ECON7740
COST BENEFIT ANALYSIS & PROJECT
EVALUATION
Lecture 13: Guidelines to Writing a CBA Report
Professor Flavio Menezes
Australian Centre for Business and Economics
Last Lecture
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✓ Define the concept of Total Economic Value (TEV) and its components.
✓ Distinguish between public goods, private goods, and mixed goods in the context of
valuation.
✓ Apply alternative pricing methods to estimate the value of environmental and social
impacts.
✓ Compare and contrast revealed preference and stated preference valuation techniques.
✓ Implement and critically evaluate non-market valuation methods in practical contexts.
Learning objectives for today
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• Understand what makes a report an effective communication tool.
• Create a CBA report including all relevant components.
• From 9 am Again, an Industry Expert in CBA, Mr. Anthony Vine, Director at
NineSquared, will provide constructive feedback on your Pitch Deck Presentation
and offer a final chance to ask him any appropriate questions.
Reading for today
4
Required:
• Social Cost Benefit Analysis and Economic Evaluation, S. Bonner, Chapter 13.
Recommended:
• Cost-Benefit Analysis: Financial and Economic Appraisal Using Spreadsheets, H. F. Campbell and R. P. C. Brown.
Chapter 13.
Understanding the Role of Cost-Benefit Analysis (CBA)
• CBA is a decision support tool — not a decision-making tool.
It provides structured insights to inform, not dictate, decisions.
• The goal of a CBA report is to support decision-makers by presenting relevant, meaningful, and accessible
information.
A High-Quality CBA Report Should:
• Describe the Project Clearly
Provide a concise overview of the project, including its objectives and scope.
• Present Relevant Analysis
Focus on findings that directly relate to the decision at hand.
• Provide Context
Explain the environment, assumptions, and constraints under which the analysis was conducted.
Key Principles for Writing a CBA Report
• Be User-Centric
Use clear, jargon-free language tailored to your audience.
• Be Purposeful
Include only information that helps inform the specific decision.
• Practice Makes Perfect
Writing effective CBA reports is a skill — one that improves with experience.
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Why is the Report Important in CBA?
6Where CBA Fits in the Decision-Making Process
CBA informs decisions — it doesn’t make them.
• It provides evidence-based recommendations, not final answers.
One input among many.
• CBA is just one of several factors considered in decision-making, alongside political, social, and strategic
considerations.
Critical when resources are limited.
• Helps prioritise projects and policies by highlighting trade-offs and opportunity costs.
Supports efficient resource allocation.
• Encourages decisions that maximize value for money and societal benefit.
Goes beyond Net Social Benefits.
• Incorporates distributional impacts through Disaggregated Group Analysis to understand who gains and
who loses.
1. What is the Report’s Objective?
• Provide policy recommendations grounded in the CBA.
• Emphasize insights from the Disaggregated CBA, highlighting distributional impacts.
2. Who is the Audience?
• Policy makers and bureaucrats — time-poor and outcome-focused.
• Keep it short, precise, and within page limits.
• Use summary tables in the main text; detailed analysis can go in appendices.
3. Who Do Decision-Makers Represent?
• Assume they represent the public interest.
• Consider both direct and indirect impacts on affected communities.
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Key Considerations for Your CBA Report
8The structure of the report
1. Specify the options or set of alternatives under
consideration.
2. Decide whose benefits and costs count.
3. Identify the impacts and select measurement
indicators.
4. Predict the impacts over the life of the proposed
project, program, or policy.
5. Monetise all impacts (attach $ values).
6. Discount future costs and benefits to obtain present
values.
7. Compute the net present value (NPV) of each
project.
8. Perform a sensitivity analysis.
9. Reach a conclusion.
The Key Steps in a CBA
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About APA 7th - APA 7th referencing style -
Library Guides at University of Queensland
Library (uq.edu.au)
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1. Executive summary
2. Introduction/ Background
3. Methodology – Decision criteria, key variables, assumptions
4. Discussion of results – Base case, alternative scenarios if any
5. Sensitivity / Threshold analysis – identifying, discussion, ranking of alternatives
6. Conclusions & recommendations
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Suggested Components for Sections
1. Executive Summary
Some guidelines
One Page Only
• Designed for decision-makers — concise,
focused, and impactful
Non-Technical Language
• Avoid jargon. Use clear, accessible language for
a broad policy audience
Write Last
• Complete after all analysis is finalized to ensure
accuracy and relevance
What to Include
Project Overview
• Brief description of the project
• Purpose and objectives
• Key stakeholders
• Decision to be made
Options & Analysis
• Outline any options considered
• Summarize the analysis undertaken
• Highlight key findings (especially from
Disaggregated CBA)
Recommendations
• Provide clear, actionable policy recommendations
• Link recommendations to evidence from the
analysis
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2. Introduction/ Background
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Purpose of This Section
• Sets the stage for the analysis — written independently of the Executive Summary.
What to Include
• A brief overview of the report’s focus
• Key stakeholders involved
• The options being analysed and compared
• The decision the analysis is intended to inform
What to Avoid
• Avoid excessive technical detail
• Do not discuss data or methodology in great detail — that comes later
Why It Matters
• Provides essential context to help readers understand the relevance and scope of the analysis.
3. Approach and Methodology
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Social Cost-Benefit Analysis (CBA) Framework
• Uses a societal perspective to evaluate the net benefits of a project.
