The Economic and Safety Impacts of 

Performance-Based Regulation and 

Consensus Standards

Catherine L. Taylor

Don Dinh

U.S. Department of Transportation

Office of the Secretary of Transportation

John A. Volpe National Transportation Systems Center

March 12, 2015

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The Economic and Safety Impacts of Performance Based Regulation and Industry Consensus 

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13. ABSTRACT (Maximum 200 words)

In response to Public Law 113-53, the “Small Aircraft Revitalization Act of 2013,” the Federal Aviation Administration (FAA) is conducting a rulemaking to reorganize part 23 of the Federal Aviation Regulations (FAR) related to airworthiness standards for small aircraft. The reorganization 

of part 23 will involve replacing current prescriptive requirements with performance-based regulations and streamlining the approval of safety 

advancements by using consensus standards to clarify how the objectives in part 23 can be met using specific designs and technologies. The 

text of the Small Aircraft Revitalization Act mentions several motivations for the changes including: improving safety, reducing regulatory 

compliance costs, spurring innovation and technology adoption. Further, as the title of the law suggests, it is hoped that these changes will 

revitalize the small aircraft manufacturing industry. This report investigates whether performance-based regulation (PBR) or streamlining of 

regulatory approval via use of industry consensus standards in other sectors has resulted in the positive outcomes anticipated in relation to the 

part 23 reorganization. 

14. SUBJECT TERMS

Part 23 Reorganization, Performance-Based Regulation, PBR, Performance Standards

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i

Contents

List of Abbreviations.............................................................................................................. ii

Executive Summary ............................................................................................................... 1

1. Introduction ................................................................................................................... 3

2. Background .................................................................................................................... 4

2.1 Performance-Based Regulation .................................................................................................. 4

2.2 Variations Within Performance Based-Regulatory Regimes ...................................................... 5

2.3 Consensus Standards.................................................................................................................. 6

3. Impacts of Performance-Based Regulation...................................................................... 9

3.1 Cost Savings and Efficiency ......................................................................................................... 9

3.1.1 Magnitude of the cost savings..................................................................................... 11

3.2 Innovation and Safety Improvements ...................................................................................... 12

3.2.1 Removing Impediments to Meeting Consumer Demands........................................... 13

3.2.2 Spurring Technology Diffusion..................................................................................... 14

3.2.3 Creating Radical Innovation......................................................................................... 16

3.3 Industry Revitalization .............................................................................................................. 16

3.4 Limiting Factors......................................................................................................................... 17

4. Industry Consensus Standards ...................................................................................... 19

4.1 Innovation................................................................................................................................. 20

4.2 Product Costs............................................................................................................................ 20

4.3 Safety ........................................................................................................................................ 21

4.4 Industry Revitalization .............................................................................................................. 22

4.5 Caveats...................................................................................................................................... 22

5. Other Experiences with PBR and Other Regulatory Reforms.......................................... 23

5.1 HACCP in Food Safety ............................................................................................................... 23

5.2 New Zealand Leaky Building Crisis............................................................................................ 24

6. Conclusions .................................................................................................................. 26

7. References ................................................................................................................... 27
ii

List of Abbreviations

Abbreviation Term

APO Office of Aviation Policy and Plans

ASTM American Society for Testing and Materials

BIA Building Industry Authority

BSEE Bureau of Safety and Environmental Enforcement

CAC Command-and-Control Regulations

CAFE Corporate Average Fuel Economy

CCP Critical Control Point

COTS Commercial-off-the-Shelf components

CPSC Consumer Product Safety Commission

EPA Environmental Protection Agency

FAA Federal Aviation Administration

FAR Federal Aviation Regulations

FSIS Food Safety Inspection Service

GA General Aviation

GAO US General Accounting Office

HACCP Hazard Analysis Control Point

LSA Light-Sport Aircraft

NAHB National Association of Home Builders

NHTSA National Highway Traffic Safety Association

NRC Nuclear Regulatory Commission

OMB Office of Management and Budget

OSHA Occupational Safety and Health Administration

PBR Performance-based Regulations

PHMSA Pipeline and Hazardous Material Safety Administration

PIO Pilot Induced Oscillation

R-LOC Runway Loss of Control

SAE Society of Automotive Engineers

S-LSA Special Light Sport Aircraft

SMS Safety Management Systems

USCG United States Coast Guard

USDA U.S. Department of Agriculture
1

Executive Summary

In response to Public Law 113-53, the “Small Aircraft Revitalization Act of 2013,” the Federal Aviation 

Administration (FAA) is conducting a rule-making to reorganize part 23 of the Federal Aviation 

Regulations (FAR) related to airworthiness standards for small aircraft. The reorganization of part 23 will 

involve replacing current prescriptive requirements with performance-based regulations and 

streamlining the approval of safety advancements by using consensus standards to clarify how the 

objectives in part 23 can be met using specific designs and technologies. The text of the Small Aircraft 

Revitalization Act mentions several motivations for the changes including: improving safety, reducing 

regulatory compliance costs, spurring innovation and technology adoption. Further, as the title of the 

law suggests, it is hoped that these changes will revitalize the small aircraft manufacturing industry. 

The FAA Office of Aviation Policy and Plans (APO) has asked the Volpe Center to investigate whether 

performance-based regulation (PBR) or streamlining of regulatory approval via use of industry 

consensus standards in other sectors has resulted in the positive outcomes anticipated in relation to the 

part 23 reorganization. 

Regarding the use of PBR, this research finds the following:

• The available literature is practically unanimous in the assertion that PBR would result in lower 

production costs for industry, i.e. higher production efficiency. The basis for this assertion is that 

firms will naturally seek cost savings efficiencies in an effort to maximize profits. The argument 

is that prescriptive regulations impede firms from adopting least cost processes, while PBR 

affords the flexibility to meet regulatory goals using a least cost option that is tailored to their 

own circumstances. 

• Performance-based standards will not by themselves spur innovation and progress toward new 

safety features. PBR will not necessarily provide an incentive to go beyond the standard set by 

the regulatory agency. Therefore, the advantage of PBR regarding fostering innovation related 

to safety and other product features is that the flexibility afforded by PBR will not impede the 

adoption of the innovations.

• If the regulating agency wishes to promote diffusion of certain technologies, PBR is capable of 

serving that function. By carefully crafting performance based standards and by tightening those 

requirements over time as new technology becomes available, PBR would be able to speed the 

diffusion of technological improvements.

• To the extent that design standards inhibit competition in a market, moving to performance 

standards may increase competition and foster growth in the market. In addition, the use of PBR 

can facilitate the use of cost saving measures and remove barriers to innovation. In turn, lower 

prices and innovative product features can spur demand and revitalize an industry.
2

• Based on the experience for the LSA segment, it appears that using consensus standards as a 

way of streamlining the aircraft certification process has resulted in lower costs of certification 

and facilitated the introduction of new and innovative designs. 

Based on these findings, it appears likely that adopting PBR as a method of safety regulation for part 23 

small general aviation aircraft will result in many of the positive impacts mentioned as objectives of the 

“Small Aircraft Revitalization Act of 2013.” However, the magnitude of the positive impacts will be 

determined by how much freedom and flexibility the new performance standards actually provide.

Providing guidance on “means of compliance” through consensus standards acts will assist 

manufacturers in developing methods for meeting the performance standards. However, it is possible 

that those consensus standards may turn out to be de facto design standards and erode the potential 

benefits of adopting PBR.
3

1.Introduction

In response to Public Law 113-53, the “Small Aircraft Revitalization Act of 2013,” the FAA is conducting a 

rule-making to reorganize part 23 of the Federal Aviation Regulations (FAR) related to airworthiness 

standards for small aircraft. The reorganization of part 23 will involve replacing current prescriptive 

requirements with performance-based regulations and streamlining the approval of safety 

advancements by using consensus standards to clarify how the objectives in part 23 can be met using 

specific designs and technologies. The text of the Small Aircraft Revitalization Act mentions several 

motivations for the changes including: improving safety, reducing regulatory compliance costs, spurring 

innovation and technology adoption. Further, as the title of the law suggests, it is hoped that these 

changes will revitalize the small aircraft manufacturing industry. 

The FAA Office of Aviation Policy and Plans (APO) has asked the Volpe Center to investigate whether 

performance-based regulation (PBR) or streamlining of regulatory approval via use of consensus 

standards in other sectors has resulted in the positive outcomes anticipated in relation to the part 23 

reorganization. Specifically, APO asked the following questions:

• Did PBR or use of industry consensus standards lead to lower product costs? If so, what was the 

magnitude of the cost reductions?

