Cranes and Derricks in Construction Part 4

A. Legal Authority

The purpose of the Occupational Safety and Health Act, 29 U.S.C. 651 et seq. (''the Act''), is ''to assure so far as possible every working man and woman in the Nation safe and healthful working conditions and to preserve our human resources.'' 29 U.S.C. 651(b). To achieve this goal, Congress authorized the Secretary of Labor to promulgate and enforce occupational safety and health standards. See 29 U.S.C. 654, 655(b), and 658. A safety or health standard ''requires conditions, or the adoption or use of one or more practices, means, methods, operations, or processes, reasonably necessary or appropriate to provide safe or healthful employment and places of employment.'' 29 U.S.C. 652(8).

A safety standard is reasonably necessary or appropriate within the meaning of 29 U.S.C. 652(8) if it substantially reduces or eliminates a significant risk of material harm in the workplace; is economically and technologically feasible; uses the most cost effective protective measures; is consistent with or is a justified departure from prior Agency action; is supported by substantial evidence; and is better able to effectuate the Act's purposes than any relevant national consensus standard. See UAW v. OSHA, 37 F.3d 665, 668 (DC Cir. 1994)(''LOTO''). In addition, safety standards must be highly protective. See id. at 669.

A standard is technologically feasible if the protective measures it requires already exist, can be brought into existence with available technology, or can be created with technology that can reasonably be expected to be developed. See, e.g., American Iron & Steel Inst., Inc. v. OSHA, 939 F.2d 975, 980 (DC Cir. 1991) (per curiam) (''AISI''). A standard is economically feasible if industry can absorb or pass on the costs of compliance without threatening its long-term profitability or competitive structure. See, e.g., AISI, 939 F.2d at 980. A standard is cost effective if the protective measures it requires are the least costly of the available alternatives that achieve the same level of p See LOTO rotection., 37 F.3d at 668.

Section 6(b)(7) authorizes OSHA to include among a standard's requirements labeling, monitoring, medical testing, and other information gathering and transmittal provisions. 29 U.S.C. 655(b)(7). Finally, the OSH Act requires that, when promulgating a rule that differs substantially from a national consensus standard, OSHA must explain why the promulgated rule is a better method for effectuating the purpose of the Act. 29 U.S.C. 655(b)(8). Deviations from relevant consensus standards are explained elsewhere in this preamble.

B. Executive Summary of the Final Economic Analysis; Final Regulatory Flexibility Analysis

1. Introduction and Summary

For the final Cranes and Derricks standard, the Agency is presenting this Executive Summary of the Final Economic Analysis (FEA) in this preamble; while the full FEA will be available in the docket. The complete Final Regulatory Flexibility Analysis is also presented here.

The Occupational Safety and Health Act of 1970 (OSH Act) requires OSHA to demonstrate the technological and economic feasibility of its rules. Executive Order (E.O.) 12866 and the Regulatory Flexibility Act (RFA), as amended in 1996, require Federal agencies to analyze the costs, benefits, and other consequences and impacts, including small business impacts, of their rules.

The final cranes standard is an economically significant action under E.O. 12866 and a major rule under the Congressional Review Act (SBREFA). In addition, as required by the RFA, the Agency has assessed the potential impacts of this final rule on small entities and has prepared a Final Regulatory Flexibility Analysis. This rule is not a significant Federal intergovernmental mandate, and the Agency has no obligations to conduct analyses of this rule under the Unfunded Mandates Reform Act of 1995; however the rule has costs of over $100 million per year on the private sector, and is thus subject to the requirement under UMRA for review of private-sector costs. These requirements are met in this section.

The purpose of the Final Economic Analysis is to identify the establishments and industries affected by the final standard; evaluate the standard's costs, benefits, and economic impacts; assess the technological and economic feasibility of the final standard for affected industries; and evaluate the appropriateness of regulatory and non-regulatory alternatives to the rule. The FEA has been developed according to the requirements of E.O. 12866 and the OSH Act. In addition, in accordance with the RFA as amended by the SBREFA, this analysis identifies and estimates the impacts of the proposal on small businesses, using the Small Business Administration's (SBA's) industry-specific definitions of small businesses. In addition, OSHA assessed the impacts of the rule on very small businesses; i.e., those with fewer than 20 employees.

The FEA differs in several respects from the preliminary economic analysis (PEA). Several affected general industry sectors have been added to the original analysis, based on comment during the rulemaking-for example, electric utilities, telecommunications, sign manufacturers, natural gas pipelines, and shipyards-an estimated 22,000 potentially affected establishments in all. Costs have been revised for employer duties for assembly/disassembly and ground conditions, power line work, and crane operator certification, as well as inspections (due to an error in the PEA). New costs have been estimated for meeting ground conditions' provisions ($2.3 million annually). Estimated costs for assembly/disassembly have been decreased in this final analysis, from about $33 million annually in the PEA to about $16 million, primarily due to an increase in current compliance (baseline) and estimated costs also fell for inspections (from $21 million annually to $16.5 million). Estimated costs for several provisions have been increased from the PEA: for work near power lines (from $30 million annually to $68 million) and for crane operator certification (from $37 million annually to about $51 million, primarily due to an increase in the unit cost, many more operators potentially needing certification in the affected general industry sectors, but decreased by the higher current baseline). Overall, estimated costs increased from the $83 million annually in the PEA to about $154 million. The final benefits analysis is based on four years' of IMIS fatality reports, rather than BLS's Census of Fatal Occupational Injuries as in the preliminary analysis, as it was not possible to use the CFOI data to estimate the number of fatalities that were occurring due to crane construction activity by employers in general industry sectors. The Agency estimates that compliance with the final standard will prevent 22 fatalities and 175 non-fatal injuries per year, compared to 53 fatalities estimated to be avoided in the PEA.

The Agency also estimates that compliance will result in considerable cost saving by preventing many more accidents that do not result in injury. The Agency has estimated that annual savings from avoiding project delay, damage to cranes and structures, and lost productivity is at least $7 million annually just from one type of crane accident-tipovers. The Agency has not attempted to quantify all of the costs avoided by all crane accidents prevented by the final standard, but concludes these cost savings are also substantial. In addition, the Agency has noted that a significant portion of these benefits will be passed back immediately to employers in the form of $51 million annual savings in liability insurance costs for the affected industries.

OMB requires agencies to monetize benefits where possible. The Agency is revising its estimate of the VSL presented in the PEA, which was based on an EPA estimate from the early 1990s. The VSL is estimated to be about $7 million in terms of 2000 dollars (Viscusi and Aldy, 2003). At the same time the willingness-to-pay to avoid serious injury was estimated to be about $50,000. The Agency is adjusting the values based on the change in the GDP implicit price deflator from 2000 to 2010 of about 25 percent (Bureau of Economic Analysis, ''National Economic Accounts,'' Table 1.1.9 at http://www.bea.gov/national/nipaweb). The VSL is then $8.7 million and the monetized value of avoiding a serious, non-fatal injury is $62,500. When fatalities and injuries are monetized, the total monetized benefits of the standard from preventing crane accidents is $202.3 million annually from those sources.

The Agency estimates that the total cost of the final standard is about $154.1 million annually. Based on comment in the record, the Agency increased unit costs for ground conditions and ''controlling entity'' duties for some sectors, crane operator certification, and power line compliance provisions. The record showed that relatively more crane operators are already certified, and the Agency reduced costs by that factor. The total estimated costs increased due to the inclusion of some general industry sectors which perform construction activities, as well as increases in unit costs. The net benefit of the standard is $55.2 million annually (total benefits of $ 209.3 million less costs of $154.1 million annually).

The economic impact on affected employers, in terms of costs versus revenues, ranged from 0.01 percent to 0.2 percent, for an average-size employer. When annual costs are compared to profits, impacts range from 0.1 percent to 4 percent, for the average employer. Impacts were highest for employers who owned and rented cranes. The final standard is technologically feasible for employers as it does not contain any requirements that are not capable of being done. The Agency also concludes that the final standard is economically feasible, as the highest impacts are on employers who own and rent cranes and even that impact is no more than 4 percent. Cost and impacts of that magnitude are far less than the typical yearly swings in revenues and profits for the construction industry. Economic impacts on small business are presented below in the Final Regulatory Flexibility Analysis.

Based on comment in the record, some employees may bear the cost of crane operator certification (that is, pay for their own certification). The Agency attributes all costs of crane operator certification to employers in the analysis, though. There may also be language and literacy barriers for operator certification that some current operators may not be able to surmount. Table B-1 summarizes the benefits and costs of this final standard.

TABLE B-1—ANNUAL BENEFITS, COSTS, AND NET BENEFITS, 2010 DOLLARS

Source: OSHA Office of Regulatory Analysis. *Costs with 7% discount rate. Total costs with 3% discount rate: $150.4 million annually.

2. Need for the Rule and Market Failure

Occupational safety problems, such as safety problems associated with cranes and derricks, routinely involve the following characteristics that lead to market failures:

(1) A variety of situations in which one party (employers, fellow employees) take actions that impose risks of death and injuries on other parties (employees);

(2) The risk in question may not be well understood by any party, or also subject to asymmetric information (the employer will typically know more about the risks than employees);

(3) The costs of the risks are routinely transferred to other parties who typically lack the information necessary for a precise estimate of the costs of the transfer, or are not permitted to price transfers appropriately (insurers are routinely forced to use premium systems that do not capture all possible knowledge about risk).

These characteristics mean that markets will not adequately capture the risk involved, and thus regulations are needed. (See Chapter 1 of the FEA for more detail.)

3. Industry Profile/Affected Industries

The final standard would affect employers and employees across most construction industry sectors as well as some in some general industry sectors where cranes and derricks are used as part of the performance of work duties. These industries include firms involved in renting cranes for use in construction projects such as: Multi-family housing; industrial buildings and warehouses; other nonresidential buildings; highway and street construction; and water, sewer, power, and communication line construction. As in the preliminary economic analysis (PEA), the Agency has grouped affected establishments, by industry, into the following categories for analyzing the final standard:

• Crane Rental with Operators,
• Crane Rental without Operators,
• Own and Rent Cranes with Operators,
• Own but Do Not Rent, and
• Crane Lessees in the Construction Industry (referred to simply as ''Crane Lessees'' throughout).

The affected firms and establishments, including information on number of employees, revenues, and profits, are presented below in Table B-2. In some sectors the number of cranes has changed from the PEA because the analysis has been updated with revenue data from the 2006 County Business Patterns (CPB) and Statistics of U.S. Businesses (SUSB), and in those sectors the number of cranes was estimated from revenues.

