Author(s): Gregory Cade. Published on May 1, 2017.

Cost/Benefit

An executive order to reduce regulations and their related costs could be a big deal for standards developers

Of the many executive orders signed by President Trump in his first months in office, one signed at the end of January could have a big potential impact on NFPA and other standards development organizations.

The order, “Reducing Regulations and Controlling Regulatory Costs,” has informally been referred to as the “One New In, Two Old Out” rule because it will require federal agencies to repeal at least two existing regulations before enacting any new regulation. More than that, though, it will require federal agencies to strictly control the costs imposed by any new regulatory action. While this will have an impact going forward, it also means agencies will have to review the total costs of existing rules already in place in the Code of Federal Regulations (CFR), many of which incorporate NFPA standards by reference.

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The requirement to conduct an accounting across the entire CFR, and to keep the cost static, is new and raises a number of questions. One of those questions is how “costs” will be determined. The lack of definition in the order leaves it unclear whether the accounting of “costs” added by new regulations is the costs alone, or the net costs—those offset by the benefits. Also, even though the order contains a “one in, two out” provision, there is no explicit mention of how this should relate to cost or whether an agency must eliminate two rules with similar cost burdens as the one to be implemented.

It is also unclear whether the two to be phased out must originate from the same agency as the one to be imposed. Implementation of the order will likely be made more challenging by the fact that many regulations are mandated by law. These and many other questions will have to be answered by the White House Office of Management and Budget, which the order directs to develop implementation guidance for agencies, and NFPA will certainly want to participate in that debate when the guidance is issued.

Obviously, of major interest will be guidance on the methodologies to measure the cost of regulations. Under current law, federal agencies are required to use voluntary consensus standards, developed by the private sector, whenever possible to carry out regulatory objectives. Thus, as agencies tally up the cost of the regulations within their jurisdictions, the costs (and benefits) of following those standards, many of which are quite old, will have to be accounted for. This cost-benefit exercise will also need to be performed for any new regulation.

At the moment, NFPA does not formally require technical committees to develop and document the estimated cost of complying with a code or standard, which means there might not be any data available to affirm or dispute cost calculations compiled by an agency. Moreover, in a number of cases, a standard may present more than one option for compliance, creating more complexities for attempts to calculate costs. Depending on how this process is carried out, NFPA and our stakeholders will have to be active in ensuring that both the accounting methodology and data are reasonable and take into account the safety benefit inherent in compliance with consensus codes and standards developed by top experts.

There is much about these issues that remains uncertain at this point. As the next steps play out, though, NFPA will work to ensure that the federal safety regulations that protect workers and ordinary citizens stay in force and continue to address safety challenges as they arise.

GREGORY CADE is division director, Government Affairs for NFPA.