• Did PBR or use of industry consensus standards spur innovation, lead to wider spread adoption 

of new technology, or foster faster introduction of safety improvements?

• Did PBR or use of industry consensus standards lead to higher numbers of products being sold 

or another form of industry revitalization?

The document presents the results of the Volpe Center’s research into these topics. The remainder of 

this report is organized as follows:

• Section 2 provides background information on PBR and use of consensus standards 

• Section 3 discusses the economic and safety impacts of PBR

• Section 4 discusses the economic and safety impacts of the use of consensus standards

• Section 5 provides additional experience with PBR and other regulatory reforms

• Section 6 provides conclusions of the research.
4

2. Background 

2.1 Performance-Based Regulation 

The available literature is remarkably consistent in its description of PBR. The basic idea of PBR is to use 

performance standards or goals to define the regulatory objective and allow the regulated entity 

freedom and flexibility to determine the best way to meet the standard.

• “[Performance-based regulations] stipulate a performance goal but allow the firms flexibility in 

determining how best to meet that goal [1].”

• “When a regulation sets performance goals, and allows individuals and firms to choose how to 

meet them, it is called a performance-based regulation [2].”

• “Performance based regulation can be defined as regulation that specifies required outputs, 

rather than inputs and thus provides a degree of freedom to the regulated to determine how 

they will achieve compliance [3].”

• “In contrast to design standards, performance standards set a general attainment target but 

leave firms free to decide how to meet the goal [4].”

• “Performance-based models, often referred to as “outcome-based” or “market-based” 

regulation, specify an outcome to be achieved without prescribing the specific requirements to 

reach that outcome [5].”

• “Performance-based approaches focus primarily on results. They can improve the objectivity 

and transparency of [U.S. Nuclear Regulatory Commission (NRC)] decision-making, promote 

flexibility that can reduce licensee burden, and promote safety by focusing on safety-successful 

outcomes [6].”

• “A performance based regulatory standard is a requirement, regulation or rule that identifies 

the desired outcome of the system but gives the developer the discretion in how they achieve 

the outcome [7].”

• “Performance based legislation means regulation which prescribes the outcomes to be achieved 

rather than focusing on the step by step processes to which businesses must comply. This allows 

industries as well as individual firms to take different (and optimal) approaches to achieving 

outcomes or performance targets [8].”

• "Performance standard" is a standard as defined above that states requirements in terms of 

required results with criteria for verifying compliance but without stating the methods for 
5

achieving required results. A performance standard may define the functional requirements for 

the item, operational requirements, and/or interface and interchangeability characteristics. A 

performance standard may be viewed in juxtaposition to a prescriptive standard which may 

specify design requirements, such as materials to be used, how a requirement is to be achieved, 

or how an item is to be fabricated or constructed [9].”

The counterpart of performance-based standards is prescriptive standards. Prescriptive standards are a 

variety of command-and-control (CAC) regulations that specify exactly how to achieve compliance by 

dictating technologies or processes.

Another alternative to CAC regulations that is often mentioned in the context of PBR is managementbased regulation. Management-based regulation “directs regulated organizations to engage in a 

planning process that aims toward the achievement of public goals, offering firms flexibility in how they 

achieve public goals [10].” Examples of management-based regulations are requirements for Safety 

Management Systems (SMS) required by several US DOT modal agencies, certain requirements imposed 

on nuclear power facilities by the US Nuclear Regulatory Agency (NRC), and food safety processes 

required by USDA and FDA. In general, these management-based regulations apply to entities 

conducting ongoing repeated processes that require continual monitoring for safety. As such, results of 

this type of regulation are of limited applicability to the part 23 experience since the part 23 

airworthiness certification process for the most part requires a one-time review of an aircraft design. 

However, in the food safety context, the management-based regulation is paired with a performance 

standard. The use of performance standards in food safety is discussed in Section 5.1 below.

Market-based regulation is also widely mentioned in the context of PBR. Market-based regulation uses 

prices and other economic incentives to promote certain policy goals; they are most often used in 

environmental regulation. Prominent examples of market-based regulations are carbon taxes and 

emissions trading permits where the use of economic mechanisms cause firms to internalize the 

external costs they would otherwise not pay directly (often called social costs , or simply externalities) of 

their activities. The issue of externalities is of limited relevance to the part 23 reorganization, so while 

there is significant literature on the experienced impacts from market-based regulations, that literature 

has been largely set aside for the purposes of this report. 

2.2 Variations Within Performance Based-Regulatory Regimes

There are several variations in performance-based regulation in practice. A full taxonomy of PBR 

applications has not yet been developed but a discussion of a few key areas of variation is useful.

Performance standards can be either tightly or loosely specified. More loosely specified standards tend 

to use qualitative standards such as “sufficient” or “reasonable.” The lack of specificity requires

regulators to make judgments when assessing whether the standard has been met. As such, those types

of standards are not very precise and the ultimate goals of the regulation might not be achieved. A more 
6

tightly specified standard would use a quantitative measure to determine compliance. Further those 

quantitative measures may either be directly observed or they might be based on predictions or

simulations. For example, the quantitative environmental standard for a coal-fired power plant might 

involve directly measuring emissions from a smoke stack while the safety standard at a nuclear power 

plant might be based on computer simulations that run a system through a variety of high-risk scenarios

[2].

An additional distinguishing factor among different PBR regimes is the degree to which prescriptive 

requirements are also included; few regulatory regimes are pure PBR. Often the regulations are a hybrid 

of prescriptive requirements with additional performance standards. One approach is to have design 

standards as the regulation but allow exemptions if a petitioner can demonstrate an equivalent level of 

performance. Alternatively the rules may be performance-based but may offer strong guidance 

involving acceptable designs that would meet the performance-standards.

The spectrum of possible performance-based standards can also be related to the distance the standard 

is from the ultimate goal of the regulation. In relation to the part 23 reorganization, the ultimate goal of 

the regulation is the safety of the aircraft occupants, those on the ground, and occupants of other 

aircraft sharing the airspace. Potentially, the performance standard could relate to an allowable number 

of fatalities or injuries per unit (say, hours flown, or per flight). However, such a performance standard is 

not practical or advisable for a number of reasons. First, the number of fatalities resulting from a certain 

aircraft model depends on many factors outside the manufacturer’s control such as the weather, airport 

configuration, human error, maintenance, etc. In addition, the general public would likely find it highly 

objectionable for a safety-focused agency to describe as acceptable any number of fatalities or injuries 

other than zero.

A step further from that purest form of performance standards would be performance standards related 

to each individual safety system on the aircraft. The performance standards for that level might be 

relate to a standard for the minimum power of an engine, or the reliability of a navigation system, etc. 

Further down the spectrum might be a performance standard for individual part of the aircraft, such as 

a strength test for a certain welding seam.

2.3 Consensus Standards

OMB Circular 119 requires all federal agencies to use “voluntary consensus standards” instead of 

government-unique standards in their procurement and regulatory activities, except where inconsistent 

with law or otherwise impractical. One of the stated goals of the government for requiring the use of 

voluntary census standards is to “reduce the burden of complying with agency regulation.” The 

definition of “voluntary consensus standards” from OMB Circular 119 is provided in Figure 1, below. The 

definition emphasizes that the process by which the standards are developed should be characterized 

by: openness, balance of interest, due process, an appeals process and consensus (not unanimity).
7

Usually consensus standards are used either to specify a level of performance or to produce 

harmonization or interoperability among products developed by different manufacturers. In some cases 

Federal regulatory agencies incorporate consensus standards by reference within the regulations. For 

instance, the National Highway Transportation Safety Administration incorporates standards developed 

by the Society of Automotive Engineers (SAE) for items such as automotive safety glass, headlamps, 

window defrosting systems, etc.1

The role of consensus standards for the part 23 reorganization is bit different than for other contexts. In 

the case of part 23, the FAA regulations will specify the performance standards. They will not be 

developed through a consensus standards body. However ASTM, the international standards 

organization, will develop a set of consensus standards that will provide guidance on “means of 

compliance” with the FAA regulations. The FAA will still conduct an assessment to make sure that the 

aircraft design meets the performance standards in the regulations but the process for that review will 

be streamlined. In addition, once a design feature has been approved by FAA, it can be referenced by 

other designers and manufacturers that wish to include that feature. This change to process is expected 

to result in significant cost savings related to aircraft certification.

