Tuesday, February 18, 2014

Internalizing Cost-Benefit Analysis

by Jennifer Nou


February 18, 2014

Before an agency completes a cost-benefit analysis (CBA) subject to oversight by the White House Office of Information and Regulatory Affairs (OIRA), or by the courts if an agency decision is litigated, what forms of internal review of that analysis should the agency undertake on its own?

Old Executive Office Building - WinterOne increasingly common practice is for agencies to establish a centralized review office or officer charged with examining the internal cost-benefit figures developed by the agency’s rule-writing staff. Examples of such offices include the Environmental Protection Agency’s (EPA) Office of Policy or the Bureau of Economic Analysis within the Federal Trade Commission (FTC). These internal agency CBA reviewers are often trained economists who work closely with agency policymaking officials to evaluate internal CBAs before they ever face external review.

Such forms of pre-judicial and even pre-presidential review can help agencies insulate themselves from potential reversal. These mechanisms are gaining increasing significance amidst growing calls for independent regulatory agencies like the Securities and Exchange Commission (SEC) to conduct cost-benefit analysis and to institutionalize more rigorous regulatory analysis practices.

Executive orders currently require executive branch agencies, for their part, to submit “significant” regulatory actions to a further stage of external review by OIRA. Once an agency submits a draft regulatory action to OIRA, OIRA then coordinates a review process with other agencies and White House offices to help ensure, among other things, the regulatory action’s consistency with presidential priorities, as well as to prevent interagency conflicts and generally to promote the careful consideration of regulatory costs and benefits.


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