r

NBSIR 80-2123

Need for Economic Information on

Standards Used in Regulatory Programs:

Problems and Recommendations

Maureen Breitenberg

I

[\

1 ^

f

•«

Office of Standards Information, Analysis

and Development

Office of Engineering Standards

National Bureau of Standards

U S. Department of Commerce

Washington, D.C. 20234

September 1980

U.S. DEPARTMENT OF COMMERCE

-^TIONAL BUREAU OF STANDARDS

100

U56

80-2123

1980

ITATIOHAI. BVBXAX) or STAKDtfXMl

LIBSABT

NOV 2 4 1980

p-^

r NBSIR 80-2123

• 4 * ! , NEED FOR ECONOMIC INFORMATION ON / STANDARDS USED IN REGULATORY PROGRAMS:

PROBLEMS AND RECOMMENDATIONS >

Maureen Breitenberg

Office of Standards Information, Analysis

and Development

Office of Engineering Standards

National Bureau of Standards

U.S. Department of Commerce

WAshington, D.C. 20234

September 1980

U.S. DEPARTMENT OF COMMERCE, Philip M. Klutznick, Secretary

Luther H. Hodges, Jr., Deputy Secretary

Jordan J. Baruch, Assistant Secretary for Productivity. Technology, and Innovation

NATIONAL BUREAU OF STANDARDS, Ernest Ambler, Director

Foreword

This report is one of a series of reports published by the

Office of Engineering Standards (OES) concerning the use of

voluntary standards by government regulatory agencies.

The purpose of this series is to provide standards writers and

government regulators with information necessary to allow

voluntary standards to be used effectively by government. It

is also hoped that this information will strengthen the

voluntary standards development process.

This report provides information on the requirements and

pressures placed on regul atory agencies in their regulatory

process. It is intended to provide standards writers with

guidelines on the type of information that they should try to

collect on standards that may be used in a regulatory

activity. It is not intended to be a hard and fast set of

rules. It is hoped that this report will stimulate more

dialogue and greater cooperation between regulators and

standards writers.

Joan Koenig

Group Leader

Standards Management and

Impact Analysis Project

1
Acknowledgements

I would like to thank Joan Koenig, Robert Atkins, and JoAnne

Debelius for their help in reviewing and in providing valuable

comments on several drafts of this report.

I would also like to thank William Cullen, James French, Carol

Chapman Rawie, George Sinnott, John Dise and Elio Passaglia who

made many useful comments and provided different points of view

on this issue.

11
Table of Contents

Page

Foreword i Acknowledgements ii

Executive Summary iv

I. Introduction 1 A. Purpose and Scope 1 B. Background 1 II. Analysis Requirements Imposed by Executive Order

12044 4

III. Economic Analysis Requirements of S. 2147 7

IV. Economic Analysis -- Implications in the Courtroom

and in Public and Congressional Forums 9

A. In the Courtroom 9

B. In Public and Congressional Forums 10

V. Problems in Assessing Economic Costs and Benefits.... 12

A. Difficulties in Implementing E.O. 12044 12

B. Availability, Adequacy, and Cost of the Data 12

C. The Problem of What Costs Should Be Measured 16

D. Problems in Developing Data on Hazards/Risks 16

E. The Existence of a "Learning Curve'VAccel erated

Technological Progress 17

F. Problems in Assigning Dollar Values to

Some Costs and Benefits 18

G. The Discount Factor 23

H. Greatest Net Economic Benefit Versus Equitable

Cost/Benefit Sharing 24

VI. Recommendations 25

A. Recommendation One: Federal Agencies Should

Prepare Lists of Their Specific Cost/Benefit

Data Needs 25

B. Recommendation Two: Standards Writers Should

Conduct an Initial Analysis of the Standard

to Determine Data Needs 27

C. Recommendation Three: Standards Writing

Committees Should Concentrate on Data

Collection 28

D. Recommendation Four: Standards Writing

Committees Should Not Try to Quantify

Government Compliance and Industry Paperwork

Costs 29

E. Recommendation Five: Federal Agencies Should

Aid Standards-Wr i t i ng Committees in

Disseminating Economic Data for Comment 30

VI I . Concl usi ons 32

Footnotes 33

Appendix 1 36

Appendix II 41

Appendix III 43

About OSIAD 56

iii
Executive Summary

It has been suggested that the government can save resources by

making greater use of private sector standards in regulatory

programs. However, agencies that adopt voluntary standards

which do not include economic impact data run the risk of not

being able to defend such standards in court or in other public

and congressional forums. Federal executive branch agencies

also need this type of data to comply with the requirement of

Executive Order 12044 to conduct regulatory analyses of all

major regulations. Pending regulatory reform legislation, may

extended these requirements to independent agencies as well as increase the degree of analysis required.

One of the greatest deficiencies in the regul atory analyses

appears to have resulted from weaknesses in the data on which

the analysis were based. If regulators and standards writers

work together, they can begin to eliminate some of these

weaknesses in the data base. For example, in many cases, the

St andards-wr i t i ng committee may have access to better impact

data than a regulatory agency; and, if a diversity of interests

is represented on the committee, may have a better

understanding of all the impacts of the standard. The cost of

obtaining data can, however, be high. If the data is required

to aid a regulatory agency in using the standard as part of its

regulatory program and the private standards-wr i t i ng organization is unable or willing to undertake the entire

expense, then government should be willing to bear a share of

the costs. There is also a need for better communication

between standards writers and the government to prevent

unnecessary duplication of data that may already be available

somewhere within the government but be unknown to the

standards-wri t i ng committee. It is important for

standards-wr i ti ng committees to check with the agency or

agencies that are likely to be using the standard to see if

they have or can obtain needed information. Most agencies have

a central source for standards committees to contact regarding

what types of data an agency is likely to include in its

analysis of the standard. The names and telephone numbers of

the contact persons within each agency should be made available

to the standards-wri ting committees. In addition to the costs

involved, the standards writing commi ttees and the Federal

regulatory agencies are both likely to experience other serious

problems in assessing the economic costs and benefits of

standards. These problems include:

0 the need to rely on forecasts and assumptions whose

validity can only be tested by the passage of time.

0 the willingness of corporations to release relevant

data for public scrutiny.

IV
0 the need to examine the effect of proposed standards

on individual types of firms that comprise the

industry affected by the standard -- both domestic and

foreign -- because of potential differences in impacts.

0 the existence of a time lag between exposure to a product and the appearance of adverse effects, as well

as the existence of intervening or interacting

happenings that may affect the appearance of adverse

effects

.

0 the possible existence of a "learning curve" or

accelerated technological progress occur ing after the

implementation of the standard.

0 the inadequacy of the current available methods for

assigning dollar values to non-quantif i able costs and

benefits.

0 the choice of an appropriate discount factor.

0 the choice between standards producing the greatest

net economic benefit and those producing equitable

cost charing.

While regulators and standards writers should be aware of these

problems, many are not easily resolvable. Some will require

the development of new methodologies by the government or

researchers working in the area.

The following steps could increase the effective use of the

standards-wr i ti ng committees in improving the quality of the

economic analyses: 1 ) Federal regulatory agencies should

prepare lists of the specific costs/benefit categories that

they are interested in and have the committee collect data

primarily on these categories; 2 ) standards writing committees

should begin the collection of economic data as soon as the

development of a standard is begun; 3 ) the committees should

concentrate their efforts on data collection and not on the

application of cost/benefit/effectiveness techniques; 4 ) committees should not try to quantify the compliance costs

incurred by agencies and the paperwork burdens imposed on

industry but consider them only in general terms; and 5 ) the

data collected should be disseminated as broadly as possible

and the data records should include any objections to the

accuracy or applicability of the data.

While economic analyses cannot and should not be used to

predetermine the nature of the final standard because of the

many potential data base and methodological problems noted

above, they can provide the regulator and the standards writer

with a mechanism for collecting and organizing available

information, highlighting alternatives and uncertainties, and

in making informed, rational decisions.

V
4
I. INTRODUCTION

Purpose and Scope

The purpose of this paper is to explore the trend towards more

intensive analysis of the impacts of proposed Federal

regulations, some of the causes for this trend, and the

implications for standards writers and government regulatory

agencies which use standards developed by the private sector.

This paper also discusses some of the problems that may be

encountered in conducting economic analyses and makes

recommendations for both standards writers and regulators on

their respective roles in conducting economic analyses of

voluntary standards likely to be used in regulatory programs.

Background

Before reaching a decision, most individuals make some type of

analysis to compare the costs and benefits of their actions.

Business owners continually make such comparisons to survive in

a competitive market. Government agencies have recently begun

conducting such analyses in a far more rigorous manner as well

as attempting to thoroughly document the process.

Costs and benefits assessment of regulation began with the

passage of the National Environmental Protection Act, which

requires agencies to, prepare Environmental Impact Statements

before taking any major actions. In his 1974 Executive Order

(E.O.) 11821, (later amended by E.O. 11949), President Ford

required that "impact statements" be prepared on the

inflationary impact of proposed regulations. E.O. 120441/

signed by President Carter on March 23, 1978, requires that a "regulatory analysis" be made of all "significant" regulations

issued by Executive Branch agencies. The requirements and

resulting pressures imposed by E.O. 12044 will be explored in

this paper.

President Carter also set up the Regulatory Analysis Review

Group (RARG) to "improve the quality of analysis supporting

proposed regulations, identify and attempt to resolve common

analytic problems among agencies, and assure adequate

consideration of less costly alternatives."!/ RARG examines

in detail a limited number of these "regulatory analyses". The

U.S. Regulatory Council created by the President in October

1978 is designed not only to identify and resolve cross-cutting

issues but also to review the cumulative impact of regulations

on vulnerable industries or sectors of the public. The Council

includes the heads of 35 Federal regulatory agencies and

publishes the Calendar of Federal Regulations - a synopsis and

brief analysis of regulations likely to have a substantial

economic or public impact.

1
Additional regulatory reform efforts are also on the horizon.

Senator Abe Ribicoff (D-Connecticut ) , Chairman of the Senate

Governmental Affairs Committee, indicated that in May 1979 the

Committee had no less than 15 regulatory reform proposals

pending. 1/ Many of the bills that have been introduced

including S.2147 also known as the Culver-Lax alt bill (which

will be discussed later in this paper); S.262 introduced by

Ribicoff; and S.755, the President's regulatory reform proposal

require more analysis of the economic and non-economic effects

of major proposed rules. For example, S.262 covers independent

regulatory agencies which are currently exempt from the

requirements of E.O. 12044. Ribicoff also indicated that the

momentum for reform is strong and that Congress is in a receptive mood - both indications that the future trend will be

towards increased analysis of regulations.

Consequently, there is a growing need for economic and

non-quantif i able impact data on standards that will be used by

Federal agencies in their regulatory programs. Data is also

needed on the risks, hazards, and problems that a standard is

designed to correct. This is especially true for those

standards that meet either the criteria set forth in E.O. 12044

or the criteria established by individual regulatory agencies

to implement this Executive Order. Data is also needed for

those standards likely to be debated in a courtroom or in

public or congressional forums.

Standards writing committees can have an important role in

improving the quality of these evaluations. As the National

Bureau of Standards noted:

After nearly 80 years of history and experience, the

discipline of identifying and qualifying both technical and

economic impacts of standardization is still in its infancy.

A General Accounting Office Report noted:

The evaluation of regulatory activities comes down to

answering two fundamental questions. What costs are

imposed by the regulation? And, what benefits follow from

the regulation?... However, answering the questions is more

difficult than posing them.!/

Standards-wr i ti ng committees may have access to needed data not

readily available to Federal regulatory agencies. They may

also have a better appreciation for and recognition of the

various effects of a standard because of the wide ranging

interests that are frequently represented in a committee.

2
One of the major assumptions of this paper has been that a private standards writing organization can determine if a standard is likely to be used by a Federal regulatory agency.

In some cases, this information is available. The Bureau of

Medical Devices in the Food and Drug Administration (FDA), for

example, has developed and prioritized a list of needed

standards. This list was published on February 1, 1980, in the

Federal Register .!/ The Bureau has also actively

communicated these needs and priorities to standards

organizations working in the medical device area. Other

regulatory agencies have not effectively communicated their

interests to private standards organizations, and need to do so

before an effective working relationship can occur.

3
II- ANALYSIS REQUIREMENTS IMPOSED BY

EXECUTIVE ORDER 12044

As noted earlier, Executive Order 12044 requires Federal

executive agencies to analyze and compare the impact of all

alternatives to "significant" regulations.^/ While,, each

agency has some discretion in defining its own criteria for , "significant", the factors that it is to consider in developing

these criteria include:

1. The type and number of individuals, businesses,

organizations. State and local governments affected;

2. The compliance and supporting requirements likely to

be involved;

3. Direct and indirect effects of the regulation including

effect on competition; and

4. The relationship of the regulations to those of other

programs and agencies.!/

Those regulations that meet the agencies' criteria for

"significant" and which may have a major economic effect on the

general economy or on specific regions, industries,

individuals, or the government itself require an analysis and

comparison of the economic consequences of various regulatory

alternatives. The Order provides that, at a minimum, such

analyses will be performed for all regulations which result in:

1. An annual effect on the economy of $100 million or

more; 8/ or

2. A major increase in costs or prices for individual

industries, levels of government or on geographic

regions.!/

As the result of analyzing the progress made on the

implementation of E.O. 12044, the Office of Management and

Budget (0MB) intends to:

"...stress to the agencies that a regulatory analysis

should be done for: 1) any sufficiently important or

controversial rule that the agency head thinks deserves

analysis; and 2) any rule with potentially major cost/price

effects on a particular region, group, industry, or

economic sector."!!/

The RARG, for example, reviewed the Environmental Protection

Agency's proposed standard for toxic effluents by the

1 eather-t ann i ng industry. The standard was considered a precedent-setting rule despite an estimated impact of only $7

million -- far below the $100 million criteria for a "significant" regulation.

4
The Order also includes a requirement for reviewing existing

regulations. This requirement may result in regulatory

analyses of standards that were included in regulations issued

prior to March 1978 - the date of the Order.

This Order is still new and its implementation is not

complete. "The Order has been in existence since March 1978,

but it has been operational in most agencies only since January

1979. "li./ Agencies are still learning how to develop

analyses that "contain a succinct statement of the problem; a description of the alternative ways of dealing with the

problem; an analysis of the economic consequences of each of

the alternatives; and a detailed explanation of the reasons for

choosing one alternative over the others. "11/

0MB guidelines on conducting regulatory analyses require:

1. Each regulatory analysis will contain an analysis of

the economic consequences -- direct as well as indirect effects, and their significance -- of each of

these alternatives (including the no action

alternative); such consequences should be presented in

comparative form to sharpen the issues and provide a clear basis for choice among alternatives; these

consequences include:

a. specific burdens imposed by each alternative

(i) what types of burdens (and how much) are

placed on specific groups as a result of

compl i ance?

0 capital outlays

0 other costs of compliance including

operating and maintenance costs

0 administrative burden (reporting

requirements, delays, uncertainty,

etc . )

.

(ii) who bears these burdens?

0 what burden falls on what types of

enterprises, levels of government,

major geographic regions, communities,

and urban areas? (e.g., the impact on

employment, fiscal conditions,

availability of public services, etc.)

5
0 how are consumers and various

population groups burdened? (e.g.,

income distribution, housing

avai 1 abi 1 i ty, etc.

)

(b) specific gains produced

(i) what type of specific gains (and how much)

to society as a whole would each alternative

produce?

(ii) who would be helped, how, and by how much,

by each alternative?

(c) overall economic impacts of each alternative

(i) how would productivity and overall economic

efficiency be affected?

(ii) how would prices and employment be affected?

(iii) how would the U.S. foreign trade position be

affected (e.g., effect of increased costs

for domestic companies on the price of goods

that compete with imports, effect of

increased costs for domestic companies on

the price of U.S. exports, effect on the

quality or utility of products and thus on

the demand for U.S. exports, extent to which

foreign competitors are subject to similar

regulations, effect on competition between

U.S. and foreign suppliers in third

countries)?

(2) A detailed explanation of the reasons for choosing one

alternative over the other; questions to be answered:

(a) will the selected alternative produce the

intended results in the least burdensome manner

possible? If not, why is this the preferred

al ternat i ve?

(b) Why isn't the action more stringent? -- less

stringent? What tradeoffs does the selected

alternative reflect?!!/

6
III. ECONOMIC ANALYSIS REQUIREMENTS OF S.2147

Of the many regulatory reform bills pending before Congress,

the provisions of S.2147, will be discussed to indicate future

trends in regulatory analysis requirements. This bill was

chosen because it incorporates many of the reform measures

contained in other bills.

