How to prepare regulatory impact assessments

A good problem analysis should clearly answer: "Why is the Government considering action?"

This section should set out the case for action. It should describe a "problem" - an actual or potential harm to the community that the Government wishes to address or reduce.

It can rely on various approaches or frameworks, including market failures, behavioural sciences, risk management, and social or equity concerns.

It should provide a clear, succinct and evidence-based description of:

• the problems or risks
• their actual or potential significance
• the underlying causes
• who is affected

When explaining objectives for action, the impact assessment should clearly answer: "Which outcomes is the Government aiming to achieve?"

This section should define the specific outcomes the Government aims to achieve in relation to the problem defined in the previous stage.

It should be focused on the ends that Government is aiming for (rather than the means to achieving them). It should draw on the problem analysis and mechanisms or harms it identified, and link to broader Government objectives (such as increasing productivity) that may be relevant.

This section should provide a clear description of:

• the objectives of Government action (for example, improved health)
• a clear statement of the relative importance of these objectives
• where relevant, intermediate indicators that can help assess whether the Government is achieving these objectives

An impact analysis should clearly answer: "What are the possible different courses of action that could be taken?"

This section should identify feasible options capable of addressing the problem, and achieving the objectives, described above.

It should broadly discuss different approaches, including non-regulatory options, approaches in other jurisdictions, and improvements to existing regulatory regimes and regulatory practice. Where possible, stakeholders should be involved in identifying possible options to address the problems they are facing while avoiding complex, onerous or ineffective requirements.

This section should provide a clear description of the broad range of possible options which address the problem, and an explanation of how they were selected and why other options were considered infeasible.

A good impact analysis should clearly answer: "What are the expected impacts (benefits and costs) of options and what is the preferred option?"

This section should identify the anticipated impacts of the feasible options and provide a clear explanation of how this was done. It should determine the preferred option, after accounting for all the costs and benefits, and provide clear advice to the Government on the potential effects of options, for informed final decisions.

Impact analyses can draw on relevant evidence and data, and use qualitative and qualitative approaches to estimate the likely effects of the feasible options in terms of:

• who will be affected and the actions people / organisations will take
• the size and value of benefits in terms of reduced harms or improved outcomes
• potential indirect and flow-on effects of actions taken (for example, where businesses may pass on costs to customers, or reduce the services they offer)

This section should provide a clear description of the expected costs and benefits of the feasible options (economic, social and environmental), including possible unintended effects. It should provide an objective, transparent and consistent comparison of options, using the problem analysis as a starting point.

When summarising the preferred option, answer: "What are the characteristics of the preferred option, including small business and competition impacts?"

This section might not be needed for simple proposals where a good summary can be provided in an executive summary or impact analysis section. For more complex proposals, a separate section should ensure the Government and stakeholders are given sufficient summary information about the preferred option to understand what it will mean in practice.

No new analysis is required in this summary, but it should include information from other parts of the impact assessment that stakeholders would need to know about the preferred option and how it would affect them. Consider the knowledge, expectations and needs of affected stakeholders.

This section should provide a clear summary of the key features of the preferred option and how it will function in practice. Compared to other sections in the impact analysis, it might:

• include more detail on specific design issues for the preferred option
• compare the preferred option with the status quo
• link to the drafting instructions (for legislation) or exposure draft (for regulations or other regulatory instruments)
• provide a summary for stakeholders who may not have fully read the impact analysis

It should also include specific summaries of the proposal's impacts on small business and competition.

An implementation plan should clearly answer: "How will the preferred option be put into place?"

It should set out a clear, practical strategy for implementing the preferred option, by outlining:

• what needs to be done
• who will be doing it
• when it will be done
• who will monitor implementation

Draw on the analysis from options development about likely implementation issues, and collaborate with those who will implement the preferred option to address these in the implementation plan. This will be easier when affected parties, delivery agencies and regulators are involved early in the impact assessment.

Document the Government's roles and resource requirements at a sufficient level to ensure accountability and to govern delivery and performance over time.

This section should clearly set out responsibilities for, and approach to:

• implementation planning, including transitional arrangements, communications and compliance
• how any capability and resourcing issues will be addressed
• delivery, oversight, feedback and review needs

An evaluation strategy should clearly answer: "When (and how) will the Government evaluate the effectiveness of the preferred option in meeting the objectives?"

This section should establish mechanisms that will enable the Government to explain how, and how well, the preferred option has worked in practice, and to drive continuous improvement of regulatory arrangements over time.

To develop an evaluation strategy, you should consider the information and data you already collect, and where information and data might be lacking. A clear strategy will confirm the roles and responsibilities for evidence gathering, monitoring and evaluation, and document the relationships between:

• the long-term objectives and outcomes sought (such as reduced harms)
• intermediate outcomes (such as the awareness and behaviours of regulated parties)
• implementation of the preferred option, including regulator activities, outputs and immediate outcomes

It should provide a clear strategy or method for evaluating the actual effects of the preferred option, explaining:

• what will be evaluated
• how it will be done
• who will do it
• when it will be done