An economic impact analysis estimates the jobs, labor income, economic output and tax revenue that a project supports in one region, such as a county or a state. A benefit-cost analysis (BCA) compares the benefits of a project with its costs for the nation as a whole. The U.S. Department of Transportation (USDOT) describes BCA as "a systematic process for identifying, quantifying, and comparing expected benefits and costs of a potential infrastructure project."
The two methods often use the same project budget. In an economic impact analysis, construction spending supports jobs and income in the region. A BCA counts that spending as a cost that the project's benefits must exceed. Guidance from USDOT, the Federal Aviation Administration (FAA) and the Office of Management and Budget (OMB) keeps economic impact results out of the benefits in a BCA.
The two methods compared
| Economic impact analysis | Benefit-cost analysis | |
|---|---|---|
| Question it answers | How much economic activity does the project support in a region? | Are the project's benefits larger than its costs? |
| Geographic area | A city, county, state or other region | The nation as a whole |
| Project spending | Activity that supports jobs and income | A cost |
| Main results | Jobs, labor income, output, gross domestic product (GDP) and tax revenue | Net present value and benefit-cost ratio |
| Time period | Usually one year, or the construction period | The full life of the project |
| Discount rate | Usually none | 7% real, under current USDOT, FAA and OMB guidance |
| Common uses | Reports to boards, legislators, voters and the press | Federal grant applications and choices between project alternatives |
Discounting converts future benefits and costs into present-day dollars. Net present value is the discounted benefits minus the discounted costs. The benefit-cost ratio is the discounted benefits divided by the discounted costs.
How each method treats project spending
USDOT's BCA guidance says that economic impact analyses view "the initial investment... as a stimulus to the local economy, rather than as a cost." According to the same guidance, these analyses do not consider that "positive impacts in one region or industry may be accompanied by offsetting losses in another."
In a BCA, the analyst compares the project's cost with its benefits. Typical benefits for a transportation project include travel time savings, lower vehicle operating costs and fewer crashes. For this reason, the two methods can give different answers for the same project. USDOT's guidance states: "A project with negative net benefits, as measured by a BCA, could generate positive regional economic impacts simply by increasing spending or employment within a specific geographic area."
Federal rules on adding impact results to a BCA
USDOT, FAA and OMB all tell analysts not to add economic impact results to the benefits in a BCA. USDOT's guidance says these results "generally do not represent categories of benefits that may be added to those addressed in a BCA." It calls adding them "another form of double counting." FAA's airport guidance takes the same position. Macroeconomic and productivity gains "should be listed separately from the aviation user benefits... and should not be included in BCA measures." OMB Circular A-94 excludes multiplier effects from social benefits. In its words, "employment or output multipliers that purport to measure the secondary effects of government expenditures on employment and output should not be included in measured social benefits or costs."
Jobs that move from one region to another are a gain for one region and a loss for the other. A BCA covers the nation as a whole, where those gains and losses cancel out. FAA's guidance describes a business relocation that "will generate apparent macroeconomic gains for the recipient region but will cost the donor region comparable gains."
Federal guidance as of October 26, 2026
| Source | Date | Discount rate | Treatment of economic impacts |
|---|---|---|---|
| USDOT, Benefit-Cost Analysis Guidance for Discretionary Grant Programs (2026 update) | December 2025 | 7% real. For fiscal year 2026, discount to 2024 dollars. | Not added to BCA benefits |
| FAA, Airport Benefit-Cost Analysis Guidance | 2026 | 7% real | Listed separately and considered apart from the BCA |
| OMB Circular A-94 | 1992 version, reinstated in 2025 | 7% real | Multiplier effects excluded from social benefits |
A real discount rate is a discount rate after inflation. At a 7% real rate, $1.07 of benefits next year is worth $1.00 today. Earlier USDOT guidance used a 3.1% rate. A BCA built on that rate does not meet the current guidance.
OMB issued a new Circular A-94 in November 2023. On April 8, 2025, OMB revoked it in memo M-25-23 and reinstated the 1992 version.
Choosing between the two methods
USDOT discretionary grant programs, such as BUILD, ask applicants for a BCA that follows the USDOT guidance. FAA applies its own BCA guidance to airport projects.
Boards, legislatures and the public often ask how many jobs, how much income and how much tax revenue a project supports in their region. An economic impact analysis estimates those figures.
Some grant applications include both methods. FAA "will consider important macroeconomic impacts separately from the BCA." USDOT's BUILD program lists economic competitiveness as a merit criterion. Before you prepare material for that criterion, check the notice of funding opportunity for the current round.
If a project needs both methods, base them on the same project description and cost estimates. Present the results in separate sections or separate documents. The economic impact report should state that its results are not BCA benefits. Zenith Economics prepares economic impact analyses and benefit-cost analyses. For a project that needs both, we can prepare them together.
Related reading
- Fiscal impact vs. economic impact
- Direct, indirect and induced effects: multipliers explained
- Transportation economic impact studies
- Airport economic impact studies
Sources
All sources checked October 26, 2026.
- USDOT, Benefit-Cost Analysis Guidance for Discretionary Grant Programs, 2026 Update (December 2025), sections 1, 4.3, 5, 7 and 8. Landing page
- USDOT, Preparing a Benefit-Cost Analysis for the BUILD Discretionary Grant Program (February 2, 2026)
- USDOT, FY 2026 BUILD: How to Compete
- FAA, Airport Benefit-Cost Analysis Guidance (2026), sections 2.3, 10.6.2 and 12.5
- OMB, Circular A-94 (October 29, 1992), sections 5, 6 and 8
- OMB, Memorandum M-25-23, Rescission and Reinstatement of Circular No. A-94 (April 8, 2025)