S.2147, the Regulatory Flexibility and Administrative Reform

Act of 1979, was sponsored by Senators John C. Culver (D-Iowa)

and Paul Laxalt (R-Nevada). On May 7, 1980, the Senate

Judiciary Committee reported out S.2147. Some of the bill's

provisions which will have an effect on the need for analysis

of regulations include:

0 A requirement that all agencies including independent

regulatory commissions prepare regulatory analyses of

proposed rules. These analyses are to include the

need for the regulation, projected consequences and

practical alternatives.

0 A requirement that agencies also develop regulatory

flexibility analyses designed to encourage agencies to

tailor their rules to fit the scale and resources of

individuals, businesses, organizations, or Government

jurisdictions that must comply with the rules.

0 A requirement for periodic review of regulations to

determine if they need to be revised or dropped.

0 A procompet i t i ve standard to encourage competition and

innovation. This standard will require economic

regulatory agencies in certain instances to choose the

least anticompetitive alternative.

Other provisions of the bill include:

0 Establishment of a Regulatory Policy Board to

consolidate the regulatory oversight functions in the

Executive Branch.

0 A requirement that all major Federal regulatory

agencies be re-evaluated by Congress and the President

over a 10-year cycle - a form of "sunset" legislation.

0 Expedited formal hearing procedures as well as authorization to adopt "hybrid" rulemaking procedures

that resemble legislative hearings.

7
Provisions such as these are included in other bills and

indicate that the need for standards writers to work with

regulators in conducting analyses of standards will be more

critical in the future.

The provisions contained in this bill also show that a greater

analysis will be required of standards used in regulatory

programs, especially on (1) their impact on different types and

sizes of organizations or firms; and (2) on innovation and

compet i t i on

.

8
IV. ECONOMIC ANALYSES -- IMPLICATIONS IN THE COURTROOM

AND IN PUBLIC AND CONGRESSIONAL FORUMS

A . In the Courtroom

Economic analyses are needed not only to comply with E.O. 12044

or in anticipation of potential regulatory reform measures that

are likely to be passed, but also because they are assuming

greater implications in the courtroom. Regulated industries

have consistently sought to bring about greater consideration

of alleged economic and inflationary impacts arising from

agency rule-making by urging agency adoption of c/b/a

(cost/benefit/analysis) - primarily through litigation

challenging agency actions not premised on c/b/a. li:/ On

October 5, 1978, a Federal appeals court in Louisianna struck

down the Occupational Safety and Health Administration (OSHA)

standard for benzene -- an industrial chemical suspected of

causing leukemia and other fatal blood disorders even in low

level concentrations such as the levels found around automotive

service stations. The standard was struck down because

"without an estimate of benefits supported by substantial

evidence," the court argued, "OSHA is unable to justify a finding that the benefits to be realized from the standard bear

a reasonable relationship to its one-half billion dollar price

tag. "12/ Since OSHA is not required by statute to conduct

economic analyses, the court, in effect, has added to OSHA's

statutory requirements. While this case was still pending

before the Supreme Court for review as of June 1980, the

implications are clear. The court is not immune to economic

persuasions.

Judge David Bazelon, a well known figure in this area,

indicated that the:

... important thing is that the agency generate a record in which the factual issues are fully

developed. By articulating both their factual

determinations and their value preferences, and by

attempting to separate the one from the other

administrators make possible effective professional

peer review, as well as legislative and public

over s i ght .1§./

Regulatory agencies which adopt voluntary standards which do

not include economic impact data, stand the risk of not being

able to defend such standards in court.

9
B . In the Public and Congressional Forums

While not all regulatory agencies' authorities, statutes and

court decisions come as near as OSHA's in implying that

economic considerations should be taken into account, public

and congressional pressure can be brought to bear on all

regulatory agencies making economic analysis of regulations

almost as mandatory. In the case of the Food and Drug

Administration (FDA), the criteria for the approval of drugs is

safety and effectiveness, not economic considerations.

However, when a study done by University of Chicago economist

Sam Peltzman 12./ concluded that the 1962 Drug Amendments

resulted in a net loss to consumers of $200-$250 million

annually or the equivalent of a 5% - 10% tax on drugs, FDA

invested considerable resources in refuting the results of this

study. Controversial regulations and decisions are likely to

be debated in public and congressional forums, if not in an actual courtroom setting. Regulatory agencies must have data

available to explain and/or defend a standard in such arenas.

Congressional oversight hearings, one type of congressional

forum, can be called to hear testimony on an agency's actions.

The agency is under great pressure in such hearings to have

adequate data to support its position. Questions raised during

budget hearings, another type of forum, can be an extremely

effective way to call attention to an agency's actions because

appropriations can hinge on the adequacy of an agency's

responses. "Sunset" reviews, such as those required under

S. 12147, could provide yet another reason for agencies to have

adequate data available to justify their regulations and

consequently their existence.

Congressional studies provide another check on the

cost/benefit/ effectiveness of agency actions. For example, an extensive Study of Federal Regulation was sponsored by the

Senate Committee on Governmental Affairs and was published in

July 1977.1^/ Recommendations of the study included

guidelines for developing regulations and suggested a series of

cost/benefit/ effectiveness-type questions which should be

addressed prior to any regulation changes. The Committee also

published a study on the Benefits of Environmental, Health, and

Safety Regulation in March 1980.11/ That study reviewed

existing private and public sector studies on the costs and

benefits of certain regulatory areas. The Joint Economic

Committee published the study. Government Regulation:

Achieving Social and Economic Balance , in June 1980. This

study recommends that such cost/benefit reviews be mandated by

Congress^O/

10
In addition, the Congress uses the General Accounting Office

(GAO) to evaluate the cost/benefit/effectiveness of

regulation. GAO has done numerous studies on the regulatory

activities of specific agencies, the cost/benefit/effectiveness

of specific regulations, as well as studies on regulatory

activities in general. These studies provide Congress with

information on the merits of agency regulations and pressure

agencies to assure that the regulations studied are

economically desirable.

Legislative veto provisions, another congressional check,

appear in approximately 300 statutes delegating regulatory

authority to the President, to the executive branch or to

independent agencies. 11/ They usually enable Congress to

invalidate a rulemaking action upon passage of a resolution by

one or both Houses of Congress within a 30 to 90 day period - an increased pressure on regulatory agencies to develop data to

justify their regulations. In Nader v. Adams No. 78-1034,

(D.C. Cir., filed January 13, 1978) , consumer advocate Ralph

Nader alleged that the Department of Transportation (DOT)

delayed its airbag order because it feared a legislative veto,

though no such veto occurred. The possibility of a legislative

veto, however, appeared to have a significant impact on the

DOT'S rulemaking.

In the future. Federal agencies may also face a congress! onal ly- imposed "regulatory budget" requirement. Such

a requirement was recently called for in the June 1980 study on

government regulation published by the Congressional Joint

Economic Committee.^/ A regulatory budget would require a strict accounting of the costs of newly proposed regulations

and consequently would require detailed cost‘ data on any

voluntary standards used in Federal regulations.

Regulatory activities are also frequently "news." The news

media keeps the activities of regulatory agencies before the

public, and such scrutiny can put tremendous pressure on

agencies to publicly explain and justify their actions. The

media also brings congressional reviews of regulatory

activities before the public, serving as a second barrel of a double barreled shot gun - agencies thus have two chances of

getting shot down if they cannot adequately explain their

act i ons

.

11
V. PROBLEMS IN ASSESSING ECONOMIC COSTS AND BENEFITS

A . Difficulties Experienced in Implementing E.O. 12044

In conducting economic analyses, standards writers and

regulators can learn from the experience and results of Federal

agencies in implementing E.O. 12044. OMB's analysis of the

progress of government agencies in implementing E.O. 12044

pointed out that the Federal government has had considerable

difficulty in conducting economic analyses of proposed

regulations that have met the criteria established under E.O.

12044. For instance, according to 0MB, deficiencies in the

Department of Agriculture's analyses have included:

"inadequate quantification of impacts, unimaginative

development of alternative options, tardy preparation of the

analysis, and unnecessary reluctance to reveal areas of

uncertainty or the negative effects of options. "11/ Problems

in the Department of Commerce's analyses have included:

"limited data; lack of appropriate economic models to judge

changes in costs, prices, productivity, employment, and other

condit ions . .

.

" 11/ In the case of the Department of Interior

(DOI), one commentor in the 0MB report noted: "Industry was

having to make its own analysis only to find that industry

numbers and agency numbers were not the same. Truth was, they

(DOI) didn't have the data to make an analysis -- it was

incomplete -- i nconsi stent

.

" 11/ While most government

agencies currently lack the necessary expertise and experience

to do their own economic analyses, they are at least in the

process of acquiring it. Deficiencies in the data used in the

analyses appear to be the greatest problem. The problems

resulting from and the causes for some of the deficiencies in

the data as well as deficiencies in the techniques used to

assess the data are discussed in more detail in the following

sec t i ons

.

B . Availability, Adequacy and Cost of the Data

When analysts develop economic data on the effects of any

standard, they must make a series of forecasts and assumptions

whose validity can only be tested by the passage of time. The

rate or amount of the price increase of the product(s) covered

by the standard, for example, cannot be predicted with

certainty. The effect on product safety also must be

estimated. Economic data is only as valid as the estimates on

which it was based.

The cost of obtaining the necessary data can also be very high

or even prohibitive. If the data is required to aid a regulatory agency in using the standard as part of its

regulatory program and the private standards-wr i ti ng

12
organization or industry is unable or unwilling to undertake

the entire expense, then government must be willing to bear a share of the costs. Data that a standards-wr i t i ng committee

may need on the impact of a voluntary standard under

development may be available within the government but be

unknown to the committee. Communication problems between

government and private standards-writing committees prevent the

sharing of this information. If a Federal regulatory agency

wants a standards-writing committee to undertake the collection

and development of hazard, impact, and cost data, then good

communication and equitable cost sharing are vital.

Another problem in data collection, already experienced by the

government, is the unwillingness of corporations to release

relevant data for public scrutiny. Companies are likely to be

reluctant to release data particularly on the health, safety

and environmental impact of the products they produce. For

example the aluminum industry, by court order, stopped the

Consumer Product Safety Commission from releasing information

on hazardous aluminum wiring affecting a number of buildings

and homes. Other such incidents are:

In the early 1970's the chemical industry estimated

its compliance cost with the proposed vinyl chloride

standard at 200 fold what it turned out to be ... The Securities and Exchange Commission found that the

U.S. Steel Corporation kept two sets of data on

compliance costs with environmental standards: one

for investors and another higher one for the media and

the publ i c ...

In a May 29, 1974, letter to the U.S. General

Accounting Office, Volvo, the Swedish automaker, noted

that most of the data released by U.S. automobile

manufacturers on the cost of meeting federal

regulations was based and "aimed purely at resisting

regulation." ...

In response to a query from Ralph Nader, a garment

manufacturer estimated that flame-retardant pajamas

would retail for $1.70 more than regular pajamas.

When it later provided actual cost data, the

manufacturer revealed that the differential was less

than one-third of its initial estimate. JZ/

As the cases above point out, resistance to the voluntary or

mandatory standards, the desire to have less stringent

requirements in a standard under development, and fear of

adverse legal implications can cause industry to refuse to

release data or to misstate the data it releases.

13
If erroneous data is supplied to the standards development

committees and is included in the economic analysis of the

voluntary standard, this data will be used by a regulatory

agency to evaluate the voluntary standard. Not only is the

validity of that voluntary standard likely to be questioned if

the errors are discovered, but the future work of the committee

and the data it supplies are also likely to be viewed as suspect. The credibility of a voluntary standards development

group and the effective use of voluntary standards by the

Federal government are intrinsically correlated.

Even if "producer" committee members are able to obtain cost

data from their firms, because such members are more likely to

be employed by the larger firms in the industry, the data may

reflect such a bias. One example of this effect can be seen in

the estimates that the auto companies have provided to the

Department of Transportation on the fixed costs of complying

with existing Federal emmissions, safety and fuel economy

standards from 1978 through 1985 (see Table I.)

Table I SALES, PROFITS, AND ESTIMATED

REGULATION-MANDATED COSTS FOR THE BIG THREEM'

Chrys 1 er Ford General Motors

Cost of regulation

(mi 1 1 i ons )

3

$800 $1,000 $2,000

Cost as percent

of sales

7.0 4.2 4.6

Cost as percent of

aftertax profits

496.9 112.7 68.5

Cost per car

produced

$550 $340 $345

Net sales

(mi 1 1 i oris

$11,390 $23,969 $43,430

Aftertax profits

( m i 1 1 i 0 n s ) $161 $887 $2,918

Number of cars

produced

(thousands)b

1,451 2,933 5,782

^Average for 1978-85.

*^Figures are for 1977 North American operations.

14
In the auto industry, Chrysler (while it is a large firm by

absolute standards) is small relative to the size of Ford and

General Motors. Chrysler's cost per car has been $550, while

the cost per car for Ford and GM has ranged from $340 to $345.

Some standards, if they are adopted as part of a regulation,

could alter the competitive structure of the industry in a similar manner by imposing a di sproport i onal burden on smaller

firms. This can occur in several ways.

If the regulation imposes an ad valorem burden - that is,

imposes costs directly proportional to the value of the

company's output - it is equivalent to a uniform sales

tax. If the regulation imposes a per unit burden, it is

equivalent to a tax bearing most heavily on those units

with the least value added. Finally, if the regulation

imposes a fixed burden without regard to the quantity of

output it is equivalent to a lump sum tax. Given generally

similar unit values of output, such a uniform requirement

for each firm in the industry will impair the performance

of small firms relative to large firms.

Small firms are not able to pass on more of the costs of a standard or a regulation through product prices increases than

the competitive process allows. Small firms cannot usually

remain competitive with larger firms if the small firms must

charge more for a comparable product. If the effect of the

standard on different sized firms is not determined and only an average cost per firm is calculated, then consideration will

not be given to the possible ant i compet i tive effects on the

industry of some firms having to increase prices substantially

more than other firms. It is necessary to examine the effects

of any proposed standards on individual types of firms that

comprise the industry affected by the standard - both domestic

and foreign.

Data on the impact of a standard on firms producing different

grades or types of products covered by the standard may also be

needed. In a study done by the Consumer Product Safety

Commission on the economic impacts of an upholstered furniture

standard, they discovered:

The larger firms in this industry tend to produce large

runs of cheaper grade furniture, whereas many small makers

are producing a limited line of more expensive

cu stom- styl ed furniture. So on an item-by-item basis

non-destructive testing would have a greater per-unit

percentage cost impact on cheaper items produced by large

manufacturers. However, CPSC is aware that there are

15
within this industry small firms making a less expensive

line who would be severely impacted. The Commi s s i on also

points out that fabric supply shortages could result from

flammability standards, which would be expecially damaging

to smaller makers of finer f urni ture .1^/

The relationship between the type and size of a specific firm

and the impact of a standard can be very complex. If the

relationships are not determined, however, and an anticompetitive effect results from the use of the standard in

a regulation, then the regulation could be subject to challenge

in the courts and possibly overturned. Likewise, it is

possible that different groups, localities of consumers, or

different categories of users may be affected differently by a standard.

C . The Problem of What Costs Should Be Measured

The net economic cost of regulatory standards ideally should

include only those costs that are solely required by the

standard plus all incremental benefits. It should not include

costs that the industry would have incurred or benefits that

would have been realized regardless of the existence of a standard. Estimating what an industry would have spent and

what benefit would have been realized regardless of the

existence of a standard is a very difficult process. Firms may

have begun implementing a standard in anticipation of its

passage, and these costs could end up being reflected as costs

the firms would have incurred without such a standard.

Estimating the incremental costs resulting from secondary

effects such as loss of productivity, construction delays, and

inflation are especially difficult.

D . Problems in Developing Data on Hazards/Risks

Risk identification and quantification are necessary to justify

a standard or a regulation and to measure the potential

benefits from risk reduction. Such identification, however,

can be difficult if not impossible. As noted by Dr. Irving

Selikoff of Mr. Sinai Medical School:

We will not know for another twenty years whether the

chemicals introduced in the 1960's are hazardous . "11/

The adverse affects of the drug, diethylstilbestrol (DES), used

to prevent miscarriage over a twenty-five year span are just

now being realized.

