February 10, 2026

How to Develop a Benefit-Cost Analysis to Demonstrate Project Value

A guide for local governments seeking competitive federal funding

A benefit-cost analysis (BCA) quantifies the long-term value of a project by comparing its expected benefits to its costs. BCAs consider a variety of impacts — such as travel time savings, safety improvements, reduced vehicle operating costs, emissions reductions, and economic productivity — relative to the scenario in which the project is not implemented. These benefits are then compared to the total costs, including for planning, construction, operation, and maintenance.

BCAs are required in many federal grant programs and provide an objective way for reviewers to compare the value of projects that differ significantly in scope or design.

The following strategies can help ensure your BCA is clear, credible, and aligned with federal guidance.

1. Know your why–and let it drive the analysis

Clearly articulating the problem and the need for your project is the foundation of a defensible BCA. Your project purpose should guide what benefits are included, how alternatives are framed, and which assumptions are emphasized.

2: Quantify as much as possible–but manage your data proactively

While BCAs include a narrative section to describe qualitative benefits, only quantified benefits are incorporated into the benefit-cost ratio used by reviewers. Local governments should look for opportunities to translate benefits that initially appear qualitative into defensible quantitative measures.

For example, the USDOT BCA guidance offers examples such as improved comfort or experience for transit users, pedestrians, or cyclists. While “comfort” may seem subjective, research increasingly supports ways to quantify its value. Project elements like safety enhancements (e.g., lighting), improved facilities (e.g., a new transit center or wider bike lanes), or better information (e.g., real-time transit data or improved trail signage) can often be quantified based on user value or mode-shift potential.

Best practice

Manage your data proactively. Understand what data you already have, where gaps exist, and how assumptions are supported. Strong BCAs are built on data that is traceable, well-documented, and aligned with how the project will ultimately be delivered—not last-minute estimates assembled only for the application.

In addition to the above strategies that will ensure you maximize your benefits estimate, it’s also important to avoid common pitfalls that could cause reviewers to consider your BCA to be inaccurate.

Below are some strategies for ensuring your BCA meets the expectations of grant reviewers:

3. Align closely with federal agency priorities and BCA guidance

The merit criteria outlined in the Notice of Funding Opportunity (NOFO) signal what the benefits reviewers consider most important. Where possible, those priorities should be reflected consistently across your application, including in the BCA.

Be mindful that priorities evolve. For example, while greenhouse gas reduction appeared in earlier NOFOs, USDOT BCA guidance now explicitly excludes greenhouse gas reduction from benefit calculations. However, the guidance does allow applicants to quantify related health impacts from reductions in other air pollutants. Aligning with current guidance—not legacy assumptions—is critical.

4. Be cautious about forecasts, and document your rationale carefully

For example, USDOT encourages applicants to avoid overly optimistic projections and to clearly justify assumptions related to traffic volumes, population growth, transit ridership, or economic activity. Forecasts should be grounded in credible data sources and methodologies. Benefit projections should generally not extend beyond 30 years after the project reaches full operation. Clear documentation of assumptions helps reviewers understand—and trust—your analysis.

5. Avoid estimates that could be perceived as double counting

Benefits included in the BCA should be mutually exclusive. A common pitfall is listing a benefit separately when it is already embedded within another calculation—for example, counting both reduced air pollution and the health benefits that primarily result from that reduction. Double counting can undermine the credibility of the entire analysis.

6. Own the results—even if a third party prepares the BCA

Many local governments rely on consultants to develop BCAs, which can be appropriate given the technical nature of the work. However, applicants should remember that ownership of the BCA rests with the applicant, not the consultant.

Government staff should understand the assumptions, data sources, and methodological choices reflected in the analysis and be prepared to explain and defend them. Reviewers may ask follow-up questions, and future audits or oversight may revisit the analysis long after submission. Treat the BCA as an extension of your program strategy—not a black box.

Ultimately, the purpose of a BCA is not just compliance—it is persuasion. A strong BCA tells a coherent story by connecting numbers back to real-world outcomes such as improved safety, time savings, economic opportunity, cleaner air, and more reliable transportation.

When done thoughtfully, a BCA becomes more than a spreadsheet. It is a strategic tool that helps paint your project in the strongest possible light, align it with federal priorities, and demonstrate why it represents a smart, defensible investment of public funds.

This resource was developed in partnership with Witt O’Brien’s to offer local government leaders a one-stop shop of resources that will help them develop an effective benefit-cost analysis (BCA) to improve competitiveness in federal infrastructure grant applications.

BCA Resources for Select Federal Agencies

US Department of Transportation (USDOT)

Federal Emergency Management Agency (FEMA)

Environmental Protection Agency (EPA)

US Department of Justice