Benefit Cost Analysis (BCA)

About Benefit-Cost Analysis

Benefit-Cost Analysis (BCA) is a method that determines the future risk reduction benefits of a hazard mitigation project and compares those benefits to its costs. The result is a Benefit-Cost Ratio (BCR). A project is considered cost-effective when the BCR is 1.0 or greater. Applicants and subapplicants must use FEMA-approved methodologies and tools—such as the BCA Toolkit—to demonstrate the cost-effectiveness of their projects.

Benefit-Cost Analysis (BCA) is the method by which the future benefits of a hazard mitigation project are determined and compared to its costs.  The end result is a Benefit-Cost Ratio (BCR), which is calculated by a project’s total benefits divided by its total costs.  The BCR is a numerical expression of the “cost-effectiveness” of a project.  A project is considered to be cost effective when the BCR is 1.0 or greater, indicating the benefits of a prospective hazard mitigation project are sufficient to justify the costs.

FEMA requires a BCA to validate cost effectiveness of proposed hazard mitigation projects prior to funding.  There are two drivers behind this requirement: (1) the Office of Management and Budget’s (OMB) Circular A-94 Revised, “Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs” and (2) the Stafford Act.

The goal of Circular A-94 is to promote efficient resource allocation through well-informed decision-making by the Federal Government.  FEMA’s BCA Toolkit has been developed to meet the guidelines published in Circular A-94.

The Stafford Act authorizes the President to establish a program to provide technical and financial assistance to state and local governments to assist in the implementation of hazard mitigation measures that are cost effective and designed to substantially reduce injuries, loss of life, hardship, or the risk of future damage and destruction of property.

BCA Toolkit Version 6.0

July 23, 2019

FEMA released the BCA Toolkit Version 6.0.   Version 6.0 replaces previous versions of the BCA Toolkit with the exception of the seismic building retrofit BCAs (see note below).

Some major features of Version 6.0 include:

  • Excel-based platform
  • Compatible with both Windows and Macintosh operating systems
  • Streamlined user interface and improved user experience
  • Reduction in the number of manual-input data fields
  • Improved help content
  • Improved report formatting

Note:  Users should continue to utilize version 5.3 to conduct BCAs for seismic building retrofit projects (structure and non-structural).   See the release notes for additional details.

Benefit-Cost Analysis Methodology

Applicants and subapplicants must use FEMA-approved methodologies and tools to demonstrate the cost-effectiveness of their projects.  FEMA has developed the BCA Toolkit to facilitate the process of preparing a BCA. 

Using the BCA Toolkit will ensure that the calculations are prepared in accordance with OMB Circular A-94 and FEMA’s standardized methodologies. It is imperative to conduct a BCA early in the project development process to ensure the likelihood of meeting the cost-effectiveness eligibility requirement.

The BCA Toolkit consists of modules for a range of major natural hazards and project types including:

  • Flood
  • Tornado Safe Room
  • Hurricane Wind
  • Hurricane Safe Room
  • Earthquake
  • Wildfire
  • Drought
  • Landslide

The Greatest Savings to the Fund (GSTF) approach is no longer allowed to determine cost-effectiveness for Severe Repetitive Loss (SRL) properties.

Pre-Calculated Benefits

To streamline the grant application process, FEMA has released pre-calculated analyses for several eligible projects as follows.

The pre-calculated benefits and benchmark costs are not intended to drive actual project costs or to serve as detailed project cost estimates. Individual project cost estimates must be based on industry standards, vendor estimates or other acceptable sources. Projects must still meet all other grant requirements.

Reference Materials

Benefit-Cost Analysis Info from FEMA

FEMA’s webpage provides information on FEMA’s Benefit-Cost Analysis (BCA) program guidelines, methodologies, and tools for the Hazard Mitigation Assistance (HMA) and Public Assistance (PA) grant programs.

Link to for information on training and technical assistance.