A benefit-cost analysis (BCA) is often the most technical part of a federal transportation grant application. Reviewers use it to judge whether a project’s benefits justify its cost. Short answer: for USDOT discretionary grants in 2026, follow the Department’s 2026 Benefit-Cost Analysis Guidance. Use a 7% real discount rate, state everything in 2024 dollars, keep the analysis to no more than about 30 years of full operations, and use USDOT’s published values for safety, travel time and emissions. Several rules changed this year, and older BCAs need updating before you reuse them.
What changed in the 2026 USDOT guidance
| Item | 2026 guidance | Why it matters |
|---|---|---|
| Discount rate | 7% real, per OMB Circular A-94 | A higher rate shrinks long-term benefits. BCAs built at 3.1% or 2% will show lower ratios when redone. |
| Dollar year | 2024 dollars, discounted to 2024 | Convert nominal costs with the GDP deflator table in the guidance. |
| Greenhouse gases | DOT no longer recommends monetizing CO₂ and other greenhouse gas reductions | Climate benefits that once lifted ratios now go in the narrative, not the numbers. |
| Other emissions | NOx, SOx and PM2.5 are still monetized using the guidance tables | Air quality benefits still count. |
| Economic impacts | Jobs, spending and output are not additive benefits | Report them separately. Adding them to the BCA is a common error. |
| Analysis period | Generally no more than 30 years of full operations, plus residual value for longer-lived assets | Match the period to the asset’s service life. |
Which programs ask for a BCA
USDOT requires a BCA “where required” by each discretionary program, so the notice of funding opportunity (NOFO) controls. Large capital programs such as INFRA, Mega and BUILD capital grants generally expect a full BCA. Planning grants usually do not. Port (PIDP), rail and transit programs have their own versions of the guidance. Always check the NOFO and any program-specific BCA instructions before you start. Our USDOT BUILD, INFRA, Mega and PIDP grant services cover each program.
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What counts as a benefit
- Safety: fewer fatalities, injuries and property-damage crashes, valued with USDOT’s crash cost tables.
- Travel time savings: for drivers, transit riders, pedestrians and freight, valued per hour by trip purpose.
- Vehicle operating costs: fuel, maintenance and wear.
- State of good repair: avoided maintenance and rehabilitation costs.
- Emissions: NOx, SOx and PM2.5 reductions. Greenhouse gases are now described qualitatively.
- Residual value: the remaining value of long-lived assets at the end of the analysis period.
- Qualitative benefits: things like noise and community connectivity, described but not monetized when no accepted method exists.
How to build a transportation BCA, step by step
- Define the base case and the build case. The base case is what happens without the project, including normal maintenance. Benefits are the difference between the two.
- Set the analysis period. Construction years plus up to 30 years of operations.
- Estimate costs. Capital, operations and maintenance, and rehabilitation, in 2024 dollars.
- Forecast usage. Traffic, ridership or freight volumes, documented with sources.
- Monetize benefits using USDOT’s Appendix A values.
- Discount at 7% and report net present value and the benefit-cost ratio.
- Run sensitivity tests on the assumptions that drive the result, such as traffic growth and crash reductions.
- Document everything in a technical memo and a spreadsheet reviewers can follow.
Common mistakes that cost points
- Reusing a 2023 or 2024 BCA without updating the discount rate, dollar year and emissions values.
- Counting construction jobs or economic output as benefits.
- Double counting, such as claiming both travel time savings and the property value gains they cause.
- A base case that assumes the road falls apart with no maintenance, which inflates benefits.
- A spreadsheet reviewers can’t trace back to sources.
For the general method that applies to all grant programs, see our benefit-cost analysis for grant applications guide, or our worked cost-benefit analysis example. FEMA hazard mitigation uses a different toolkit, covered in FEMA benefit-cost analysis.
What we would do in your position
- Read the NOFO and the 2026 guidance before scoping. Confirm whether a BCA is required and which version of the guidance applies.
- Update any older BCA to 7%, 2024 dollars and the new emissions treatment.
- Keep economic impacts in a separate section, where they still help your narrative.
- Use a PhD economist. GERC prepares USDOT-compliant BCAs and technical memos for public agencies and the primes that support them. Book a consultation.
Benefit-cost analysis for transportation projects: frequently asked questions
What discount rate does USDOT require for a BCA in 2026?
The 2026 USDOT Benefit-Cost Analysis Guidance uses a 7% real discount rate, consistent with OMB Circular A-94. Costs and benefits are stated in 2024 dollars.
Can I include greenhouse gas reductions in a USDOT BCA?
Under the 2026 guidance, DOT no longer recommends monetizing reductions in CO2 and other greenhouse gases. Other pollutants such as NOx, SOx and PM2.5 are still monetized.
Are jobs created counted as benefits in a transportation BCA?
No. Jobs, spending and economic output are economic impacts, not additive benefits. Report them separately from the benefit-cost ratio.
Do BUILD grants require a benefit-cost analysis?
Capital grants under programs such as BUILD, INFRA and Mega generally require a BCA, while planning grants usually do not. The notice of funding opportunity for each round controls.
How long should the analysis period be?
USDOT guidance generally caps the analysis at about 30 years of full operations after construction, with residual value used for assets that last longer.
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