Assessment Methodology for

Economic Analysis

United States Government Accountability Office

April 2018

GAO-18-151SP
Page i GAO-18-151SP Assessment Methodology for Economic Analysis

Assessment Methodology for Economic Analysis 1

Section 1: Economic Analysis 3

Section 2: Key Elements of an Economic Analysis 3

Section 3: Assessment Methodology 6

Appendix I Objective, Scope, and Methodology 9

Appendix II GAO Contact and Staff Acknowledgments 11

Contents

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Page 1 GAO-18-151SP Assessment Methodology for Economic Analysis

441 G St. N.W.

Washington, DC 20548

In its engagements, GAO may review economic analyses that are 

intended to inform decision-makers and stakeholders about the economic 

effects of a public action. The economic analyses that GAO reviews may 

have been performed to meet requirements described in Executive Order 

or related statutes, to propose or support an action, or to examine an 

action that has already been taken. The purpose of this report is to inform 

the public about the methodology that GAO may use to assess these 

economic analyses. 

We prepared this report under the authority of the Comptroller General to 

answer the question: What are key methodological elements of an 

economic analysis that is intended to inform decision-makers and 

stakeholders? We answered this question by reviewing economic 

elements and concepts that serve as the basis for sound economic 

analysis. We considered a wide range of economics documents prepared 

by various government agencies and institutions on how economic 

analysis should be performed. These documents included, among others, 

Circulars released by the Office of Management and Budget (OMB) and 

handbooks for economic analysis from federal and international agencies, 

such as the U.S. Environmental Protection Agency, the U.S. Department 

of Defense, the U.S. Department of Transportation, the Organization for 

Economic Co-operation and Development (OECD), and HM Treasury 

Government of the United Kingdom. In addition, we consulted with 

experts on economic analysis of public actions. We synthesized 

economic concepts embodied in these documents into the present report 

for use by GAO in assessing economic analyses.

GAO’s commitment to informative and transparent economic analysis is 

in line with the Office of Management and Budget’s guidelines on 

achieving a high degree of transparency in data and methods in scientific 

Letter

Assessment 

Methodology for 

Economic Analysis

Preface
Page 2 GAO-18-151SP Assessment Methodology for Economic Analysis

information.1 An important benefit of transparency is that the public can 

assess the structure of an analysis and, in particular, how much of an 

analytic result hinges on the specific choices made by the authors. This 

transparency indicates the solidity of the analytic choices. For example, it 

allows the implication of these choices, related risks, and uncertainties to 

be readily assessed. This type of sensitivity analysis is regarded as an 

essential feature of high-quality analysis, and it cannot be undertaken 

without a high degree of transparency. 

The key methodological elements we identify in this report are not 

intended to be exhaustive and to supplant or alter relevant federal and 

agency requirements for economic analysis. They simply serve to 

establish a sound baseline framework for the assessment of an economic 

analysis. GAO’s assessment methodology examines the extent to which 

an economic analysis properly dealt with these key elements and, 

accordingly, informed decision-makers and stakeholders about the 

economic effects analyzed.

We conducted our work from June 2017 to April 2018 in accordance with 

all sections of GAO’s Quality Assurance Framework that are relevant to 

our objectives. The framework requires that we plan and perform the 

engagement to obtain sufficient and appropriate evidence to meet our 

stated objectives and to discuss any limitations in our work. We believe 

that the information and data obtained, and the analysis conducted, 

provide a reasonable basis for any findings and conclusions in this 

product.