16
The causes of these problems result from a number of factors

including: (1) the existence of a time lag between exposure

and the appearance of the effects as in the case with DES; (2)

the existence of intervening or interacting events which may or

may not affect the appearance of adverse results; and (3) poor

or nonexistent data. Data problems can, for example, result

from extrapolating animal data to humans which is a questionable practice at best. Yet using humans as guinea pigs

in such testing would be unacceptable. In addition, a product

may have minimal risks associated with its use -- provided it

is not used with certain other products or chemicals or under

certain circumstances. The possibility of additive or

synergistic adverse effects among interacting agents is not

only a difficult problem to identify, but it can also a difficult if not impossible task to include such interactions

within the context of a cost/benefit or cost/effectiveness

equation. For example, a given noise level may be below the

threshold level at which hearing damage occurs; but nonetheless

if the noise is in the workplace, it can reduce visual acuity

to the point where there is an increased risk of industrial

accident. Quantifying and including the potential effects

resulting from all possible interactions in a cost/benefit

equations, even if such effects are known, would be a difficult

task. There have been numerous documented cases of adverse

reactions resulting from mixing certain foods and beverages

with particular drugs, as well as with the amount of and the

time of day a drug is consumed. Techniques currently available

to assess such risks are far from adequate; and as the National

Academy of Sciences noted:

Perhaps the most important problems are those for which

there are no data -- the effect of today's radiation ten

years hence, the probability of nuclear meltdown, (and) the

future buildup of nuclear wastes ...11/

Other problems include lack of knowledge on how a hazard reacts

with or is affected by its environment, such as: how hazardous

pollutants react with other chemicals in the atmosphere; the

potential for increased risk to population subgroups, such as the aged or pregnant women; and lack of knowledge regarding the

physical expression of mutagenic effects in a biological system.

E . The Existence of a "Learning Curve"/Accel erated

Technological Progress

Economists and other analysts have difficulty in assessing

whether or not a "learning curve" or "the acceleration of

technological progress" will occur upon implementation of a new

standard or regulation. These terms refer to a situation where

costs will go down as greater experience is gained or new

17
methods are developed in implementing the standard or

regulation. Whole new industries may arise as the result of

regulation and the desire to control or reduce the costs of

complying with a regulation. For example, the government's

pollution control regulations have lead to a flurry of

innovative activity as well as the formation of a pollution

control industry which manufactures devices and chemicals

designed to deal with the problem of pollution. This has lead

to the creation of new products, new jobs, and many other

benefits.

A study on the cost of new bumper safety standards done by

Dr. Murray Weidenbaum of the Center for the Study of American

Business estimated the cost per car to be $340. The National

Highway Traffic Safety Administration later found that the

actual cost per car was closer to $250.11/ One of the

problems with Weidenbaum's estimate was that it failed to take

into account a "learning curve" -- that experiments with

different materials could and, in fact, did lead to the

development of a less expensive bumper which could meet the

standard.

F . Problems in Assigning Dollar Values to Some Costs and

Benefits

Those seeking to quantify the value of costs and benefits for

comparison purposes have considerable difficulty when

confronted with impacts that have not traditionally been

quantified and assigned economic values or with the

mathematical idiosyncracies of available methodology. Methods

of analysis currently available are, for the most part, unable

to effectively deal with these types of problems. The two most

widely used methods of analysis are the cost/effectiveness

technique and the cost/benefit technique. While the

cost/effectiveness technique supposedly overcomes the problems

of assessing non-quant if i able benefits, it is rare that

relative benefits do not have to be compared in some fashion.

For example, suppose that the desired result of a standard is

to reduce risk by 50 percent or more. One alternative may

reduce risk by 6S% at a cost of $1,000,000. The other

technique may reduce risk by 55% at a cost of $800,000. The

choice of alternatives approaches a quasi cost/benefit analysis

exercise -- is the additional 10% decrease worth $200,000? In

addition, placing a dollar value on intangible or noneconomic

costs still poses the same problems as those experienced in

cost/benefit analysis.

18
A mathematical quirk of cost/benefit and cost/effectiveness

ratios is that they do not show which alternative produces the

greatest benefits. For example, if one life can be saved for

5100 and 100 lives can be saved for $100,000, the former

alternative would be selected because it has the best

cost/benefit ratio, although the benefits (lives saved) of the

latter alternative are far greater - 100 to 1.

The problem of measuring and quantifying intangible or

noneconomic costs and benefits with current anal yti cal methods

is also formidable, and none of the available techniques can

effectively handle impacts that are non-quant if i able in

monetary terms. Intangibles are products, services, or

conditions not usually bought or sold at a price or a fee and

whose value cannot be derived indirectly from the dollar value

of any secondary products they might produce. They may only be

measurable in monetary terms by arbitrarily attributing a dollar value to them. Such intangible or noneconomic benefits

might include a better informed consumer; reduction in the

hazards to human life; preservation of scenic beauty, wildlife,

and the ecosystems; decrease in noise, smell, air pollution,

water pollution, litter and food contamination; better national

security; increased buyer confidence; reductions in the

restrictions on trade, innovation, and competition; more

efficient industrial process; better products; safer, healthier

workplaces; and reduced production of unsafe products.

Intangible costs could include the opposite of those mentioned

above, as well as interuptions in production and employment

resulting from the implementation of the standard, and

increased discomfort or lack of ease in using the product(s)

covered by the standard. These intangible costs and benefits

can either be ignored in the equation making the final outcome

questionable, or an attempt can be made by the analyst to

assign a value to them. The methods currently available,

however, to quantify intangibles have serious deficiencies.

The National Academy of Sciences' Committee on the Principles

of Decision Making for Regulating Chemicals in the Environment

noted

;

Different individuals place different values on things such

as human life, aesthetics, or national security. Thus an analysis that assigns a quantitative value to ... these

factors is necessarily subjective and, to some degree

arbitrary.ll/

In addition, human lives are not homogeneous.

19
For example, while new approaches are being developed there are

at least five approaches now being used to assign a value to a human life outside of pure judgement. One is the discounted

future earnings (DFE) approach which places a value on a life

based on the computation of the value to society of a person's

labor. Future earnings are discounted to reflect the

assumption that a dollar is worth more now than in the future.

Other losses and costs may be added to the DFE base such as the

costs of the person's living or dying to society, and the costs

of medical care, lawyers, and funeral expenses.

Under this method, however, the value placed on the lives of

those without much earning potential such as the handicapped,

the aged, or the very poor is next to nothing -- an assumption

that a person in one of those classes might question. The life

of a baby boy would also be assigned a higher value than a baby

girl's life since his earning potential would be greater. The

discount factor, in addition to being difficult to determine,

can also place higher values on those who are closer in age to

their future earnings. A baby's life would, therefore, be

valued less than an eighteen year old who might be starting his

productive earning career.

Another method, "willingness to pay" (WTP), is equally flawed.

WTP allows an individual to place a value on his own life,

safety, or health. Problems arise because the value that an individual places on these factors is likely to increase as the

risks increase. For example, an employee may accept $1,000 for

a 1-in-lOOO risk but may not accept $10,000 for a 1-in-lOO

risk. In addition, wi 1 1 i ngness-to-pay frequently correlates

with the ability-to-pay -- a rich person is often able to and

willing to pay more for his life than a poorer person. For

these reasons, the applications of this method have not shown

much consistency in the results obtained. Two surveys, for

example, which discussed the disparity of the dollar values

assigned to a human life, noted:

Such outrageous range of values ($28,000 - $5,000,000),

spanning two orders of magnitude, seems less a reflection

on human intelligence than an indication of the primitive

state of the survey (WTP) approach.

Dr. Edward I. Mishan, Professor of Economics, London School of

Economics and American University, developed an approach which

expands on the WTP method and accounts for not only the

benefits and costs to those whose health and safety risks are

directly affected, but also for costs and benefits to those

indirectly affected. This includes the negative benefits

(costs) to those that may wish to see the person harmed.

20
For example, an analysis of a health program especially

effective in reducing the risk of death for the elderly

would add the WTP of the elderly, their friends, family,

and the public at large -- but then subtract from this

total the amount necessary to compensate any greedy heirs

for tne decrease in their welfare resulting from the

possible lengthening of the lives of their eventual

benefactors. 1^/

While this approach may be theoretically sound, it is

inconsistent with the American political and moral philosophies

to recognize malevolent preferences.

Explicit valuations of the worth of a life in the form of jury

awards for wrongful death is also a possible, though less

frequently used, approach to placing a value on human life.

The court determination is usually based primarily on the loss

of the victim's net earnings, but may also include other losses

such as loss of the victim's services.

Courts have faced serious difficulties when awarding

compensation to parents for the loss of a child. Recent court

awards have considered the parents' investment in raising the

child and the loss of the child's companionship, though prior

court awards only carried compensation in cases where the

child's services exceeded the cost of his support.

Placing a value on a human life based on court awards results

in discrimination against certain segments of society - those

who are not wage earners or who are not contributing valuable

services to other members of a family or society. The awards

are also person-specific; that is, each award is identified

with one specific individual and not a category of

individuals. There is also considerable variation between the

amounts awarded by the court in similar cases.

Yet another approach similar to the DFE approach involves

estimating the worth of a person's life by the amount of

foregone consumption. In this approach, the value of a life is

also age-dependent. Because as the probability of death at any

specific future time increases with age, the value of the

foregone consumption decreases. Children, therefore, would

have the highest value placed on their lives; and the aged the

least. This again is a form of discrimination against certain

segments of society.

A fifth way of placing a value on a life rests on using the

number of dollars that the government has expended in order to

reduce certain types of deaths. The problem with this method

is that agencies are not consistent in the amounts that they

21
are willing to spend to save a human life. As noted below,

there are not only differences between agencies, but there may

also be differences between programs within a single agency.

If the government has spent more to reduce the number of deaths

for certain categories of individuals than for others, the

lives of those former categories would be assigned a higher

value - again a form of discrimination.

The Nuclear Regulatory Commission has adopted a value of

$1000 per man rem to use in its (cost/benefit analysis)

application which, when multiplied by the number of rems

capable of producing different types of deaths, provides

dollar values for human life. The Environmental Protection

Agency's Office of Radiation Programs, also dealing with

the health effects of radiation ... has chosen a value of

$500,000 per life ... The Consumer Product Safety

Commission has used values ranging from $200,000 to $2

million per life in different analyses. Highway

transportation officials have frequently used a value of

$200,000 per life. The National Bureau of Standards (in

several studies) used $300,000 per life . . .IZ/

Similar problems arise in the application of the available

methods for assigning a value to the other intangibles -- many

of which directly or indirectly involve placing a value on life

and health.

As a Senate Committee on Governmental Affairs study noted:

...(T)here is no appropriate way to put a dollar value on

the costs of the pain and suffering endured throughout the

lifetime of a child who is the victim of a sleepwear

fire... Clearly it is not enough to total up... the reduced

costs of medical treatment. M/

As noted in a Congressional Research Service Report, this lack

of methodology has resulted in values being assigned to

intangible costs and benefits which vary depending on who

conducts the cost/benefit study:

What has disturbed several observers of some cost (benefit)

estimates particularly projected cost estimates for many

individual regulations (standards) ... is that they tend to

support the vested interest of the sponsor of the estimate

or to fit the hypothesis of the individual making the

estimate... The effectiveness of federally mandated safety

standards in saving lives and limiting injuries is

estimated to be greater by insurance companies than by

automobile manuf acturer s .li./

22
One congressional subcommittee noted:

The most significant factor in evaluating a benefit-cost

study is the name of the sponsor.

It is unlikely that the values assigned to intangibles by

private standards-writ ing committees (even if they could be

assigned in an acceptable manner) would the same as those

assigned by a Federal regulatory agency. As the Commission on

Law and the Economy of the American Bar Association noted

regarding proposed governmental actions:

When proposed actions and their consequences are viewed in

a political balance, "value" is often in the eye of the

beholder.^/

G . The Discount Factor

Any person who tries to place a current value on future costs

and benefits will run into the problem of choosing a discount

factor to evaluate future impacts. While the Office of

Management and Budget (0MB) indicated in a 1972 directive that

the rate should be 10%, this directive has been largely

ignored.il/ In the absence of a generally accepted discount

rate, analysts are free to choose and often do choose discount

factors that will support the action that they wish to be

chosen.

The choice of the discount rate can be the deciding difference

between two choices depending upon the rate that is chosen,

because the lower the rate, the higher the value of future

benefits and costs. For example, the present value of $100

which will be received in 10 years is $55.80 if a 6% discount

rate is chosen; but only $16.20 if a 20% discount rate is used.

The problem of choosing a reasonable discount rate is

compounded by unstable inflation rates, energy prices, and

interest rates. Some government agencies base their choice of

a discount factor partially or totally on the rate of interest

that the government is paying on its long term obligations.

However in recent months that rate has fluctuated between 8%

and 14%.

Until the 0MB or other appropriate Federal agency is able to

publish and enforce the government-wide use of a uniform

methodology to establish an appropriate discount rate, the

choice of a discount factor like the assignment of values to

intangibles should probably be left to the regulatory agency.

23
H . Greatest Net Economic Benefit Versus Equitable Cost/Benefit

Sharing

Another problem for the standards writer and user results from

the character i sties of the consensus process itself. The final

standard is usually the one that is most nearly acceptable to

all interests represented on the standards-wr i ti ng committee.

Cost/benefit and cost/effectiveness techniques do not consider

inequalities in the distribution of costs and benefit within or

among generations. This characteristic is incompatible with

the consensus process. The final version of the voluntary

standard is not necessarily the one that generates the greatest

net economic benefit. It is the result of compromises on the

benefits and costs that will accrue to each interest group

affected by the standard. In addition, the benefits and costs

should be fairly shared with generations to come. A standardswriting committee will probably decide on a standard that,

while it may not be the one that produces the greatest net

economic benefit, at least allows the costs and benefits of the

standard to be more equitably shared.

24
VI . RECOMMENDATIONS

The problems presented in this paper are not easily

resolvable. There are, however, several steps that can be and

should be taken to improve the effective use of standards by

regulatory agencies. These include: (1) having Federal

regulatory agencies prepare lists of the specific costs/benefit

categories that they are interested in; (2) having standards

writing committees begin collection of economic data as soon as the development of a standard is begun; (3) having the

committee concentrate their efforts on data collection and not

on the application of evaluation techniques; (4) not having

committees try to quantify compliance costs incurred by

agencies and paperwork burdens incurred by industry if

standards are used in a regulatory program; and (5)

disseminating the data collected as broadly as possible and

including in the data records any objections to the accuracy or

applicability of data. These recommendations and their

rationale are discussed in more detail below.

A. RECOMMENDATION ONE: FEDERAL REGULATORY AGENCIES SHOULD

PREPARE LISTS OF THEIR SPECIFIC COST/BENEFIT DATA NEEDS

Rationale :

As any economist knows, the direct and indirect costs and

benefits that can be looked at in making economic evaluations

are almost limitless. If a dog in one state bites a girl, then

costs are incurred by the girl, the parents of the girl, the

family and friends of the girl and her parents, the owners of

the dog, relatives of the owner of the dog, etc. One can even

carry the analysis to the point of trying to assess the

benefits of that dog biting that girl in that state, because he

was unable to bite children in another state at the same time.

It is in neither the standards writing committee's nor in the

government's interest to have standards committees spend time

collecting data about al

1

direct and indirect benefits and

risks. Even in E.O. 12044, some guidelines, though inadequate,

are given to agencies on where to direct their attention.

Agencies need to develop specific guidance on what

cost/benefit data are useful. How these guidelines are

developed, along with their format and content, will depend on

the interests and statutory authorities of the specific

regulatory agency. The agency may wish to establish

thresholds, i.e., include information on anticipated price

impact when that impact is expected to affect the price of the

article by X% or more. They may wish information to be

obtained based on the type of product or type of standard

regardless of any thresholds; i.e., the effects on competition

of any design standard. Defining their interests as

25
specifically as possible will aid not only the standards group

but also the agency itself when it comes time for them to make

the actual analysis. It will help alleviate the need to do

after-the-fact analyses which can and do delay implementation

of standards. A list of intangible and tangible factors to be

considered in calculating the economic impact of standards was

developed and published in the National Aerospace Standard

(NAS) 1524. The list (which is included in Appendix II) can be

used by regulatory agencies to develop a basic list of factors

and thresholds that a standards committee can use as a guideline for data collection.