Use of international consensus bodies like ASTM may also produce harmonization of the general 

aviation regulations among different countries. Such harmonization would have advantages to general 

aviation (GA) manufacturers who could then sell the same model aircraft in multiple countries. As a 

result of larger markets for each model of aircraft, manufacturers can increase their production of each 

model and perhaps realize cost savings due to economies of scale.

 

1 For an example, see 49 CFR 571.5.
8

Figure 1. Definition of Voluntary Consensus Standards from OMB Circular 119

4. What Are Voluntary, Consensus Standards? 

a. For purposes of this policy, "voluntary consensus standards" are standards developed or 

adopted by voluntary consensus standards bodies, both domestic and international. These 

standards include provisions requiring that owners of relevant intellectual property have 

agreed to make that intellectual property available on a non-discriminatory, royalty-free or 

reasonable royalty basis to all interested parties. For purposes of this Circular, "technical 

standards that are developed or adopted by voluntary consensus standard bodies" is an 

equivalent term. 

(1) "Voluntary consensus standards bodies" are domestic or international organizations 

which plan, develop, establish, or coordinate voluntary consensus standards using 

agreed-upon procedures. For purposes of this Circular, "voluntary, private sector, 

consensus standards bodies," as cited in Act, is an equivalent term. The Act and the 

Circular encourage the participation of federal representatives in these bodies to increase 

the likelihood that the standards they develop will meet both public and private sector 

needs. A voluntary consensus standards body is defined by the following attributes: 

(i) Openness. 

(ii) Balance of interest. 

(iii) Due process. 

(vi) An appeals process. 

(v) Consensus, which is defined as general agreement, but not necessarily unanimity, 

and includes a process for attempting to resolve objections by interested parties, as 

long as all comments have been fairly considered, each objector is advised of the 

disposition of his or her objection(s) and the reasons why, and the consensus body 

members are given an opportunity to change their votes after reviewing the comments. 

b. Other types of standards, which are distinct from voluntary consensus standards, are the 

following: 

(1) "Non-consensus standards," "Industry standards," "Company standards," or "de facto 

standards," which are developed in the private sector but not in the full consensus 

process. (2) "Government-unique standards," which are developed by the government for 

its own uses. 

(3) Standards mandated by law, such as those contained in the United States 

Pharmacopeia and the National Formulary, as referenced in 21 U.S.C. 351. 
9

3.Impacts of Performance-Based 

Regulation

The FAA directed this research to investigate the economic and safety impacts of PBR that have been 

experienced in other contexts. Unfortunately, after a careful and thorough review of the available 

literature, we found only minimal empirical research related to measured impacts from real world 

applications of PBR. 

In 2002, the Regulatory Policy Program at the Center of Business and Government at Harvard 

University’s Kennedy School of Government convened a workshop to “see what could be learned from 

agencies’ experience with performance standards and to begin to identify the likely conditions for the 

effective use of performance standards.” Representatives from several U.S. regulatory agencies as well 

as several academics participated. The report on the proceedings of that workshop was very useful 

resource for this paper and it is cited in several places. However, an important conclusion from that 

workshop is that there has been little empirical evidence of the effectiveness of PBR works in practice

[2]. 

More recently, in the wake of the Deepwater Horizon oil spill, The Department of Labor, Occupational 

Safety and Health Administration (OSHA); Department of Interior, Bureau of Safety and Environmental 

Enforcement (BSEE); Department of Homeland Security, United States Coast Guard (USCG); 

Environmental Protection Agency (EPA); and Department of Transportation, Pipeline and Hazardous 

Materials Safety Administration (PHMSA) co-sponsored a stakeholder meeting on “the use and 

implementation of performance-based regulatory models for enhanced safety and environmental 

performance in the United States oil and gas industry [5].” The materials discussed at this more recent 

meeting did not provide new empirical information related to assessing the effectiveness PBR.

Nonetheless, this document provides an overview of the conceptual literature related to impacts of PBR

and, where available, qualitative discussion of the impacts from instances where PBR has been 

implemented.

3.1 Cost Savings and Efficiency

The FAA asked whether PBR would result in lower product cost to the consumer. The literature does not 

address that specific question but is practically unanimous in the assertion that PBR would result in 

lower production costs, i.e. higher production efficiency. The basis for that assertion is that firms will 

naturally seek cost savings efficiencies in an effort to maximize profits. CAC regulations impede firms 

from adopting least cost processes, but PBR affords the flexibility to meet regulatory goals using a least 

cost option that is tailored to their own circumstances. 

• “[An advantage of PBR is] that it uses market forces to encourage firms to find low-cost 
10

solutions to meet a given standards [1].”

• “By focusing on outcomes... performance standards give firms flexibility to seek the lowest-cost 

means for them to achieve the stated-level of performance [2].”

• “Setting performance standards and allowing choice of production methods and, over time, 

innovation to meet standards should allow greater efficiency in meeting a particular public 

health goal [11].”

• “Performance standards leave firms free to choose or invent least-cost solutions to given 

regulatory objectives. They foster innovation, impede competition less, and can produce more 

flexible, results-oriented policy than design standards [4].”

• “The performance-based approach is appealing because it holds the prospects for increased 

flexibility in how regulated entities meet regulatory objectives. This, in turn, may promote more 

cost-effective and innovative solutions. Because particular methods or technologies are not 

prescribed, performance-based approaches provide a more level playing field in the choice of 

products or technologies. This means particular suppliers or producers are not favored over 

others [12].”

• “Industry is constantly searching for ways of cutting costs and creating extra revenue. It is often

industry that is best suited to identify the most cost effective solutions using innovative

technologies, best practices and Commercial-off-the Shelf (COTS) components. The 

opportunities afforded by the introduction of performance based regulation can help to satisfy 

these needs. The freedom and choice passed to industry by identifying ‘what’ is required and 

not ‘how’ it is to be achieved should benefit all parties. The supplier is to be given the freedom 

to choose what standards they will follow in developing solutions to meet the requirements of 

the regulator. In turn they must be willing to shoulder some of the risk and responsibilities 

associated with the operation of their delivered product in service [13].”

• “With design standards there is little incentive for industry to develop a cheaper method to 

achieve a regulatory goal in question, because the new approach would not be consistent with 

the specified design. Design standards ignore the particular circumstances of individual firms or 

processes. At best, this is costly to firms; at worst, it makes compliance impossible [4].”

• “As we have achieved success, we have learned a great deal about the limitations of ‘commandand-control.’ Prescriptive regulations can be inflexible, resulting in costly actions that defy 

common sense by requiring greater costs for smaller returns. This approach can discourage 

technological innovation that can lower the costs of regulation or achieve environmental 

benefits beyond compliance [14].”

Circling back to FAA’s original question, whether those production cost savings resulting from a change 

to PBR are passed along to consumers would be determined by a variety of other factors related to the 
11

market for small general aviation aircraft such as amount of competition among suppliers to the 

industry and the availability of substitute products. Regardless of whether those cost savings are passed 

on to the consumer, doing the same work with fewer resources creates value for society.

3.1.1 Magnitude of the cost savings

While the literature was unanimous that cost savings should be expected from PBR relative to 

prescriptive standards, there is only very limited information available regarding what the magnitude of 

those cost savings might be. 

Figure 2 shows a comparison of CAC costs compared to least cost solution for a variety of air pollution 

control initiatives. The table shows that the cost of CAC solution in the available studies ranges from 

being seven percent higher than the least cost solution to 22 times the least cost solution [15]. However, 

it must be noted that the studies underlying the cost estimates reported in the table are all from 1984 or 

earlier and the least cost solution may not be related to PBR, but instead might be a form of marketbased regulation or another type of policy instrument. For instance, the 1983 study related airport noise 

control compared the costs associated with mandatory retrofitting of airplane engines with quieter 

technology to the use of noise charges. The table below is provided as context as to the magnitude of 

what the cost savings might be related to a move away from prescriptive standards but don’t necessarily 

map to the cost savings resulting from PBR.