Signed by Oliver Richard

Chief Economist

Director, Center for Economics

Applied Research and Methodology 

Date: April 10, 2018 

1 Office of Management and Budget, Guidelines for Ensuring and Maximizing the 

Quality, Objectivity, Utility, and Integrity of Information Disseminated by Federal 

Agencies, 67 Fed. Reg. 5365 (Feb. 5, 2002).
Page 3 GAO-18-151SP Assessment Methodology for Economic Analysis

For the purpose of this report, an economic analysis is defined as an 

analysis that is intended to inform decision-makers and stakeholders 

about the economic effects of an action. Economic effects (hereafter also 

called “effects”) commonly include costs, benefits, and/or economic 

transfers (for example, transfer payments). Action is defined to include a 

government law, rule, regulation, project, policy, or program. An action 

may be examined in the context of legislation, regulation, advocacy, 

agency operations, or in response to certain events (such as a natural 

disaster, for example). An economic analysis may be prospective, 

examining an action that could be taken, or retrospective, examining the 

outcome of an action that has already been taken. Examples of economic 

analyses include: 

1. An economic analysis of the costs of a government program, project, 

or policy; 

2. An economic analysis of the benefits and costs of a government rule 

or regulation;

3. An economic analysis of the impact of a proposed or existing 

regulation on regulated entities and consumers.

4. An economic analysis of an action in response to an event (for 

example, an analysis of a federal response to a natural disaster);

5. A benefit-cost analysis or cost-effectiveness analysis.

GAO reviewed handbooks and guidance on economic analysis that have 

been issued by various government agencies and institutions and 

consulted with experts. (Appendix 1 details GAO’s objective, scope, and 

methodology.) In this Section, GAO synthetizes economic elements and 

concepts embodied in this literature for use by GAO in its assessment 

methodology for the review of an economic analysis.

GAO identifies five key methodological elements to the baseline structure 

of an economic analysis. These key elements are: 

1. Objective and scope— the objective and scope of the analysis. 

2. Methodology— the methodology used to examine the economic 

effects. 

3. Analysis of effects — the analysis of economic effects. 

4. Transparency— the transparency of the analysis of economic effects.

5. Documentation— the documentation included in the analysis. 

Section 1: Economic 

Analysis

Section 2: Key 

Elements of an 

Economic Analysis
Page 4 GAO-18-151SP Assessment Methodology for Economic Analysis

These key elements are standard to the structure of analyses, generally 

speaking. That is, an analysis is performed to address an objective; the 

analysis is scoped to address that objective; the analysis adopts a 

methodology, which is used to analyze the economic effects of interest; 

and the analysis is transparent and properly documented. The emphasis 

on transparency is consistent with the final implementation guidelines of 

the Office of Management and Budget (OMB). 

“The primary benefit of public transparency is not necessarily that errors in analytic results 

will be detected, although error correction is clearly valuable. The more important benefit 

of transparency is that the public will be able to assess how much of an agency’s analytic 

result hinges on the specific analytic choices made by the agency.”2

Having identified key elements to the structure of an economic analysis 

we synthetized for each key element, economic concepts embodied in the

literature that we reviewed. For example, what might we be assessing 

under the key element: Objective and Scope? We considered economic 

concepts commonly identified across the documents we reviewed, and 

incorporated feedback from the experts and agencies with whom we 

consulted. The documents that we reviewed included, among others, 

Circulars A-94 and A-4 released by OMB, handbooks for economic 

analysis from federal and international agencies, such as the U.S. 

Environmental Protection Agency, the U.S. Department of Defense, the 

U.S. Department of Transportation, the Organization for Economic Cooperation and Development (OECD), and the United Kingdom’s HM 

Treasury.

These documents generally outline a methodical structure to an economic 

analysis. This methodical structure takes the form of a set of issues or 

sequence of steps to address while conducting the analysis. These 

issues or steps, in turn, embody economic concepts. For the purpose of 

developing our assessment methodology, we synthetized and 

categorized these economic concepts with the key elements that we 

identified—as listed below. The concepts for each listed key element are 

not intended to be exhaustive and do not supplant or alter existing 

requirements for economic analysis. Depending on the context in which 

an action is examined, GAO’s assessment of a key element could 

exclude some concepts, or extend beyond the concepts listed for that 

 2 Office of Management and Budget, Guidelines for Ensuring and Maximizing the Quality, 

Objectivity, Utility, and Integrity of Information Disseminated by Federal Agencies, 67 Fed. 