For routine regulations or standards that will be used in

regulatory programs, the Environmental Protection Agency (EPA)

has indicated that it is interested in the following data:

-the number of establishments that will be affected;

-an estimate of the total costs that will be borne by each

affected industry segment;

-an estimate of the price impacts under an assumption that

cost changes will be reflected in prices;

-an estimate of revenue changes for each segment if costs

are not reflected in price changes;

-an estimate of job gains and losses;

-an estimate of total energy impacts for each affected

industry segment; and

-an estimate of impacts on any particular regions and

localities that will be more seriously affected than

others

For major regulations or standards that have significant

economic impact, the EPA is interested in more detailed

information. Their recommended approach for developing a data

base for in-house analysis is as follows.

1. Prepare an economic profile of the affected sectors

(producers and/or consumers), including the industry

structure (e.g., degree of concentration, the way prices

are determined), the type of competition in the affected

sectors, and performance trends (e.g., financial rates,

growth trends) of the affected sectors.

2. Segment the industry (or other affected groups) into

categories of economic units that will be

similarly-impacted (e.g., according to size distribution,

polution control process, age).

3 . Develop marginal (incremental) cost effectiveness curves

for each process/strategy for each affected industry

segment.

26
4. Analyze the economic impact of proposed standards and

of alternatives including any economic benefits from

regulation (standardization) such as the generation of new

product markets and new employment opportunities. It may

not be necessary to analyze all alternatives in the same

level of detail. The following impacts are analyzed when

feasible:

(a) price effects

(b) production effects

(c) industry growth, profitability, capital

availability effects

(d) employment effects

(e) community effects, including disproportionate

effects on particular regions or localities

(f) balance of trade effects

(g) energy effectsM/ (See Appendix III for more

detai 1

)

In some cases, the agency may already have some or all of this

data available. It is important for a standards committee to

check with the agency or agencies that are likely to be using

the standard to see if they have or can obtain this information

from other government sources before the group attempts to

"reinvent the wheel." It also benefits the group to check with

the agency's organizational unit responsible for in-house

economic analyses and/or the implementation of E.O. 12044 for

additional guidance on how costs and benefits should be arrived

at or estimated. EPA has an Economic Analysis Division which

provides guidance in conducting economic analyses to EPA

program offices. Most agencies have a central source for

standards committees to contact regarding what types of data an agency includes in their economic analyses. The names of

contacts should be made available by regulatory agencies to

standards organizations for this purpose.

B. RECOMMENDATION TWO: STANDARDS WRITERS SHOULD CONDUCT AN

INITIAL ANALYSIS OF THE STANDARD TO DETERMINE DATA NEEDS

Rationale :

An initial review of the potential impact is needed once a standards-wr i ti ng committee agrees to work on a standard that

is likely to be used by a Federal regulatory agency. This

initial analysis by the standards-wr i ti ng committee should

determine: (1) what, if any, are likely to be the areas where

the standard will have a significant economic impact; (2) what

effects are likely to meet the criteria or guidelines set forth

by the appropriate regulatory agency on its data needs; and (3)

if the standard is likely to be controversial or have a more

significant impact on one segment of the public sector.

27
As a matter of policy, several Federal agencies, such as the

Departments of Agriculture and Transportation, undertake an economic evaluation of every proposed regulation. If the

standard falls within their purview, at least some data will

always be required. The initial analysis should look at

alternatives to the standard and the costs and benefits of each

alternative. This initial analysis should aid standards

writers in assessing the potential economic consequences of

their proposals as they proceed in the development process.

The enumeration of costs and benefits may also help standards

writers focus on objective rather than subjective

considerations in the standards development process itself.

The analysis may also show the types of data that a regulatory

agency is likely to need, and give the committee time to

contact the agency to see what data is available and what they

need to collect. More time will be available to collect data

not easily obtainable and to resolve any funding problems

without slowing down the completion of the standard.

Government has often discovered in "hindsight" the need to

develop a regulatory analysis or to expand the analysis to

include additional factors. In many cases, this delay could

have been prevented if a careful initial analysis had been

done. Standards writers should also periodically review their

initial judgements to see if they have overlooked any impacts

of significance as well as to assess the utility of the version

of the standards proposal under consideration.

C. RECOMMENDATION THREE: STANDARDS-WR I TI NG COMMITTEES SHOULD

CONCENTRATE ON DATA COLLECTION

Rationale :

It is difficult for st andards-wr i t i ng committees to "second

guess" a regulatory agency on what the values of intangible

benefits and costs should be in cost/benefit and effectiveness

equations. William D. Rowe, Director of the Institute of Risk

Analysis at the American University, noted: "A risk (cost) is

acceptable when those involved are no longer apprehensive about

it. 15/ When a regulatory agency uses a voluntary standard,

the risks or costs of that standard are acceptable to the

regulatory agency when the agency is no longer apprehensive

about them. Haggai Cohen, Director of Reliability and Safety

for Space Transportation Systems in NASA, noted: "An

acceptable risk is one that we have looked at and determined

that to attempt to eliminate it would cost so mu chin weight or

dollars that we are determined to live with it."!!/ it is

difficult for standards writers to accurately gauge what a regulatory agency will "live with".

28
While better data can improve decisionmaking by standards

writers and regulators, the benefits to be derived from placing

a dollar value on all costs and benefits is subject to question.

Federal agencies are currently building expertise in making

economic analyses in their efforts to implement E.O. 12044. As

noted, a major weakness of government analyses of the impact of

proposed regulations will likely lie in the continuing lack of

accurate and adequate data -- an area where standards writers

might be able to serve an extremely useful function.

If a standards-wr i ti ng committee can tell how many lives can be

saved per year by implementing a standard or the

purchase/maintenance costs and useful life of a piece of

equipment required for implementation, then the appropriate

regulatory agency can, if it desires, assign its own value to a life or cost to the piece of equipment. For example, if a standards committee knows that the implementation of a standard

will require a piece of equipment that has a cost of $500 and a useful life of 5 years and will replace a machine costing $300

with a useful life of 2 years, and that the machines will have

salvage values of $100 and $200 respectively, then the

regulatory agency can be left to deal with the issues of how to

compare the costs and benefits of the two pieces of equipment

to arrive at the cost/savings of the new piece of equipment.

The agency can decide whether to use Present Worth analysis or

Rate-of-Ret urn comparisons, what the cost of capital should be,

the inflation rate, etc. If a standards committee estimates

that a standard will reduce pollutants given off by a manufacturing firm by 10% and that an alternative standard will

reduce pollutants by only 5%, then the regulatory agencies can

again, if it so desires, place a dollar value on the

comparative benefits of the two standards.

The standards-wr i ti ng organization, however, may incur a legal

risk if their discussions of such data take on a price-fixing

overtone or if the data they provide can be used in liability

cases against the manufacturers on the committee. Care should

be taken to avoid any appearance of price-fixing as well as to

avoid identifying injury data on a specific manufacturer's

products

.

D. RECOMMENDATION FOUR: STANDARDS-WR I TI NG COMMITTEES SHOULD

NOT TRY TO QUANTIFY GOVERNMENT COMPLIANCE AND INDUSTRY

PAPERWORK COSTS

Rationale : One cost associated with the use of a voluntary, private sector

standard as part of a regulatory program is the cost to the

Federal agency of ensuring industry compliance with the adopted

standard. These costs are usually readily ascertainable by the

29
agency itself. Their estimates are likely to be better than

those developed by standards writers since they are likely to

have had experience administering similar type of compliance

programs and are better aware of what existing support

functions can be modified to accommodate the new effort at a lesser cost than setting up new support functions. They are

also usually more aware of what level of compliance they seek

-- the higher the level, the greater the costs for most

programs. Because of this, it is a waste of scarce resources

for the standards writers to try to quantify these costs. The

compliance issues should, however, be considered in general

terms in developing the standard. If a standard cannot be

easily enforced, it is not likely to be adopted. The cost of

any paperwork burdens imposed on industry by a regulation

mandating a standard developed by the private sector cannot be

accurately assessed until the regulatory approach and

requirements are known. Therefore, the standards- writing

committees should not spend time on assessing specific

paperwork costs.

E. RECOMMENDATION FIVE: FEDERAL AGENCIES SHOULD AID

STANDARDS-WRITING COMMITTEES IN DISSEMINATING ECONOMIC DATA

FOR COMMENT

Rationale : While consensus by the committee on the accuracy of all of the

data is probably not worth the cost in terms of lengthening an already long standards development process, recording any

problems noted by standard writers in the data and in the

assumptions on which the data was based is necessary. Some of

the data problems can be resolved through wide dissemination.

The difficulty lies in how to disseminate this information to

those outside the committee for their review and comment.

Government can aid the committee in an initial review by

referring the data to outside advisory committees or similar

groups. Dissemination of the data for review and comment

through publication in the Federal Register as a proposed

standard is another approach likely to uncover subtler problems

in the assumptions on which the data was based, i.e., that

large and small firms will not be equally affected and that all

consumers or industrial users of the products covered by the

standard will not uniformly receive the same benefits and incur

the same costs. Special agency mailing lists can also be

developed and used to disseminate data to those with a special

interest in the area. Whether industry will be willing to

release data that will be widely disseminated is not known.

30
What limitations will have to be placed on the dissemination of

specific types of data such as the elimination of firm names,

etc., as well as whether such restrictions are feasible in

light of the Freedom of Information Act requirements placed on

Federal agencies will have to be determined.

The best and most accurate data used to make regulatory

decisions will result only when all who have relevant knowledge

are given an opportunity for review and comment.

31
VII. CONCLUSIONS

Evaluating the economic impact of any action is a complex

undertaking. Evaluating the economic impact of a standard is

especially difficult because of the large number of factors

that can be directly or indirectly affected by standardization,

the difficulty and cost of obtaining data, and the difficulty

in quantifying the intangible costs and benefits that result

from standardization and in estimating such things as "learning

curves" and accelerated technological progress.

Each of the recommendations in this report should be discussed

within and between government and standards-wr i t i ng committees

to work out a mutually agreeable method for their

implementation. The issue of funding these data collection

activities also needs to be addressed by both parties to arrive

at an equitable cost sharing. All the problems inherent in the

process and in the techniques available for economic analysis

are not currently resolvable; however, if regulators and

standards writers work together, they can begin to eliminate

some of the weaknesses in the data base used in regulatory

analyses. This will work to both parties' benefit in assuring

that government regulators will effectively utilize private

sector standards, and that the standards developed will not

only achieve their intended purpose but will do so in an economically desirable manner.

Economic analysis cannot and should not be used to predetermine

the nature of the final standard. It can, however, provide

both the regulator and the standards writer with a mechanism

for collecting and organizing available information,

highlighting alternatives and uncertainties, and in making

informed, rationale decisions.

32
FOOTNOTES

1. See Appendix I for the complete order.

2. Office of Management and Budget (0MB), "Improving

Government Regulations: A Progress Report," (Office of

Management and Budget: September 1979) p. 6.

3.

Abe Ribicoff, "For Effectiveness and Efficiency:

Requl at i on , May/June 1979, pg. 17-20.

S. 262,"

4. General Accounting Office, Government Regulatory Activity:

Justifications, Processes, Impacts, and Alternatives , (General

Accounting Office: June 3, 1977), Report No. PAD-77-34, p. 28.

5. Food and Drug Administration, "Medical Devices: Procedures

for Performance Standards Development; Requests for Data,

Information and Comments on Voluntary Standards Development and

Policy, and Request for Data and Information on in Vitro

Diagnostic Devices," Federal Register, February 1, 1980, pp.

7493-7495.

6. Independent regulatory commissions are exempt from this

Order

.

7. Executive Order (E.O.) 12044, "Improving Government

Regulations," Federal Register , March 24, 1978, p. 12662.

8. Some

Commerce

departments and agencies such as have lowered this dollar amount.

9. m • o • 12044, p. 12663.

10. 0MB, P. 20.

11. 0MB, P- 8.

12. 0MB, P. 18.

13. Michael S. Baram, "Final Report to the Administrative

Conference of the United States: Regulation of Health, Safety

and Environmental Quality and the Use of Cost-Benefit

Analysis," (Administrative Conference of the United States:

1979) p. 96-97. See also the 0MB Memorandum to the Heads of

Departments and Agencies entitled "Regulatory Analysis"

(November 21, 1978).

14. Baram, p. 17.

33
15. "OSHA's Benzene Exposure Rules Set Aside by U.S. Court,"

The Washington Post , October 17, 1978, p. A3. See also

American Petroleum Institute vs. OSHA, 581F. 2d 493 (5th Cir.

1978).

16. David Bazelon, "Coping with Technology Through the Legal

Process." Paper presented at the Atomic Industrial Forum,

Inc., Conference on United States Energy Policy, Washington,

D.C. (January 10, 1977).

17. Sam Peltzman, "An Evaluation of Consumer Legislation: The

1962 Drug Amendments," Journal of Political Economy , September/October 1973, Vol. 81, No. 5.

18. Senate Committee on Governmental Affairs, Study on Federal

Requl ation , 95th Congress, 1st Session, July 1977.

19. , Benefits of Environmental, Health, and

Safety Regulation , 96th Congress, 2nd Session, March 25, 1980.

20. Joint Economic Committee, Government Regulation: Achieving

Social and Economic Balance, (united States Congress: June

1980)

.

21. Commission on Law and the Economy, Federal Regulations:

Roads to Reform , American Bar Association, 1978, pp. 88-89.

22. Joint Economic Committee, p. iii.

23. 0MB, P. A-7.

24. 0MB, P. A-13.

25. 0MB, P- A-47.

26. Mark Green and Norman Waitzman, "Business War on the Law:

An Analysis of the Benefits of Federal Health/Safety,

Enforcement," (Corporate Accountability Research Group, Ralph

Nader: 1979) p. 16.

27. Ibid, pp. 24-26.

28. Clarkson, Kadlec, & Laffer, "Regulating Chrysler out of

Business," Regu 1 ation , September/October 1979, p. 46.

29. Ibid, p. 45.

30. Charleswater Associates, Inc., "The Impact on Small

Business Concerns of Government Regulations that Force

Technological Change," (Small Business Administration and the

National Bureau of Standards: September 1975) p. 73.

34
31.

Business Week, October 30, 1978.

32. National Academy of Sciences, Assembly of Life Sciences,

"Consideration of Health Benefit-Cost Analysis for Activities

Involving Ionizing Radiation Exposure and Alternatives,"

(National Academy of Sciences: 1977) p. 5.

33. "The Contributions of Automobile Regulation.

National

Highway and Safety Administration , June 1978.

34. Baram, p. 26. See also National Academy of Sciences,

Environmental Studies Board, "Decision Making for Regulating

Chemicals in the Environment," (National Academy of Sciences:

1975). r et

35. Mark Green and Norman Waitzman, "Business War on the Law:

An Analysis of the Benefits of Federal Health/Safety,

Enforcement," (Corporate Accountability Research Group, Ralph

Nader: 1979) p. 44.

36. Steven E. Rhoads and Max Singer, "What is Life Worth," The

Public Interest , Spring 1978, p. 87.

37. Baram, p. 27-28.

38. Senate Committee on Governmental Affairs, Benefits of

Environmental, Health and Safety Regulation , p. 7.

39. Julius W. Allen, "Estimating the Cost of Federal

Regulation: Review of Problems and Accomplishments to Date,"

(Congressional Research Service: September 26, 1978) p. 22.

40. Ibid.

41. Commission on Law and the Economy, p. 85.

42. Barum, p. 32.

43. Environmental Protection Agency, "Improving Environmental

Regulations; Final Regulations; Final Report Implementing

Executive Order 12044," (EPA, Washington, D.C.: June 1979) p.

30995. Can also be found in the Federal Register , Vol. 44, No.

104, Tuesday, May 29, 1979, p. 30995.

44. Ibid, p. 30994.

45. Garrett Epps, "They Bet Your Life," Washington Post

Magaz i ne , November 18, 1979, p. 40.

46. Ibid. , p. 44.

35
APPENDIX I

presidenttQl documents

[3195-01] Title 3—The President

Executive Order 12044 • March 23, 1978

Improving Government Regulations

As President of the United States of America, I direct each Executive

Agency to adopt procedures to improve existing and future regulations.

Section L Policy. Regulations shall be as simple and clear as possible.

They shall achieve legislative goals effectively and efficiently. Tliey shall not

impose unnecessary burdens on the economy, on individuals, on public or

private organizations, or on State and local governments.

To achieve these objectives, regfulations shall be developed through a

process which ensures that:

(a) the need for and purposes of the regulation are clearly established;

(b) heads of agencies and policy officials exercise effective oversight;

(c) opportunity exists for early participation and comment by other

Federal agencies. State and local governments, businesses, organizations and individual members of the public;

(d) meaningful alternatives are considered and analyzed before the

regulation is issued; and

(e) compliance costs, paperwork and other burdens on the public are minimized.