The PEA accompanying the proposed standard presented an industry profile describing crane use in all sectors of the traditional construction industries, the current NAICS 233-236 (the older SICs 16, 17, and 18) and the crane rental industry sector in general industry, NAICS 53214. There were no comments objecting to the inclusion of these sectors in the economic analysis. However, there was comment from some general industry sectors following publication of the proposal. They noted that the PEA had focused exclusively on the construction industry and had not captured costs or benefits for general industry employers who own equipment covered by the standard and engage in construction activity in addition their primary work in the various general industry sectors.

TABLE B-2—INDUSTRIAL PROFILE OF AFFECTED FIRMS AND ESTABLISHMENTS FOR THE PROPOSED STANDARD

Source: U.S. Census Bureau data; Country Business Patterns, 2006; Statistics of U.S. Businesses 2006; Internal Revenue Service, Source Book, profit rates over 2000-2006.

These employers either routinely have a few tasks that can be considered construction activity or infrequently engage in construction projects with cranes at their own facilities. ("Cranes" will be used throughout this section to refer to all covered equipment by the final standard: Cranes, derricks, pile driving equipment, and so forth.) Comment in the record indicates that the industry sectors in the table below have some construction activity involving cranes within the scope of the final standard, and the Agency has made a determination that their construction activity with cranes does, in fact, fall under the final standard. Table B-3 below identifies the sectors in general industry that were identified during the rulemaking, and the Agency concludes will be affected by the final standard.

TABLE B-3—GENERAL INDUSTRY SECTORS THAT PERFORM CONSTRUCTION WORK INVOLVING CRANES

Source: Office of Regulatory Analysis.

The Agency concludes that general industry's permanently installed overhead and gantry cranes should be covered under general industry standards rather than the final construction crane standard, even if they perform incidental construction work (see discussion of §1926.1400, Scope). However, all other general industry cranes, whether mobile or permanently installed, are covered under the final standard to the extent that they perform construction work.

Several general industry sectors that commented in the rulemaking will not be affected by the final standard because their only interaction with construction consists of making deliveries of materials to the ground at construction sites. Several commenters noted that their industry only made deliveries to the ground. (ID-0236; -0299.1.) The Agency has made clear in the Scope section above that the delivery process from truck to ground is not considered to be a construction activity covered by its construction standards. For that reason, brick manufacturers, pre-cast concrete products manufacturers, and all other distributors of similar supplies are not affected by the standard because they only deliver materials from truck bed to ground.

However, the Agency views deliveries into or onto structures differently-as construction activity within the purview of the standard. Therefore, industries that deliver materials into or onto structures with articulating cranes are included in the industry profile. The final standard exempts such deliveries for articulating cranes with automatic overload protection devices (AOPDs). If all such articulating cranes had these devices, then affected industries (building supply, lumber yards, HVAC distributors, for example) would be exempt. The Agency had comment in the record that newer articulating cranes for building material supply are equipped with AOPDs, but the Agency concludes that there are still older models of articulating cranes making building supply deliveries, and that these affected employers would be covered by the standard-chiefly by the requirement for operator certification.

The electric utility industry made several comments to the record. (ID- 0144; -0155.1; -0163.1; -0200; -0203.1; -0213; -0215; -0226; -0345.17; -0408.1.) This industry is affected by the standard both because they have digger derricks and other cranes that perform construction work from time to time, and because utilities must provide voltage information and participate in meetings with contractors to determine power line safety. Although digger derricks are exempted from the final standard for all work on utility poles, several commenters made clear that they are routinely used for lifting in other work settings (ID-0328.1; -0344). For construction crane activities by electric utilities, the main impact of the final standard is to require that operators be certified, as all linemen currently received extensive training in crane safety practices and procedures otherwise (ID-0155.1; -0344; -0345.17). The Agency also learned through comment that the telecommunications industry uses digger derricks and truck-mounted cranes, and this industry is included in the standard's industry profile as well.

The Federal Railroad Agency has jurisdiction over most of the work done by railroads. The Agency has concluded that railroads will not be affected by the final standard.

All of the affected general industry sectors have been added to the industry profile in the category of employers who ''Own but do not Rent.'' With respect to the industries not included in the PEA, the Agency has taken a conservative approach to not underestimate costs, and therefore economic impacts, on these sectors. The traditional construction industry sectors have remained unchanged. The data for all sectors has been updated with information from the 2007 Economic Census, 2006 County Business Patterns, and 2006 Statistics for U.S. Businesses for number of firms, establishments, and revenues. Table B-2 presents information about the affected industry sectors: the number of affected establishments, employees, industry profit rates, and average revenues and profits for affected establishments.

Estimating the number of establishments and cranes covered by the standard in general industry

To estimate the number of establishments and cranes in general industry sectors affected by the final cranes standard, the Agency relied on: comment in the record; 2006 CPB and SUSB, and occupational data from the Bureau of Labor Statistics' Occupational and Employment Statistics, May, 2008 Occupational Employment and Wage Estimates, extracted from 4-digit NAICS industry-specific estimates (Nov. 4, 2009 from http://bls.gov/oes/oes_dl.htm). The Agency's purpose in estimating the number of cranes in the affected general industry sectors is to estimate the costs employers will bear and demonstrate that the standard is economically feasible. For some industries below, the Agency's estimates are certainly high-overestimates, but the ultimate purpose here is not to predict or forecast cost estimates, but to show that even if more cranes are affected and more costs result from the final standard, the standard is still economically feasible. In addition, since economic impacts are measured as the costs for affected employers, the total number of affected cranes in a sector does not alter the measure of impact on an affected employer. Although a higher total number of cranes in a sector obviously changes the estimated total cost of the entire standard. For example, if an average employer in the industry sector has 10 employees and the Agency estimates one crane and one crane operator, it does not affect how economic impact is measured whether there is one crane in the industry or 50. The impact of costs as a fraction of revenues and profits are, on average, the same for each affected employer. As a result, though the Agency will try to estimate the number of affected employers, the exact number is not critical to the economic feasibility finding that is essential for the rule. In addition, although all of the sectors below engage in crane construction activities, some likely may contract such work out and would then only be affected by the final standard indirectly.

Estimating the number of cranes and crane operators in affected general industry sectors

• Electric Power Generation (NAICS 221110) and Electric Power Transmission Control, and Distribution (NAICS 221120). The Agency is basing its estimate of affected cranes and crane operators on the industry profile and cost analysis for subpart V, Table 5.1. (ID-0389.2.) Table 5.1 shows that the two industries had about 114,500 employees working on power lines affected by subpart V in about 7,600 crews for Electric Power Generation and about 12,600 crews in the Transmission, Control, and Distribution sector. Together, in total, the Agency estimated that the industry was using about 20,200 powered vehicles, one for each crew. OSHA concludes that each sector has one piece of equipment, such as a digger derrick, bucket truck, or truck-mounted crane that each crew works with (in crew sizes of 3 or 6). Further, based on several comments in the record that digger derricks perform crane-related work in substations and other locations (ID-0155.1; -0201.1; -0328.1; -0344), the Agency concludes that each digger derrick would need a certified operator to work as the industry customarily has. Other comment in the record suggests that journeymen are often hired as if each is completely trained in all aspects of work (ID-0155.1; -0344); hence the industry has asserted that to maintain this arrangement all linemen would have to receive crane operator certification, which would be prohibitively expensive (ID-0203.1; -0367.1). However, another comment in the record indicated that for each crew, individuals have specific assignments-that not all journeymen are given responsibility for operating lifting devices, whether that be a bucket truck or aerial lift, a crane, or a digger derrick. (ID-0344.) Comment in the record indicates that, roughly, equipment is equally divided between equipment that is covered by the standard (digger derricks and boom trucks) and bucket trucks, which are not. (ID-0344.) The record also indicates that journeymen are extensively trained in apprenticeship programs in the use of their powered equipment, and that the primary cost of meeting the duties of the final standard is certifying crane operators. (ID-0155.1; -0344.) The Agency can also estimate based on comment in the record that there are far more digger derricks than boom trucks, in a ratio of about 85:15, based on reports of 16 of Edison Electric's members who provided information in the record and identified their types of equipment. The PEA in subpart V was based on the 2002 Economic Census. The 2007 Census shows that employment in NAICS 221110 has fallen to 78 percent of the 2002 level and employment in NAICS 221120 has fallen to 90 percent of the 2002 figure. However, there was no information in the record that showed the number of linemen or pieces of equipment had declined; so the Agency is basing its estimate of the number of employees who would be certified to use the equipment covered under the final standard as presented in subpart V's PEA Table 5.1. Neither of the affected industry sectors has objected to certifying operators of their truck-mounted cranes; yet if it were necessary that every lineman perform every function, that would surely also necessitate certifying every journeyman as well. The Agency concludes that it is not necessary to certify every journeyman as a crane operator for the industry to continue to efficiently use their equipment and manpower. If the industries are still operating as many as 20,200 powered vehicles, and about one-half are digger derricks and truck-mounted cranes, then, at the very bare minimum, to have an operator in each piece of equipment potentially covered by the final standard would require certifying 10,100 as crane operators. However, having the bare minimum, the Agency recognizes, would not afford the industries the same flexibility and efficiency as it now has nor is every employee available to work every day of the year. However, the Agency believes that certifying 30,000 journeymen as crane operators would afford a sufficient number that each piece of covered equipment (digger derricks and truck-mounted cranes) would in almost all situations have a journeyman certified as a crane operator available to perform work addressed by the final standard in a crew. Work that is construction work and covered by the final standard, and not subpart V, is not an every day occurrence for the two industry sectors. Indeed, the Agency believes that this estimate is likely higher than the most efficient solution that these two industries will devise, but, for purposes of showing that the final standard is economically feasible even with this many journeymen certified as crane operators, the Agency believes it is sufficient. Accordingly, the Agency estimates that NAICS 221110 Electric Power Generation will expend resources to certify about 10,000 journeymen as crane operators, and NAICS 221120 Electric Power Transmission, Control, and Distribution about 20,000.

• Two natural gas sectors are potentially affected by the final standard: NAICS 221210 Natural Gas Distribution and 486210 Pipeline Transportation of Natural Gas. Both industries were reported to be impacted by the final standard. (ID-0155.1; -0328.1; -0344.) NAICS 237120 Oil and Gas Pipeline Construction performs much of the construction of new gas pipelines, the Agency concludes. However, the two natural gas sectors likely also perform some pipeline work themselves-or at least some employers in the industries do. Sideboom cranes are commonly used in pipeline construction, but are exempt from the requirement for crane operator certification. The Agency concludes that the major significant cost for these industries is certifying operators for their other, mostly truck-mounted cranes. Power line safety issues occur most often below ground, and the Agency concludes that the industry already addresses these issues, based on comments (ID-0155.1; -0344). The 2006 CPB and SUSB shows that Natural Gas Distribution sector has 2,458 establishments and 78,813 employees; while Pipeline Transportation of Natural Gas has 1,363 establishments with 22,248 employees. According to BLS' 2008 Occupational Employment survey, Natural Gas Distribution has 2,390 employees who are electric line installers, 950 who are operating engineers and other construction equipment operators, 1,180 heavy truck drivers and tractor trailer drivers, and no crane operators. For the Pipeline Transportation of Natural Gas, the employment figures are 50, 130, zero, and also no crane operators, respectively, for the same employment categories. The Agency concludes that the Natural Gas Distribution industry is performing significant pipeline work, mainly with excavation equipment, and each company on average has over 30 employees. The Agency concludes that the average employer in this industry may be using one crane that is not a sideboom crane and needs to certify the operator for new construction work that would be covered by the standard. The Agency also concludes that the Pipeline Transportation of Natural Gas has considerably less construction activity that would involve cranes covered by the final standard and that the average establishment or employer only has about 10 employees. The Agency estimates that as few as 50 employers in this industry sector are using equipment in construction activity that would necessitate certifying crane operators.

