FAAXX504: En Route Automation Modernization (ERAM)

Two major classes of quantifiable benefits were identified during the ERAM final investment analysis: 1) those that would accrue to the FAA directly and 2) those that would accrue to NAS users. Quantifiable FAA benefits result from the avoided costs of maintaining and refreshing legacy En Route systems and from streamlined information processing in the ARTCCs. Quantifiable user benefits result from an increase in safety and efficiency of the NAS. Safety benefits result from reductions in projected operational errors, operational deviations and the possibility of mid-air collisions. Efficiency benefits result from improved NAS throughput and better routing, as well as having a fully functional backup system. Per OMB guidelines, a 7% discount rate was used to calculate the present value costs and present value benefits, based on the risk-adjusted estimates for benefits and costs denominated in FY03 constant dollars through FY2020. The results indicated a benefit-to-cost (B/C) ratio range of 1.4, and a net present value (NPV) range of $927M with a break-even point of 2017. When the program was rebaselined in 2011, no changes to the program benefits were assumed except for the timeframe for which they were projected to be delivered. To approximate the schedule impact on the benefits and the associated economic analysis, the benefits were shifted by two years with FAA savings starting in FY2006 and user benefits in FY2012. Both cost and benefits were included through FY2022. The ERAM rebaseline business case analysis considered the same benefit areas from the original baseline in order to estimate the NPV of the program and its B/C ratio. The economic analysis from the rebaseline indicated a B/C ratio of 1.3, with a NPV of $626M with a break-even point of 2020. As anticipated, the rebaseline NPV decreased from the original NPV due to additional funds being required to complete deploying the capability to all of the sites. Similarly, the other economic measures were all less favorable as compared to the original baseline with the payback year extending with the revised program schedule. When considering only the future costs and benefits, the NPV increases to $700M and the B/C Ratio is 3.0, with break-even occurring in 2016. The improved economic results are due to the large majority of the investment costs being sunk with the preponderance of the benefits anticipated in the future. With the ROI = ((B/C)-1); the original ROI=0.4 and the rebaseline ROI=0.3.

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