Reg. 5365 (Feb. 5, 2002).
Page 5 GAO-18-151SP Assessment Methodology for Economic Analysis

element. In such cases, GAO’s written assessment of the relevant key 

element will specify the concepts that were actually considered in the 

review process.

The five key elements and economic concepts in GAO’s assessment 

methodology for an economic analysis are:

1. Key Element: Objective and Scope—the objective and scope of the 

analysis. 

The economic analysis explains the action examined and includes a 

rationale and justification for the action. The analysis states its 

objective. The scope of the analysis is designed to address this 

objective. Unless otherwise justified, the analysis focuses on 

economic effects that accrue to citizens and residents of the United 

States, and its time horizon is long enough to encompass the 

important economic effects of the action.

2. Key Element: Methodology—the methodology used to examine the 

economic effects.

The economic analysis examines the effects of the action by 

comparing alternatives, using one of them as the baseline. Unless 

otherwise justified, it considers alternatives that represent all relevant 

alternatives, including that of no action. The analysis defines an 

appropriate baseline. The analysis justifies that the world specified 

under each alternative considered (including the baseline) represents 

the best assessment of what the world would be like under that 

alternative. The analysis identifies the important economic effects for

each alternative considered, their timing, and whether they are direct 

or ancillary effects.

3. Key Element: Analysis of Effects—the analysis of economic effects.

Where feasible, the economic analysis quantifies the important 

economic effects and monetizes them using the concept of 

opportunity cost. The analysis applies the criterion of net present 

value, or related outcome measures, to compare these effects across 

alternatives. It controls for inflation and uses economically justified 

discount rates. Where important economic effects cannot be 

quantified, the analysis explains how they affect the comparison of 

alternatives. Where the equity and distributional impacts are 

important, the full range of these impacts is separately detailed and 

quantified, where feasible.
Page 6 GAO-18-151SP Assessment Methodology for Economic Analysis

4. Key Element: Transparency—the transparency of the analysis of 

economic effects.

The economic analysis describes and justifies the analytical choices, 

assumptions, and data used. The analysis assesses how plausible 

adjustments to each important analytical choice and assumption affect 

the estimates of the economic effects and the results of the 

comparison of alternatives. The analysis explains the implications of 

the key limitations in the data used. Where feasible, the analysis 

adequately quantifies how the statistical variability of the key data 

elements underlying the estimates of the economic analysis impacts 

these estimates, and the results of the comparison of alternatives.

5. Key Element: Documentation—the documentation included in the 

analysis.

The economic analysis is clearly written, with a plain language 

summary, clearly labeled tables that describe the data used and 

results, and a conclusion that is consistent with these results. The 

analysis cites all sources used and documents that it is based on the 

best available economic information. The analysis documents that it 

complies with a robust quality assurance process and, where 

applicable, the Information Quality Act. The analysis discloses the 

use and contributions of contractors and outside consultants.

In summary, GAO identifies five key elements, with associated economic 

concepts, to the structure of an economic analysis. GAO’s assessment 

methodology then examines the extent to which an economic analysis 

properly dealt with these key elements.

GAO’s assessment methodology has two steps: (1) an assessment of 

each individual key element and (2) an overall assessment based on the 

assessment of the individual key elements. Below, these two types of 

assessment are discussed. While GAO’s assessment methodology 

typically considers all five key elements, there may be cases, for example 

depending on the scope of an engagement, where it may consider only 

certain key elements. In those cases, GAO may not be able to make an 

overall assessment.