• The Structural Building Components Association (SBCA) commented in the record that many of their members use ''boom crane trucks to deliver and/or set their products at the jobsite.'' (ID-0218.1.) Their members manufacture ''roof and floor trusses, wall panels, I-joists, engineered wood beams, plywood and oriented strand board * * *. In most instances the components are simply unloaded at the jobsite, using either a custom roll-off trailer, a forklift, or a boom truck crane, and left for the builder to install. It is not uncommon for a component manufacturer who utilizes a boom truck to deliver both in markets that require hoisting and setting of components (thus engaging in construction activity) and those that require delivery of the components and other building materials on the ground (not a construction activity).'' (ID-0208.1.) SBCA viewed their crane operations as low risk and asked for an exemption to eliminate training burden. Under the final standard, delivery of materials onto or into the structure, such as setting components, is a construction activity covered under the final standard. SBCA did not mention the use of articulating cranes, which with a lifting movement limiting device, would in fact exempt their equipment from the standard, and thus OSHA concludes that these affected industries are only employing boom trucks. The Agency, based on SBCA's comment, concludes that the primary affected industries are NAICS 321213 Engineered Wood Member (except Truss) Manufacturing and NAICS 321214 Truss Manufacturing. Engineered Wood Member Manufacturing has 162 establishments and 51,270 employees (2006 CPB and SUSB). Truss Manufacturing has 1,085 establishments and 51,270 employees. According to the 2008 Occupational Employment Survey, the four-digit NACIS 32120 Veneer, Plywood, and Engineered Products industry has 120 crane operators, 2,240 drivers of heavy trucks and tractor trailers, and 420 drivers of delivery trucks (total employment of 98,000). The Agency concludes that typical employers in these two sectors, with about 50 employees, likely employ one to two boom trucks for delivery. Truss manufacturers are much more likely to use boom trucks for delivery and placement of components-and therefore fall under the scope of the standard-than manufacturers of engineered wood members, the Agency concludes, because the small equipment typically used by the latter employers would not be capable of lifting heavy members for placement (ID-0208.1). In addition, the relatively few engineered wood member manufacturers produce specialty items and do not simply serve more local or regional markets as do truss manufacturers. The Agency concludes that employers in this latter industry are much more likely to transport their products longer distances and deliver to the ground. These products are also more typically used only in larger residential and commercial applications, where an on-site crane would lift and position them for installation. As SBCA noted in its comment, most deliveries are made to the ground. The Agency concludes that, on average, employers in the Engineered Wood Member industry employ one truck-mounted crane and employers in the Wood Truss manufacturing industry also employ one, on average. According to comments by SBCA, employers are likely already meeting all of the other safety requirements in the final standard save for crane operator certification. (ID-0208.1.)

• A comment by a major shipyard alerted the Agency to the potential impact of the final construction cranes standard on the Shipbuilding and Repair Industry NACIS 336611. (ID- 0195.1.) When shipyard cranes perform construction activities, they will be covered by the final standard; although the final standard exempts permanently installed overhead and gantry cranes in general industry. According to the 2008 Occupational Employment Survey, there are 550 crane operators in the shipyard and boatbuilding industries (the four-digit NAICS 33660). Northrup-Grumann in its comment reported that it alone employs 600 cranes throughout its shipyards around the country. (ID- 0195.1.) Northrup-Grumann's 40,000 current employees represent about one-half of the employment in the shipbuilding and ship repair industry, and the Agency estimates that: There are about 1,200 cranes in use in shipyards and about one-half would be potentially covered by the standard if construction activities are performed with them, since many large cranes in shipyards are permanently installed. The 1,200 figure is surely not an underestimate as Northrup-Grumann is the largest shipbuilder in the country and likely the most intense user of cranes for its larger projects. Since construction activities in shipyards are episodic or irregular, the Agency estimates that if shipyard employers provide certification for crane operators for one-half of the number of non-permanent cranes (with 300 certified operators) that would be sufficient to perform their own construction activities without hiring outside construction contractors for their needs.

• The final standard potentially affects the general industry sector NAICS 339950 Sign Manufacturing. In its comment to the record, the International Sign Association reported that it had 2,600 members, most of whom are small businesses. (ID-0247; -0344.) Not all sign manufacturers have cranes or provide installation services, nor does the industry build or erect billboards, which is an industry properly represented among the traditional construction industries. The average employer has about 10 employees, according to the 2006 CPB and SUSB data. Although many manufacturers do not use cranes or install signs, those that do were said to have one or two cranes (ID-0344). A sign manufacturer who participated in the public hearings described his business: Revenues of less than $10 million annually, with 70 employees, nine of whom were in the installation department. (ID-0344.) Gelberg sign has two crane trucks for installation, and one bucket truck for servicing. Sign manufacturers reported that for large projects, employers typically hired crane companies. Based on the comment in the record, the Agency has estimated the number of cranes and operators in the sign manufacturing sector in the table below. The Agency has assumed that the sign making industry has one trained crane operator for each crane it uses for installation.

ESTIMATION OF NUMBER OF CRANES IN NAICS 339950 SIGN MFG

Source: ORA; 2006 County Business Patterns, SUSB.

• Retail and commercial building supply associations and employers provided comment to the record in regard to how the standard would affect their businesses. (ID-0184; -0326.1; -0380.1.) The Agency concludes that commercial and retail building supply dealers are represented in the industries in the table below:

The building supply dealers provided extensive and detailed comment to the record-both written comment as well as testimony at the public hearings. The key issue for these industries was that their deliveries to construction sites were typically not construction work and about one-half of all deliveries are to the ground. (ID-0341: -0343.) For deliveries onto or into structures, such as drywall into buildings and roofing materials up to roofs, they use articulating cranes which have controls to prevent tipover, called lifting moment limiting devices (LMLD). The Specialty Building Material Distributors and Safety Coalition (SBMDSC) in testimony described truck-mounted cranes used to deliver drywall, for example, and ''knuckle'' cranes used to deliver roofing materials. The Agency has concluded that these are both versions of articulating cranes. Both SBMDSC and the National Lumber and Building Material Dealers Association repeated several times in written comment and public testimony that their articulating cranes had LMLDs. (ID-0184; -0326.1; -0341; -0344; -0380.1.) Since the truck-mounted cranes in use are articulating cranes with LMLDs, they are exempt from the rule and these industries will not incur any costs of compliance. Although the industries did not report any older truck-mounted cranes used for deliveries without LMLDs, if these do exist, the employer would have the option to use them for deliveries to the ground (and be unaffected by the final standard since this is not a ''construction activity'') or to deliver materials into or onto structures by complying with the rule, which would essentially be to ensure that their operators are certified, as well as following the final standard's specific safety precautions. In addition, operator certification is required only within four years after the standard is effective, and any older equipment may be replaced in the interim if still extant.

• The Heating and Air Conditioning Equipment Distributors reported that their deliveries to buildings would be affected by the final standard because they often must hoist equipment to the first or second floor of buildings, which would qualify as construction work. (ID-0235.1.) Deliveries are also made to the ground, and some employers do hire crane trucks for some deliveries. The Heating, Air Conditioning, and Refrigeration Distributors International (HARDI) reported that their 450 members who are wholesale distributors in the industry have, on average, 11 branch companies each. According the 2006 CPB and SUSB, there are 5,193 establishments with 55,606 employees, or about 10 to 11 employees per employer. The Agency estimates that the typical establishment in the industry operates one truck-mounted crane with a single, trained operator who must become a certified crane operator under the final standard to deliver HVAC equipment onto structures.

• Direct-selling propane dealers use cranes to deliver and install LP, or propane, tanks, mostly in rural areas. Installing a new tank would constitute a construction activity, and crane use for that activity would fall under the final crane standard. The affected industry is identified as NAICS 434312 Liquefied Petroleum Gas Dealers. According to the 2006 CPB and SUSB there are 5,567 establishments in the direct selling sector with 43,583 employees. Clearly, the industry is predominantly made up of small businesses, with the average establishment having about eight employees, and this is attested to by the industry's comment (ID-0198.1). The National Propane Gas Association noted that delivering tanks is ''one of the most common activities'' performed by propane retail marketers and that ''to install these tanks, it often requires the need of a truck-mounted crane to lift and/or place the empty ASME tank onto its support or foundation.'' (ID-0198.1.) The Agency estimates that each of the retail establishments has, on average, a truck-mounted crane that would be engaged occasionally in construction activity covered under the rule.

• Locomotive cranes are listed as one of the types of cranes covered by the final standard, and several railroads participated in the rulemaking. But the Agency has concluded that the Federal Railroad Authority has primary authority over crane activity performed by railroads. The Agency has concluded that no railroad employers will be impacted by the final rule.

• Telecommunications employers were identified by several commenters as an industry that would be affected by final standard. (ID-0155.1; -0234; -0326.1; -0344.) The telecommunications industry is identified as NAICS 517110 Wired Telecommunications Carriers. According to the Economic Census the telecommunications industry has about 2,500 firms, 27,000 establishments and 634,000 employees. There are 89,000 employees in the industry who are ''telecommunications line installers and repairers''-as opposed to the electric power industry's journeymen who are ''electric power installers and repairers'' (2008 Occupational Employment Survey, or OES). OES reports only 50 power line installers are employed in the industry. The telecommunications industry was described in comment as engaged in work similar to that of the electric power industry-using digger derricks and radial boom trucks to install or replace utility poles or in laying underground cable. The Agency concludes that telecommunications workers are not primarily engaged in constructing and replacing structural members, but in running or maintaining communications lines on poles or underground, and therefore are far less intensely engaged in activities that require digger derricks or cranes. In addition, the industry likely also employs construction contractors for its construction work. There is nothing in the record to suggest that digger derricks in the telecommunications industry are used for activities other than utility pole work. For example, they would not be used to hoist transformers or other moderately heavy equipment onto utility poles, or at substations or other facilities, because telecommunications equipment does not consist of such hardware. Digger derricks therefore will largely be exempt from the final standard in the telecommunications industry because they do not perform construction work in which they hoist loads in other construction activities. The Agency estimates that the industry employs about 1 truck-mounted crane per firm (for a total of about 3,000), on average, that will be covered by the final standard.

