Regulatory Reform: Agencies Could Improve Development, Documentation, and Clarity of Regulatory Economic Analyses
RCED-98-142
Published: May 26, 1998. Publicly Released: May 26, 1998.
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Highlights
Pursuant to a congressional request, GAO reviewed the extent to which federal agencies are incorporating the best practices set forth in the Office of Management and Budget's (OMB) guidance for preparing economic analyses in accordance with Executive Order 12866 and the Unfunded Mandates Reform Act (UMRA) of 1995.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of Management and Budget | To facilitate full disclosure and add credibility to the economic analyses required for regulatory decisionmaking, the Director, OMB, should amend its guidance to include additional elements, the latter two of which are reflected in S. 981. Specifically, the guidance should be amended to provide that economic analyses should address all of the best practices identified in OMB's guidance or state the agency's reasons for not addressing them. |
Closed – Implemented
GAO recommended that OMB require agencies to provide executive summaries in their regulatory impact analyses that briefly and concisely identify all benefits and costs, describe the range of uncertainties associated with the benefits and costs, and compare reasonable alternatives compared by the agencies. On March 22, 2000, OMB issued new guidance to help agencies estimate the benefits and costs of federal regulations and summarize the results of the associated analyses. Among other things, this guidance calls for summaries of the benefit and cost estimates for each alternative and full disclosure and transparency of uncertainty in developing risk, benefit, and cost information.
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| Office of Management and Budget | To facilitate full disclosure and add credibility to the economic analyses required for regulatory decisionmaking, the Director, OMB, should amend its guidance to include additional elements, the latter two of which are reflected in S. 981. Specifically, the guidance should be amended to provide that economic analyses should contain an executive summary that briefly and concisely: (1) identifies all benefits and costs--both those that can be described quantitatively and those that can be described qualitatively; (2) describes the range of uncertainties associated with the benefits and costs; and (3) compares the reasonable alternatives considered by the agency. |
Closed – Implemented
On March 22, 2000, OMB issued new guidance that requires agencies to provide a summary table for reporting benefits and costs for each major final rule. While OMB suggested use of a summary table that would highlight some of the information GAO recommended be provided in an executive summary--the benefits and costs, described both quantitatively and qualitatively, and the uncertainties associated with benefits and costs--the new OMB guidance does not require that this information be stated in an executive summary which would enhance the ability of Congress, the public, and decisionmakers to understand key issues and be fully informed in a brief and concise manner. Furthermore, OMB proposed that the summary table be prepared only for each major final rule but not for proposed rules.
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| Office of Management and Budget | To facilitate full disclosure and add credibility to the economic analyses required for regulatory decisionmaking, the Director, OMB, should amend its guidance to include additional elements, the latter two of which are reflected in S. 981. Specifically, the guidance should be amended to provide that economic analyses should undergo an appropriate level of internal or external peer review by independent experts and state the agency's basis for selecting that level. |
Closed – Implemented
GAO recommended that OMB issue guidance to agencies to have economic analyses (regulatory impact analyses) undergo an appropriate level of internal or external peer review by independent experts. In September 2001, OMB issued guidance to agencies stating that draft economic analyses should be subject to various internal reviews--by agency economists, engineers, scientists, and agency attorneys prior to submission to OMB. In addition, the guidance recommends that economic analyses for major rules be subject to independent, external peer review by qualified specialists. Furthermore, OMB encourages agencies to have analyses peer reviewed by stating that peer-reviewed analyses will be given a measure of deference during the OMB review process.
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Agency proceedingsCost effectiveness analysisEconomic analysisExecutive ordersPolicy evaluationPrivate sector practicesProposed legislationRegulatory agenciesReporting requirementsBest practices