Figure 2. Empirical Studies of Air Pollution Control Costs

Pollutants covered Year of Study Ratio of CAC Cost 

to Least Cost

Sulphates standards 1982 1.07

Airport Noise 1983 1.72

Sulphur Dioxide 1984 1.78

CFC emissions from non-aerosol applications 1980 1.96

Hydrocarbons 1984 4.15

Particulates 1984 4.18

Sulphur Dioxide 1981 4.25

Nitrogen Dioxide Regulations 1983 5.96

Particulates 1974 6.00

Particulates 1984 22.00

Another piece of information related to the costs of overly prescriptive regulations comes from a 1998 

survey conducted by the National Association of Home Builders (NAHB). That survey found that about 
12

ten percent of the cost of building a typical new home can be attributed to “unnecessary regulation and 

regulatory delays, fees associated with building, plumbing, electrical, and tree removal permits, disposal 

of construction wastes [16].” This example may be interpreted as an upper bound on the potential cost 

savings due to streamlining the aircraft certification process under part 23. First, it is derived from

survey data based on a builder’s interpretation of “unnecessary” which may not be an accurate 

accounting of which regulations are actually necessary. Second, the ten percent estimate includes the 

costs of permits which are probably used to cover the costs of site visits by inspectors. The cost of site 

visits by inspectors is generally incurred for each housing unit built whereas for part 23 the aircraft 

design would undergo one airworthiness review for the design and then unlimited numbers of units 

could be built without additional inspections related to the design. Therefore, the cost of the initial 

review could be spread out over many aircraft. 

Another cost savings estimate comes from a case study discussing the move by the Department of 

Health and Human Services to change to a performance approach to hospital fire safety. The change was 

estimated to save “one half of the costs of compliance [4].” The estimate is potentially useful because it

is derived from an instance where the regulating agency changed from prescriptive regulation to 

performance standards. In addition, setting fire safety standards for the design of a hospital is roughly 

analogous to the setting safety standards for the design of an airplane. They both have multiple systems 

that interact in order to both prevent and mitigate safety problems. The hospital fire safety systems 

include sprinkler systems, fire extinguishers, fire walls, emergency exits, fire retardant materials, etc. 

Airplanes have navigation systems, power systems, braking systems, etc. However, it is not clear what 

“the cost of compliance” refers to. Second, this estimate comes from an overview document which is 

over 30 years old and the basis for estimate is not provided. This estimate of cost savings may not be 

grounded in empirical evidence.

3.2 Innovation and Safety Improvements

Promoting innovation is often cited a reason to adopt PBR. As is described in Section 3.1, much of the 

discussion of the innovation benefits of PBR pertain to innovations related to cost savings. However, a 

move to PBR may have impacts on other types of innovation as well. This section discusses the potential 

impact of PBR on innovation of new product features desired by consumers, particularly innovation 

related to new safety features.

The literature reviewed as part of this effort did not contain any quantitative assessments of safety 

impacts. At the OSHA sponsored meeting regarding Performance-Based Regulations in the Oil and Gas 

Industry, Dr. M. Sam Mannan discussed his research on the pros and cons of performance-based 

regulatory models. He found that he was not able to answer the question of whether prescriptive or 

performance-based regulations produced better safety outcomes. He states that the reason for 

knowledge gap is that no one is tracking the right data [5].
13

3.2.1 Removing Impediments to Meeting Consumer Demands

A significant concern related to CAC design standards is that “they fail to provide long-term dynamic 

incentives that induce innovative behavior [1].” CAC design standards may indeed be state-of-art when 

they are developed but overtime they act to “fossilize” that stage of technological innovate and impede 

the further improvements.

• “A significant advantage of performance standards – particularly over the long run – is that they 

enhance innovation. A shift to performance standards can release the imagination of those 

closest to the ultimate regulatory impacts – e.g., plant engineers – and put private ingenuity to 

work to find more cost effective solutions to public policy problems [4].”

• “Design standards can constrain creativity, reduce the feasible set of solutions to a problem, and 

freeze technology. Performance standards remove these constraints [4].”

Prescriptive approaches to safety are also criticized because they are slow to respond to new 

technology:

• “Best practices identified in prescriptive standards are often out of date with those required to 

support evolving technologies. This can restrict the technologies available for use and could 

prevent industry from adopting best practices available at the time [13].”

• “Performance standards can also accommodate technological change and the emergence of 

new hazards in ways that prescriptive technology-based standards generally cannot [2].”

In addition, prescriptive regulations tend to be responses to past experience and as such may not 

anticipate new dangers or risks associated with an evolving industry [13].

2

However, performance-based standards will not by themselves spur innovation and progress toward 

new safety features. PBR will not necessarily provide an incentive to go beyond the standard set by the 

regulatory agency [2]. Therefore, the advantage of PBR regarding fostering innovation related to safety 

and other product features is that the flexibility afforded by PBR will not impede the adoption of the 

innovations.

In contrast, a disadvantage of design standards is that by prescribing a set design, the regulator in effect 

disallows better technologies from being used instead. In the case of consumer goods, manufacturers 

may more easily meet latent consumer demand for even higher standards in the areas of say, safety, 

and not be hampered by the prescriptive regulations of the regulator. That is, in contrast to CAC, PBR 

 

2 Some of the prescriptive rules that currently exist in part 23 are based on lessons learned from accident history

and those prescriptive rules have been effective in avoiding repetitive accidents. If the industry standards and 

other accepted means of compliance do not capture and maintain the corrective practices in these lessons 

learned, new airplane developers may not be aware of them. Therefore it is important to ensure that the industry 

standards capture the lessons learned and corrective practices embodied in the current prescriptive rules.
14

can more easily accommodate technological innovation [2]. Therefore the answer to whether the 

change to PBR would result in new safety features or other innovative features being introduced into 

the market depends on whether consumers in the small general aviation aircraft market desire and 

would pay for additional safety features or other technological innovations.

Although current part 23 rules don’t explicitly disallow new safety technologies such as angle of attack 

indicators, terrain displays, or touchscreen controlled devices, the current rules discourage their use 

because they require a special condition action or equivalent level of safety determination which 

typically take a number of month to complete which in turn may result in certification delays. The 

process for an equivalent level of safety determination also involves a high degree of uncertainty as to 

whether the new design proposed by the manufacturer would be found acceptable by FAA. The FAA 

knows of one recent case where a manufacturer decided against incorporating a new safety feature 

precisely because of the uncertainty around the equivalent level of safety determination and the 

understanding that including the new feature would have added approximately six months to the 

project. Breyer notes this issue as well:

• “. . . design standards limit the firm’s flexibility. A firm that finds a cheaper or more effective way 

of achieving the regulation’s objective must undertake the heavy burden of forcing a change in 

the standard before it can use its new method. For the same reason, a design standard tends to 

freeze existing technology and to favor those firms already equipped with that technology over 

potentially innovative new competitors. A performance standard permits flexibility and change. 

It is directly addressed to the problem that must be solved. And since the agency must, in any 

event, consider the comparative performance of different machines in order to write a design 

standard, it may be easy for the agency to write its standard directly in terms of performance

goals such as cleaner air or fewer injuries [17]”

By clearly stating the performance standards that will be used to judge the airworthiness of proposed 

aircraft design, the part 23 reorganization can be expected to reduce the uncertainty associated with 

introducing new designs. A logical consequence of making it easier to introduce new designs should be 

an increase in the amount of new designs introduced into the market place. The use of industry 

consensus standards may also be instrumental in reducing the cost of introducing new designs. Sections 

2.3 and 4.1 contain more discussion on the cost implications of the use of consensus standards.

3.2.2 Spurring Technology Diffusion

There is a distinction as to whether a certain regulatory scheme spurs radical new innovation or whether 

it causes the wider diffusion of existing innovation. Many discussions in the literature do not 

differentiate between the two concepts but both issues are of interest related to the FAA’s questions for 

this report. 

If the regulating agency wishes to promote diffusion of certain technologies, PBR is capable of serving 

that function. By carefully crafting performance based standards and by tightening those requirements 
15

over time as new technology becomes available, PBR would be able to speed the diffusion of 

technological improvements.

The Consumer Product Safety Commission (CPSC) is responsible for regulating the safety of any 

consumer product not specifically assigned to another federal agency. Its authorizing legislation requires 

the CPSC to use performance-based standards for its regulations. For example, in its regulations related 

to making medicine bottles “child-proof”, the performance measure is a test in which children actually 

try to open the bottles after passively watching an adult open a bottle (i.e., no special instructions are 

provided to the children). A product passes the test if fewer than 20 percent of four year old children 

can open the bottle during the test [4].