The self-employed owner-operators of cranes doing construction work would not be required under the standard to be certified crane operators as they do not have employees and are themselves not employees. The Agency estimates that about 5 percent of cranes are owned and operated by the self-employed, based on BLS data (ID-0025).

Table B-2 summarizes the industries affected, and the number of cranes they use. As can be seen from this table, adding the general industry sectors in the manner outlined above results in approximately 35,000 additional cranes and crane operators. Table B-4 presents information about ''small entity'' establishments, as defined by SBA. Table B-5 presents information about establishments with fewer than 20 employees.

TABLE B-4—INDUSTRIAL PROFILE OF SBA DEFINED SMALL ENTITIES FOR THE PROPOSED STANDARD

Source: U.S. Census Bureau data. Country Business Patters, 2006; Statistics of U.S. Businesses 2006. Internal Revenue Service, Source Book, profit rates over 2000-2006. Statistics of U.S. Business (SUSB).

TABLE B-5—INDUSTRIAL PROFILE OF VERY SMALL ENTITIES (LESS THAN 20 EMPLOYEES) BY MAJOR CATEGORY

Source: ORA. U.S. Census Bureau data. Country Business Patterns, 2006; Statistics of U.S. Businesses 2006. Internal Revenue Service, Source Book, profit rates over 2000-2006.

4. Benefits

The Agency received several comments in the record on the benefits analysis in the Preliminary Economic Analysis (PEA). For example, the commercial building supply industry noted that their industry had not been included in the economic analysis, nor, consequently, included in the Agency's characterization of risks and benefits. The industry provided 2008 accident data (5 injuries related to work with cranes) to the rulemaking record in their comments. (ID-0184; -0342; -0345.17; -0384.1.) Stephen Yohay, representing Edison Electric Institute noted that there was no explanation of the benefit that would result for the electric utility industry or electric industry employees, and therefore no evaluation of whether the benefit was reasonably related to the cost of compliance. (ID-0203; -0335; -0342; -0345; -0372; -0380; -0381; -0408.) The Agency was also made aware of the potential overlap of costs and benefits of industries affected by both the construction cranes' standard and the Agency's previously proposed standard Electric Power Generation, Transmission, and Distribution; Electrical Protective Equipment (subpart V), which essentially resulted in double counting of risk reduction, or benefits, in the electric utility industry as well as the construction industries working for the electric utility industry in the cranes proposed standard. This oversight has been corrected.

The proposed standard's benefits analysis rested upon BLS' Census of Fatal Occupational Injuries (CFOI) data for total annual fatalities in the construction industry, an estimate that eight percent of (CFOI) construction fatalities were crane related, and an analysis of a small sample of fatality reports from OSHA's IMIS data indicating that 58 percent of construction crane-related fatalities could be prevented by the proposed cranes standard. The application of the construction crane standard to general industry sectors and the necessity of disentangling the affect of subpart V required a different approach. The Agency instead is relying on an analysis of four years of IMIS fatality reports across all industries to estimate the risk reduction, or benefits, attributed to the final cranes standard. This method has been used by the Agency to evaluate risk reduction in virtually all of its safety standards. The Agency collected 506 fatality reports from IMIS across all industries for the years 2004-2007. Of these, over 200 were found to be construction related, including some in general industry sectors. One hundred and twenty-six of these (with 132 fatalities) were accidents that the Agency concluded were potentially impacted by the final standard, and the Agency estimates that 88 of these will be prevented by the final standard, or about 22 per year. The Agency also estimated that the final standard would prevent 175 injuries annually. The table below describes the industry sectors with IMIS accident fatalities that the Agency concludes are impacted (i.e., potentially avoided) by the final standard.

TABLE B-6—AVOIDABLE FATALITIES IN THE CONSTRUCTION INDUSTRY, 2004-2007

The Agency provides a full Agency concluded that results from This same analysis also showed that explanation of its method of evaluating these two regulatory efforts are there is a serious risk of fatalities in risk reduction in the FEA in the docket, consistent with OSHA’s conclusion that General Industry construction work. along with an Appendix (Excel spreadsheet) of the IMIS records examined. The Agency evaluated reports from the effect of crane regulations in California as well as the Canadian province of Ontario. The Agency concluded that results from these two regulatory efforts are consistent with OSHA's conclusion that the final standard reduces risk of construction crane accidents and injuries; however, the Agency determined that review of IMIS records would provide a better method to quantify benefits.

This same analysis also showed that there is a serious risk of fatalities in General Industry construction work. Table 7 shows the fatalities in construction related work in the General Industry sectors that have been added to the economic analysis.

TABLE B–7—FATALITIES THAT OCCURRED OUTSIDE TRADITIONAL CONSTRUCTION INDUSTRIES THAT COULD BE AVOIDED BY THE FINAL STANDARD, 2004–07

Source: ORA; IMIS.

Analyzing IMIS Crane Fatality Reports

OSHA typically measures the risk reduction, or benefit, of its safety standards by examining accident reports. Accidents that occur because of a failure to comply with an existing standard are not counted as a benefit, or risk reduction, that is attributed to the effect of the new standard. In addition, the Agency does not try to estimate, or factor in, compliance with the new standard in estimating costs and benefits. It estimates costs as if all employers fully comply, and estimates benefits as if employer efforts prevent all types of accidents, or risks, the standard addresses. The chief purpose of the analysis is to demonstrate feasibility while providing a measure of the size of the rule, its possible impact on industries and the economy, and the ability to weigh and compare its costs and benefits. The analysis is not trying to predict with precision exactly the outcomes under the rule, which depend on employer compliance, changes in technology and the way employers react to the new standard, and many other factors.

The Agency is taking a somewhat different approach to estimating the risk reduction under the crane standard. OSHA's current construction crane standards were adopted in 1972 under the OSH Act's sec. 6(a), permitting the Agency to adopt existing standards and current consensus standards without informal rulemaking. Thus, for example, former §1926.550(b)(2) referred to the ANSI B30.5-1968 standard (that is, from the year 1968) for requirements for design, inspection, testing, and maintenance of crawler, locomotive, and truck cranes. The current standards were widely believed to be out of date and ineffective; hence, the creation of the Negotiated Rulemaking Committee (C-DAC) from affected industries and labor representatives to address weaknesses.

For example, the former construction crane standard had in former §1926.550(a)(15)(i) a prohibition from working within 10 feet of any energized overhead power line. Yet power line contact causes more crane-related employee deaths than any other source, and the negotiated rulemaking committee produced provisions that are meant to reduce those fatalities. Technically, however, one could argue that it is a failure to comply with the current standard that results in electrocutions. If the crane, boom, wire, or load were not getting closer than 10 feet to power lines, there would be no electrocutions. The final standard increases the prohibited distance to 20 feet, but also includes a number of other precautions. California recently increased the prohibited distance to 20 feet, and reported that electrocutions due to cranes have fallen from five over a two and one-half year period prior to the regulation to just one in the same period of time afterward. The reduction in the California fatalities also can be attributed to a requirement for operator certification; this final OSHA standard also includes this requirement.

The Agency concludes that its final standard will result in fewer fatalities and injuries due to a number of the provisions in the final standard, even though there are some existing construction crane provisions that address the same risk. This is attributed to more specific precautions in particular sections of the rule as well as the requirement for certifying crane operators, which potentially affects safety in all aspects of crane operations.

Another example where the final standard will be more protective than current standards is in assembly/disassembly operations. Assembly/disassembly operations are, along with power line contact, a leading cause of fatalities in crane work. Technically, one could argue that these fatalities could always be avoided by compliance with the current crane standard-to follow manufacturers' specifications-which is a general, passive, and non-specific duty. The final standard has lengthy provisions in the final standard to prevent these types of accidents.

OSHA believes that these types of accidents will be prevented by compliance with the provisions of this final standard for assembly and disassembly of equipment. Section 1926.1403 requires that equipment be assembled in compliance with manufacturer procedures or with alternative employer procedures designed to prevent the equipment from collapsing. In addition, under §1926.1404, assembly must be conducted under the supervision of a person who understands the hazards associated with an improperly assembled crane and is well-qualified to understand and comply with the proper assembly procedures. Section 1926.1404(f) would prohibit employees from being under the boom when pins are removed. In situations where site constraints require an employee to be under the boom when pins are removed, the employer must implement other procedures, such as ensuring that the boom sections are adequately supported, to prevent the sections from falling onto the employee. This specific work practice alone will prevent virtually all fatalities associated with assembly/disassembly of lattice boom cranes. Section 1926.1404(q) contains several provisions designed to ensure that outriggers are deployed properly before lifting a load. In addition, the operator qualification and certification requirement of proposed §1926.1427, which is intended to ensure that operators understand and follow the safety requirements for the equipment they are operating, would help prevent this type of accident.

For informational purposes, as required by E.O. 12866 (also following the guidance of OMB's Circular A-4), OSHA monetizes the safety benefits of standards. OSHA assigns a value of statistical life (VSL) to fatalities prevented by the final standard of $8.7 million per VSL. This estimate is based on the median value found by Viscusi and Aldy in their 2003 review ($7 million in 2000 dollars), adjusted by the GDP implicit price deflator 2000 to 2010). The total monetized value of preventing 22 fatalities annually is about $191.4 million. For accidents, OSHA uses a willingness-to-pay methodology to monetize the value of injuries avoided, of $50,000 in 2000 dollars; which, when adjusted by the GDP deflator is about $62,500 in 2010 dollars. Thus, the monetized annual value of an estimated 175 injuries avoided by the standard annually is about $10.9 million. The total annual monetized value of avoided injuries and fatalities is about $202.3 million.

Costs of Crane Accidents

Several commenters noted that crane accidents represented a substantial cost to employers in the crane industry. (ID- 0341; -0342; -0343; -0344.) In the PEA the Agency did not estimate cost savings from avoiding crane accidents, but only estimated monetized benefits for avoiding fatalities (the value of a statistical life, or VSL) or injuries (a value based on willingness to pay). These cost savings do not represent other losses associated with accidents, such as production time lost to provide medical services to injured employees, damage to cranes, damage to the work site or beyond, damage to the load materials or rigging, lost time in cleaning up and repairing damage to the worksite, lost production time while the crane is removed, repaired, or replaced with a substitute. More obviously they do not account for costs of crane accidents where no fatality or injury was recorded. There are many more crane accidents that do not involve any injury than those represented in the IMIS reports, and the Agency concludes that the final standard will avoid these just as effectively as the accidents where injuries occur.