• Focuses on efficiency and equity, considering both total net benefits and how they are
distributed.
Key Variables and Assumptions
• Clearly describe only the relevant variables that significantly influence the analysis.
• Include assumptions related to:
• Time horizon and discount rate
• Costs and benefits (quantified and monetised where possible)
• Affected stakeholder groups (for disaggregated analysis)
• Externalities and risk factors
Keep It Focused
• Exclude variables or assumptions that are not material to the project’s outcomes.
• Aim for transparency and replicability without overwhelming the reader.
Project Viability
• Should either project be accepted?
Evaluate based on Net Social Benefit and alignment with policy goals.
• Which project is preferred?
Compare outcomes across all relevant criteria, including distributional impacts.
Stakeholder Interest
• Is a private firm or public entity likely to be interested?
Assess commercial viability and alignment with public sector priorities.
Support & Opposition
• Will the preferred project receive support from key stakeholders?
Use Disaggregated CBA to identify likely supporters.
• Who are the potential opponents (losers)?
Identify groups negatively impacted by the project.
Addressing Opposition
• Can opposition be mitigated?
Explore redistribution strategies or compensatory measures to address equity concerns.
Base Case Scenario
• Ensure the Base Case is clearly discussed as the reference point for all comparisons.
4. Discussion of Results
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5. Sensitivity Analysis
Purpose
• Addresses uncertainty in predicted impacts.
• Tests how changes in key assumptions affect outcomes
like Net Present Value (NPV).
Key Considerations
• CBA is built on estimates:
• Quantities and prices
• How reliable are these values?
• How likely are they to change over time?
• Identify Influential Variables:
• Small changes that cause large shifts in NPV
• Will the project remain viable if these change?
• Types of Variables:
• Controllable (policy): Can be influenced (e.g. tax
rates, subsidies)
• Non-controllable (exogenous): Outside control
(e.g. global commodity prices)
Approach
• One-variable sensitivity tests: Change one input at a
time
• Scenario analysis: Vary multiple inputs simultaneously
• Base Case
• Most Optimistic
• Most Pessimistic
• Correlations:
• Explicitly state if variables are assumed to
be correlated or independent
• Presentation:
• Use grids or matrices to summarize results
• Avoid overwhelming detail — focus on key insights
• Threshold Analysis:
• Identify the point at which the project becomes
unviable
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6. Conclusion & recommendations
Summary of Findings
• Present key results from the Base Case scenario.
• Highlight the preferred option and its Net Social Benefit.
Recommended Scenario(s)
• Clearly state the recommended project or option.
• Justify the recommendation with supporting evidence from
the analysis.
• If multiple projects are considered, rank them based on
performance.
Sensitivity & Risk
• Identify influential variables and how they affect NPV.
• Discuss risk mitigation strategies, especially for controllable
variables.
Qualitative & Non-Monetary Impacts
• Acknowledge significant impacts that were identified but not
quantified (Environmental, social, cultural, or political
considerations).
• Explain how these factors influenced the final
recommendation.
Final Recommendation
• Should the project be:
• Approved; Rejected; or Improved (with specific
suggestions)
• Ensure the recommendation is clear, qualified,
and easily understood by decision-makers.
Transparency & Further Work
• Outline any biases, limitations, or data gaps in the
analysis.
• Identify areas needing further investigation before
implementation.
Recommendation Criteria
• Does the project offer an overall improvement (e.g.
potential Pareto improvement)?
• Are distributional effects and stakeholder
impacts acceptable?
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Part 1 – Excel CBA Spreadsheet Task worth 20%
MUST be submitted as an Excel file (.xls or .xlsx) / Save file name: ECON7740 CBA Case Study - LAST
NAME_FIRST NAME_STUDENT ID
Part 2 – Written Report Task worth 20%
MUST be submitted as a Word file (.doc or docx) / Save file name: PART 2 - ECON7740 CBA Case Study - LAST
NAME_FIRST NAME_STUDENT ID
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CASE STUDY OVERVIEW
• Minor errors
- Some incorrect formulae
- Trivial mistakes
• Major errors reduce marks
• Numbers entered in spreadsheets other than variables sheet
• Incorrect important formulae
• Results and Formulae
- Results must be derived “calculated” not “typed-in numbers”
- Different formulae producing same results acceptable
• All files will be checked
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CASE STUDY – EXCEL (20%)
• You must follow best practice as discussed throughout the semester. Input values only once.
Values should be linked.
• Summary results for sensitivity/threshold analysis can be saved as ‘values’ but we must be
able to replicate them, so you must show clearly what assumed input values each
sensitivity/threshold result is based on.
• You are welcome to use note, textboxes or comments to indicate any aspects you wish to
highlight.
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CASE STUDY – EXCEL CONT (20%)
• ENSURE YOU READ THE TASK SHEET AND COVER THE REQUIRED COMPONENTS.
• Written interpretation of the results in the report
- Clear discussion; How accurately are the results transferred from the spreadsheet to tables &
text in report
• Ensure that the relevant results are discussed
- don’t waste space discussing results not relevant to the main conclusions
• Minor - one or two incorrect numbers quoted in text
• Major - irrelevant numbers discussed in the text
• Draw on the information discussed in this lecture to help you write the report.
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CASE STUDY – REPORT (20%)
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