However, we did not find evidence that the CPSC typically requires safety standards higher than those 

available in the market today. Presumably, it would be politically difficult to require something beyond 

what is currently achievable. However, the CPSC potentially has the power to spur increased diffusion of 

existing technology through its performance standards. For instance, the CPSC is currently considering 

requiring for newly manufactured table saws a system that detects contact between a person and a saw 

blade and automatically stops the saw blade. Such a requirement is only being considered because such 

a system has already been developed. The “SawStop” system is a patented automatic braking system 

that using measurements of electrical conductivity of the saw blade immediately stops the table saws if 

the blade comes in contact with the human skin (contact with the human body changes the conductivity 

of the saw blade, so when a change is detected the saw blade is stopped). The CSPC gave a Safety 

Commendation Award to SawStop in 2001. This example shows how through the use of performance 

standards and by raising those performance standards in response to safety innovations, the CPSC has 

the potential to increase diffusion of a safety innovation.

Another example of how performance-based regulations can stimulate technology diffusion is the 

Corporate Average Fuel Economy (CAFE) performance standards. These standards call for automobile 

manufacturers to improve the average fuel economies of their fleet to prescribed target. The standards 

are developed based on the technologies that are currently available today or are in advanced stages of 

development such that they would be available very soon, and the levels are set such that existing 

technologies must be adopted more widely throughout a manufacturer’s model fleet. The benefit of 

stating the standard and not the exact technologies is that the manufacturer can mix and match 

available technologies to reduce costs and meet heterogeneous customer needs and preferences. 

As a result, the CAFE standards certainly spurred diffusion of technological innovations in the 

automobile sector, including downsizing gasoline engines, more frequent use of turbo boosting, more 

diesel-powered light duty vehicles, the development of more hybrid electric vehicles and battery electric 

vehicles, and the investment in hydrogen fuel cell vehicles [18].

Even though the CAFE standards are developed such that they can be met using existing technologies, 

there is also evidence that they have spurred radical innovation as well. A representative of the 

steelmaking industry states that the CAFE standards forced them to develop high strength but lighterweight steel products to meet the standards. 
16

• "The (Corporate Average Fuel Economy) standards were a kick in the teeth. We've exponentially 

increased the rate at which we're developing new products" - John Farris, vice president and 

general manager of Nucor Steel-Texas [19].

3.2.3 Creating Radical Innovation

In some cases the structure of the regulations can incentivize firms to innovate in order to achieve 

results even better than the standards developed by the regulator. However, the most compelling 

examples relate to instances of market-based environmental regulation such as tradable permits for 

emissions or pricing/taxing schemes related for emissions [20].

3

Market-based mechanisms provide 

incentives for regulated entities to continually improve their performance (beyond any government set 

amount) because there are market incentives to do so. For example, prior to the Clean Air Act of 1990 

new coal plants were required to use scrubbers which were the best available technology at the time. 

During this period patents awarded to electric power utilities generally related to reducing the operating 

costs of scrubbers. The 1990 Clean Air Act enacted a market-based trading regime with tradable 

permits. Electric utilities that produced fewer emissions than they were allowed by their permits could 

sell those additional permits and thereby generate revenue. The patents awarded to electric power 

utilities in the subsequent period continued to relate to reducing operating costs but also related to 

improving the performance of the scrubbers [21]. 

In the part 23 context, the regulator does not need to create artificial market-based incentives to 

produce superior outcomes because the safety benefits or other innovative benefits can be assessed 

and valued in the actual market. Therefore, if there is latent consumer demand for even higher levels of 

safety for part 23, the part 23 reorganization’s use of performance standards should allow 

manufacturers to fulfill that latent consumer demand. In fact, there is evidence of consumer demand for 

new safety features in the light sport aircraft (LSA) category. New safety features found in LSA include

parachutes, auto pilot, and air bags, among others.

3.3 Industry Revitalization

The available literature does not directly comment on the likelihood that streamlining regulations or 

adopting PBR would revitalize an industry. However, the literature does provide commentary on some 

complementary impacts.

 

3 Kemp and Pontoglio, while acknowledging that theoretical literature supports the idea that market-based 

regulation should be the preferred regulatory instrument for spurring eco-innovation, find through empirical 

research that market-based environmental regulatory schemes produce only marginal innovations and that 

traditional regulation has been responsible for radical innovation in some environmental contexts. Kemp and 

Pontoglio also emphasis the importance of the specific regulatory context and thus applicability of this finding to 

the part 23 context is not clear [20]. 
17

A few authors state that the use of design standards can inhibit competition in a market. For example, a 

guidance document on the use of performance standards notes the following: “Performance standards 

are more compatible with competition. Design standards may inhibit competition and effectively serve 

as a barrier to entry into the marketplace for firms that do not possess the particular technology 

required by a design standard. Performance standards avoid these anticompetitive effects [4].” For 

example, some local building codes prevented using plastic pipes for water systems in residential 

buildings. As a consequence plastic pipe manufacturers complained that the codes prevented them from 

competing even though their products performed just as well. More competition in a market benefits 

consumers because the competition increases pressure to provide lower prices and improved products. 

When competition in an industry is limited, the small number of manufacturers may restrict supply in 

order to keep prices high. Therefore opening the markets to more competition may cause the industry 

to grow.

As discussed in Sections 3.1 and 3.2, PBR can facilitate cost-saving efficiencies and remove barriers to 

new product innovations. To the extent that products can be offered at lower prices and with new 

features, it can also be expected to stimulate demand for the product and thereby help to revitalize the 

industry.

Finally, a literature review of the macro-level economic impacts of regulatory policy concluded that 

there is evidence that poorly designed regulations can stifle economic activities and ultimately reduce 

economic growth. The literature review also finds that regulation can reduce the entry of new firms into 

markets. Therefore, based on the empirical studies reviewed, one could conclude that better crafted 

regulations would lead to economic stimulation and growth. However, the authors of the literature 

review emphasize that the effects of regulation are context specific [22].

3.4 Limiting Factors

Many authors warn that PBR may not be appropriate in all contexts. In addition, it can be difficult to 

craft the standards themselves in a way that provides enough specificity for them to be adequately 

enforced and ensure compliance. As mentioned in Section 2.2, loosely specified standards using terms 

like “sufficient” or “reasonable” are difficult to interpret and enforce and as a result the safety 

objectives of the standards may not be met. 

The magnitude of the cost savings, innovation, and/or revitalization will depend on whether the PBR 

standards truly allow for freedom and flexibility. For instance, as discussed in 2.2, the closer the 

performance standards are to the ultimate goal of the regulation (safety) the more freedom and 

flexibility they will provide. In contrast, where a performance standard is narrowly defined, such as 

specifying the performance of a pump in an industrial process, the performance standard may actually 

offer very little flexibility to the regulated firm [2].In relation to the part 23 reorganization, an aircraft 

performance standard could be that the seats and seatbelts in the plane be able withstand a certain Gforce as an crash-worthiness factor. But such a factor may be limiting if the same level of crash-
18

worthiness protection could be accomplished by an entirely different means, such as use of an airbag.

Some note that PBR may impose higher costs on small business which may find it easier to comply if 

they are simply told what processes to follow rather than searching for a way to meet standards [2]. To 

compensate for this possibility, in some cases, “non-binding codes of practices” have been developed by 

government, or industry associations to provide practical guidance on how to meet the standards. The 

part 23 reorganization effort intends to pair performance standards with direction on means of 

compliance provided by consensus standards developed by ASTM. Some authors warn that such “codes 

of practice” may in effect act as prescriptive standards that would erode the potential benefits of the 

PBR.

While the costs to the regulated entities are generally thought be lower under PBR, the costs to the 

regulatory agency may be higher to develop and enforce the PBR [23].However, there may be agency 

costs savings in the form of less time and resources needed to provide variances and exemptions to 

design standards [4].

Grandfathering is another issue that may limit the impacts of the change to PBR. Grandfathering is 

intended to ease the burden of transitioning to new regulations for industry and manufacturers. 

Grandfathering provisions exempt certain pre-reform era members from select parts, or in some 

circumstances all, of the new qualifications or standards. Grandfathering provisions tend to have 

provisions that state an entity can continue to operate under the previous regulatory regime until such 

time as the entity does an upgrade. For example, changes in building codes don’t usually require 

immediate compliance of all existing buildings but when building undergoes a significant rebuild or 

remodel, the entire building must be brought “up to code.” The unintended consequence of such 

grandfathering provisions is that they act to delay and postpone those upgrades by adding additional 

cost to the upgrades. As a result they slow down adoption of new technologies beyond the ones that are 

subject to the regulations. To continue the building code example, the additional costs of bringing 

building “up to code” not only delay the adoption of the electrical or fire safety regulations in the new 

building code but also delay the adoption of more energy efficient building materials as well because of 

the second order effects.