For example, there were ten tipover accidents with fatalities in OSHA's IMIS records for 2008, and data collected in the State of California over a three year period showed that there were 35 (mobile) crane tipovers for the single tipover accident fatality (Op cit. Yow, Philip, ''Crane Accidents 1997-1999 ***.''). Since California has about ten percent of the U.S. population and economy, this suggests that there are on the order of 350 crane tipover accidents over a three year period, or about 120 per year. Tipovers typically require crane repair, lost production time for all employees at the site, and schedule delays. Since there are firms that specialize in repairing cranes damaged in accidents, the Agency believes that they are in fact frequent. If the cost of these kinds of accidents are only, on average, $100,000 each, the total annual cost savings from avoiding two-thirds (the fraction of current crane fatalities prevented by the final standard) of them would be about $7 million per year. That represents a cost saving of avoiding accidents from just one cause. Although tipovers and crane or boom collapses are likely the most expensive type of crane accident, they represent only about 10 percent of the types of fatal accidents.

Tower crane collapses in urban areas, while infrequent, are very costly, as the crane is typically lost, considerable damage done to the worksites and structures beyond, and days if not weeks of lost production. The Agency believes that this cost is significant, but has no information in the record with which to estimate this source of cost savings.

Similarly, there are costs associated with all crane accidents, whether or not there is an employee injury. The Agency does not have information in the record upon which to estimate the overall number of crane accidents, or the particular costs of the different types of accidents, such as dropping a load, contact with power lines, and so forth. But the Agency believes that the potential economic benefits from reducing these with compliance with the final standard is likely very substantial.

Insurance Savings

An expert from the insurance industry reported that his company offers a 10 percent reduction in general liability premiums if all an employer's operators are certified. (ID-0343; -0345.34; -0347.) Several commenters confirmed that fact and also said that this saving alone more than paid for the cost of certifying operators. (ID-0343.) There was no information in the record about the cost of general liability insurance to employers with cranes, and so the Agency cannot compute any cost saving based on their cost or prices. However, this possible saving clearly shows that it is not simply OSHA that sees savings associated with operator certification, and that employers can reasonably expect some immediate savings associated with operator certification (projected to cost about $51 million annually).

Net Benefits

The monetized benefits and other benefits of the final standard are estimated by the Agency to be $209.3 million annually ($202.3 million from fatalities and injuries avoided, plus $7 million in avoided tipover accident costs). The Agency has not quantified the cost savings from many accidents which do not involve injury that will be prevented by the final standard.

5. Technological Feasibility

In accordance with the OSH Act, OSHA is required to demonstrate that occupational safety and health standards promulgated by the Agency are technologically feasible. Accordingly, OSHA reviewed the requirements that would be imposed by the final regulation, and assessed their technological feasibility. As a result of this review, OSHA has determined that compliance with the requirements of the final standard is technologically feasible for all affected industries. The standard would require employers to perform crane inspections, utilize qualified or certified crane operators, address ground conditions, maintain safe distances from power lines using the encroachment prevention precautions, and to fulfill other obligations under the standard. Compliance with all of these requirements can be achieved with readily and widely available technologies. Some businesses in the affected industries already implement the requirements of the standard to varying degrees (some states have requirements), as noted during the SBREFA Panel. OSHA believes that there are no technological constraints in complying with any of the proposed requirements, and received no comments that suggested that these standards were technologically infeasible.

6. Costs

The Agency received comment on some unit cost estimates of specific provisions in the PEA: Operator certification, the number of crane jobs involving work near power lines, electric utilities providing voltage information, de-energizing power lines, locking out automatic line re-energizing devices, providing line wraps for power lines, and conducting power line meetings. Based on that comment, the Agency has revised the original cost analysis ($123 million annually), and corrected errors noted below. The Agency estimates that the final construction cranes standard will cost employers $154.1 million annually.

The Agency did not receive comment on its estimate of the number of cranes and crane jobs per year; nor on the time and cost of provisions on assembly/disassembly (except for ground conditions), and inspections. The Agency also did not receive any comment on its estimates of ''baseline'' compliance, or the fraction of affected employers who are already performing or providing protections required in the final standard. For example, the Agency had estimated that, as a baseline, 30 percent of affected crane operators are already certified. However, the Agency did receive considerable comment and new information in several areas: the number of operators already certified; the number of cranes, crane jobs, and certified crane operators from individual employers or industries; the extent of current compliance (baseline) with providing safe ground conditions and assembly/disassembly operations; frequency of crane inspections; and the frequency of work close to high-voltage power lines. Based on the new information in the record, the Agency has revised several of its baseline figures, discussed below.

The Agency also received considerable new information about general industry sectors that would be affected by the final standard. The Agency has incorporated that information into its estimates of costs for those sectors. The Agency has also updated its information about wages, establishments, and revenues from the 2006 Statistics for U.S. Business (SUSB) and County Business Patterns. As the number of cranes in the PEA was, for some sectors, based on an estimate of revenues, the number of cranes for some sectors has changed from the PEA based on newer revenue data.

Employers have four years from the publication date of the final rule to comply with the requirements for operator certification. The Agency could assess that cost across the next four years and discount those values back to the present to add to the other annual costs of the standard. However, assessing benefits for only part of the final standard for several years is problematic. The Agency has concluded that the clearest picture of cost, benefits, and impacts will be given as if all costs and benefits of the final standard occur in the first year. This removes the problems of parsing risk reduction from separate provisions of the final standard for several years, in addition to assessing when employers might comply with certification and the resulting effects on discounting. Presenting full benefits and costs side by side also provides the easiest view of the long-run effects of the final standard.

The Agency presents and discusses comment on the PEA, new information in the record, and revisions to cost estimates in the following sections: operator certification, power lines, assembly/disassembly (A/D), inspections, and ground conditions. Unit costs are explained below and presented in Table B-8. Wage rates in the PEA were based on 2003 BLS data. The Agency has increased these base wage rates by 19 percent for the FEA, based on more recent BLS data. Summarized costs by provision are presented in Table B-9.

Cost of Operator Certification

For the FEA, the Agency has increased the estimated cost of test preparation (a course) for a third party operator exam from $500 in the PEA to $1,500, plus, as before, $250 for the exam itself and 18 hours of wages ($31.37/hour, total of $564). When the total initial cost ($2,064) is annualized over 5 years, the annualized amount is about $500. In addition, based on comment in the record the Agency has increased the baseline of current compliance in the traditional construction industries from 30 percent to 60 percent, and assumed that no crane operators in the affected general industry sectors have been certified (ID- 0341; -0342; -0343; -0344). The Agency also reduced the turnover rate of crane operators from 23 percent to 5 percent, thus reducing the number of new entrants each year who would require certification. The annualized cost of crane operator certification is estimated to be about $59 million per year.

The PEA had estimated that a two-day preparation and testing would cost employers $750 for each employee taking the operators certification test ($500 for the prep course, and $250 for the written and practical exam). In addition, employers would have to pay the wages of a crane operator ($31.37 per hour with benefits) for 16 hours of his time, plus an additional 2 hours, on average, for travel. The total cost was estimated to be $1,314 per employee taking the crane certification exam. The Agency annualized that one-time figure over 10 years, for an annual per operator costs of $187.

The Agency erred in the PEA in annualizing the cost of the training and testing over 10 years instead of five, since the certification is only good for five years. Although, re-certification does not typically entail the prep course and time, and future costs of certification are therefore probably considerably much lower, the Agency concludes that for purposes of weighing the costs and impact of the final standard, that it will rely on the initial costs annualized over five years. However, because the Agency accounted for turnover of operators and estimated costs for new operators as a result of retirement for the industry, a simple five year annualization would overestimate costs. As a result, the Agency introduced a factor to the formula to assure that no costs were taken for recertification of retired operators. (See full formulas in the FEA.)

Operator certification was the primary focus of comments on costs. Many commenters stated that in regard to the means of crane operator certification Option (1), or third-party testing, was the only viable alternative. (See, e.g., ID-0151; -0342.) The Agency agrees that this will be the primary means of certification and notes there are several testing organizations now available, with more reportedly in the process of being accredited. (ID-0341; -0343.)

Michael Eggenberger of Bay Ltd provided several comments on the unit cost of operator certification. (ID-0254.) Mr. Eggenberger provided photocopies of invoices that showed Bay Ltd paying for NCCCO written and practical exams, over two days, for $1,375 each. The invoice does not make clear whether the two days included prep training, but handwritten on each invoice is the additional information that the invoice costs did not include prep training at $500, plus five days' wages for each employee. The Agency concludes that Bay Ltd provided a course of prep training and testing that lasted five days. If Mr. Eggenberger's employees were paid the average wage (including benefits) of $31.36 per hour that OSHA is relying on, based on BLS data, then the total cost per employee would be $3,129 (about $1,250 in wages, $1,375 for prep and the exam, and $500 in prep training.)

Edison Electric Institute, representing the electric utility industry, submitted cost data for certification ''utilizing $1,750 as the base cost for a training course and the actual exam. EEI has estimated that it would cost approximately $1,500 for an employee training course, and $250 for the certification program.'' (ID-0345.17; -0370.1.) EEI did not provide any detail about its figures.

Comment received from James Nevel of the National Utility Training & Safety Education Association (NUTSEA) said that ''typical training programs that we have seen run $1200 to $1400 for classroom training and then an additional $450+ or so for the certification testing.'' (ID-0155.1.) NUTSEA's membership of 250 ''provides safety and training services to most of the electric cooperatives in the United States.''

California enacted a requirement for crane operator certification which took effect in June 2005. That State's operator certification requirement did not apply to digger derricks and mobile-usually truck-mounted-cranes with a capacity below 15,000 pounds. The State estimated that there were 5,000 mobile cranes and 700 tower cranes affected and that about 10,000 operators would require certification (''Economic Impact Statement,'' Attachment #1 for Crane Operator Qualifications/Certification, Economic and Fiscal Impact Statement, STD, 399). California estimated that there were almost 2,000 businesses that owned, operated, or leased cranes affected by the State's regulation. Further, the State's impact report estimated that the cost of certification would include a physical examination ($320), a substance abuse test ($120), and cost of a written and practical exam from a NCCCO testing agent ($550), or a total of $990 per operator.

The Agency received several estimates of the cost of operator certification as part of the Small Business Advocacy Review Panel (SBAR). John Anderson reported that he estimated certification costs at $2,900 per employee, including five days for training, exam, and wages (OSHA-S030A-2006-0064-0019), with the average cost of an exam $382 and with training or prep courses $1,260 on average, and wages $1,255. Mr. Anderson also cited a general contractor's cost of exams and prep class of $1,375. Art Daniels of AR Daniels Construction estimated the cost of certifying one operator to be $6,141.59, but did not provide any detail of how the estimate was determined. Mr. Daniel also commented that the Agency's wage estimate was too low, but his estimate included wages for overtime which accounted for much of the difference. (OSHA-S030A-2006- 0064-0019.) Mr. Daniel also stated that no costs were included for re-testing or loss of production. However, the Agency did include costs for re-testing (when an operator initially fails the test) and the value of lost production is accounted for in operator's wages. Several participants in the SBAR panel also noted that they have no turnover among their crane operators.

