How to Commission an Economic Impact Study: A Guide for Government Agencies and Nonprofits

Economic impact studies are standard tools for government agencies, nonprofits, developers, and industry associations that need to communicate the value of their work to funders, policymakers, and the public. But for organizations commissioning their first study — or their first rigorous one — the process can be opaque. Consultants speak in multipliers; clients speak in deadlines; and the gap between the two is where disappointing studies are born.

This guide walks through the commissioning process from start to finish: what you need to provide, what you should expect to receive, how long it takes, and how to tell whether you are getting analysis or merely arithmetic with a cover page.

Step 1 — Define the Question

The most important step happens before you contact a single consultant: defining the question you need answered. Common ones include:

• What is the total economic contribution of our organization to the regional economy?
• What jobs, GDP, and tax revenues would this proposed development generate?
• Does this tax incentive generate enough economic activity to justify its public cost?
• What is the statewide economic impact of this industry?
• How does this infrastructure investment affect the regional economy over a 20-year horizon?

Each requires a somewhat different analytical approach — different models, different geographies, different time treatments. A vague question produces a vague study, at full price. Being precise upfront saves both.

Step 2 — Identify Your Audience

Who will read this study, and what will they do with it? The answer shapes everything from technical depth to presentation.

Legislative or regulatory audiences require rigorous methodology documentation, clearly stated assumptions, and results built to survive adversarial scrutiny. Assume the study will be read by someone paid to find its weaknesses, because it may well be.

Board or funder audiences need a clear executive summary with headline numbers, a credible methodology section, and a narrative connecting the figures to the organization's mission.

Media and public audiences need accessible language, clean visuals, and a story. The technical detail belongs in appendices — present, but not in the way.

Developer or investor audiences need precise fiscal projections, sensitivity analysis, and scenario modeling that can support real financial decisions.

Step 3 — Gather Your Data

A study is only as good as its inputs. Before engaging a consultant, gather as much of the following as possible:

For an organizational impact study:

• Annual operating budget (total expenditures)
• Payroll and full-time-equivalent employment
• Major vendor and supplier relationships (local vs. out-of-region)
• Capital expenditures in the study period

For a development project:

• Total construction cost and timeline
• Projected permanent employment (direct jobs at the facility)
• Annual operating expenditures once open
• Projected revenues (if relevant to fiscal analysis)

For a policy or incentive evaluation:

• Cost of the incentive (foregone revenue, direct expenditure)
• Projected economic activity attributable to the policy
• A baseline scenario: what happens without the policy

Perfection is not required. A good consultant will help identify gaps and work with what exists. But every gap in the data becomes an assumption in the model, and assumptions are where studies are later attacked. The more complete your data, the less your study has to defend.

Step 4 — Evaluate Proposals

When reviewing proposals from consulting firms, look for five things:

Methodology transparency — The proposal should name the model (IMPLAN, RIMS II, or another peer-reviewed tool) and explain why it suits your application. Vagueness about methodology in the proposal predicts vagueness about methodology in the report.

Relevant experience — Has the firm done comparable work? Ask for examples and, where possible, references who can speak to quality and responsiveness.

Deliverable clarity — What exactly will you receive? A credible proposal itemizes: executive summary, full report, data appendix, presentation materials. Understand what is and is not included before signing, not after.

Revision process — How many rounds are included, and how are draft findings reviewed before the report becomes final?

Independence — Does the firm have a financial stake in the outcome? A study whose author profits from a particular answer will be read accordingly — by everyone except, perhaps, its commissioner.

Step 5 — Understand the Timeline

A well-executed study typically takes four to eight weeks from data receipt to final deliverable:

Complex fiscal modeling, scenario analysis, or multiple geographies extend the schedule; clean data and a well-defined scope compress it. Be wary of anyone promising a rigorous study in a week — speed of that kind usually means the answer was decided before the data arrived.

Step 6 — Review the Draft Carefully

When the draft arrives, read it with these questions in mind:

• Does the study answer the question you defined in Step 1?
• Are the assumptions clearly stated — and reasonable?
• Will your target audience understand the results as presented?
• Are limitations and caveats acknowledged?
• Are the numbers consistent with your own intuition about the project's scale?

If something looks wrong, ask. A good consultant welcomes questions and explains methodology in plain terms. A consultant who grows defensive when asked how a number was produced is telling you something important about the number.

What a Good Study Looks Like

A well-executed economic impact study includes:

• An executive summary with headline numbers and key findings
• A methodology section documenting the model, data sources, and assumptions
• A results section presenting direct, indirect, and induced impacts separately
• A fiscal analysis (where applicable) showing revenues, costs, and net fiscal position
• A data appendix with supporting tables and model outputs
• Clear attribution of every data source

The body should be readable by a non-economist; the appendices should satisfy an economist. A study that achieves only one of these has done half the job.

The Bottom Line

Commissioning a good economic impact study is not complicated, but it requires clarity about the question, realistic expectations about the process, and active engagement during review. The organizations that get the most from these studies treat the consultant as a partner in answering a question — not a vendor delivering a predetermined number. The studies that age worst are invariably the ones commissioned the other way around.

If you are considering an economic impact study and are not sure where to start, we are happy to discuss your project and help you think through the right approach before any engagement begins.

References

U.S. Bureau of Economic Analysis. (2023). RIMS II: Regional input-output modeling system. U.S. Department of Commerce.

MNS Analytics & IMPLAN Group. (2023). IMPLAN system data and modeling framework. IMPLAN Group LLC.

Ambargis, Z. O., Mead, C. I., & Rzeznik, S. J. (2014). University contribution studies using input-output analysis (BEA Working Paper No. 0105). Bureau of Economic Analysis.

National Center for Education Statistics. (2023). Integrated Postsecondary Education Data System (IPEDS). U.S. Department of Education.

Office of Management and Budget. (2003). Circular A-4: Regulatory analysis. Executive Office of the President.

Weimer, D. L., & Vining, A. R. (2017). Policy analysis: Concepts and practice (6th ed.). Routledge.

U.S. Government Accountability Office. (2012). Program evaluation: Strategies to facilitate agencies' use of evaluation in budget and management decisions. GAO-13-228.