The issue of grandfathering in the US aviation regulations is not unique to the part 23 reorganization. An

aircraft model that receives an airworthiness certificate can continue to be manufactured even if the 

regulations change over time. Small changes to the initial design can be approved in isolation but if 

there are significant number of changes made to the model the entire design will require a complete

costly and time consuming airworthiness certification process. Therefore even with the additional 

flexibility allowed by PBR, some manufacturers may wish to continue producing their existing models 

because developing a new model with innovative new features would still incur some amount of cost 

due to review by FAA. 
19

4. Industry Consensus Standards

The literature related to the use of industry consensus standards as a form of safety regulation is not as 

well developed as the literature related to PBR. However, there is at least one very relevant example 

that we rely on as a case study related to consensus standards: the relatively new Light Sport Aircraft 

(LSA) category. 

In 2004, The Federal Aviation Administration created a new segment in the general aviation industry for 

sport pilots, light sport aircraft, and light sport aircraft repairmen under FAA Order 8130.2G. The rule 

includes a special airworthiness certificate that is issued to an aircraft that meets the definition of LSA.

4

To receive the special airworthiness certificate, the manufacturer must provide a statement of the 

aircraft’s compliance with an identified consensus standard. In addition, the rule has provisions for 

obtaining sport pilot certifications, flight instructor certifications, and repairman certifications. One of 

the most notable features of the rule allows sport pilots to utilize a U.S. driver’s license in lieu of a 

medical certificate, an attempt to allow more pilots in the industry to fly a wider range of aircraft. This 

feature was aimed at pilots who are otherwise healthy, but who choose not to renew their third class 

medical certificate (perhaps because of the expense), to be able to continue flying in LSA’s. However, if a 

pilot has previously applied for a medical certificate and was turned down, the FAA forbids that pilot 

from becoming a Sport Pilot indefinitely. Furthermore, Sport Pilots cannot fly at night, on instruments, 

for profit, and they are limited on the types of controlled airspace they may enter.

The experience regarding LSA is informative to the part 23 reorganization because both involve the use 

of consensus standards. However, as noted above the LSA rulemaking involves several additional 

aspects so the results of may not be completely applicable to the part 23 reorganization.

 

4 14 CFR Part 1.1 defines light sport aircraft to be any aircraft, other than a helicopter or powered-lift that, since its 

original certification, has continued to meet the following:

(1) A maximum takeoff weight of not more than—

(i) 1,320 pounds (600 kilograms) for aircraft not intended for operation on water; or

(ii) 1,430 pounds (650 kilograms) for an aircraft intended for operation on water.

(2) A maximum airspeed in level flight with maximum continuous power (VH) of not more than 120 knots CAS under 

standard atmospheric conditions at sea level.

(3) A maximum never-exceed speed (VNE) of not more than 120 knots CAS for a glider.

(4) A maximum stalling speed or minimum steady flight speed without the use of lift-enhancing devices (VS1) of not 

more than 45 knots CAS at the aircraft's maximum certificated takeoff weight and most critical center of gravity.

(5) A maximum seating capacity of no more than two persons, including the pilot.

(6) A single, reciprocating engine, if powered.

(7) A fixed or ground-adjustable propeller if a powered aircraft other than a powered glider.

(8) A fixed or feathering propeller system if a powered glider.

(9) A fixed-pitch, semi-rigid, teetering, two-blade rotor system, if a gyroplane.

(10) A non-pressurized cabin, if equipped with a cabin.

(11) Fixed landing gear, except for an aircraft intended for operation on water or a glider

(12) Fixed or retractable landing gear, or a hull, for an aircraft intended for operation on water.

(13) Fixed or retractable landing gear for a glider.
20

4.1 Innovation 

The substitution of consensus standards for formal FAA review has apparently reduced the cost of 

introducing new designs. ASTM International is the body responsible for developing the LSA consensus 

standards. In a paper available on the ASTM website, ASTM touts the success of its LSA consensus 

standards. The authors estimate the approval process to cost $10,000 to $20,000 and make a 

comparison to $20 million estimated cost to certify a new aircraft model under part 21 [24]. The 

comparison to a part 21 certification is perhaps a stretch given the great disparity in size and complexity 

of the two types of aircraft, but the larger point that the LSA certification costs are quite low still stands.

Several observers of the new LSA segment have stated that the newly created category resulted in many 

new aircraft designs and innovations:

• “There’s no argument that LSA has ignited a bushel of new designs [25]”

• “In terms of sales, the segment is a success. According to a presentation given by the FAA at 

the Friedrichshafen (Germany) airshow, the total LSA fleet size is now nearing 10,000 

airplanes. Of those, around 6,700 are experimental-LSAs and around 1,300 are special-LSAs. 

There are more than 100 approved LSA designs, a number that might not decrease over 

time, since the cost of admission to the industry is very low. And there seems to be an 

enthusiastic market for LSAs, much more so than many observers predicted [26].”

• One decade into the new SP/LSA rule, “a large number of new LSA models have arrived on 

the market [27].” 

• “Many customers chose to equip their LSA with loads of features. No one anticipated 

autopilots on LSA in 2003, yet today most of the higher end models are so equipped. When 

something like an autopilot – or digital glass panels or angle of attack indicators or airframe 

parachute systems, and more – can be added to an LSA without the high cost of 

conventional certification, these improvements proliferate [27].”

In 2008, ASTM reported that 76 new aircraft designs were developed as a result of the ASTM design 

standards [24]. Currently there are over 130 approved LSA designs suggesting that over the last six years, 

on average nine new designs per year have been introduced.

5

4.2 Product Costs 

Despite the observation that there has been impressive number of new designs created for the LSA 

segment, there is evidence that some manufacturers believe that the 1,320 pound maximum weight 

 

5 See http://www.faa.gov/aircraft/gen_av/light_sport/media/ExistingModels.pdf for a list of the current models.
21

regulation is impractical for light sport aircraft. Piper and Cirrus originally entered the market with 

rebranded European models but then quickly exited. Cessna developed a brand new model, the 

Skycatcher. The model had some design issues during testing phase, and the initial design was then 

modified to correct it. Cessna abruptly pulled the Skycatcher in 2013 [29]. 

One reason pointed to for the big American manufacturers pulling out of the LSA segment is the 

difficulty of designing aircraft under 1,320 pounds without being very costly. However, the strict weight 

and size requirements on these aircraft have resulted in LSAs becoming expensive to develop for the 

manufacturers, and consequently they are often costly for consumers as well [29].

The original price for the Skycatcher was $110,000 but then increased to $150,000 and the price of 

other LSA models has also increased “dramatically” overtime [29].ASTM reports that the price of typical 

LSA is $130,000 which is considerably cheaper than the retail price of $240,000 for a part 23 GA aircraft.

However, that price tag is higher than people originally estimated for new LSA segment. ASTM by 

spreading the initial cost of the certification over the number of units built, estimates that only about 

$1,000 of the LSA price is due to cost of the approval process [24].

4.3 Safety 

Early research from 2009 into the safety of LSAs found that one out of every 100 special LSAs had been 

involved a fatal accident and that the fatal accident rate per 100,000 hours flown was just over 5, twice 

the rate for personal part 23 aircraft [26].

In a more recent 2012 article for The Aviation Consumer, Paul Bertorelli calculates various LSA accident 

rates for the top 10 LSA manufacturers for the period 2005 to 2012 [25]. This sample selection yields 

1,440 aircraft and 960,000 flight hours. He found that the LSA fatal accident rate of 1.4 per 100,000 

flight hours is a bit higher than the GA average 1.2, but given the small sample size of available flight 

hours for LSA, the difference may not be statistically significant. He also states that the overall accident 

rate of LSA is substantially higher than the accident rate for GA. The GA accident rate is reported to be 

6.3 per 100,000 flight hours. An overall average LSA accident rate is not provided, but accident rates for

each LSA manufacturer are provided showing that only Cessna and Jabiru had accident rates lower than 

the GA accident rate. The other eight manufacturers had accidents exceeding the GA average, often by 

several fold. The majority of LSA accidents are runway loss of control (R-LOC) which are rarely fatal. 

Bertolli notes that the lighter weight of the LSA aircraft makes them it more difficult to land, more 

susceptible to PIOs, and more easily disturbed by crosswinds and gusts. 

