Often, governments, nonprofits, foundations, and associations have budgets to answer important questions but don’t know exactly what kind of study they need to answer them. I use $40,000 as an example of a typical analysis because it is enough to answer a significant policy question but requires an agency or organization to make decisions about what sort of analytical approach they want to use.
This article explores four examples for what a policy analysis firm could do with $40,000. These are illustrative scopes, not fixed-price packages. But these are all approaches we have taken with $40,000 or less to great success on a range of different topics.
Option 1: Understand the economic impact of an industry or project
Are you asking a question like “how much does our industry contribute to a local economy?” If so, economic impact analysis could be the right approach for you.
Economic impact analysis is an approach to economic analysis that focuses on jobs, earnings, economic output, tax revenue, and other activity associated with a given industry or project. A $40,000 economic impact analysis project could pay for an analysis of an industry including its impact on regional Gross Domestic Product, jobs supported, earnings supported, and tax revenue generated.
This kind of study could include those results, a methodology explaining how the results were calculated, analysis of the results, and a report ready to be distributed to the public. This gives the client evidence to inform economic development and investment decisions and information about how to explain the impact of an industry to policymakers. A limitation of this approach is that this kind of analysis rarely can establish what would happen if an industry or project didn’t exist and it generally does not analyze the social impacts of policies.
Option 2: Determine whether social benefits of a policy outweigh social costs
If you are asking a question like “would expanding this program generate more benefits than it costs?,” then a cost-benefit analysis may be what you are looking for.
Cost-benefit analysis is the process of assessing all the social impacts of a policy, quantifying those impacts, then monetizing them to see what society’s aggregate willingness to pay for the intervention is. An exploratory cost-benefit analysis using existing data sources can be done for $40,000.
In a cost-benefit analysis, we can estimate what the benefits or costs of a policy are, the net benefits of a policy, the benefit-cost ratio, and conduct sensitivity analysis to see how the assumption about the policy affect its results. Clients can use this to learn whether a policy creates social benefits and under what conditions it does. Some limitations of this approach are that cost-benefit analysis often lends itself to analyzing specific policies and that extensive primary data collection is not usually possible with this approach.
Option 3: Compare policies for fighting a public problem
If you are asking a question like “what should we do to most effectively solve this problem?,” then policy analysis could be the approach for you.
Formal policy analysis compares policy options against consistent evaluative criteria. Policy analysis begins with defining a problem rigorously then moves into assembling evidence on the problem, constructing options to ameliorate it, defining criteria, projecting outcomes on those criteria, then confronting tradeoffs and telling the story.
A policy analysis generally includes an assessment of each policy option, a comparison of how policies bring about certain outcomes, identification of tradeoffs between policies, all written into a report on the findings. Clients walk away from a policy analysis with evidence to help policymakers choose among competing policy approaches. One limitation is that a $40,000 project likely has to rely on existing high-quality research to make estimates about a given policy since extensive data collection is difficult to do with a budget like this.
Option 4: Benchmark a community against its peers
If you are more interested in questions of comparison like “how does our community compare to other communities and where are we falling behind,” then community benchmarking may be what you are looking for.
Benchmarking uses a series of indicators to assess how a community compares to others in community conditions and performance. A $40,000 community benchmarking report could include choosing comparison communities, collecting data, and compiling data into a digestible and sharable report.
A report like this could include the indicators themselves, trend analysis, visualizations, and analysis of which indicators make a given community unique. This can be helpful to clients who want a clearer picture of local conditions for the purpose of strategic planning, making decisions about investments, and evaluation of the community in the future. A limitation of this approach is that with this kind of budget, we usually have the ability to talk about what a community looks like without the ability to say why it looks like this.
It’s also worth mentioning that benchmarking doesn’t have to just be communities. It can also apply to organizations.
Which type of analysis should I choose?
The type of analysis an organization should choose is based on the decision you are trying to make.
If you are trying to understand the economic activity associated with an industry, organization, or project, economic impact analysis is the best tool for you. If you are trying to understand if the economic benefits of a policy will outweigh its economic costs, cost-benefit analysis is the best type of analysis for you. If you are trying to evaluate the relative benefits of competing approaches to solving a problem, policy analysis is the best tool for you. If you need to understand the conditions, trends, or performance of your community versus others, data analysis and benchmarking will be the best approach for you.
These are analytical archetypes. Different analyses can combine techniques from different analytical frameworks. But limited budgets tend to limit the ability of answering all of these questions, so prioritizing which questions are most important to you and your organization is key to doing a thorough analysis with a given budget. Your most important job is to find out which question you most need answered, then analysts can help you understand the best way to go about answering them.
A $40,000 budget can support a range of different kinds of helpful analyses. There is no universally correct way to allocate those funds. It all depends on the question you are trying to answer. The most useful engagement for a policy analysis firm is when they can work with a client who needs evidence to help make decisions. If you want to learn more about costs associated with policy analysis, check out another blog I wrote on the topic. And if you are trying to figure out what kind of analysis you need, email me. I’d be happy to have a conversation with you about the question you are trying to answer and what can be answered with your budget.