Current OSHA standards require operators of construction cranes to ensure that operators are trained. The Agency does not agree that the final standard requires a five-day training and prep course for employees to take and pass the crane operator's certification. Five-day courses are designed not just to prepare potential operators for certification, but to train newcomers. For example, Bob Behlman of Behlman Builders in describing the training that he sends his crane operator to, notes that the five-day course by a national consulting firm that specializes in mobile crane training and inspection services is ''designed for both newcomers to the crane operators field [and] to those who have years of experience.'' (ID-0373.1.) Mr. Behlman notes that the current five-day course that he provides for his crane operators as of this time still does not include a written and practical test, such as NCCCO or the International Union of Operating Engineers (IUOE) offers. As Mr. Brent of NCCCO said at the public hearing, ''a lot of those costs * * * are not associated with certification at all. They're associated with the training process.'' (ID-0343.)

Many testing companies provide testing along with a preparation in either two-day or five-day courses, but virtually all commenters on the record note that few certified operators take the preparation course when re-certifying is done, and that re-certification is much less costly. The preparation course is designed not to train operators on cranes, but to help them negotiate the written test. Again, as noted above, the Agency was not including in its estimates of the cost of operator certification any training related to obtaining knowledge about, or operating, a crane, which is already a duty of operators of cranes in construction. Operators have been taking certification exams without benefit of special preparatory courses for many years in cities and states (such as Connecticut and New York City) that perform their own testing of crane operators for licensing or certification. As was pointed out in testimony, part of the resistance to third-party certification may be that current crane operators may lack the requisite training or skills. (ID-0343.)

It was not incumbent upon the Agency to include purchased, preparatory training from third party providers as a cost of the standard. The final standard requires no such purchased training. The Agency concludes that while many employers and crane operators will avail themselves of the test preparation, not all will do so, and this was recognized in comment. (ID-0343.) In terms of estimating the costs of the final standard, it is reasonable that employees and independent crane operators, who have already been sufficiently trained in crane operation and may have many years' experience, certainly need no more than a short preparation to successfully pass the crane operator certification tests. Thus, the Agency has included as part of the cost of the standard, $1,500 as the price of a two-day prep course for taking the operator's written and hands-on exams.

The Agency did not include costs of operator certification for users of sideboom cranes found in pipeline construction (NAICS 237120 Oil and Gas Pipeline Construction) and derricks, found in water tank construction (NAICS Water and Sewer Line Construction). Both types of cranes are exempted from requirements for operator certification in the final standard.

The Agency increased the number of current crane operators in construction who already are certified. NCCCO reported that since 1996 they had provided exams for 65,000 operators who had taken over 365,000 exams. (Operators frequently choose to be certified on several different types of cranes. (ID-0343.)) NCCCO reported that crane certification was primarily sought for construction cranes. The IUOE reported that they have provided 12,000 written and 8,000 practical, or hands-on, exams. (ID-0341.) Sixteen states now have a requirement for operator certification or licensing. (See, e.g., -0347.1.) Four states have their own State licensing programs. In addition, the nation's largest cities also have their own licensing or certification requirements. One commenter noted that in Ohio, which has no requirement for crane operator certification, hiring certified construction crane operators had become the norm for the industry. (ID-0341.) Insurance representatives and other commenters at the public hearings noted that many employers were getting their crane operators certified as the cost was recouped from premium reductions. (ID-0341; -0343; -0344.) Accordingly, the Agency has increased its estimate of the number of construction crane operators who already are certified to 60 percent of current operators.

The Agency is confident that the estimated costs of operator certification are not underestimated. The Agency concludes that at least 5 percent of construction cranes are owner-operated. (ID-0025; -0341.) Since these self-employed individuals or family-owned businesses have no employees, they will not-for purposes of following the standard-have to be certified. In some areas, it is the custom for crane operators to pay for their own certification. (ID-0343.) However, a new provision in the final standard requires employers to pay for certification in any event. NCCCO's Mr. Brent testified that: ''There are some candidates who are paying outright. Some employers have instituted a vesting program where some fees are due to be repaid if the employee leaves in a certain period.'' (ID-0343.) In addition, in situations where crane operators are union members, who may be hired out of union hiring halls, it is likely that training and certification will be performed through the union rather than an employer. The IUOE pays for their members' crane training and certifications costs out of union dues (ID-0341); so while employers, and ultimately owners of new construction projects, may pay for the cost of union operators' certification via somewhat higher wages, there is no immediate cost to employers or general contractors for operator certification. In addition, many certification prep courses and exams are offered on weekends, and there will not be any lost time of production in such cases. (ID-0343.)

Several small employer representatives on the Small Business Advocacy Review Panel remarked that they had no turnover of crane operators. (OSHA-S030A-2006-0664-0019.) Similarly, employers and associations who provided public testimony at the standard's public hearings also noted little or no turnover among operators. Accordingly, the Agency concludes that although there may be transfer between employers, crane operators are a select and highly paid group who are unlikely to exit their field. Employers who lease cranes with operators, which is the predominant mode of crane jobs, or who hire from union hiring halls would experience no turnover of crane operators at all.

Power Lines

The Agency has revised its estimates in the PEA of the ''unit'' costs of power line work for: assembly/disassembly; crane operations closer than 20 feet to a power line (§1926.1408); and crane operations within the Table A distances (within 10 feet in most instances) (§1926.1410). Comment in the record indicated that crane operators routinely assess sites for potential power line risks. (ID-0341; -0344.) Thus the Agency concludes that the current baseline of compliance with assessing power line risks is 100 percent and this provision does not impose new costs on affected employers. The Agency did not estimate costs for work near power lines within Table A distances for the electric utility industries, power line construction, and electric contractors, as these employers work near power lines under subpart V.

The Agency has revised estimates of unit costs for some operations near power lines. There were two primary sources for the revision of some unit costs of power line work: the written submission by Edison Electric Institute (EEI) reporting cost information from 16 members and the testimony and written comment from EEI itself. (ID-0343; -0345.17.) Based on the EEI member's information, the Agency concludes that the cost of providing voltage information is about $200 per occurrence; that the cost of locking out automatic line re-energizing devices is about $320; and that it takes electric ''utility owner/operator'' or engineers a total of six hours ($360) for travel and for participation in planning meetings, review of procedures, and identification of a person to implement procedures. These figures represent approximately the median or average of estimates provided by EEI members, although each member did not provide information about each operation. In addition, the Agency had estimated the cost of using an insulating link when working very close to power lines as $427 per use. Comment in the record showed that the average cost of these devices is lower than the Agency's estimate in the PEA of $15,000, that their working lifetime is 20 years rather than 10, and that they may require recertification each year. (ID-0085; -0085.1; -0085.2.) Accordingly the Agency has revised its estimated cost per use to $210 (based on the information and model in ID-0085, but with a 7 percent discount rate). Although the final standard may not require the use of NRTL-approved insulating links until up to three years after the standard takes effect, the Agency is including costs for this provision as if employers will replace their inventory by purchasing and beginning use of NRTL-approved insulating links in the first year that these links are available.

The Agency has also revised the costs of planning meetings. In the PEA the Agency concluded that four individuals would participate in such a meeting. That model fits with operations of a traditional lattice-boom crane. However, most cranes jobs today are of short duration by truck-mounted cranes, and the Agency estimates that only three individuals will typically be involved in a planning meeting.

Operations Closer Than Table A Distance

The Agency received comment about work close to power lines that has significantly increased its estimates of costs. (ID-0342; -0345.17.) Unit costs for the time required of electric utilities or professional engineers has been revised to $360 per episode; costs of de-activating or locking automatic line reclosure devices has been increased from about $30 to $320, and the cost of supplying voltage information is $200.

The Agency had estimated that cranes were performing operations closer than 10 feet, or the Table A distance, in about 5 percent of all crane jobs that were not assembled near power lines (which was 75 percent of the total estimated 859,000 cranes jobs per year). In testimony, EEI's David Highland, also from Allegheny Power, referred to the frequency of close-to-power-line work as OSHA's estimate of ''50,000 episodes'' per year. The 50,000 figure was also noted in EEI's written testimony. (ID-0345.17.) However, OSHA's estimate of the actual number (5 percent of 75 percent of 859,000) was approximately 32,000. Mr. Highland also said, ''We thought it would double,'' in speaking of the number of times construction employers would operate cranes closer than the Table A distances.

The former OSHA standard at former §1926.550(a)(15) permitted work near power lines no closer than 10 feet except where they are de-energized and grounded or when they have ''insulating barriers.'' If power lines are not de-energized or do not have insulating barriers, all parts of the crane, line and load, must maintain a 10-foot clearance, with a designated person to observe clearance in situations where the crane operator would have difficulty ensuring clearance by visual means; and insulating links may be used as well (former §1926.550(a)(15(iv)). In oral testimony and written comment, EEI noted that electric utilities provide line covers now for construction crane operations, with practices varying from region to region. All electric utilities make use of line hoses for protection. (ID-0342.) Mr. Highland reported that his company gave ''free line hose up to a certain length. * * * After 20 feet, they [crane users] start paying about 10 bucks apiece.'' (ID-0342.) Earlier in testimony, EEI said, ''Currently, many electric utilities also place line hoses on power lines when so requested by non-utility crane contractors who need to work within 10 feet of a power line. Usually the utility owner/operator receives a call from a contractor prior to this work. More often than not, however, the utility discovered that work is being performed close to a power line when it is observed by happenstance, for many contractors simply do not call.'' (ID-0342.) Although the electric utility industry predicted that the number of these episodes involving construction cranes would double or increase exponentially, and thereby force them to incur greater costs under the standard, the Agency disagrees. The final standard imposes significant new procedures and costs beyond what current standards require. Generally, one expects crane users in the affected industries to take further steps to avoid working closer than the Table A distances to power lines, rather than more.

The Agency included in its cost estimates for work closer than Table A distances the following:

• A planning meeting (2 hours for three individuals costing about $132);
• Time and costs for the utility owner/operator or engineer for all of their duties (6 hours or $360), i.e., planning, voltage information, determining a minimum clearance distance, reviewing procedures, and identification of an individual to implement procedures;
• Request that electric utilities de-activate the automatic re-energizing devices, which the Agency assumes will cost crane employers $320, on average, to be paid to electric utilities;
• Use a dedicated spotter at all times (average of 4 hours, $64.06);
• Use of an insulating link ($210); and
• Provision of barricades and grounding of equipment ($4.04 and $8.08).

The crane user must also secure voltage information from the electric utility, but the Agency assumes that since the utility's owner/operator or an engineer is present, this information is at hand; therefore, for work within Table A distances, there is no separate, additional cost.