Sec. 2. Reform of the Process for Developing Significant Regulations. Agencies

shall review and revise their procedures for developing regulations to be

consistent with the policies of this Order and in a manner that minimizes

paperwork.

Agencies’ procedures should fit their own needs but, at a minimum, these

procedures shall include the following:

(a) Semiannual Agenda of Regulations. To give the public adequate

notice, agencies shall publish at least semiannually an agenda of

significant regulations under development or review. On the first Monday in October, each agency shall publish in the Federal

Register a schedule showing the times during the coming fiscal year when the agency’s semiannual agenda will be published.

Supplements to the agenda may be published at other times

during the year if necessary, but the semiannual agendas shall be

as complete as possible. The head of each agency shall approve

the agenda before it is published.

At a minimum, each published agenda shall describe the regulations

being considered by the agency, the need for and the legal basis for'^ the action being taken, and the status of reg^ulations previously

listed on the agenda.

Each it^m on the agenda shall also include the name and telephone

number of a knowledgeable agency official and, if possible, state FEDERAL REOISTER, VOL 43, NO. 58—FRIDAY, MARCH 24, 1978 36

12661
THE PRESIDENT

whether or not a regulatory analysb will bo required. The agenda

shall also include existing regulations scheduled to be reviewed in

accordance with Section 4 of this Order.

(b) Agency Head Oversight Before an agenc7 proceeds to develop significant new regulations, the agency head shall have reviewed the

issues to be considered, the alternative approaches to be explored, a tentative plan for obtaining public comment, and target

dates for completion of steps in the development of the regulation.

(c) Opportunity for Public Participation. Agencies shall give the public an

early and meaningful opportunity to participate in the development of agency regulations. They shall consider a variety of ways

to provide this opportunity, including (1) publishing an advance

notice of propos^ rulemaking; (2) holding open conferences or

public hearings; (S) sending notices of proposed regulations to publications likely to be read by those affected; and (4) notifying

interested parties directly.

Agencies shall give the public at least 60 days to comment on

proposed significant regulations. In the few instances where agencies determine this is not possible, the regulation shall be accompanied by a brief statement of the reasons for a shorter time period.

(d) Approval of Significant Regulations. The head of each agency, or the

designated official with statutory responsibility, shall approve significant regulations before they are published for public comment

in the Federal Register. At a minimum, this official should

determine that;

(1) the proposed regulation is needed;

(2) the direct and indirect effects of the regulation have been

adequately considered;

(3) alternative approaches have been considered and the least burdensome of the acceptable alternatives has been chosen;

(4) public comments have been considered and an adequate re- sponse has been prepared;

(5) the regulation is written in plain English and is understandable to those who must comply with it; (6) an estimate has been made of the new reporting burdens or recordkeeping requirements necessary for compliance with the

regulation;

(7) the name, address and telephone number of a knowledgeable

agency official is included in the publication; and

(8) a plan for evaluating the reg^ulation after its issuance has been

developed.

(e) Criteria for Determining Significant Regulations. Agencies shall establish criteria for identifying which regulations are significant. Agencies shall consider among other things: (1) the type and number

of individuals, businesses, organizations. State and local governments affected; (2) the compliance and reporting requirements

likely to be involved; (3) direct and indirect effects of the regulation including the effect on competition; and (4) the relationship

of the regulations to those of other programs and agencies. Regulations that do not meet an agency’s criteria for determining

significance shall be accompanied by a statement to that effect at the time the regulation is proposed.

FfOEIAL RE«ISrai, VOi. 43, Na St—nilOAY. MARCH 34, IfTt 37

12662
THE PRESIDENT

Sec. 3. Regulatory Analysis. Some of the regulations identified as significant

may have major economic consequences for the general economy, for individ- ual industries, geographical regions or levels of government. For these regulations, agencies shall prepare a regulatory analysis. Such an analysis shall involve a careful examination of alternative approaches early in the decisionmaking process. The following requirements shall govern the preparation of regfulatory

analyses:

(a) Criteria. Agency heads shall establish criteria for determining

which regulations require regulatory analyses. The criteria established shall:

(1) ensure that regulatory analyses are performed for all regulations which will result in (a) an annual effect on the economy

of $100 million or more; or (b) a major increase in costs or

prices for individual industries, levels of government or geographic regions; and

(2) provide that in the agency head’s discretion, regfulatory analysis may be completed on any proposed regulation.

(b) Procedures. Agency heads shall establish procedures for developing

the regulatory analysis and obtaining public comment.

(1) Each regulatory analysis shall contain a succinct statement of

the problem; a description of the major alternative ways of

dealing with the problem that were considered by the agency; an analysis of the economic consequences of each of these

alternatives and a detailed explanation of the reasons for choosing one alternative over the others.

(2) Agencies shall include in their public notice of proposed rules an explanation of the regulatory approach that has been select- ed or is favored and a short description of the other alternatives considered. A statement of how the public may obtain a copy of the draft regulatory analysis shall also be included.

(3) Agencies shall prepare a final regulatory analysis to be made

available when the final regulations are published.

Regulatory analyses shall not be required in rulemaking proceedings

pending at the time this Order is issued if an Economic Impact Statement has

already been prepared in accordance with Executive Orders 11821 and 1 1949.

Sec. 4. Review of Existing Regulations. Agencies shall periodically review their existing regulations to determine whether they are achieving the policy goals

of this Order. This review will follow the same procedural steps outlined for the development of new regulations.

In selecting regulations to be reviewed, agencies shall consider such criteria as:

(a) the continued need for the regulation;

(b) the type and number of complaints or suggestions received;

(c) the burdens imposed on those directly or indirectly affected by

the regulations;

(d) the need to simplify or clarify language;

(e) the need to eliminate overlapping and duplicative regulations; and

(f) the length of time since the regulation has been evaluated or'lhe

degree to which technology, economic conditions or other factors have changed in the area affected by the regulation.

12663 FEDERAL REGISTER, VOL 43, NO. 58—FRIDAY, MARCH 24, 1978 38
THE PRESIDENT

Agencies shall develop their selection criteria and a listing of possible

regulations for initial review. The criteria and listing shall be published for

comment as required in Section 5. Subsequendy, regulations selected for review shall be included in the semiannual agency agendas.

Sec. 5. Implementation,

(a) Each agency shall review its existing process for developing regulations and revise it as needed to comply with this Order. Within

60 days after the issuance of the Order, each agency shall prepare

a draft report outlining (1) a brief description of its process for

developing regulations and the changes that have been made to comply with this Order; (2) its proposed criteria for defining

significant agency regulations; (3) its proposed criteria for identifying which regulations require regulatory analysis; and (4) its proposed criteria for selecting existing regulations to be reviewed

and a list of regulations that the agency will consider for its initial review. This report shall be published in the Federal Register

for public comment. A copy of this report shall be sent to the

Office of Management and Budget.

(b) After receiving public comment, agencies shall submit their re- vised report to the Office of Management and Budget for approval before final publication in the Federal Register.

(c) The Office of Management and Budget shall assure the effective

implementation of this Order. OMB shall report at least semiannually to the President on the effectiveness of the Order and

agency compliance with its provisions. By May 1, 1980, OMB shall recommend to the President whether or not there is a continued

need for the Order and any further steps or actions necessary to achieve its purposes.

Sec. 6. Coverage.

(a) As used in this Order, the term regulation means both rules and

regulations issued by agencies including those which establish

conditions for financial assistance. Closely related sets of regulations shall be considered together.

(b) This Order does not apply to: (1) reg^ulations issued in accordance with the formal rulemaking

provisions of the Administrative Procedure Act (5 U.S.C. 556,

557);

(2) regulations issued with respect to a military or foreign affairs function of the United States;

(3) matters related to agency management or personnel;

(4) regulations related to Federal Government procurement;

(5) regulations issued by the independent regulatory agencies; or

(6) regulations that are issued in response to an emergency or which are governed by short-term statutory or judicial deadlines. In these cases, the agency shall publish in the Federal

Register a statement of the reasons why it is impracticable or

contrary to the public interest for the agency to follow the

procedures of this Order. Such a statement shall include the

name of the policy official responsible for this determination.

Sec. 7. TTiis Order is intended to improve the qualiiy of Executive

Agency reg^ulatory practices. It is not intended to create delay in the process

FEDERAL REGISTER, VOL 43, NO. 58—FRIDAY, MARCH 24, 1978 3912664
THE PRESIDENT

or provide new grounds for judicial review. Nothing in this Order shall be

considered to supersede existing statutory obligations governing rulemaking.

Sec. 8. Unless extended, this Executive Order expires on June 30, 1980.

The Whiie: House,

March 23. 1978.

CFR Doc. 78-8091 Filed 3-23-78; 12:58 pm]

40
APPENDIX II

Some Tangible and Intangible Factors to be Considered in Determining

the Economic Impact of Standardization

(National Aerospace Standard (NAS) 1524)1

ENGINEERING

Reduce technical time in processing product design

Reuse of known items improves reliability and reduces "debugging"

Reduce hazard of technical error in judgment

Increase time available for work requiring special design or

handling

Reduce need for special communication between engineers,

draftsmen, production, etc.

Reduce need for minor supervisory decisions

Reduce need for waivers and nonstandard part testing and approval

Reduce redesign and redrafting effort

Improve interchangeability of parts, designs, packages, test

fixtures, etc.

Promote use of improved methods and products

Help eliminate unsound practices based on prejudice, tradition,

advertising, etc.

Develop cost estimates more economically

PROCUREMENT

Increase purchasing power through procurement of larger

quantities of fewer items

Reduce number of purchase orders, receipts, payments

Reduce lead time

Provide a common language between buyer and seller reducing time

required for negotiations

Put all suppliers on a fair competitive basis

Promote purchase by intrinsic value rather than by sales-talk

QUALITY CONTROL

Improve quality control based on accepted and explicit

spec i f i cat i ons

Decrease hazard of misunderstanding with suppliers

Provide better control of end product

Reduce and simplify inspection (sampling plan, etc.)

1/Taken from Tamas Foldesi, "Economic Effects of Standardization,"

TSO (Geneva, 1975) Annex 3.

41
2

INVENTORIES

Reduce capital requirement and amount tied-up

Reduce record keeping

Reduce storage area

Reduce material handling

Reduce obsolescence and spoilage hazards

Reduce stock-keeper's time

Reduce stock-keeper training required

Provide basis for data mechanization, handling, reduction in

errors

More accurate and predictable planning and budgeting

Provide quicker service

PRODUCTION

More routine activity and familiarity in fabrication and assembly

Decrease rework

Improve mechanization

Derive economies through special-purpose machines performing

standard operations, utilizing standard parts

Reduce the need for special tooling, training, layout and test

Reduce production methods and industrial engineering effort and

manpower

Avoid production delays through stocked standard parts

MAINTENANCE

Reduce breakdowns and downtime

Reduce preventive maintenance time

Reduce repair time

Decrease critical expediting

Reduce the number of unfamiliar jobs encountered

Decrease number of service-spares

Decrease size and complexity of service manuals

Reduce operator training time

GENERAL

More routine work frees higher skilled people for unique aspects

of project

Improve general communication

Ease selling design composed of customer approved or recognized

devices

Improve user and customer confidence

42
unitea :>tates Environmental Protection Agency

June, 1979

appTMix III

oEPA Improving Environmental

Regulations;

Final Report Implementing

Executive Order 12044
30988 Federal Register / Vol. 44, No. 104 / Tuesday, May 29, 1979 / Notices

ENVIRONMENTAL PROTECTION AGENCY

[FRL 990-8]

Improving Environmental Regulations

Agency: Environmental Protection Agency.

Action: Final report

Summary: The Environmental Protection Agency (EPA)

presents its report on how it wilt implement Executive Order

12044, Improving Government Regulations. The report

describes procedures to improve management oversight in the development of regulations, to involve the public and

other governmental organizations in evaluating regulatory

proposals, to analyze the effects of new and existing

regulations, and to avoid unnecessary regulatory burdens on

the public.

A request for public comments on EPA’s plan appeared in the Federal Register on )u?y 11. 1978 (Vol. 43, pp. 29891-

29900), and the Agency held public meetings in San

Francisco, Kansas City, and Washington, D.C. in August. A

summary of EPA's response to major comments appears as Appendix B. Dated: March 29. 1979 Douglas M. Costle, Administrator. Organization of this Report:

Preface. A. Agency Administrator’s Oversight.

B. External Participation.

C. Analysis.

D. Reporting Burdens Reduction.

Appendix A—Sunset Policy for New Reporting

Requirements.

Appendix B—Response to Public Comments.

PREFACE

EPA is now using an efficient system for drafting and

reviewing regulations, parts of which have served as models

for the President’s Order. This report presents ways in which we are modifying that system to comply with the Order. EPA’s internal and external review procedures ensure that new EPA regulations meet the Order’s standards for quality of analysis of regulatory impacts, openness to participation

by outside parties, and avoidance of undue regulatory burdens.

Part A of this report describes EPA’s internal procedures

for writing regulations. Key features are the priority classification for all EPA regulations and the use of management controls that systematically focus attention on

the most important regulations. Part B describes how EPA

will involve interested citizens and Outside groups (both

private and public organizations and local. State and Federal

agencies) in developing regulations, and presents EPA’s plan

to formulate a new Agency-wide policy for external

participation in regulation development. Part C sets out

guidelines for economic analysis of regulations in each

priority class. It also describes a one-year project to screen

all existing EPA regulations to identify those that require

revision to eliminate unnecessary burdens or improve

effectiveness. Part D describes how EPA will avoid unnecessary paperwork burdens on the public in the reporting and recordkeeping requirements of new and

existing regulations.

The parts of this report describing EPA 's mechanisms for public participation are printed in italics. EPA has received and considered a large number of public

comments on its proposed plan, including those submitted at

public discussion meetings in three cities. Appendix B

describes EPA’s response to major comments and tells hov.

to obtain a detailed analysis of all comments. EPA is now implementing portions of this plan. Many

other parts will be implemented through revision of the Agency’s Manual for Regulation Development. The Manual

will provide detailed instructions to those developing new

regulations. It will be publicly available in order to facilitate outside participation. To receive a copy when it is completed, write to Philip Schwartz, Standards and

Regulations Evaluation Division (PM-223), EPA,

Washington, D.C. 20460. The process described in this report meets all requirements of the Order. Table 1 lists sections of the Order

and shows where to find a description of our plan to implement it. As indicated in Section 7 of the Order, failure

to comply with procedures established in response to the Order is not grounds for judicial review of EPA regulations.

Procedures described in this part will not apply when they

conflict with statutory requirements.

Tabi.k 1Relationship of This Report to Executive Order

Requirements

Executive Order Corresponding Part(s) of This Section Report

§ 2 Reform of the Process

(a) Semiannual Agenda B Agency Participation Policy

(b) Agency Head Oversight .. A(2) Development Plan

(c) Public Participation B Agency Participation Policy

(d) Approval of Significant

Regulations

(1) Necessity of the Regulation A(2) Development Plan: A(3) Decision Package

(2) Consideration of Impacts A(3) Decision Package;

C(l) Analysis of New

Regulations

(3) Evaluation of Alternatives A(3) Decision Package:

C(l) Analysis of New

Regulations

(4) Response to Public Comment A(3) Decision Package: B Agency Participation Policy

(5) Use of Plain English .... A(3) Decision Package:

A(4) Internal Review: B Agency Participation Policy

(6) Reporting Burden Assessment A(3) Decision Package:

D Reducing Burdens on the Public

(7) Name of Responsible

Official A(3) Decision Package: B Agency Participation Policy

(8) Evaluation Plan A(3) Decision Package:

C(2) Review of Existing

Regulations

(e) Criteria for Significant

Regulations A(l) Initiation of Work: Chart 1 § 3 Regulatory Analysis

(a) Criteria C(l) Analysis of New

Regulations: Chart 4

(b) Procedures C(l^ Analysis of New

Regulations

§ 4 Review of Existing Regulations

(a) Selection Criteria C(2) Review of Existing

Regulations

(b) List of Possible Candidates C(2) Review of Existing

Regulations

44
Federal Register / Vol. 44. No, 104 / Tuesday. May 29, 1979 / Notices 30989

PART A: AGENCY ADMINISTRATOR’S OVERSIGHT

This Part describes how EPA will strengthen top

management oversight for the development of new

regulations. It emphasizes EPA’s internal processes and only

touches on (see italicized sections) the way the Agency will involve outside parties in its decisions. Part B is entirely

devoted to external participation in EPA regulation

development.

