^®: CRE Regulatory Action of the Week

Corps of Engineers: The Birthplace Of Benefit/Cost Analysis and Centralized Regulatory Review
It takes a Ph. D candidate in history to put institutional egos aside and tell it as it is. Joe Conley, a PhD. candidate at Princeton, in an article entitled: "Hungry? Eat an Environmentalist": From Earth Day to Regulatory Reform, 1970-1980", diligently traces the evolution of benefit cost analysis and regulatory review in the US government.

Unlike many of his predecessors, he does not take the easy route and start the clock in the eighties, but instead searches back to the thirties.

Consider the following:

"In the United States, cost-benefit analysis was first used by the Army Corps of Engineers in the 1920s and 1930s to justify flood control and dam projects." (pg. 5)

"In the mid-1960s, this Systems Analysis Group, based in the Office of the Secretary of the Army, had been busy applying PPB-style cost-effectiveness criteria to Corps' budgets and civil works projects. A paper circulated to the group by a visiting professor to the Army secretary's office, Alan Schmid, argued that cost-benefit analysis should be applied not just to the evaluation of public expenditures, such as flood control projects, but to rulemaking as well." (pg. 15)

The study concludes with the statements:

"Scholars have tended to underestimate the success of regulated industries in constraining the reach of environmental regulation during the "environmental decade" of the 1970s."

"… businesses succeeded in making the costs of environmental protection a central issue. In the process, they reshaped environmental politics, moving law, federal management, and even the terms of debate toward quantitative cost-benefit balancing, an ascendance which continues today. Most important was the legacy of cost-benefit analysis. Injected into administrative rulemaking by the Nixon administration in 1971 to appease the business community, the practice was woven into the fabric of environmental policymaking during the 1970s through "balancing" statutes and White House regulatory review."

When the Office of the Secretary applied benefit/cost analysis to rules issued by the Corps of Engineers, it established two precedents which unknowingly would have a substantial impact on the entire federal government: (1) it extended the applicability of benefit/cost analysis from Corps of Engineers water resource projects to rules issued under the Administrative Procedure Act, and (2) it utilized a centralized office ( The Systems Analysis Group in the Office of the Secretary of the Army) for the review of an agency's (Corps of Engineers) rules.

The Systems Analysis Group was established by Mr. Alfred B. Fitt, the General Counsel of the Army in 1965.