The first step in the review process is an assessment of the extent to 

which the economic analysis has considered and properly dealt with each 

key element. For each element, the outcome of the review is a written 

Section 3: 

Assessment 

Methodology

Step 1: Assessing Each 

Individual Element
Page 7 GAO-18-151SP Assessment Methodology for Economic Analysis

assessment and an assessment score. The written assessment details 

the extent to which the analysis considered and properly dealt with the 

element. To the extent that important limitations are identified in the 

review, the written assessment describes these limitations. This written 

assessment informs the assessment score, which is one of three mutually 

exclusive scores:

1. fully met—that is, the economic analysis has considered and properly 

dealt with the element;

2. partly met—that is, the economic analysis has only partly considered 

and properly dealt with the element; 

3. not met—that is, the economic analysis has not considered or not 

properly dealt with the element. 

If the outcome is “partly met” or “not met,” the written assessment should 

describe the limitations of the analysis. 

Assessments are made from expertise in economics and with 

professional judgment. The guiding principles of a review are objectivity, 

integrity, and compliance with generally accepted government auditing 

standards (GAGAS). An assessment is contextual—that is, it is 

conditional on the evidence underlying the action examined, and the 

context in which it takes place. The assessment is also conditional on the 

reasonably obtainable information available at the time of the economic 

analysis that is being reviewed. A caveat may be added to the 

assessment if new information that would affect it, has become available 

and is reasonably obtainable since the analysis was made. Should the 

review of a key element exclude certain concepts, or extend beyond the 

concepts listed for that key element, GAO’s written assessment of the key 

element will specify the concepts that were actually considered in the 

assessment process.

Once each element has been individually reviewed, an overall 

assessment is made of the extent to which the economic analysis 

accordingly informs decision-makers and stakeholders about the 

economic effects of the action examined. Four outcomes are possible: 

1. The analysis informs decision-makers and stakeholders about the 

economic effects of the action examined.

Step 2: Overall 

Assessment 
Page 8 GAO-18-151SP Assessment Methodology for Economic Analysis

2. The analysis informs, with caveats, decision-makers and stakeholders 

about the economic effects of the action examined. (If this is the 

outcome, the review should describe the caveats in writing.)

3. The analysis needs additional work to inform decision-makers and 

stakeholders about the economic effects of the action examined. (If 

this is the outcome, the review should describe in writing the important 

limitations of the economic analysis.)

4. The analysis does not inform decision-makers and stakeholders about 

the economic effects of the action examined. (If this is the outcome, 

the review should describe in writing the deficiencies of the analysis.)

An economic analysis that has fully met all the key elements should be 

identified as informing decision-makers and stakeholders about the 

economic effects of the action examined (this is outcome 1). This 

determination is neither an endorsement of the specific findings and 

conclusions of the analysis, nor is it a determination that these are 

correct. For example, a prospective analysis is predictive of a potential 

result, but cannot definitively determine the result. It is a determination 

that the analysis is adequately and properly designed, and accordingly, it 

can inform the public discourse about the economic effects of the action 

examined. 

The written statements added to outcomes 2–4 should refer to the review 

of the individual elements. The difference between outcomes 2 and 3 is a 

matter of degree and professional judgment. Generally speaking, the 

caveats under outcome 2 will be relatively minor or few, whereas the 

important limitations under outcome 3 are likely to be more consequential. 

Should the economic analysis suffer from major deficiencies in meeting 

the key elements, then outcome 4 may be appropriate.
Appendix I: Objective, Scope, and 

Methodology

Page 9 GAO-18-151SP Assessment Methodology for Economic Analysis

Our objective was to identify, for the purpose of developing GAO’s 

assessment methodology for the review of economic analysis, key 

methodological elements to the structure of an economic analysis that is 

intended to inform decision-makers and stakeholders about the economic 

effects of a public action.

To address this objective, we reviewed existing Circulars issued by the 

Office of Management and Budget (OMB), handbooks for economic 

analysis issued by federal agencies, international government agencies 

and institutions, and established textbooks on economic theory and 

benefit-cost analysis. We also solicited feedback from economics experts 

(in academia and public policy) and international audit agencies.

