This page provides information on Benefit-Cost Analysis (BCA) program guidelines, methodologies, and software modules for the Hazard Mitigation Assistance and Public Assistance grant programs.
About Benefit-Cost Analysis
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. To evaluate proposed hazard mitigation projects prior to funding FEMA requires a Benefit-Cost Analysis (BCA) to validate cost effectiveness. BCA is the method by which the future benefits of a mitigation project are estimated and compared to its cost. The end result is a benefit-cost ratio (BCR), which is derived from a project’s total net benefits divided by its total project cost. 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.
Although the preparation of a BCA is a technical process, FEMA has developed software, written materials, and training to support the effort and assist with estimating the expected future benefits over the useful life of a retrofit project. It is imperative to conduct a BCA early in the project development process to ensure the likelihood of meeting the cost-effective eligibility requirement in the Stafford Act.
The BCA program consists of guidelines, methodologies and software modules for a range of major natural hazards including:
- Flood (Riverine, Coastal Zone A, Coastal Zone V)
- Hurricane Wind
- Hurricane Safe Room
- Damage-Frequency Assessment
- Tornado Safe Room
The BCA program provides up to date program data, up to date default and standard values, user manuals and training. Overall, the program makes it easier for users and evaluators to conduct and review BCAs and to address multiple buildings and hazards in a single BCA module run.
BCA Toolkit Version 5.1
On April 4, 2014, FEMA released the Benefit Cost Analysis Tool version 5.0. Since then, FEMA released the BCA Tool version 5.1, which corrects software issues and improves the help functions on February 24, 2015. Version 5.1 replaces version 5.0 and is available for use to demonstrate cost-effectiveness for FEMA’s Hazard Mitigation Assistance (HMA) grant programs. Due to the software issues in version 5.0, that version will no longer be acceptable to use to demonstrate cost-effectiveness. Users must download the Benefit Cost Analysis Version 5.1 Setup Standard Zip File, extract the contents into a folder on the user's computer and then run BCAV5_1_Setup_Standard.exe to install.
Version 5.1 and version 4.8 can be installed on the same machine at the same time. It is recommended that you keep version 4.8 installed as users transition to version 5.1 of the benefit cost toolkit. Version 5.1 will import projects created in versions 4.5.5 and 4.8. Older versions will not import projects created in version 5.1 due to the new features of the toolkit.
- BCA Tool Version 5.1
- Landslide Acquisition Benefit Calculator
- Hurricane Hazard Data
- Earthquake Hazard Data
- BCA Reference Guide
- BCA Reference Guide Supplement
BCA Toolkit Version 4.8
Due to the size of the Version 4.8 toolkit file, the installation file was separated into three separate .ZIP files. Users must download all three .ZIP files and extract those files into the same folder on the user's computer and then run Setup.exe to install version 4.8.
Environmental Benefits Policy and Calculator
The Environmental Benefits Policy allows for incorporation of environmental benefits (ecosystem service benefits) for acquisition projects under the HMA grant programs. Environmental benefits can be included for each structure when the project benefit cost ratio (BCR) reaches 0.75.
Version 5.1 provides the ability to perform these calculations and the spreadsheet calculator is not needed. The spreadsheet calculator is needed if using version 4.8.
Benefit-Cost Analysis Landslide Methodology Update
Hazard Mitigation Assistance has developed a methodology for calculating the Benefit Cost Ratio for the acquisition of properties in landslide hazard areas where the risk of catastrophic failure of the slope is imminent, an immediate threat – within five years of the timeframe of application development.
The Benefit Cost calculation is demonstrated using a landslide calculator or spreadsheet. This spreadsheet is not included in the BCA Tool. Inputs required to run the analysis are the building replacement value, number of occupants and the project costs. The tool calculates all the other values automatically based on FEMA standard values and methodologies.
Grantees will be required to attest that the structure is within five years of imminent collapse due to landslide hazards. They may obtain this determination from a state or local professional geologist or engineer. If they choose to hire a professional geologist or engineer to make that determination, the cost for those services is eligible for the project.
Hazard Mitigation Assistance and Sea Level Rise
Pursuant to the FEMA directive to integrate climate change adaptation into its programs, FEMA will fund cost effective hazard mitigation projects that include sea level rise estimates.
The list of Frequently Asked Questions provides information on how to incorporate sea level rise into Hazard Mitigation Assistance projects and use the FEMA Benefit Cost Tool to calculate the benefit cost ratio for a mitigation project that includes sea level rise.
For more information see the memo and list of Frequently Asked Questions.
Training Materials which include the Instructor Guide, Student Guide, PowerPoint, and Handouts for the BCA Toolkit are available for Version 5.1 and 4.8 by accessing the links below.
Benefit-Cost Analysis Technical Assistance
FEMA’s BCA Technical Assistance Helpline is available to provide assistance using FEMA’s BCA Software. Inquiries presented to the Benefit Cost Helpline are addressed on behalf of FEMA by an outside entity. The Benefit Cost Helpline cannot review or perform benefit cost analysis. Assistance requests in reviewing or performing BCA and eligibility or policy questions should be direct to the local State Hazard Mitigation Officer.
The Helpline’s hours are 9 a.m. – 5 p.m. (E.T.) Monday through Friday.
Benefit-Cost Analysis Methodology
Grantees and sub-grantees must use FEMA-approved methodologies and software to demonstrate the cost-effectiveness of their projects. FEMA has developed Benefit-Cost Analysis (BCA) software to facilitate the process of preparing a BCA. Using FEMA-approved BCA software will ensure that the calculations are prepared in accordance with OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs and FEMA's standardized methodologies.
A non-FEMA BCA methodology may only be used when it addresses a non-correctable flaw in the FEMA-approved BCA methodology or it proposes a new approach that is unavailable using FEMA BCA software. The non-FEMA methodology must be approved by FEMA in writing prior to submission of the project application to FEMA.
In June 2009, the Greatest Savings to The Fund (GSTF) approach was released for use in demonstrating the cost-effectiveness of mitigation projects. Currently, FEMA allows the use of the GSTF methodology for any HMA program for Severe Repetitive Loss (SRL) properties. Grantees are required to use the current GSTF value at the time of application submission.