Both reports mention that experienced pilots are the ones who are actually getting into LSA accidents 

more frequently than pilots who are learning to fly in an LSA and one report provides a quote to that 

effect from FAA safety manager Harris Hooper: “pilots transitioning from conventional GA aircraft to 

LSAs are involved in more fatal LSA accidents than are newly trained sport pilots [26].” Experienced 

pilots who do not want to deal with the hassle of the medical requirements are abandoning their GA 
22

planes and hopping into an LSA without expecting them to handle much differently. Yet it may be 

unreasonable to assume that a 1,320 pound airplane will handle similarly to one that weighs 500 pounds 

more. Flight instructor Earl Kesser, of Carson City NV, affirms that “it takes a finer touch to fly an LSA

[25].” Jerry Eichenberger, a flight instructor who operates a school out of Ohio believes that LSA’s “take 

a significant amount of transition training [25].”Many flight instructors believe that it is often easier to 

teach a novice how to safely fly an LSA airplane rather than teach an experienced GA pilot since the two 

aircraft can handle differently, due to the restrictive weight regulations. However, there still is not 

enough data to conclusively determine what may be causing the differences because the LSA category is 

still a new one. Bertorelli believes “it is too soon to draw blanket conclusions about LSA fleet safety in 

general. We simply need more flight hours.”

Therefore, it seems that observers of the LSA segment are linking higher overall accident rates to factors 

other than the use of consensus standards. And the available information suggests that there is little to 

no difference in fatal accident rates between LSA and GA. One observer calls the ASTM consensus 

standards “quite high [29].”

4.4 Industry Revitalization

Despite the absence of the major US manufacturers, there are still several European firms providing 

aircraft in the segment and new models are regularly introduced at trade shows. One observer states 

“the innovations keep coming” and the market is “thriving” even though the new segment has “not 

quite become the chicken in every pot – an airplane in every hanger – scenario GA hoped for [29].”

4.5 Caveats

In a 2010 assessment, the FAA visited 30 LSA manufacturers in the United States to conduct random 

evaluations. Inspectors discovered that many safety standards were being violated. Many 

manufacturers did not keep records of planes or aircraft owners to ensure quality and control.

Additionally, the FAA said it found irregularities in how sport aircraft companies imported aircraft parts.

A report published by the FAA stated that it:

“Found irregularities in how U.S. firms imported aircraft or plane parts. FAA regulations require 

that aircraft manufactured outside the U.S. be assembled in countries that have agreed to follow 

U.S. standards. In some cases, all or most of the construction had been done in other nations, 

even when U.S. firms told the FAA that they were the manufacturer [30].”

Dan Johnson of the Light Aircraft Manufacturers Association believes the FAA audits do not currently 

threaten the LSA industry because growing pains are expected when new regulations are introduced. 

Johnson stated that many of the violations uncovered “involved a failure to keep up paperwork” but 

that “missing a document doesn’t mean an airplane wasn’t build right, it just means you can’t prove it 

was built a certain way [30].”
23

5.Other Experiences with PBR and Other 

Regulatory Reforms

This section discusses the experience of regulatory reform in a few cases where more in-depth 

information was available. Keep in mind that every regulatory context is different and the experience 

from one industry may not be relevant to the part 23 reorganization.

In the course of our research, we observe that other researchers in this area tend to be drawn to 

investigating instances where there were observed regulatory failures. The researchers tended to not 

find fault with PBR itself, but with crafting the standards, compliance, or enforcement of the regulations. 

Thus one conclusion stemming from this research is that to experience the conceptual advantages 

discussed in this document, the PBR must be enacted appropriately to ensure compliance and the 

performance standards themselves must be carefully crafted.

As shown in the New Zealand building code case study below, one attribute of a well-crafted 

performance standards is that they cover all relevant areas. But more pragmatically, the process of 

crafting performance standards may be one of trial and error. For that reason it is important the 

regulatory agency monitor the results of the rules and make refinements and adjustments to deal with 

shortcomings as they become apparent. For example, NHTSA has revised its performance standards 

related to airbags twice since they were first created in 1991. NHTSA observed that in some cases they 

airbags were doing more harm than good (especially for smaller occupants) and in 1997 altered the 

regulations to allow depowered airbags. In 2001 the standards were again revised to recapture

increasing injuries & fatalities in high severity crashes that resulted from the depowered airbags. The 

newest standards call for air bags to be tested with female and child crash dummies and have features 

that allow for differential airbag deployment, depending on the characteristics of the occupant.

5.1 HACCP in Food Safety

The Hazard Analysis Control Point (HACCP) system for food safety involves establishing process control 

by identifying points in the production process that are most critical to monitor and control. During the 

1990s HACCP was mandated for seafood, fruit juice, meat, and poultry. Under HACCP, the processors 

themselves identify critical control points (CCPs) in their own plants, assess the risks at CCPs, and 

conduct their own monitoring and testing. The regulatory agency then monitors that the plant is 

following the program. As such, the HACCP is a form of “management-based” regulation [10]. However, 

USDA also utilizes a performance-based standard for allowable levels of Salmonella and the USDA 

conducts the testing itself [23].Testing for E. Coli is somewhat different. The standards established are 

not enforceable as regulatory standards because a scientific basis for those standards has not been 

established and the plant conducts the testing while the inspectors monitor that the plants are actually 

conducting the testing as part of the HACCP plan [23].
24

Because the HACCP involves continuous monitoring a continuous process, and airworthiness 

certification is a one-time approval process, the HACCP experience may be of limited usefulness. 

However, this regulatory context involves public safety and utilizes PBR, so the experience of food safety 

regulation is perhaps worth examining.

The literature regarding HACCP and PBR in food safety suggest that the industry prefers the flexibility 

afforded by HACCP and would not like to return the previous “poke and sniff” regime [23].

Unnevehr and Jensen provide a discussion of the economics of HACCP [11]. They note that HACCP offers 

firms a great of flexibility to develop processes to fit circumstances, and that it reduces costs of 

regulatory enforcement. They find that the higher upfront costs of developing a HACCP system result in 

economies of scale and disadvantage small businesses and also note that the system provides incentives 

for vertical integration of production to better control the entire food supply system and identify CCPs.

The concern that performance-based regulations may favor larger firms over small firms was mentioned 

in the conceptual literature as well.

However, May (2004) in an overview of several PBR case studies finds that there have been “spectacular 

lapses in the quality of meat production leading to massive recalls since the HACCP system has been 

implemented [23].”However, the author does not indicate if such problems existed in the previous 

regime or if the other changes in the industry since that time may have created those issues. The issues 

may also be related to deficiencies in compliance/enforcement. A 2002 GAO report found that USDA’s 

Food Safety Inspection Service (FSIS) was “not ensuring that all plants’ HACCP plans meet regulatory 

requirements and, as a result, consumers may be unnecessarily exposed to unsafe foods that can cause 

foodborne illnesses [31].”

5.2 New Zealand Leaky Building Crisis

In a series of papers, Peter May provides details of the so called “Leaky Building Crisis” in New Zealand.

The crisis occurred subsequent to an overhaul in the New Zealand building codes resulting from the 

Building Act 1991. The Building Act incorporated PBR with broad objectives relating to protecting 

people, their health and safety, and the environment and sub-objectives related to averting potential 

injuries, fire safety, protection from hazardous materials, protecting property from damage, 

accessibility, and energy efficiency. The Building Industry Authority (BIA) was created as a new Crown 

agency concerned with enacting the Act, but building regulation was delegated to local authorities. A 

building owner could either have the building certified by the local authority or by third-party certifiers, 

thereby incorporating some market-mechanisms of competitive pressure into the building inspection 

services sector. The third party certifiers were to be certified by the BIA [23].

The “crisis” emerged due to lack of weathertightness in a particular type of exterior cladding used in 

condominiums and a type of stucco used in high-end residences. The problem affected up to 18,000 

homes and numerous multi-family buildings. 
25

However the link between the subsequent crisis and PBR is not clear. First, the same issues related to 

those building products appeared in the U.S. and Vancouver, Canada which had fairly prescriptive 

building codes. Therefore, one cannot claim the PBR “caused” the crisis. However, May suggests that the 

particulars of the PBR regime in New Zealand allowed the problem to remain unresolved for a longer 

period than would have been the case under a different regulatory regime. 

In addition, two investigations conducted into the crisis supported the basic concepts of PBR but found 

that the issues related to compliance, the design of the system of procedural and technical controls, 

responsibility, and accountability. The Hunn Report states “The Building Act has clearly succeeded in 

providing the building industry with the scope to develop innovate and cheaper building solutions.