Since line hoses or barriers are already required, and terms are currently arranged between the crane employer and the utility, there is no new cost for line covers under the final standard. The Agency concludes that the crane employer faces, at a minimum, about $800 in new costs under the final standard to work within 10 feet or the Table A distance of a power line. If the employer must also fully compensate the electric utility for the utility owner's or engineer's time, the total cost is estimated at $1,100.

The final standard seems to shift the duty and expense of line covers wholly onto electric utilities, with crane contractors reported as compensating electric utilities to some degree currently. (ID-0342.) However, the limited comment on this issue in the record does not permit an estimate of any effect.

All other provisions of the final standard's §1926.1410 are already being performed in current construction crane jobs close to power lines, the Agency concludes.

Assembly/Disassembly Near Power Lines

Under the proposed standard, before beginning crane assembly/disassembly, the crane operator or employer must determine if any parts of the crane or equipment may get closer than 20 feet to a power line during A/D. If so, either the employer must have the line de-energized (Option (1)); stay farther than 20 feet from the power line (Option (2)); or follow the procedures in Option (3): determine the line voltage and minimum clearance distance; prevent encroachment by having a planning meeting and use either a dedicated spotter, proximity alarm, a ''range control warning device,'' or an elevated warning line. The Agency believes that by far the most common method will be to provide a dedicated spotter during A/D. There was considerable comment in the record that de-energizing lines was rare, difficult for regulatory reasons, and expensive. (ID-0342.)

The Agency has estimated costs as if A/D operations near power lines follow Option (3) and that crane employers or owners use a spotter to ensure that cranes stay far enough away. In the PEA, the Agency estimated that this happened in 25 percent of crane jobs. There was no comment on that estimate in the rulemaking, and the Agency concludes that A/D near power lines occurs about 200,000 times per year.

The Agency has estimated A/D costs near power lines as follows:

• Crane operators and employers already assess distance to power lines; so the Agency takes this as a baseline and concludes there are no new costs due to this provision in the final standard;
• To determine voltage and the minimum clearance distance, the Agency estimates that A/D will be close enough to the power line to contact the utility about 25 percent of the time, costing about $50 (one-fourth of $200), on average, for each A/D episode. Most crane operations will be near typical residential power lines of less than 50 kV, with a minimum clearance distance from Table A of 10 feet.
• Hold a planning meeting which for the typical crane operation will consist of the crane operator, spotter, and any on-site employer or contractor (for a lattice-boom crane that truly performs A/D operations, many more individuals are involved in the planning meeting as required in §1926.1407(b)(1);
• Employ a spotter to ensure that the minimum clearance distance is maintained, and provide training for the spotter, if needed (2 hours plus 15 minutes training).

The Agency estimates that the total costs of providing protective procedures during A/D near power lines for a typical crane job will cost less than $100. Table B-9, Cost by Provision, shows that the total costs of these operations for all affected employers is estimated to be about $16 million annually.

Crane Operations Within 20 Feet of Power Lines (§1926.1408)

Under the proposed standard, before beginning crane or derrick operations, employers must either: (1) Define a work zone with demarcated boundaries by using flags or a device such as a range-limiting device or range-control warning device that prohibits the operator from operating the crane past those boundaries, or (2) define the work zone as the area 360 degrees around the crane based on the crane's maximum working radius (see proposed §1926.1408(a)(1)). The Agency estimates that, in most cases, the least-cost option would be to mark the zone with flags. Based on the defined work zone, the employer must determine whether the crane, load, or load line, if operated to its maximum working radius, could get closer than 20 feet to a power line.

If the 20-foot determination is positive, then the employer would be required to follow one of three options. If any part of the crane, load, or load line could not come within more than 20 feet of a power line at the crane's maximum radius, the employer would not be required to take any further action. If the crane operations could take the crane closer than 20 feet, the employer must either: (1) De-energize and visibly ground the power line, (2) maintain the 20-foot clearance by employing a spotter or other warning device, after having a planning meeting, or (3) determine the line voltage and minimum clearance distance and maintain that distance between all crane parts and the power line by employing a spotter or other warning device, after having a planning meeting.

If the employer follows Option (2) or (3), the employer must then maintain the appropriate distance by implementing several encroachment-prevention procedures to ensure that the crane does not contact the energized power lines, including: Having a planning meeting with the operator and other workers who will be in the area of the crane, and using either a proximity alarm, operational aids/limiting devices, a dedicated spotter, or an elevated warning line. The Agency estimates that a designated spotter would be used to ensure that the appropriate distance is maintained between the crane and power line.

In the SBAR panel process, many small entity representatives commented on this provision. The majority believed that, most of the time, a dedicated spotter would be used. For some, work near electric lines was rare; for others, it occurred several times each year. In the PEA, the Agency estimates that work potentially within 20 feet of a power line, occurred on 22.5 percent of all crane jobs. The Agency has simplified this estimate for the final analysis, and estimates that, as for A/D operations near power lines, operations within 20 feet of power lines occur about 200,000 times per year.

Costs for working within 20 feet of power lines thus consists of:

• Identifying and demarcating a work zone and determining the maximum swing radius of the crane (0.5 hours)
• Ensure that the crane does not come within 20 feet of the power line by using a dedicated spotter (2 hours), or
• Determine the line voltage and maintain the minimum Table A clearance distance by using a dedicated spotter (2 hours).
• Seek voltage information.

The Agency estimates that, for operations near power lines, crane employers will do so about half the time ($100, or one-half of $200), on average, for each occurrence.

The Agency estimates the average cost for protective measures in the final standard for cranes to work within 20 feet of a power line is about $160.

Crane Inspections

The Agency received little comment on its estimates of costs of inspections. Inspections were frequently mentioned by commenters as necessary and already being performed. However, the industry consensus standard requires frequent (daily to monthly) inspections and periodic inspections (monthly to annual ones). The final standard requires daily visual inspections, and monthly and annual inspections that must be documented. In addition, the final standard adds more specific checks on more equipment that the consensus standards. Thus, the Agency is keeping its estimate that monthly and annual inspections will take 15 minutes longer than is typically done today. Due to an error in the spreadsheet calculations, in the PEA estimates of the monthly inspections were too high-based on an additional 30 minutes per month rather than 15 minutes. When this error was corrected the annual additional cost for inspections fell from about $21 million per year in the PEA to $16 million annually. The final standard has a new provision requiring written notification when an operational aid is broken or a repair is necessary (§1926.1417(j)(1)). The Agency has estimated that condition will occur to 30 percent of (122,091) cranes annually and require 0.17 hours (10 minutes) of a crane operator's time (wage $35.62). This cost of written notification (about $257,000 annually, or $2 per crane, on average) has been added to the inspection costs in the tables. The Agency has also included in the inspection costs the estimated the cost of providing affected employees notice at the beginning of each shift that a crane function or part is broken (§1926.1417(j)(2)). The Agency estimates that such notice will take an average of 3 minutes for, on average, 20 days by the crane operator.

Ground Conditions and Assembly/Disassembly

In the PEA the Agency estimated that for each crane job an assembly/disassembly (A/D) supervisor-likely the crane operator in many instances- would assess ground conditions and power line risks. Many commenters reported that these functions were routinely already performed, and the Agency has adopted that practice as its baseline. (ID-0341; -0343.) More pointedly, most crane jobs today are performed by truck-mounted cranes. Several commenters noted in both written comment and oral testimony that these cranes have no assembly or disassembly. While there is a lengthy description in the A/D provision in the final standard, with pictures, of steps and procedures for lattice-boom cranes, these cranes perform relatively few crane jobs. A large lattice-boom crane may be assembled for a job lasting several months-one crane job-while a truck-mounted hydraulic crane may perform three or four jobs in a day. While truck-mounted cranes have safety hazards when extending stabilizers or outriggers, these are not the same hazards associated with lattice-boom cranes-or tower cranes which have their own specific provisions for erection and climbing at §1926.1435, Tower Cranes. There are also relatively few tower cranes, which also perform a single ''crane job'' that may last many months.

No commenter denied that current crane operators assess conditions prior to setting up and operating a crane. In addition to comment in the record, several organizations provided training materials that indicated an assessment of conditions was standard operating procedures for crane work. (ID-0345.14; -0345.17; -0380.) The Agency eliminated these assessment costs in the final standard, but still included A/D costs related to work near power lines.

There was considerable comment about ground conditions. The final standard places responsibility for providing sufficient ground conditions on the ''controlling entity.'' Small builders and general contractors objected to this provision. There were several parts to most of the criticisms. First, many builders and contractors now rely on the crane company or the crane operator to assess conditions for safe crane operations, for example, when hiring a crane company to set roof trusses. (ID-0341; -0343.) In addition, many builders or contractors who hire cranes for particular construction jobs have no expertise in ground conditions (ID-0341), which the Agency acknowledged in the proposal's preamble. In response to these comments, the Agency accounted for the new burden which controlling entities will have under the final standard.

These costs fall primarily on the lessees of cranes or of cranes with operators, not employers affected by the crane standard who own their own cranes. The Agency concludes that, for estimating the costs of the ground conditions provision, builders of large commercial, residential, and industrial buildings and contractors do not face a new cost since they are, in general, at the building site. However, small builders and developers, or their supervisors or representative, may not be at one of their sites. (ID-0341.) The Agency estimates that the ground conditions duty will require two hours of employer time to be present at the site to meet their obligations. However, the standard does not require that controlling entities be physically present, and the Agency concludes that in most cases their attendance at the site will not be necessary because, in most situations, the ground conditions will be dry and reasonably level, and the cranes will be lifting materials such as roof trusses and pre-fabricated wall sections-i.e., low-risk ground conditions. Any information that the controlling entity has about underground risks can be communicated by telephone. The Agency concludes that small builders in three industries will, at most, be affected by the ground condition provision at 10 percent of their projects involving crane operations. The Agency concludes that the typical crane job-setting roof trusses-and the fact that these loads are generally not close to the capacity of the truck-mounted cranes that perform the task, means that concern about ground conditions will not arise often. The three affected industries are: NAICS 236115 New Single Family Housing Construction; NAICS 236117 New Housing Operative Builders; and NAICS 236118 Residential Remodelers.

The Agency has estimated the costs of complying with the controlling entities' duties in regard to ground conditions for SBA-size small entities in the three affected industries. The criterion for ''small entity'' for these industries by SBA is revenue of less than $31 million. This is roughly comparable to construction of about 100 single family homes, and the Agency concludes that all small builders are certainly captured within this category. Accordingly, the Agency calculated the costs of expending two hours of time by employers for 10 percent of all crane jobs within the industry sectors by small employers. The costs for the affected sectors are presented in Table B-9. Table B-10 presents average annual costs per establishment across the affected sectors. Table B-11 provides the Agency's estimate of the number of cranes and crane jobs.