In outlining the steps for EPA's process the following

definitions may be useful; —Lead Office: The Assistant Administrator for the relevant program (the Office of Air. Noise and Radiation,

the Office of Enforcement, the Office of Toxic

Substances, or the Office of Water and Waste

Management) has the lead responsibility for initiating

and writing most new regulations. —Work Group: This is a group of specialists drawn from

various offices within EPA to advise and assist the lead

office in preparing each significant regulation and its support materials. —Steering Committee: This is a continuing group

representing the six Assistant Administrators, General

Counsel, and appropriate Office Directors on the Administrator’s staff. It oversees the mechanics of the process and conducts the first internal review of materials prepared by the lead office.

—Rod Ihmh'r //cr/cu , This is an internal review by all Assistant Administrators. CamtMal Counsel and chief

Staff Office Directors, l lu' hiMcls of EPA s ten regional

offices (Regional Aciministiators) also have an

opportunity to submit comments. A full review takes

three weeks. —Sonior Maiuigrnu'iii: This group includes the Administrator. Deputy Administrator. Assistant

Administrators. Regional Administrators. General

Counsel, and appropriate Staff Office Directors. —Tho Administrator: As Agcmcy head, the Administrator

provides the final levcd of internal review. —Interagency lU'gtdatory Liaison Group (IRLC): This group includes EPA. the Consunum Product Safety

Commission, the Food and Drug Administration, the Occupational Safety and Health Administration, and the; Food Safety and Quality Service. EPA produces regulations in a four stage process: (1) starting work on a regulation. (2) preparation of a development plan, (3) preparation of a decision package;, and

(4) conducting a three-part internal n;view prior to publication (see Figure 1). Each r(;gulation goes through the; third and fourth stages twice, first as a proposal and again in final form. The stages of regulation drafting are explained in detail below.

KICIIRF. 1

STAGES IN THE DEVEl.OPMENT OF SKiNlFlCAN I F,I>A RK( it II.A 1 1( )NS

(1) Start work: (2) Prepare a development

plan: • Send • Classifv

notification regulations form as Major • Invite work or Routine group members • Identify purpose. • Schedule a issues, mujor

development alternatives plan • Plan external

participation measures • Describe

analyses including

Regulatory

Analysis when

required • Establish development

and publication schedules • Notify interested and affected parties

of development plan

EPA is changing this process in response to the President’s Executive Order according to two general principles. First, EPA will establish priorities for all regulations and introduce

management controls that reflect those priorities. Priorities and different degrees of attention are essential at EPA

because of the large volume of regulations. More than 400

regulations are already in one stage or another of the

drafting process.

(;t) Pi(;pare a

(l(;cision packagi':

|4 1 ( lomlucl

inlernal reviews:

• Involve pul)lic. • GonducI Steering

Slale/local Gommitlee review

officials • Uoniliicl "Red • Analyze effects: Hordei" review —Environmental by senior —Economic management —Urban • Uondiict final —Resource leview by —Paperwork Administrator • \Vrile rule. preamble • R(;commen(l

action to Administrator

EPA uses the label “Significant” (as recommended in the Executive Order) for about 200 of its regulations. These

regulations are subject to the formal EPA procedures

outlined in this report. Regulations that are not classified as

Significant are not subject to the uniform procedures

described in this report. They follow other specialized

procedures that include provisions for public review and

comment.

45
30990 Federal Register / Vol. 44, No. 104 / Tuesday, May 29, 1979 / Notices

Significant regulations are subdivided as "Routine" and

“Major". Routine regulations will include most of the

Significant actions in the drafting process. The Major

subclass of Significant regulations (about 50 at present) receive extra attention from senior management, allowing

EPA and the public to focus cheir attention on the most

important policy areas. The criteria we use to classify regulations appear in Charts

1 and 2. Figure 2 shows how the classes are related. Some of EPA’s Major regulations require Regulatory

Analyses as specified in Section 3 of the Executive Order. This requirement is the only factor distinguishing these

regulations from other Major regulations for purposes of management oversight.

iiiMiKi-; j

I’KIOHI I V CI.ASSII ICA I IONS lOK I'.i'A Ki;(.iii.AH(i\s

Somr ir^iil.thuns will mi'H i‘(.imnmM. i ritiMi.i iv(|iii>in>> prrpanition «if ri Ki‘Riihiliiry Analysis. (Sn* I’iirt C.l |

CHART 1

CRITERIA FOR SIGNIFICANT AND SPECIALIZED

REGULATIONS

EPA presumes that all new regulations are Significant unless they fall into one of the specialized exclusion

categories below. Significant regulations follow the uniform

development process described in this report. Other

regulations follow separate specialized procedures.

Exclusions:

1. Regulations that are administrative or procedural in nature and

do not affect stringency, compliance costs, or the environmental

(health) benefits of EPA programs.

2. Minor amendments to existing regulations when the amendment

does not affect the stringency, compliance costs, or the environmental (health) benefits of the regulation.

3. Regulatory actions resulting from detailed Congressional

mandates (e.g., deadline changes) that leave EPA no discretion

to evalua.e alternatives.

4. Regulations designated by a lead office Assistant Administrator

in the notification form as not sufficiently important to require formal development procedures. Any senior manager may

request a change in the classification to Significant.

5. EPA actions on regulations developed by State and local governments.* Some of these actions have large impacts;

however, adding this report’s procedures to State/local

regulation development procedures would iiuroduce i unnecessary duplication of effort and excessive delay. Such

actions include;

a. Approval or disapproval of the following plans and their revisions: (a) State Implementation Plans (SIP) under section 110

of the Clean Air Act and (b) plans for designated pollutants from designated facilities under section 111(d) of the Clean Air

Act. Although the approval of a SIP or a 111(d) plan with

national policy implications is not subject to full regulation

development procedures, additional EPA review is required. All

SIPs, 111(d) plans, and their revisions are subject to specialized

EPA review procedures that include public participation.

b. Water Quality Standards set by States or by EPA in the event

a State fails to set an acceptable standard. These local standards are subject to specialized EPA review procedures

that include public participation.

6. Pesticide tolerances and regulations to exempt pesticides from

the provisions of the pesticide statute (the Federal Insecticide, Fungicide, and Rodenticide Act—FIFRA) under its section 25(b) because of a determination that; (a) the pesticide is adequately

regulated by another agency, or (b) it is of a character which need not be subject to FIFRA in order to carry out the purposes

of FIFRA.* (Note: Many important decisions in EPA’s pesticide program do not take the form of regulations and are not

therefore subject to this report. These include pesticide

registrations, cancellations, suspensions, “rebuttable presumptions against registration", experimental use permits and emergency exemptions. These actions follow specialized

requirements for public notification and comment.)

CHART 2

CRITERIA FOR MAJOR REGULATIONS

For internal management purposes EPA will divide all Significant regulations into two classes. Major and Routine. Both types will follow the uniform regulation development

process. However, Major regulations will receive extra

attention from senior Agency management. We will classify

a regulation as Major if it is likely to:

1. Address a major health or ecological problem.

2. Result in a major health, ecological, or economic impact.

3. Cause substantial urban impact, including constraints on

transportation mobility.

4. Initiate a substantial regulatory program or change in policy.

5. Cause a substantial impact on another EPA program or another

Federal agency program.

6. Cause a substantial change on a national scale in the scope of State-administered environmental programs or in the relationship between EPA and States or localities.

7. Cause a disproportionate impact on a particular region of the United States.

8. Implement a regulatory program central to the basic purpose of

the statute under which it is adopted.

The second general principle of the internal process is extensive and continuous participation by various EPA

offices. Participatory decisionmaking continues to be

important at EPA because systematic review by other offices provides several types of valuable input. Scientists and

economists check data and analyses: lawyers check

procedures, clarity and consistency with the law; and other program managers will know how proposed regulatiors

would affect their programs. This process starts when .ne lead office invites Assistant Administrators, the General

Counsel, Regional Offices, and Staff Offices to send

representatives to a work group to participate in writing a 46

* These actions do not require the notification form described in Part A(l).
Federal Register / Vol. 44, No. 104 / Tuesday, May 29, 1979'/ Notices 30991

Significant regulation. The lead office seeks to identify and

resolve issues at each stage, in work groups, Steering

Committee review, and senior management review. The lead

office retains primary responsibility for new regulations.

When consensus is not reached at a particular level, the disagreement is spelled out and the matter is taken to a

higher level for review. When consensus is reached on major

issues at lower management levels, the lead office identifies for senior management the nature of the issue and the consensus that has been reached. As a result, final decisions

remain with publicly responsible appointed officials at the top of the Agency. The lead office may withdraw a particular

regulation from parts of the formal process, or use some

modification of the process, as long as it justifies the need

and meets legal and Executive Order requirements. Before

making such changes, the lead office Assistant

Administrator must notify the other Assistant

Administrators, the General Counsel, and Office Directors

and consult with them if requested. The Administrator

resolves any differences of opinion.

The four stages of regulation writing and review are as

follows:

Stage 1: Starting Work on a Regulation

When the Assistant Administrator for a lead office determines that he or she is required by law or otherwise

decides to start work on a new regulation, he or she sends a

notification form to senior management. This brief standard

form requires lo analysis. The lead office submits this notification form as soon as possible, usually within 45 days

of the time it learns (through passage of new legislation, a

court order, etc.) that regulation may be necessary. The notification form tells interested persons that a

regulation is contemplated and allows them to plan

accordingly.

The notification form indicates whether or not the new

regulation is Significant based on the criteria in Chart 1. At

the request of another office the Administrator may

reclassify a regulation as Significant. Submitting this form

places Significant regulations on EPA ’s Regulatory Agenda,

which is printed quarterly in the Federal Register and

distributed to the public. NOTE: Regulations not classified as Significant are not subject to the requirements described below for a development plan and a decision package. These regulations do not pass through Steering

Committee review. When published in the Federal Register, EPA

will indicate that they do not meet the criteria for Significant EPA

regulations and are subject to specialized development procedures. Notification forms invite interested offices to assign

appropriate personnel as work group members. (See Chart 3

for a list of EPA offices with formal responsibilities for regulation development. These offices receive a notification form.)

The notification forms set a date for submitting a development plan for Significant regulations to the Steering

Committee.

CHART 3

WORK GROUP REPRESENTATION

EPA Regional Offices Office of Air, Noise and Radiation*

Office of Enforcement

Office of General Counsel

Office of Legislation

Office of Planning and Management

Office of Research and Development

Office of Toxic Substances

Office of Water and Waste Management**

The Office of International Activities. Office of Civil Rights. Office

of Environmental Review, and Office of Public Awareness will servi on appropriate work groups.

‘Previously called the Offic'.e of Air and Waste Management.

“Previously called the Office of Water and Hazardous Materials.

Certain actions, such as revisions in State implementation

Plans. State Water quality standards, and some pesticide

actions, are initiated by other organizations and reviewed by

EPA. They do not require a notification form.

Stage 2: Preparation of a Development Plan

The Assistant Administrator for the lead office (or someone, such as a Deputy Assistant Administrator, t») whom such authority is delegated) appoints a chairperson

for the work group assigned to work on a particular

Significant regulation. In the event that special expertise

exists in a Regional Office, the le.id office Assistant

Administrator considers asking thi; Regional Administrator

to concur in the appointment of an (ixpert in the Rijgional

Office to serve as chairperson. The lead office puls together

a development plan with the advice and assistance of the work group. An early step in this process is deciding whether

the Significant regulation falls into the Routine or Major

class (see Chart 2 for criteria). At the re(|uesl of another

office the Administrator may change this classification. Development plans for Routine regulations are approved

by the lead office and review(;d by the Steering Committee

before substantial work begins. These development plans

are sent to senior managers for their information. Development plans for Major regulations are review(;d by

the lead office and the Steering Committee but must pass

through Red Border review and receive the Administrator’s

approval before substantial work begins.

The format for the development plan varies according to the type of regulation. Development plans include the following items when they are applicable.

• Purpose: This is a brief description of the possible need to regulate and the consequences of not regulating.

• Schedule: This is a timetable with target dates for: identifying and notifying interested outside parties,

completion of required analyses of the impacts of the proposed actions (including a Regulatory Analysis when

required [See Chart 4], an Environmental Impact

Statement when required by Agency policy, and such

other analyses as the lead office will include in the decision package), completion of the initial draft, internal and external review of drafts, award and completion of contract work, any required progress reports. Steering

Committee review, publication of the proposed

regulation, end of the public comment period, and

promulgation of the final regulation.

• Public Notice: This is the text of a Federal Register notice

(usually an Advance Notice ofProposed Rulemaking)

that describes the purpose of the proposed action, the development schedule, the issues that must be resolved, the alternatives to be considered, the special analyses

that will be conducted, the plan to obtain external

participatian, and the name and location of an 47
30992 Federal Register / Vol. 44, No. 104 / Tuesday. May 20. 1979 / Nolioos

appropriate Agency contact person. It invites comments

and solicits the submission of needed information.

• Priority Classification: This reports whether the Significant regulation is Routine or Major according to EPA criteria (Chart 2). • Issues: This is a list of issues to be resolved.

• Alternatives: This is a summary of the major options

(available under the authorizing statute) that will be

evaluated, including a discussion of whether alternatives or supplements to direct regulation are feasible (such as economic incentives; see the discussion of alternatives in Part C.l).

• Exclusions: This is a list of any normally required

materials that the work group expects to omit from the decision package, with a brief explanation.

• Internal Participation: This is a list of offices within EPA

whose expertise and assistance will be needed, and a plan for coordination with EPA Regional Offices.

• Eternal Participation: This is a plan to involve those

parties outside the Agency in the regulation

development process. It indicates how persons

interested in and affected by the regulation will be

identified, notified, and brought into the process. It notes any interest by other Interagency Regulatory Liaison

Group members or other Federal agencies and lists contact persons. It lists actions planned for coordination

with State and local governments.

• Resources: This is an estimate of EPA money and personnel

needed to develop the regulation, with a specific estimate of resources coming from EPA offices outside the lead office. Stage 3: Preparation of a Decision Package

After the development plan is completed, the lead office with the advice and assistance of the work group begins

analyzing alternatives, assembling support materials and

writing the preamble and regulation. These make up the decision package.

Members of the work group may, in some cases, write

portions of the document. They review drafts as they are prepared and keep in close touch with their offices’ senior management and Steering Committee representatives.

The work group chairperson has overall responsibility for regulation drafting and is accountable to lead office superiors (Division Director, Deputy Assistant

Administrator, and Assistant Administrator), who provide

guidance on the substance, procedures, and policy of the

regulation.

The chairperson is responsible for resolving any issues or problems that may arise during the drafting process. This

may be done through progress reports to senior management

or by consultation with lead office superiors and other appropriate EPA managers. For Major regulations the lead

office has an affirmative duty to keep EPA senior management periodically informed of issues that the work

group has under consideration and to seek their policy

guidance.

The lead office actively seeks the views of outside groups and consults with them both before and after formal

publication of regulatory proposals. These groups include

those persons directly affected by the regulation,

environmental and other interested groups, industry

representatives, other Federal agencies and State and local governments. This last group. State and local governments,

often have a major role in the process because they

implement and enforce many EPA regulations and have

special knowledge of local conditions and available program

resources. Wheneverpossible, the lead office provides an

opportunity (and adequate time) for the outside parties to

ivvit'w ivgulatiuy proposal.'; ami .suppt>rl documonts.

incluiling thr Ih'gulatt’ry . Xnalysis wlioii one i.'; prepared.

The decision package contains the following items:

•. \ction Memorandum: This is a brief summary of the

regulation, and includes a description of alternatives considered, environimmtal. economic, and resource

impacts, unresolviul issues, anticipated reactions by the

public, and recommeniled action. The alternatives described should include realislii: options that the lead

office anil work group have consiilered seriously. Where

feasible, a summary of incremental environmental and

economic effetds should accompany the discussion of each alternative. The action memorandum conlain's a summary of why thir recommended alternative is the

least burdensome way to accomplish environmental

goals.

•Federal Register Doe.uments: These include a preamble

written in plain English that describes the facts and

rationale for the decision to regulate and how the regulation Tits into the larger regulatory program; it shows how the recommended action is the least burdensome way to accomplish environmental goals. For

final regulations the preamble snmmarf/.es public and

inter-governmental comments and the Agency's riKsponse

to each major point rai.-ted. 'I'he regulation it.self is written in a manner clearly understandable to those it affects and compli(;s with the Federal Register Document

Drafting Handbook. The name and address of on EPA

contact is included.