However, hand-in-hand with the service or product provider being given the ability to determine and 

provide design and construction solutions must go a responsibility and accountability to guarantee their 

performance against the Building Code’s requirements. This has not happened [32].” May observes that 

the lack of accountability of key players was a key factor undermining the effectiveness of the 

performance-based regulatory regime [12].

In the wake of the crisis there was no effort to return to the building code to its pre-PBR state. Rather 

the Building Act was modified to correct the issues uncovered as a result of the crisis. For instance, there 

was not a performance objective related to adequate provision of shelter which might have addressed 

the weathertightness issue. 

Interestingly, May also found that local authorities were hesitant to use a heavy hand in enforcing 

building codes because the locality feared that they might lose the development opportunity to a more 

lax locality. So, the lesson for the part 23 reorganization may be that care should be taken to ensure that 

the desire to revitalize an industry does not undermine the safety objectives of the FAA. This sounds 

obvious, but the New Zealand experience suggests otherwise.
26

6.Conclusions

Regarding the use of PBR, this research finds the following:

• The available literature is practically unanimous in the assertion that PBR would result in lower 

production costs, i.e. higher production efficiency. The basis for that assertion is that firms will 

naturally seek cost savings efficiencies in an effort to maximize profits. Prescriptive regulations 

impede firms from adopting least cost processes but PBR affords the flexibility to meet 

regulatory goals using a least cost option that is tailored to their own circumstances. 

• Performance-based standards will not by themselves spur innovation and progress toward new 

safety features. PBR will not necessarily provide an incentive to go beyond the standard set by 

the regulatory agency. Therefore, the advantage of PBR regarding fostering innovation related 

to safety and other product features is that the flexibility afforded by PBR will not impede the 

adoption of the innovations.

• If the regulating agency wishes to promote diffusion of certain technologies, PBR is capable of 

serving that function. By carefully crafting performance based standards and by tightening those 

requirements over time as new technology becomes available, the PBR would be able to speed 

the diffusion of technological improvements.

• To the extent that design standards inhibit competition in a market, moving to performance 

standards may increase competition and foster growth in the market. In addition, the use PBR 

can facilitate the use of cost saving measures and remove barriers to innovation. In turn, lower 

prices and innovative product features can spur demand and revitalize an industry.

• Based on the experience for the LSA segment, it appears that using consensus standards as a 

way of streamlining the aircraft certification process has resulted in lower costs of certification 

and facilitated the introduction of new and innovative designs. 

Based on these findings, it appears likely that adopting PBR as a method of safety regulation for part 23 

small general aviation aircraft will result in many of the positive impacts mentioned as objectives of the 

“Small Aircraft Revitalization Act of 2013.” However, the magnitude of the positive impacts will be 

determined by how much freedom and flexibility the new performance standards actually provide.

Providing guidance on “means of compliance” through consensus standards acts will assist 

manufacturers in developing methods for meeting the performance standards. However, it is possible 

that those consensus standards may turn out to be de facto design standards and erode the potential 

benefits of adopting PBR.
27

7.References

[1] Economic Report of the President, 2003.

[2] Coglianese, Cary, Jennifer Nash, and Todd Olmstead. “Performance-Based Regulation: 

Prospects and Limitation in Health, Safety, and Environmental Protection,” Regulatory Policy 

Program Report No. RPP-03 (2002).

[3] Deighton-Smith, Rex. 2008. “Process and performance-based regulation: Challenges for 

regulatory governance and regulatory reform” in Peter Carroll, Rex Deighton-Smith, Helen 

Silver, and Chris Walker (eds), Minding the Gap: Revisiting the promise and Performance of 

Regulatory Reform in Australia, Canberra: ANU E Press, chapter 7.

[4] Project on Alternative Regulatory Approaches, “Performance Standards: A Practical Guide to 

the Use of Performance Standards as a Regulatory Alternative” September 1981. 

[5] Occupational Safety and Health Administration (OSHA) 2012. “Expert Forum on the use of 

Performance-Based Regulatory Models in the U.S. Oil and Gas Industry, Offshore and Onshore. 

Action: Notice of Stakeholder meeting” Docket Number OSHA-2012-0033.

[6] U.S. Nuclear Regulatory Commission, 2002. “Guidance for Performance-Based Regulation.”

[7] Viscusi, K., 1983. “Risk by Choice: Regulating Health & Safety in the Workplace,” Cambridge, 

MA: Harvard University Press

[8] Queensland Government, Department of State Development. 2006. “Guidelines on 

Alternatives to Prescriptive Regulations.

[9] OMB Circular 119 (Revised), February 10, 1998

[10] Coglianese, Cary and David Lazer, 2003. “Management-based regulation: prescribing private 

management to achieve public goals.” Computer Information Science Faculty Publications. 

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[11] Unnevehr, Laurian J. and Helen H. Jensen, 1998. “The Economic Implications of Using HACCP 

as a Food Safety Regulatory Standard,” Working Paper 99-WP 228.

[12] May, Peter J. “Performance –Based Regulation” Jerusalem Papers in Regulation and 

Governance, Working Paper No. 2. April 2010.

[13] Moore, Keith. 2005. “The Move to Performance Based Standards – Managing Uncertainty” 

University of York, Safety Critical Systems Engineering MSc Dissertation.
28

[14] Clinton, Bill and Al Gore. 1995. “Reinventing Environmental Regulation,” National Performance 

Review.

[15] Tietenberg, T.H., 1990. “Economic Instruments for Environmental Regulation” Oxford Review 

of Economic Policy, Vol 6, No. 1.

[16] U.S. House of Representatives. Committee on Small Business. Regulatory Reform Initiatives 

and Their Impact on Small Business. Hearing before the Committee, Serial No. 106-60. 

Washington DC: US Government Printing Office, 2000.

[17] Breyer, S. 1982. “Regulation and Its Reform,” Harvard University Press. Quoted by David 

Besanko (1987) “Performance versus design standards in the regulation of pollution,” Journal 

of Public Economics 34. 19-44.

[18] Eichenberger, John. “Regulating Innovation,” NACS magazine, August 2014, pp. 54-55.

[19] Pete, Joseph S. “Fuel Efficiency Standards Have Driven Innovation in Steelmaking” NWI.com, 

May 10, 2014.

[20] Kemp, Rene and Serena Pontoglo, 2011. “The Innovation Effects of Environmental Policy 

Instruments – A Typical Case of the Blind Men and the Elephant?” Ecological Economics, 72 

(2011) 28-36. 

[21] Popp, David. 2001. “Pollution Control Innovations and the Clean Air Act of 1990,” NBER 

Working Paper 8593.

[22] Parker, David and Colin Kirkpatrick, “The Economic Impact of Regulatory Policy: A Literature 

Review of Quantitative Evidence,” OECD, Expert Paper No. 3, August 2012.

[23] May, Peter. 2004. “Performance-based Regulation and Regulatory Regimes,” 13th World 

Conference on Earthquake Engineering, Vancouver, BC August 1-6, 2004, Paper No. 3254.

[24] Stephenson, James and Deborah Stephenson, “Light Sport Aircraft Industry Takes Flight on 

ASTM International Standards,” ASTM Standardization News November/December 2008.

[25] Bertorelli, Paul. “LSA Accident Survey: Low Fatals, High Overall,” The Aviation Consumer,

November 2012.

[26] Goyer, Robert. “LSA Safety Picture Emerging,” Flying Magazine, August 19, 2009.

[27] Johnson, Dan, “The Next Decade of LSA Innovation,” General Aviation News, September 3, 

2014.

[28] Stephenson, James and Deborah Stephenson, “Light Sport Aircraft Industry Takes Flight on 

ASTM International Standards,” ASTM Standardization News November/December 2008
29

[29] Cipriani, Rocco. “Are LSAs Too Light Weight for American Companies?” Aviation Marketing 

Consulting, March 19, 2014.

[30] Levin, Alan. “Sport Plane Makers Warned by FAA to Stop Evading Rules”. Bloomberg News, 

June 29, 2012.

[31] U.S. General Accounting Office, 2002. “Meat and Poultry: Better USDA Oversight and 

Enforcement of Safety Rules Needed to Reduce Risk of Foodborne Illnesses.” GAO-02-902.

[32] The Hunn Report. Report of the Overview Group on the Weathertightness of Buildings on the 

Building Industry Authority. October 2002.