Motor Vehicle Regulations: Regulatory Cost Estimates Could Be Improved
RCED-92-110
Published: Jul 09, 1992. Publicly Released: Aug 19, 1992.
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Highlights
Pursuant to a congressional request, GAO evaluated the: (1) methods federal agencies and the automobile industry use to calculate the cost of proposed automobile safety, emissions, and fuel economy regulations; and (2) extent to which federal agencies coordinate and exchange information on the total regulatory costs in any one year.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Transportation | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, Environmental Protection Agency (EPA), should request additional data, including confidential data, from industry when cost estimates are controversial and industry and agency estimates are far apart. |
For ongoing and future cost estimates, DOT will request additional data, including confidential information, if necessary, to determine the reasons for the differences in cost estimates.
|
| Environmental Protection Agency | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, Environmental Protection Agency (EPA), should request additional data, including confidential data, from industry when cost estimates are controversial and industry and agency estimates are far apart. |
EPA intends to use the expanded information gathering authority provided by the Clean Air Act Amendments to obtain additional substantiated data, including proprietary cost data, when EPA and industry cost estimates differ substantially.
|
| Department of Transportation | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should publicize the current methods agencies use to estimate costs and solicit comments from industry and other interested parties on the procedures. |
DOT published a paper describing its methods of estimating manufacturer and consumer costs in the Federal Register on June 17, 1993. Public comments have been received and are being reviewed.
|
| Environmental Protection Agency | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should publicize the current methods agencies use to estimate costs and solicit comments from industry and other interested parties on the procedures. |
EPA believes the supporting documents filed with each proposed and final rulemaking adequately describe its cost-estimating practices and invite industry comments on its practices. EPA will continue to solicit industry comments on its cost-estimating practices.
|
| Department of Transportation | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should explore options outside the formal regulatory process for soliciting industry comments and cooperation, such as informal contacts between agency and industry analysts on cost methods, or workshops such as those used in implementing the 1990 Clean Air Act Amendments. |
Agency officials generally agreed with the facts presented and said that they would consider informal meetings and contacts with cost estimators following the publication of the Federal Register notice setting forth DOT methods for estimating costs. The notice was published in June 1993. DOT and EPA have also reviewed each other's cost-estimating methodologies.
|
| Environmental Protection Agency | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should explore options outside the formal regulatory process for soliciting industry comments and cooperation, such as informal contacts between agency and industry analysts on cost methods, or workshops such as those used in implementing the 1990 Clean Air Act Amendments. |
EPA stated that it has used informal approaches such as workshops in the past and that it could use them again for cost estimates of future regulations when the cost estimates are controversial and industry shows an interest in participation. EPA will also monitor a joint Department of Energy and American Automobile Association Manufacturers research effort aimed at improving estimates of the costs of fuel economy technologies. If this effort proves successful, EPA stated that it may provide a useful precedent for future cooperative efforts with industry.
|
| Department of Transportation | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should account for the variations among auto manufacturers and product lines by publishing a range, instead of a single cost estimate for proposed regulations, and testing assumptions thoroughly when a great deal of uncertainty exists. |
The National Highway Traffic Safety Administration will publish a range of cost estimates for each new proposed regulation if the costs are likely to vary significantly between manufacturers and product lines. Cost assumptions will be tested using sensitivity analyses.
|
| Environmental Protection Agency | To improve federal agency cost estimates, the Secretary of Transportation and the Administrator, EPA, should account for the variations among auto manufacturers and product lines by publishing a range, instead of a single cost estimate for proposed regulations, and testing assumptions thoroughly when a great deal of uncertainty exists. |
EPA believes that it adequately addresses variations in costs among auto manufacturers and product lines. Agency officials stated that, currently when a great deal of uncertainty exists they may estimate costs under alternative scenarios that provide a range of costs outcomes and will continue to do so when the data warrant or enable their use.
|
| Department of Transportation | To improve federal agency costs estimates, the Secretary of Transportation and the Administrator, EPA, should update the database for calculating the component costs of proposed safety and emissions regulations, combining the NHTSA and the EPA efforts and using one database on component costs to reduce federal costs and avoid duplication. |
NHTSA has updated its cost estimating databases to include foreign manufacturers and tier-1 original equipment manufacturers of major automotive components and systems. NHTSA has also derived product markup rates for 10 domestic and foreign vehicle manufacturers and 15 suppliers of automotive components and systems. NHTSA and EPA discussed the feasibility of updating their databases for component costs and using one database. EPA, however, has not responded to NHTSA's initiatives to develop a joint database as of August 1996 and NHTSA has decided not to pursue this effort any further with EPA.
|
| Environmental Protection Agency | To improve federal agency costs estimates, the Secretary of Transportation and the Administrator, EPA, should update the database for calculating the component costs of proposed safety and emissions regulations, combining the NHTSA and the EPA efforts and using one database on component costs to reduce federal costs and avoid duplication. |
EPA officials stated that they had tried to improve the basis for estimating costs but acknowledged problems with obtaining cost information from industry. EPA nevertheless believes its method of applying an inflation factor to its materials and labor costs is acceptable for estimating the cost of proposed emission regulations. EPA and DOT have discussed the feasibility of using one database. While the National Highway Traffic Safety Administration (NHTSA) has updated its database, EPA has not responded to NHTSA's initiatives to use one database.
|
| Department of Transportation | The Secretary of Transportation and the Administrator, EPA, should standardize their methods of estimating the cost of proposed regulations affecting the auto industry, particularly their approach to determining the manufacturer and dealer markups, when calculating the consumer cost. |
NHTSA and EPA have discussed the feasibility of standardizing their methods of estimating the costs of proposed regulations. EPA had not responded to NHTSA's initiatives to follow through on this effort as of August 1996. NHTSA does not believe that further actions with EPA are warranted.
|
| Environmental Protection Agency | The Secretary of Transportation and the Administrator, EPA, should standardize their methods of estimating the cost of proposed regulations affecting the auto industry, particularly their approach to determining the manufacturer and dealer markups, when calculating the consumer cost. |
EPA officials began discussing GAO's suggestions for standardizing assumptions on overhead costs and markup rates with NHTSA at regulatory coordination meetings. EPA, however, has not responded to NHTSA's initiatives on this effort.
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