M/Jo/yses.‘ These are sup|>ort docunumls that lay out the major issues and show how alternatives were analyzed.

The analyses identify and (|uantify (where possible) the regulation's environmental effects, economic (including

incremental) impacts, energy impacts, technical

feasibility, anticipalml barrims to im|ilementation.

alternatives and supphmienis to direct regulation, and,

for selected Major regulations, urban and community

impacts. When any of thi’se imjiacts c.innot bi; determined exactly, the documimts include the operating

assumptions the Agency has madi;. The analyses show

how unnecessary duplication with othc>r EPA or Federal programs has beim avoided. 'I’he Regulatory Analysis,

when one is required, summarizes the results of several

of these analyses. An Environmental Impact Statement is written when necessary to comply with Agency policy.

The support documents an; available to the public or the reason for confidentiality is explained. •Resource Requirements Summary: This is a summary of money and personnel that EPA, State, and local governments will need to implement the regulation.

(Affected officials and the public have an opportunity to review a draft of this assessment.) Where possible, this includes (or refers to) portions of Agency program

guidance and zero base budgeting documents that show

necessary short term and long term adjustments in EPA

resources. •Reporting Impacts Statement: This details the impacts of

reporting and record-keeping on those subject to the regulation, including staffing projections and required

expertise. New EPA reporting and record-keeping

requirements have "sunset" expiration schedules. (See

Part D.) •Public Participation Summary: This is a summary of comments, including comments from other Federal

agencies and State and local governments received

during the process, and the Agency's response to each

major comment.

48
3099b Federal Register / Vol. 44. No. 104 / Tuesday. May 29, 1979 / Notices

•Evaluation Plan: This is a plan and schedule for subsequent evaluation of the effects of the regulation.

(See Part C.2.)

Stage 4: Conducting Internal Reviews

After the lead office Assistant Administrator approves the decision package, he or she submits it for prepublication

review. This process has three parts: Steering Committee

review, Red Border review and final review by the Administrator.

The Steering Committee reviews all Significant regulations

to help resolve any issues on which the work group does not reach consensus and to make sure the decision package

meets standards of completeness, quality, and

comprehensibility. When the Steering Committee resolves u major issue it identifies for senior management the nature of

the issue and the resolution reached. The Steering

Committee makes sure all components of the decision

package are prepared and that material to be published is clear and understandable. It is the Steering Committee’s

responsibility to see that the regulation meets the eight

specific requirements set forth in Section 2(d) of Executive

Order 12044. For Routine regulations, EPA’s senior managers rely on the Steering Committee to see that decision packages are in order. They are notified when the Steering Committee

reviews Routine regulations. Unless a senior manager

requests a full Red Border review period, any Routine

decision package that has received consensus approval from

the Steering Committee is scheduled for an expedited Red

Border review of eight working days. At the end of the eighth

day it goes to the Administrator for signature. If the Steering

Committee does not reach a consensus the package enters normal Red Border review.

During the Red Border process EPA senior management

reviews alt Major regulations regardless of concurrence at lower levels. For Major regulations, the Steering Committee

checks the completeness of decision packages and makes

sure any unresolved issues are clearly and fairly presented

to senior management.

Red Border review of Major regulations does not exceed

three weeks. The lead office Assistant Administrator may

request a shorter review period. The lead office reports to the senior management on how formal objections or comments by senior managers have been resolved. When all top-level reviews are complete or the review

time has lapsed, the regulation goes to the Administrator.

When the Administrator has signed it, it is published in the Federal Register.

PART B. EXTERNAL PARTICIPATION

EPA will continue to place a high priority on improved

public awareness and public participation in its decision

making processes. The Administrator will continue to approve Regulatory

Agendas and will see that they are published four times a

year. Each Regulatory Agenda will list the title and status of

all Significant regulations for which notification forms have

been filed and that will be issued in the next year. It will

cite the appropriate statutory authority, say whether a

Regulatory Analysis is required, andgive the name and

telephone number of a person to contact at EPA. The Agenda

will show the status of regulations removedfrom the list since the last Agenda was published. It will list existing

regulations that are scheduled for review (see Part C.2) and

reporting requirements that will reach their sunset date (see Part D). In addition to publishing the Agenda in the Federal

Register, EPA will distribute it directly to interested and

affected parties. For each Significant regulation, EPA will:

(1) Draw up a plan far external participation (as part of

the development plan) that shows in detail how interested

and affected parties will be identified and notified.

(2) Provide early notice that regulation development is under way. This includes publishing a Federal Register

notice (usually an Advance Notice of Proposed Rulemaking),

which informs the public that work is beginning, provides

the general approach and schedules, and identifies particular areas where additional information is needed.

This notice describes the purpose, schedule, issues,

available alternatives, analyses, external participation measures, and the name, address and telephone number of an EPA contact person for the regulation. EPA will mail this Notice directly to interested and affected groups and will use appropriate news articles and radio and television spots

to provide timely notice that regulation development is beginning.

(3) Meet to discuss issues and alternatives during the development of the regulation with representatives of

consumer, environmental and minority associations; trade,

industrial, and labor organizations: public health, scientific andprofessional societies; educational associations and

other appropriate individuals or groups of interested and

affected parties from outside the Agency.

(4) Hold open conferences, workshops, hearings, meetings,

and arrange direct mailings as appropriate to supplement

other opportunities for public participation, and keep a

mailing list of those interested in receiving draft regulations

and background materials.

(5) Provide suitable background information prior to any

meeting to those who will be attending. This information

may include such material as a description of EPA 's regulation development process; a summary of the draft regulation and key supporting materials; a list of major

issues; and the name, address and telephone number of

persons who can supply additional information.

(6) Consult with State and local governments. On the day

that he signed Executive Order 12044, President Carter also signed a memorandum that terminated existing procedures

for the review of Federal regulations by State and local governments. He asked that each Agency develop substitute measures. EPA is currently working with national

organizations of State and local public officials to replace

the former review procedures according to the President’s memorandum. For particular regulations EPA also coordinates with particular States and localities and

cansults with groups of non-Federal environmental officials. A summary of intergovernmental consultation appears in the Federal Register preambles for new regulations that have

major intergovernmental consequences.

(7) Track any Agency overlap orjoint interest with other

members of the Interagency Regulatory Liaison Group. For

regulations of interest to other IRLG members, the preamble

will describe coordination efforts and how they have

affected the substance and procedure of the regulation.

(8) Communicate with other Federal agencies affected by

a planned regulatory action. EPA 's lead office contacts another Federal agency when the other agency (a) has a

statutory mandate in the area* to be regulated, (b) will require additional resources because of the EPA action, or

(c) has important expertise relevant to the matter to be

regulated. (Note: where possible, any interagency

differences will be resolved at the staff level). (9) Write the regulation and explanatory materials

clearly. To help lead offices write regulations that people

49
30994 Federal Register / Vol. 44, No. 104 / Tuesday. May 29. 1979 / Notices

can understand. EPA is develapini’ a style book for regulation writers, selecting several regulations and

developing them as models of good writing, and hiring editors to assist work groups write selected regulations.

(10) Make available a draft of the Regulatory Analysis

( when one is required) by the time M-e publish a Notice of

Proposed Rulemaking. The Federal Register preamble will have a summary of the Regulatory Analysis and information on how the public can obtain it. (Note: EPA will make public a final Regulatory Analysis when it publishes the final rule.)

(11) Provide at least 60 days for public comment,

measured from the date the proposal is published, and

refrain from requiring commenters to supply multiple copies

of their comments. When a 60-day comment period is not possible the proposal will contain a brief statement of the reasons for using a shorter time period.

(12) Summarize outside comments, indicate EPA 's response to major points and distribute both to interested

and affected individuals andgroups. (We summarize

comments and our responses in preambles to our final

regulations.)

As stated in the July 11, 1978 version of this report, EPA

will adopt an Agency-wide public participation policy and

write specific guidance to its employees for ensuring public

participation in the regulation writing process. We intend to adopt the policy and corresponding guidance using a process

that will fully and effectively involve interested and affected persons outside EPA. Although we don’t now know the form

the overall policy or the guidance will take, they will contain at a minimum the twelve elements listed above. PART C. ANALYSIS

The Executive Order calls for careful analysis of available

regulatory alternatives. In this Part we describe criteria and

procedures for EPA analysis of (1) the economic effects of new Significant regulations and (2) regulations the Agency

has already issued.

(1) Economic Analysis for New Significant Regulations

Other parts of this report (see Part A) describe the range of analyses that EPA will provide for all Significant regulations:

EPA assesses health, ecological, economic, urban, energy, and program resource impacts. This subpart provides further

detail on EPA’s economic analysis requirements. In each

economic analysis the lead office indicates by reference the other parts of the decision package that analyze the benefits

the regulation will generate. This provides to the extent

possible a clear identification of *he regulation’s costs and

benefits. The economic analysis itself examines, in appropriate cases, positive as well as negative economic

consequences. The extent of analysis of the economic impact of new

Significant regulations depends on whether the regulation is Routine, Major, or subject to the Regulatory Analysis

requirements of the Executive Order. Guidelines based on

our current internal requirements are presented for each of these categories. The guidelines in section (a) apply to those Major regulations that trigger a Regulatory Analysis (see

Chart 4). Not all'regulations requiring a Regulatory Analysis

lend themselves to the analytic approach in the guidelines. In these cases, the lead office with the advice and assistance of the work group may amend the approach to suit the circumstances. For other Major regulations a less intensive analysis is sufficient, as described in section (b). For Routine

regulations the basic guidelines in section (c) apply.

CHART 4

CRITERIA FOR CONDUCTING REGULATORY ANALYSES

'I'he lead office prepares a Regulatory Analysis of potential economic impacts for any regulation that triggers one of the following criteria:

1. Additional annual c«)sls of t:oin|ilianci'. including capital charges

(interest and depreciation). t*jtal $HM) million (i) within any one

of the first five years «)f iinplennrntation. or (ii). if applicable, within any calendar year up l«i the date by which the law

reipiires attainment of the relevant pollution standard.

2. Total additional cost of production of any major industry

product or service exceeds .t percent of the selling price of the product.

3. The Administrator reipiests s\ich an analysis (for example,

when there appear t») be major impacts on geographical regions

or local governments).

(a) Guidelines for Regulatory .\nalysis

The lead office bases its Regulatory Analysis on the general approach describcul below. EPA has used this approach to determine the costs of such regulations as

effluent guidelines and new source performance standards. Some types of regulations may require a modified approach.

Sewage treatment plant regulations and some solid waste

regulations that affect primarily other government agencies

are examples that do not require industry segmentation as

part of the analysis.

General Approach

1. Prepare an economic profile of the affected sectors (producers and/or consumers), including the industry

structure (e.g., degree of concenlralion, the way prices are determined), the type of competition in the affected sectors, and performance trends (e.g., financial rales, growth trends) of the affected sectors.

2. Segment the industry (or other affected groups) into categories of economic units that will be similarly-impacted

(e.g., according to size distribution, pollution control process,

age).

3. Develop marginal (incremental) cost effectivene.ss curves for each process/stralegy for each affected industry

segment.

4. Analyze the economic impact of proposed standards

and of alternatives including any economic benefits from

regulation such as the generation of new product markets

and newemployment opportunities. II may not be necessary

to analyze all alternatives in the same level of detail. The

following impacts are analyzed when feasible:

(a) price effects

(b) production effects

(c) industry growth, profitability, capital availability

effects

(d) employment effects

(e) community effects, including disproportionate effects on particular regions or localities

(f) balance of trade effects

(g) energy effects When feasible, effects on productivity are described. For grant programs, some impact categories are not

applicable, although user charges (as an analogue to price), effects on communities (affordability,

employment, growth), and energy effects may be

applicable.

EPA has developed more detailed internal working

guidance to assist program offices in conducting their economic analyses. It is available upon request from Frans (.

50
Federal Register / Vol. 44, No. 104 / Tuesday, May 29, 19/9 . Notr.us

Kok, Director, Economic Analysis Division, EPA,

Washington, D.C. 20460. Alternatives

Although the decision package for a regulation addresses

alternatives available under the authorizing statute, the lead

office and work group may, during their analysis, identify attractive regulatory alternatives that cannot be

implemented under existing law. EPA will review such

alternatives and, where appropriate, develop (apart from the regulation development process) legislative proposals that W'ould permit their use. The analysis covers the important alternatives that EPA

has considered. Such alternatives may include;

1. Alternative types of regulations —taking no additional regulatory action. —relying on market forces (e.g., use of a marketable rights

approach). —using an informational requirement where applicable

(e.g., product labeling). —specifying performance levels (e.g., an allowable level of emissions) but allowing those regulated to achieve

attainment by whatever means they prefer. —using engineering design approaches that specify how a proposed outcome is to be achieved.

2. Alternative stringency levels —making the standard or regulation either more or less stringent. —tailoring the degree of stringency to stages of processing,

particular industries or other pertinent groups.

3. Alternative timing —using different effective dates. —phasing in the requirement more or less rapidly.

4. Alternative methods of ensuring compliance —using economic incentives. —employing various enforcement options (e.g., on-site inspections vs. periodic reporting, sharing

implementation responsibilities variously among the

different levels of government). —using different compliance methods for different industry segments or types of economic activity where

costs of compliance vary sharply (e.g.. treating small

firms and large firms differently).

(b) Other Major Regulations For Major regulations that do not require a Regulatory

Analysis, the lead office conducts an analysis for EPA

purposes. This analysis follows the same general approach

as outlined above, but it need not provide the same level of

detail as a formal Regulatory Analysis.

(c) Routine Regulations

EPA will continue to analyze all Routine regulations for insights into the potential effects on the economy and on

those who are affected. To minimize the burden on lead offices, this analysis is less sophisticated. It includes the following estimates: —the number of establishments that will be affected —an estimate of the total costs that will be borne by each

affected industry segment —an estimate of the price impacts under an assumption

that cost changes will be reflected in prices —an estimate of revenue changes for each segment if costs are not fully reflected in price changes —an estimate of job gains and losses —an estimate of total energy impacts for each affected industry segment —an estimate of impacts on any particular regions and

localities that will be more seriously affected than

others.

This analysis C(;vpr^ both the piooosed regul.itio!. inc. ‘

applicable, the a'.lei natives ron.;.dei ed, howevi;r some

alternatives may be analyzed in less detail.

( 2 ) Review of Existing Regulations

Section 4 of the Executive Order calls for the re'. iew of existing regulations. To comply. EPA h is established rtntei la and processes to select regulations for irnmeditite reviev. ;ind

to identify additional regulations for subsequent review. Section 2 of the Executive Order requires that each new

Significant regulation include a plan for its future evaluation,

(a) Selection Criteria and Process Many of EPA's most important regulations have recently

been reviewed or scheduled for review in response to statutory or judicial direction: Air Program —Ambient Air Quality Standards —New Source Performance Standards —Approval of State Implementation Plans Water Program —Best Available Technology for Primary Industries —Water Quality Management and Standards Regulations —NPDES Permit Regulations —Construction Grants Regulations

This set of reviews is either under way or completed. To

make the review of existing regulations a comprehensive

program, EPA has begun to screen all of its existing

regulations. The screening will conclude in November 1979. The EPA program office responsible for each part (or subpart) of Title 40 of the Code of Federal Regulations

(which contains almost all of EPA's regulations) has formed

work groups to conduct the screening.

The lead office, with the advice and assistance of the work

group, is relying on currently available data for this initial screening. The selection criteria are; —Estimated high actual costs to the public of the regulation; —Estimated low actual benefits; —Existence of overlap with other regulations (issued by

EPA or other agencies); —Need for integra'tion with other programs; —Existence of preferable alternatives; —Low degree of compliance; —Low enforceability; —High reporting burden; —Lack of clear language; —Length of time since the regulation became effective or was last substantively amended; * —Intensity of public sentiment in favor of changing the regulation; —Availability of adequate data for analysis of the effectiveness and cost of the regulation.

During the screening the lead office will summarize its assessment of each regulation and designate appropriate

regulations for formal review. It will prepare a plan to review all regulations so selected within five years. When

possible the lead office will schedule related regulations for review at the same time. The review plan will include an estimate of the necessary

dollar resources and identify data needed for the review.

Where there are not sufficient data for review, the plan will include provisions for obtaining them. The lead office should

make any request for additibnal or reprogrammed resources

EPA is now writing regulations that will be adopted during the screening

project, including regulations to implement a hazardous waste control program, identify criteria for acceptable landfills, and set various new air quality and drinking water standards. Such new regulations are not subject to the screening or review requirements listed in this Part. They are subject to section (c) of this Part which asks that each new Significant regulation contain an evaluation plan. 51
30996 Federal Register / Vol. 44, No. 104 / Tuesday, May 29. 1979 / Notic es

to carry out its review plan through the zero base budget

process. The lead office will submit designated regulations and

review plans to the Steering Committee for review and to senior management for approval.

