Public Disclosure Concerning the Use of Cost-Benefit and Similar Analyses in Regulation

Federal agencies must frequently weigh competing health, safety, resource management, environmental, economic, and other societal interests when seeking to achieve a prescribed statutory objective. Wise decisionmaking presupposes that the potential benefits and costs of the actions under consideration will be identified, will be quantified if feasible, and will be appraised in relation to each other. To give structure to the exercise of this responsibility, agencies sometimes use “cost-benefit” or similar analytic approaches to organize available information to determine the consequences of possible courses of action in terms of their costs, risks and benefits. Such techniques seek to display the projected net effects of alternative courses of action and, when properly used, can assist the decisionmaker in deciding which of the alternatives is most likely to produce a desired result.

The following recommendation seeks to promote openness in the decisionmaking process, to ensure that agencies’ analytic methods are sound and that their assumptions are known, so as to enhance public confidence in the soundness of conclusions finally reached. The recommendation is not intended to promote or to discourage the use of any single kind of analysis as a framework for agency decisionmaking, since this choice is normally a matter of agency discretion. The choice of analytic technique may depend on several factors, including the technical complexity of the problem, the magnitude of the impacts, the time frame for agency action, and the extent to which quantification is possible for the specific costs and benefits to be considered.  Any analysis, of course, should be viewed as an aid to rational decisionmaking, and not as an end in itself. The intent of the recommendation will be served by giving the public adequate advance notice of the agency’s proposed methodologies, either generically or by means of special notice in a particular proceeding.

Recommendation

1. Agencies, as general policy though not necessarily by binding rule, should adopt the practice of addressing, in their public notices of particular proceedings in which cost-benefit or similar analyses are to be used, the following points:

a. Any statutory or other legal requirements pertaining to or affecting the agency’s conduct of cost-benefit or similar analyses in the proceeding.

b. The particular analytic technique to be followed by the agency (e.g., cost-benefit analysis, cost-effectiveness analysis, qualitative or non-numerative balancing), with a description of the method, including an identification of any analytic models preliminarily determined to be used.

c. Any factual assumptions or preliminary findings of the agency to be utilized in the analyses.

d. The agency’s techniques for assessing and revealing uncertainties in its quantitative estimates, and making explicit the range of error associated with particular quantitative estimates.

e. The agency’s methods for evaluating intangible costs and benefits, for discounting future costs and benefits, and for taking account of distributional effects arising under the selected methodology, to the extent such issues are involved in the analyses.

f. The stages of the proceeding at which the cost-benefit or similar analyses will be conducted and the results considered.

g. The extent and nature of public participation in the design, conduct, and evaluation of the cost-benefit or similar analyses.

h. The extent and manner in which the public is to be accorded access to assumptions and information used in the analyses.

A statement of the weight given the cost-benefit or similar analyses, and a description of any revisions of assumptions or preliminary findings, should be included in the final agency determination and made available to the public.

2. Where a pattern of recurring decisional problems exists for which a particular analytic technique is appropriate, the agency should consider adopting a generic regulation or policy statement describing the use of that technique with respect to those problems. Agencies that have varied statutory functions may suitably formulate separate regulations or policy statements for different areas of statutory responsibility. Generic regulations or policy statements so adopted may permit the use of different techniques on an ad hoc basis where the agency determines that to be necessary. Any such regulations or policy statements should address the points listed in paragraph 1.

 

Citations:

44 FR 38826 (July 3, 1979); correction at 44 FR 47755 (August 15, 1979)

1979 ACUS 27

Citation:

Baram, Michael S.  Regulation of Health, Safety and Environmental Quality and the Use of Cost-Benefit Analysis.  1979 ACUS 377.  Also:  Cost-benefit Analysis:  An Inadequate Basis for Health, Safety, and Environmental Regulatory Decisionmaking.  8 Ecology L.Q. 473 (1980).