When completing a state or federal application for a discretionary grant you may be asked to provide a “Benefit-Cost Analysis” of your proposed project. (Note that these may also just as often be referred to as a “Cost-Benefit Analysis”). The analyses are useful to the governmental agency conducting the competitive review process and final funding decision for identifying, quantifying, and comparing expected benefits and costs of competing projects.
Every Benefit-Cost Analysis will differ in some respects depending on the type of project being funded but some aspects of the BCA are fundamental. For example, the “benefits” of projects may typically be described as economic gains that may be expected as a result of the project:
- Increased numbers of jobs
- Increased expenditures into a certain region
- Increased tax receipts
The “costs” of a project are typically the funding being provided by the granting agency that will be used to plan, build or operate your project. The funding agency will use the results of your BCA to determine if the benefits outweigh the costs – this is a typical measure used by governments to determine if the finds are being expended wisely.
Sometimes the benefits and the costs used in a BCA are not so obvious and not so easy to count. A good example of this might be the benefits to the environment from a project – for example a solar project will decrease the amount of carbon dioxide and other greenhouse gas emissions into the atmosphere. To include this kind of benefit there must be a way to quantify in dollars how much this benefit is worth. Luckily, in the case of carbon dioxide, the price per ton of reduced emissions was calculated by EPA as the “Social Cost of Carbon”. Currently that amount is estimated to be about $40/ton. If your project were to reduce carbon emission by 100 tons then your BCA would report a benefit of $4,000. The BCA can be a critical part of any grant application so it’s important to learn all of the different hidden costs and benefits involved with every project