Writing the Benefit-Cost Analysis Report
If benefit-cost analysis is to assist in the decision-making process the analyst must be able to convey and interpret the main findings of the benefit-cost analysis in a style that is user-friendly and meaningful to the decision-makers. The analyst should never lose sight of the fact that the findings of a BCA are intended to inform the decision-making process. BCA is a decisionsupporttool; not a decision-making tool. To this end it is imperative that the report provides the decision-maker with information about the project and the analysis which is directly relevant to the decision that has to be made, and to the context in which it is to be used.
There is no blue-print for report writing, as every project or policy decision will be different in various respects, as will the decision-making context and framework within which the analyst will be operating. Good report writing is essentially an art that can be developed and refined through practical experience. The purpose of this final Chapter is to identify what we consider to be some of the key principles the analyst should follow when preparing a report and to illustrate how these might be applied in the drafting of a report on the ICP Project we have used in previous chapters as a case study. As an illustration, we have selected the report prepared by one of our postgraduate students at the University of Queensland, Australia, who has kindly given us permission to use it in this way. In the sections below we explain why we consider this study an example of good BCA reporting. The report itself, along with the appended spreadsheet tables, is reproduced in its original form (with the exception of a few minor editorial corrections) as an Appendix to this chapter. Note that the report consists of an Executive Summary, four main sections – Introduction, Methodology, Analysis and Conclusion – and an Appendix containing the printouts of the spreadsheet tables.
Before commenting on this report, we should note that the starting point for the exercise was the ICP Case Study problem appended to Chapter 4. This starting point is already some way along the path which the analyst must follow. As in any area of investigation, framing the questions to be answered is an important first step. The ICP Case Study asked for an analysis of seven different scenarios involving two different locations and various tax regimes. These scenarios would have been established in discussions between the analyst and the client about the terms of reference for the study. It must not be assumed that the analyst plays a passive role in developing the terms of reference. As noted in Chapter 1, the benefit-cost analyst may play an important role in project design by asking pertinent questions about the options which are available. This significant contribution to the decision-making process is sometimes referred to as scoping the project.