Language and Literacy

There was also comment in the record about the difficulty some current crane operators may have in achieving crane operator certification due to a language barrier or weak literacy skills, and thus the FEA also describes possible impacts on current and future crane operators. Two testing organizations reported in the public hearings that they neither offer crane operator testing in languages other than English nor had any plans to do so. (ID-0341: -0343.) Testing in other languages would not merely require translating existing written and practical test materials, but developing and evaluating tests as if they were completely original. There was comment in the record that some current crane operators would not be able to read and therefore successfully pass a test in English. (ID-0100.1; -0243.1; -0387.) The Agency is not presenting any quantitative estimate of the impact of the final standard on individuals with language or literacy issues. The final standard has a new provision requiring that certification exams ''must be administered in a language understood by the operator candidate'' which may alleviate any burden imposed on non-English speaking crane operators.

TABLE B-8—UNIT COST ESTIMATES FOR THE CRANES AND DERRICKS PROPOSED STANDARD

Source: Office of Regulatory Analysis; BLS 2010 Wages and Earnings.

TABLE B-9—ANNUALIZED COMPLIANCE COST BY SECTOR AND MAJOR PROVISION

Source: ORA.

Table B-10—Annualized Compliance Costs per Establishments by Sector

Source: ORA.

Table B-11—Estimates of Cranes, Crane Jobs, and Affected Crane Operators for All Establishments

Source: ORA. U.S. Census Bureau data.

7. Economic Feasibility and Impacts

This section presents OSHA's analysis of the potential economic impacts of the final standard and an assessment of its economic feasibility. A separate analysis of the potential economic impacts on small entities (as defined by the Small Business Administration) and on very small entities (employers with fewer than 20 employees) is presented in the following section as part of the Final Regulatory Flexibility Analysis, conducted in accordance with the Regulatory Flexibility Act.

A standard is economically feasible if it does not threaten massive dislocation to an industry or imperil its existence. (See United Steelworkers v. Marshall, 647 F.2d 1189 (DC Cit. 1980).) The court also found that a standard that is financially burdensome or threatens the survival of some companies in an industry is not sufficient to render it infeasible. Further, the cost of compliance with an OSHA standard must be analyzed "in relation to the financial health and profitability of the industry and the likely effect of such costs on unit consumer prices.'' Id. The court also found that "the practical question is whether the standard threatens the competitive stability of an industry, or whether any intra-industry or inter-industry discrimination in the standard might wreck such stability or lead to undue concentration.'' Id.

To assess the potential economic impacts of the final rule, OSHA compared the anticipated costs of achieving compliance against revenues and profits of establishments affected by the rule. This screening analysis is presented in Table B-12. This table is considered a screening analysis because it measures costs as a percent of pre-tax profits and revenues, but does not predict impacts on pre-tax profits and sales. This screening analysis is used to determine whether the compliance costs potentially associated with the standard would lead to significant impacts on establishments in the affected industries. The actual impact of the standard on the profits and revenues of establishments in a given industry will depend on the price elasticity of demand for the services sold by establishments in that industry.

Price elasticity refers to the relationship between the price charged for a service and the demand for that service; the more elastic the relationship, the less able an establishment is to pass the costs of compliance through to its customers in the form of a price increase, and the more it will have to absorb the costs of compliance in the form of reduced profits. In general, "when an industry is subject to a higher cost, it does not simply swallow it, it raises its price and reduces its output, and in this way shifts a part of the cost to its consumers and a part to its suppliers.'' American Dental Association v. Secretary of Labor, 984 F.2d 823, 829 (7th Cir. 1993).

TABLE B-12-ESTIMATES OF ECONOMIC IMPACTS FOR AFFECTED ESTABLISHMENTS ACROSS INDUSTRY SECTORS

Source: U.S. Census Bureau data. Country Business Patters, 2006; Statistics of U.S. Businesses 2006. Internal Revenue Service, Source Book, profit rates over 2000-2006.

In the extreme, if demand is perfectly inelastic (i.e., the price elasticity is 0), then the expected impact of compliance costs equal to 1 percent of revenues would be a 1 percent increase in the price of the product or service, with no decline in demand or profit. Such a situation would be most likely when there are few, if any, substitutes for the product or service offered by the affected sector or if the products or services of the affected sector account only for a small portion of the income of its consumers. On the other hand, if demand is perfectly elastic (i.e., the price elasticity is infinitely large), then no increase in price is possible, and before-tax profits would be reduced by an amount equal to the costs of compliance (minus any cost savings resulting from compliance, such as improved worker health and reduced insurance costs). Under this scenario, if the costs of compliance represent a large percentage of the sector's profits, some establishments might be forced to close. This scenario is highly unlikely to occur, however, because it can only arise when there are other goods and services that are, in the eye of the consumer, perfect substitutes for the goods and services the affected establishments produce or provide.

A common intermediate case would be a price elasticity of one. In this situation, if the costs of compliance amount to 1 percent of revenues, then production would decline by 1 percent and prices would rise by 1 percent. The sector would be expected to remain in business and maintain a comparable profit rate as before implementation of the standard, but would produce 1 percent less of its services. Consumers would effectively absorb the costs through a combination of increased prices and reduced consumption; this, as the court described in ADA v. Secretary of Labor, is the more typical case.

Table B-12 presents estimates for the number of affected establishments, average establishment revenues and profits, and average establishment costs for each affected industry sector. Economic impacts in the table (the two right-most columns) are represented by two ratios: Of average establishment costs to revenues, and of costs to profits.

The average (unweighted) cost of the final standard per establishment is about $560 annually. As is evident from the data and estimates in Table B-12, average establishment costs of compliance for the final standard are not large in relation to the corresponding average establishment revenues and profits in each of the industry sectors. The estimated per establishment cost of compliance represents less than 0.2 percent (or 0.002) of average establishment revenues for all affected sectors. In most sectors it is lower. The average cost as a percentage of revenues across all sectors is 0.05 percent (0.0005).

The impact of the final standard measured by the ratio of costs to profits varies across the affected sectors. Among the sectors in the Crane Lessees sector, which includes about 163,000 of the 267,000 affected establishments; in this sector, employers, on average, are expected to have costs that represent about 1 percent of profits. Within the sector of employers Own but Do Not Rent, affected establishments in 14 of the 46 sectors have average costs as a percent of profits of 1 percent or higher (from 1 to 3 percent); this impact of costs as a percentage of profits is relatively low.

In the two sectors that are most intensively involved in crane use, Crane Rental with Operators (employers primarily in the crane rental business) and Crane Rental without Operators (bare rentals), estimated costs are about 2 percent of profits. In the Own and Rent Cranes with Operators sectors, costs as a percentage of profits are estimated at about 4 percent. Because these employers both own and use cranes, as well as rent them, the cost model estimates significantly higher average establishment costs for them - even in relation to the sectors involved primarily in crane rentals. In addition, as noted above for the Own but Do Not Rent sector, most employers in these sectors are quite small, with only a few employees, and a relatively small fraction of employers in the sectors that own cranes. Consequently, average establishment revenues and profits may be lower for the average establishment than for establishments that own cranes. If so, the cost as a percentage of profits overestimates that impact for affected establishments.

The Agency concludes that the final standard is economically feasible for the affected industries. As described above, a standard is economically feasible if there is a reasonable likelihood that the estimated costs of compliance "will not threaten the existence or competitive structure of an industry, even if it does portend disaster for some marginal firms." United Steelworkers of America v. Marshall, 647 F.2d 1189, 1272 (DC Cir. 1980). The potential impacts on employer costs associated with achieving compliance with the final standard fall well within the bounds of economic feasibility in each industry sector. Costs of 0.2 percent of revenues and 4 percent of profits will not threaten the existence of the construction industry, affected general industry sectors, or the use of cranes in affected industry sectors. OSHA does not expect compliance with the requirements of the final standard to threaten the viability of employers or the competitive structure of any of the affected industry sectors. When viewed in the larger context of the construction sector, an increase in costs of $148.2 million a year is effectively negligible, and will have no noticeable effect on the demand for construction services. Even when viewed as an increase in the costs of using cranes, an increase in the cost of rentals services of 0.2 percent will not cause the construction industry to forego the use of cranes and, thus, put crane leasing firms out of business.

For several reasons, the Agency believes that the impact of compliance costs will be less than estimates in Table B-12. For the affected construction sectors, the economic impact of the final standard is most likely to consist of a very small increase in prices for construction projects involving work with cranes (0.2 percent or less, depending on the sector). Crane rental companies, all of which must incur the costs of compliance unless they are already in compliance, should be able to pass through costs to lessees. The additional costs of crane safety measures are extremely small in relation to the value of construction, and there are no economic substitutes, or alternatives, to the use of cranes in construction. It is unlikely that a price increase of this magnitude would significantly alter the services demanded by the public or any other affected customers or intermediaries. If the compliance costs of the final standard are substantially recouped with an increase in rental prices, there would be little effect on profits. Impacts on all affected general industry sectors are slight, and far below any test of economic feasibility.

Given the small incremental increases in prices potentially resulting from compliance with the final standard, and the lack of readily available substitutes for the products and services provided by the covered construction and general industry sectors, demand is expected to be sufficiently inelastic in each affected industry to enable entities to substantially offset compliance costs through minor price increases without experiencing any significant reduction in revenues or profits.

Final Regulatory Flexibility Analysis

The Regulatory Flexibility Act, as amended in 1996, requires the preparation of a Final Regulatory Flexibility Analysis (FRFA) for specified proposed rules (5 U.S.C. 601-612). Under the provisions of the law, each such analysis must contain:

(1) A description of the impact of the rule on small entities;

(2) A succinct statement of the need for, and objectives of, the rule;

(3) A summary of the significant issues raised by the public comments in response to the initial regulatory flexibility analysis, a summary of the assessment of the agency of such issues, and a statement of any changes made in the proposed rule as a result of such comments;

(4) A description of and an estimate of the number of small entities to which the rule will apply or an explanation of why no such estimate is available; and

(5) A description of the projected reporting, recordkeeping and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record.

1. Impact of the Final Rule on Small Entities

OSHA has analyzed the potential impact of the final standard on small entities. The total annual cost of compliance with the final for small entities is estimated to be $101 million, as shown by industry in Table B-13. The costs per establishment in the table are identical in several sectors because the cost model assumed that, on average, the number of cranes, operators, and crane jobs were the same for each affected establishment. In the crane-rental sectors, the Agency had rental income data for each sector and estimated the number of cranes owned per establishment for each sector. Different sizes of firms with different numbers of cranes in the rental sectors resulted in per establishment (average) costs varying by industry NAICS.

TABLE B-13—ANNUALIZED COMPLIANCE COSTS FOR SBA DEFINED SMALL ENTITIES BY MAJOR CATEGORY