We identified in our document review, five key elements to the structure 

of an economic analysis. These key elements are: (1) objective and 

scope; (2) methodology; (3) analysis of effects; (4) transparency; (5) 

documentation. These key elements are standard to the structure of 

analyses, generally speaking. That is, an analysis is performed to 

address an objective; the analysis is scoped to address that objective; the 

analysis adopts a methodology, which is used to analyze the economic 

effects of interest; and the analysis is transparent and properly 

documented. 

Having identified key elements to the structure of an economic analysis, 

we synthetized for each key element economic concepts embodied in the 

literature we reviewed. For example, what might we be assessing under 

the key element objective and scope? To do so, we looked for economic 

concepts commonly identified across the documents we reviewed and 

incorporated feedback from the experts and agencies that we consulted 

with. We then categorized these economic concepts across the key 

elements that we identified.

Among the documents we reviewed in our process were the following:

• OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost 

Analysis of Federal Programs, Revised (Oct. 29, 1992). Circular A-94 

provides a checklist of whether an agency has considered and 

properly dealt with all the elements for sound benefit-cost and costeffectiveness analyses. 

• OMB Circular A-4, Regulatory Analysis, (Sept. 17, 2003). Circular A-4, 

released in collaboration with the Council of Economic Advisors, 

Appendix I: Objective, Scope, and 

Methodology
Appendix I: Objective, Scope, and 

Methodology

Page 10 GAO-18-151SP Assessment Methodology for Economic Analysis

identifies key elements to the structure of economic analyses in 

regulatory proceedings.

• Office of Management and Budget, Office of Information and 

Regulatory Affairs, Regulatory Impact Analysis: A Primer

(Washington, D.C.: The White House). The purpose of the primer is to 

offer a summary of OMB Circular A-4.

• Agency-issued handbooks for economic analysis, such as, for 

example, those issued by the U.S. Environmental Protection Agency, 

the U.S. Department of Defense, the U.S. Department of 

Transportation, and the Organization for Economic Co-operation and 

Development (OECD). We also reviewed The Green Book: appraisal 

and evaluation in central government, issued by HM Treasury, 

Government of the United Kingdom, (London; July, 2011). HM 

Treasury describes The Green Book as a best practice guide for all 

central departments and executive agencies, and covers projects of 

all types and size. The guide applies to appraisals—defined as any 

analysis used to support a government decision to adopt a new policy, 

or to initiate, renew, expand or re-orientate programs or projects that 

would result in measurable benefits and/or costs to the public—and 

evaluations—defined as retrospective analysis of a policy, program or 

project at its completion, conclusion or revision.

• The National Academies of Sciences, Engineering, and Medicine, 

Guidelines for the review of Reports of the National Academies of 

Sciences, Engineering, and Medicine. While these guidelines are 

specific to the review of reports issued by the National Academies and 

outline review criteria that apply across a broad range of disciplines, 

not just economics, they provide review criteria for scientific analysis. 

We conducted our work from June 2017 to April 2018 in accordance with 

all sections of GAO’s Quality Assurance Framework that are relevant to 

our objectives. The framework requires that we plan and perform the 

engagement to obtain sufficient and appropriate evidence to meet our 

stated objectives and to discuss any limitations in our work. We believe 

that the information and data obtained, and the analysis conducted, 

provide a reasonable basis for any findings and conclusions in this 

product.

We provided a draft of this product for third-party outside review to 

experts at various U.S. and international government agencies and 

specialists. Reviewers provided technical comments which we 

incorporated as appropriate.

Third-party Comments
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 11 GAO-18-151SP Assessment Methodology for Economic Analysis

Oliver Richard, (202) 512-8424, richardO@gao.gov

In addition to the contact named above, Carol Bray, Timothy Carr, Tim 

Guinane, Kathleen Scholl, Paola Tena and Elaine Vaurio made key 

contributions to this report. 

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(102132)
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