EPA will publish its five-year review schedule in 1979 and

will indicate upcoming reviews as a regular part of its quarterly Regulatory Agendas.

(b) Nature of the Review

Once it has selected a regulation for review, the lead office will conduct the review at the time scheduled in the five year

plan with the advice and assistance of a work group. The review of existing regulations will follow the procedures for the development of new regulations, including measures to assure public participation. The review will not

duplicate any analyses made when the regulation was first issued if the analyses are still valid and meet current quality standards.

(c) Development of Evaluation Plans

Section 2(d)(8) of the Executive Order requires that each new Significant regulation have a plan for evaluating its effectiveness. In compliance with this requirement, the lead

office for each Significant regulation develops a plan to evaluate the regulation within five years of implementation.

Evaluation plans indicate the resource needs, data

requirements, and a schedule for conducting the subsequent

evaluation. One objective of the evaluation is to improve the relevance and adequacy of data collected over time to support the analysis of regulatory effectiveness. In order to invite public involvement in these evaluations, a schedule of

upcoming assessments will appear regularly in EPA 's Regulatory Agenda.

If an evaluation leads to modification of the regulation, the

full procedures of this report (including provisions for external participation) will apply.

Part of each evaluation will be a plan and schedule for subsequent evaluation. In this way EPA regulations will receive continuing retrospective reviews.

PART 0: REPORTING BURDENS REDUCTION

To carry out its statutory mandates, EPA must obtain data

from the public, industry, and State and local governments.

We often request data on environmental (health) effects, economic parameters, pollutant discharge and emission

rates, and much more. EPA’s permit and grant programs also require submission of applications that often contain

detailed requests for information. While this information remains essential, EPA has

installed mechanisms to minimize paperwork, record- keeping and reporting burdens wherever possible. These

devices comply with Section 2(d) of the Executive Order,

which requires an analysis of new reporting or record- keeping burdens before Significant new regulations are adopted; and with Section 4 which requires a review of burdens imposed by existing regulations.

First, EPA has established a “sunset” policy on reporting

and recordkeeping requirements contained in new

regulations. This will terminate automatically those reports

that cannot be justified after a set period, usually five years.

If a lead office requests renewal of a reporting requirement,

EPA will conduct an internal review (not to exceed six months) of its costs and its benefits. The reporting

requirement will not expire during the time it is under

review. The review process will include an early opportunity

for public comment. Only after this review, and upon order

of the Administrator, will a reporting requirement continue

bevond iis sunset date. (See Appendix A for details of this policy.)

Second, EPA requires a "reports impact analysis" for all new Significant regulations. This analysis is part of the decision package that moves through the review stages

described in Part A. The analysis describes the reason for the reports, evaluates major alternatives (including the use

of existing sources of information), outlines the information

requested and the form of the report, and estimates the costs

for the Agency and for those reporting to collect, prepare and

analyze the data. The analysis describes any known

overlapping data requirements imposed by other government

agencies in order to prevent duplication of burdens. EPA

considers public comments on the analysis before it issues the regulation.

Third, EPA continues to include a request for public

comment on reporting burdens in the Federal Register

preambles for proposed new regulations. In the past. EPA

has sent these comments to the Office of Management and

Budget when seeking 0MB clearance for the report. The lead

office and work group consider these comments in drafting the final regulation.

Fourth, as part of its screening and review of existing

regulations (according to subpart C.2 of this report) EPA is re-examining reporting and record-keeping requirements.

These reviews follow the public participation measures used

for new regulations.

APPENDIX A—SUNSET POLICY FOR NEW REPORTING

REQUIREMENTS

I. Coverage

New regulations that impose a reporting or record-keeping

requirement contain a provision for repeal of that requirement on a specific date unless action is taken by EPA

to renew or modify it. This policy places a continuing burden of proving the

report's desirability on those who advocate its retention. The

process will include participation by affected parties and

the general public.

The lead office proposing a new regulation that imposes a reporting requirement must include a sunset provision. The

lead office has three options:

(1) To set as a termination date the semiannual sunset date (May 1 or November 1) that falls within 5 years

after reporting begins (e.g., a reporting requirement

taking effect on January 1, 1979 would expire no later than November 1, 1983).

(2) To set an earlier or later sunset date, depending on

such factors as the life-span of the program for which the information is being sought; the time needed to evaluate

the usefulness of the report; and the burden that frequent

changes in the reporting requirement might impose.

(3) To exempt the reporting requirement from the sunset process if the resources that would be needed for a sunset review are greater than the burdens imposed by

the report itself, or if the report is required by statute.

II. Review

The review process will begin six months before the scheduled sunset date. At that time, EPA will publish in ts Regulatory Agenda a list of reporting requirements due lo expire on the next semiannual sunset date. This notice will

invite public comment on the need o- review, mi d r or

terminate any of the requirements s wduled to expire. Tl'c EP\ lead office administering the re 4 uirement and any

52
Federal Register / Vol. 44. No. 104 / Tuesday. May 29. 1979 / Notices 30997

outside party affected by the program may request renewal

for an appropriate period.

After 60 days, another public notice will list those

reporting requirements for which renewal has been

requested. It will invite further public comment to be

included in a public docket for each requirement.

The lead office that administers the requirement will evaluate it, inviting other interested EPA offices (including

the office with responsibility for reports management) to participate on a work group. The evaluation will resemble

the reports impact analysis for new regulations, but will

reflect the actual costs, burdens, and usefulness of the reporting requirement. The program office and work group

either must provide a justification for renewing the requirement or recommend that it be modified or terminated.

The Steering Committee will review the assessment along

with public comment and Agency responses to those comments and recommend to the Administrator that he

renew, modify, or terminate the reporting requirement. Upon

his approval the Administrator will sign an order

implementing the decision. On the sunset date, a Federal Register notice will list those regulations repealed and those renewed. Reporting

requirements will not lapse while they are under review. In the case of a regulation for which modification is proposed

EPA will retain it until the Agency completes procedures to implement the modified regulation.

APPENDIX B—RESPONSE TO PUBLIC COMMENTS

I. Background

In the two months following publication of its draft report on improving the regulation writing process, EPA received 65

written comments from interested organizations and

individuals. These suggestions and critiques came from

private companies, trade associations, governmental

agencies, public interest groups and citizens. They were

carefully considered along with transcripts from public

meetings in San Francisco, Kansas City and Washington,

D.C., as the EPA staff prepared the final report on the regulatory process. This summary of public comments cannot begin to catalog

the depth and variety of thoughtful comments EPA received.

All of the public comments, however, have been compiled

for internal use, especially in drafting public participation

provisions of the proposed "EPA Guidelines for Regulatory

Development.” For a detailed compilation of public

comments please contact Chris Kirtz, EPA, (PM-223),

Washington, D.C. 20460.

II. Analysis for New Regulations

One of the most important revisions had to do with the impact of EPA regulations on local communities. As a result of comments, a new criterion has been added to the list of items to be considered in the Regulatory Analysis conducted

for new regulations. In the future each new regulation will be

examined for any disproportionate effects it might have on

particular regions or localities. Similarly, regulations that do

not require a Regulatory Analysis will also be studied for an

estimate of the impacts on particular regions or localities that are most severely affected.

In addition EPA has specified that economic analyses of new regulations consider the positive as well as any

negative economic consequences of the regulation being

proposed. This suggestion came from several commenters.

Because EPA nas to regulate in situations where

information is imperfect or incomplete, certain assumptions

must be made. In the future, the analyses will state these assumptions explicitly and their rationale. A number of commenters suggested that the quantitative

criteria for preparing a formal Regulatory Analysis—$100

million in annual costs or 5% impact on product costs—are

too high. We retained these criteria, which EPA has used for preparing Economic Impact Assessments in the past. EPA

will subject all regulations to rigorous economic analysis, but

feels it must marshal its analytic resources to provide the most thorough analysis on the regulations with greatest

potential impact.

III. Review of Existing Regulations

The public’s concern with procedures for reviewing

existing regulations led to modifications in the final report. Those commenting on the review process agreed that EPA

must take into account the cumulative effects of related

regulations. In the future, lead offices will schedule existing related regulations for review at the same time when

possible. Because the public expressed interest in which

regulations will be reviewed and when the review will take

place, EPA will publish a five year review plan that will list all the major existing regulations scheduled for scrutiny.

Upcoming reviews of individual regulations will also be

listed in EPA’s quarterly Regulatory Agenda.

Several commenters recommended a “sunset" policy for

all EPA regulations. EPA believes that the existence of expiration dates for its regulations could give those regulated an incentive to delay compliance. However, the final report

clarifies the Agency's intent to conduct a fresh evaluation of regulations every 5 years.

IV. Paperwork Burdens

Some commenters expressed concern that EPA regulations

might impose reporting or record-keeping burdens

duplicating those of other government agencies. In response

to this concern, EPA lead offices are now required to describe in their “reports impact analysis,” known data

requirements imposed by other agencies so that duplication can be avoided. This reports impact analysis will be

presented for Administrator and senior management review

in each decision package going to the Administrator for signature.

There was extremely broad support for EPA's proposed

“sunset" provision that will set a five-year time limit for reporting and record-keeping requirements unless a need for their continuance is demonstrated. The final report clarifies that “sunset” covers both reporting and record-keeping and

makes it clear that the burden of proof rests with those advocating retention of the requirements.

V. External Participation

Most commenters, particularly the participants in the public meetings, were interested in the public participation

procedures for EPA regulation writing. Based on their suggestions, EPA has made several modifications for this final report. To make sure there is no delay in informing the public about a proposed regulation, a new requirement has

been added. Whenever a lead office Assistant Administrator

learns that a new regulation will be required—due to new

legislation, a court order, etc. —the lead office will submit a notification form within 45 days. The next Regulatory

Agenda will provide public notice that action is intended. As another step to keep the public regularly informed of work in progress, EPA has expanded the publication of ds Regulatory Agenda from twice a year to Four times a ye ir. Co.Timents on the importance of early and informed public

participation generated additional procedural changes.

53
30998 Federal Register / Vol. 44, No. 104 / Tuesday. May 29. 1979 / Notices

including requirements that (1) the lead office keep lists of

interested and affected people outside the Agency for use as contact points for each regulation: (2) the Agency provide

appropriate background information for public use prior to public meetings: and (3) the Agency distribute Advance

Notices of Proposed Rulemaking as widely as possible.

There were several comments that a 60-day public

comment period for proposed regulations is too short, that EPA should more frequently hold meetings and hearings in relevant field locations, and that State and local governments should be invited to consult on new

regulations. The final report does not address these

suggestions: the Agency will investigate these points more

carefully as it develops its Agency-wide guidance on

external participation and as it formulates its new inter- governmental consultation procedures in compliance with

the President's March 1978 memorandum.

Opinion was divided on whether EPA should fund

external participation in regulation development. The final report takes no position on this matter. EPA has undertaken

a pilot funding program and will base its policy on the

results of the test program.

54
U.S. DEPT. OF COMM.

BIBLIOGRAPHIC DATA

SHEET

1. PUBLICATION OR REPORT NO. NBSIR 80-2123

Roi 3. Redptenfs Acctssipn Ho.

4. TITLE AND SUBTITLE

Need for Economic Information on Standards Used in Regulatory

Programs: Problems and Recommendations

7. AUTHOR(S)

Maureen Breitenberg

5. Publication Date September 1980

8. Performing Organ. Report No.

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, DC 20234

11. Contract/Grant No.

12. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS rSfreer, city, state, ZIP)

Office of Engineering Standards

National Bureau of Standards

Department of Commerce

Washington, D.C. 20234

13. Type of Report & Period Covered Final

15. SUPPLEMENTARY NOTES

I I Document describes a computer program; SF-185, FIPS Software Summary, is attached.

IS. ABSTRACT (A 200-word or leas factual eununary of moat aignificant Information, If document includes a significant bibliography or

literature survey, mention it here.) A number of government regulatory agencies are increasing their use of standards

developed by the private sector. Federal regulators are, however, being required

to provide increasing justification for their regulations, especially information

on their econcmic desirability. If regulators are to effectively use voluntary

standards in their regulations rather than develop standards in-house, they will

need the same types of economic information on the voluntary standards as they

would have on their in-house standards. This paper describes the types of

requirements and pressures that regulatory agencies are faced with in justifying

their actions, and provides standards writers with guidelines on the types of

economic information that may allow regulators to make greater use of voluntary

standards

.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first tetter of the first key word unless a proper name;

separated by semicolons)

Economic information on standards. Standardization, Procedural history. Rationale,

Federal use of voluntary standards. Economic impact of standards. Economic

impact of regulations.

18. AVAILABILITY [^Unlimited 19. SECURITY CLASS

(THIS REPORT)

21. NO. OF

PRINTED PAGES

1 1 For Official Distribution. Do Not Release to NTIS UNCLASSIFIED 61

1 1 Order From Sup. of Doc., U.S. Government Printing Office, Washington, DC

20402, SD Stock No. SN003-003-

20. SECURITY CLASS

(THIS PAGE)

22. Price

[Xl Order From National Technical Information Service (NTIS), Springfield,

VA. 22161 UNCLASSIFIED

$7.00

USCOMM>DC
' '{

If*!'*

.Hf-,

• <u T

__ ^ „d ^.i • •_. ••_!_!? , i <*>f ;^fHt w»

'

'>*»<» *k^--.-‘M -V. *y.lh

u >v^«4-

4 r i-m* n i*Ai, Mi ^

T<2|>\ 4’1‘tl^fiy llTir-tTQlj' ijllii^.*' jfc., -l-l

"00

r*»mr^t».l.w WTOf»> ^l&

'

i'S'.,'\

't* - . M^ »i ^> — iiii <rft0 A “h «#ft -ll X4»t!’^ .r , , •V ’ ><'* r

V/.S

i _c^- -^'.

’ 'W V,<!>f(i-A^

4. t^i

• ' '>%it;%i

' w

kl'1

ill nbtBisnbit r?s^!jjiW-ii[

'

' '' ‘r'

^ • f^yiiMks^ %3^‘ ifittmrac^

I w iiiUiifpi** *nw

[,:»yt prv^ I

I t*W«r\* tUfaiwlMi t«w33l51^^ ./ 'fl

* ¥^. m- • >' .- V-.T---— *v- . ^hUMkona^ ^ *ai im!!i''|ljjite.iK4 indiii^Ai

jB^tt«ji4rr 'anlisirf .T^wawihrf pShr*itifelirfw»Tr 'firiwih«i!l .>ni':’iA*TA't4rvrw''*rft.

' bb^itd^ 3ola<f ^td*^**^ cWAliJl5^t lntJ<w*i /so;r,3^TeKftviT^'#4tj:^

nui^«At^3i^

X^isMdm fsm pn si» II ad|atort(KJ6' xiaitJ ist> ^ Xiiv vwit tk3»pts^ %xtiro^ niaf^ iSX

lo 8fl«nJ «ft> ?>dd[ii:ia«^.m<^ ;4fcljr^|»sNp *8^ j» ov»f(;^‘«>fr

»"i« ^oavga xio^XJi^^ jriiii? miit^f^ia hot, eio^idtJp^ ^

a^qxtf j«l# i»*t«^/ofc>£«S;iwlWf' Wifi ,enpi'j»',-iiari®

-^^rr«>fmi|dv M ejuJti^i'trjoIlti^ WmK>:3^

*>;

,• ^

•‘^

. t • f tf

»’ ‘f

'‘ i

*«aSvtMt '>«rt))V <mU l«i vuimit.mM •«! "m

^aUisiiiSa^ »XWajbi Xii*ttiti^>ooirt( ,,

,

‘!>XiKvta'3a , sibistos^e ^

/oficittt

' -' -i[ '*' ’ 'IV'* '

^ M ,tl

i^gf^no aciiit . Zr

rrJPiEintJ lo

• wbXtt-* ,

' If' w J -«’

»sfiiw (W1

't

VTIJ18AJI

08r%»2Aj0«nj f£T¥i<it'-mp^'i0.*p

H .'.Iff- jfOkwojOti

lb

15^-

QSti*nt^rm

9

g

••*-’,

, r" J~^ Z' ^ • —• •—^ ^

. » "_>. V^

Ifk: '•’.'Z^'^

<• V

li