INSTRUCTIONS FOR PERFORMING A BENEFIT COST ANALYSIS (BCA)
A. Benefit Cost Analysis (BCA)
The following worksheets are sample formats for use in developing a Benefit Cost
Analysis. Three acquisition options must be compared: leasing, purchasing, or
constructing space. Use the following instructions for completing the worksheets:
The Leasing Alternative - Listed below are detailed explanations of the assumptions and
inputs for Worksheet 1:
Line 1 - Firm Term - from the Space Requirements Package (SRP);
Line 2 - Renewal Term - from the SRP. Not all agency missions require a renewal term.
Some may even require multiple renewal terms. For the scope of the BCA, assume that
all of the required renewal-term options are exercised. Adjust the number of years of this
analysis as required.
Line 3 - Holding Period - Line 1 plus Line 2;
Line 4 - Discount Rate - The discount rate is the rate at which future cash flows will be
reduced to present value or today's dollars. This may be obtained from the Fiscal Officer
and represents VA's cost of funds.
Line 5 - Total Usable Square Feet (USF) - from the SRP;
Line 6 - Common Area Factor - This is unique to each building and represents the
percentage by which the USF must be increased to include the building's common areas
such as elevator lobbies and public corridors. It is the percentage by which the USF are
increased to equal the rentable square feet (RSF). The reason USF must be converted to
RSF is that VA purchases space in units of USF, but most lessors and landlords sell or
lease space in units of RSF. Landlords and lessors sell their product by the RSF so that
they may recover the costs of common areas which are used in common with all tenants
but which cannot be leased to generate rental income.
The CO obtains this factor by surveying knowledgeable sources in the marketplace and
determining a typical common area factor for the type of buildings that will best satisfy the
requirement. For example, in some markets, a common area factor of 17% is typical on
multi-tenanted floors of modern, high-rise office towers. The common area factor for
single tenant floors in the same type of building may equal only 7%. A common area
factor of 0% may apply to building in which one tenant occupies the entire building.
Line 7 - Total RSF - Multiply Line 5 by the sum of 1 plus Line 6.
BENEFIT COST ANALYSIS -- 1 of 11
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