit Cost Analysis of Federal Programs, provides explicit guidance on what benefits to count. Conceptually, however, most of the benefits can be sorted into four main categories: Physical Damages, Loss of Function, Casualties and Emergency Management Costs.