OMB Seeks Comments on Costs and Benefits of Federal Regulations

On February 3 the Office of Management and Budget (OMB) published a Federal Register notice seeking comments on a draft report to Congress on the Costs and Benefits of Federal Regulation and Paperwork, focusing on major regulations issued during the 2001-2002 federal fiscal year (see 68 Fed. Reg. 5492).

OMB's draft report includes recommendations for reform under the Regulatory Right-to-Know Act. When the guidelines ultimately are finalized, they will have considerable influence on the conduct of certain regulatory analyses associated with major rules affecting the converting industry.

The draft Guidelines begin with a discussion of what should go into a regulatory analysis. OMB says a good regulatory analysis should include 1) a statement of the need for the proposed action, 2) an examination of alternative approaches, and 3) an evaluation of the benefits and costs of the proposed action and the main alternatives identified by the analysis. Transparency is another important element. The Guidelines recommend specifying assumptions used and how the analysis would change if assumptions changed.

Of perhaps greatest interest to converters, OMB requests comments on current US approaches to analyzing and managing emerging risks. This has long been a major issue for US businesses and is of significant concern to global companies in light of a broader push for adoption of the precautionary principle in regulating perceived health and safety risks.

Illustrating the importance of the topic, OMB has formed an interagency Work Group on Risk Management co-chaired by the chairman of the White House Council on Environmental Quality, James Connaughton, and the administrator of OMB, John Graham. OMB requests comments on the following:

  • Ways in which “precaution” is embedded in current risk-assessment procedures through “conservative” assumptions in risk estimates or explicit “protective” measures in management decisions required by statute;

  • Examples of approaches in human and ecological risk-assessment/management methods addressed by US regulatory agencies that appear unbalanced;

  • How the US balances precautionary approaches to health, safety, and environmental risks with interests such as economic growth or new technology.

OMB recommends agencies do the following:

  • Perform both cost-effectiveness and benefit-cost analyses of major rules;

  • Report analytic results based on two discount rates (3% and 7%) for major rules whose effects will be felt primarily within this generation, with additional discount rates for those whose effects will be felt beyond the current generation;

  • Support rulemakings with formal probabilistic analysis of the key scientific and economic uncertainties regarding costs and benefits for rules whose economic effects exceed $1 billion a year.

OMB suggests calculating benefits and costs that can be monetized, those that can be quantified but not monetized, and those that cannot be quantified.

OMB also seeks comments on how to evaluate more effectively the benefits and costs of the many new homeland security initiatives expected to be issued in a variety of areas, including food safety. Homeland security regulations raise unique issues. OMB seeks input on how agencies might assess the probability of future terrorist attacks, the likely damages, and the effectiveness of federal regulations in preventing attacks, reducing vulnerabilities, or mitigating damages when attacks occur. OMB also is interested in insights on how agencies might better identify, quantify, and weigh both direct and indirect costs of homeland security regulations, including impacts on time, convenience, privacy, and economic productivity, as well as auxiliary benefits unrelated to homeland security concerns potentially associated with such rules.

While the comment deadline will have passed by the time this issue goes to press, OMB's draft Guidelines — and ultimately the final report — are useful reading for all converting industry members interested in the regulatory process.

Sheila A. Millar, a partner with Keller and Heckman LLP, counsels both corporate and association clients. Contact her at 202/434-4143; This email address is being protected from spambots. You need JavaScript enabled to view it.;

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