to the appropriate NAICS. The Agency then used data from the 2007
Statistics of U.S. Businesses to obtain information on the number of
establishments and receipts (revenues), and data from the Internal
Revenue Service Corporation Source Book to obtain the average of 2003-
2007 profit rates for these sectors. Subsequently, OSHA allocated
confined-space projects to sectors and size classes on the assumption
that smaller establishments are less likely to work in such spaces than
larger ones, and on an allocation rule whereby the Agency assigned each
establishment a project before assigning any establishment a second
project (for analytical tractability). Finally, OSHA

aggregated compliance costs by industry, divided by the number of
affected establishments in the industry to derive average compliance
costs per affected establishment by industry, and compared the quotient
to average annual establishment revenues and profits by industry.
    Note that, in any industry sector in construction, the final
standard will affect directly only a small percentage of firms and
establishments in any given year. Many business entities in affected
industries do not regularly work with confined spaces. As demonstrated
in Tables IV-16 and IV-3, respectively, the final standard will affect
only about 6.3 percent of firms and 7.2 percent of establishments in
the affected industries. OSHA estimates that the average cost of
complying with the final standard, per affected establishment, will be
less than $2,000 annually (compared with average revenues of about $2.6
million). The estimated costs of compliance represent about 0.08
percent of revenues and 1.6 percent of profits, on average, across all
affected entities.
    As previously noted, OSHA established a minimum threshold level of
annualized costs, equal to 1 percent of annual revenues or 10 percent
of annual profits, below which the Agency concluded that costs are
unlikely to threaten the economic viability of an affected industry.
The key result from Table IV-16, for purposes of determining economic
feasibility, is that annualized compliance costs do not represent more
than 0.48 percent of revenues for affected firms in any industry.
Furthermore, there is only one industry, NAICS 236210 (Industrial
Building Construction), in which annualized compliance costs for
affected firms exceed 10 percent of annual profits. For that industry,
annualized compliance costs are equal to 10.56 of annual profits.
However, the Agency believes that the final standard would still be
clearly feasible for this industry because, first, the final standard
affects only 1.84 percent of all firms in that industry each year (see
Table IV-4). Second, OSHA believes that firms engaged in confined-
spaces work are larger and more profitable than average, so profit
losses to them are likely to be less than modeled. Third, OSHA does not
believe that industries will absorb all or most of the costs of the
final standard in lost profits. The price elasticity of demand in
construction is sufficiently inelastic to enable affected firms to
substantially offset variable compliance costs through minor price
increases--here, less than 0.5 percent-- without experiencing any
significant reduction in total revenues or in net profits.
Consequently, the Agency concludes that the final standard for confined
spaces in construction is economically feasible for all affected
industries.\62\
---------------------------------------------------------------------------

    \62\ In Chapter 6 of this FEA, OSHA explained why it was not
including costs for respiratory protection as part of the estimated
costs of the final standard. The Agency notes that this feasibility
determination would not change with respect to any affected industry
even if OSHA attributed to the final standard the respiratory-
protection costs included in the PEA. Using the PEA assumptions, and
updating unit-cost information for half masks and HEPA filters
(based on currently available online price quotes), OSHA finds that
none of the annualized costs for any NAICS code exceed the Agency's
threshold of presumptive feasibility of one percent of revenues. The
annualized costs for only one NAICS code, 236210 (Industrial
Building Construction), exceed the threshold of presumptive
feasibility of 10 percent of annual profits. The overall annualized
costs for this NAICS code would total roughly $2.8 million after
including the costs for respiratory protection; this figure
represents 0.57 percent of annual revenue and 12.6 percent of annual
profit for this industry. However, for the reasons stated above, the
Agency believes that the final standard would be feasible for this
industry even after including the respiratory-protection costs.

                 Table IV-16--Potential Economic Impacts for Entities Affected by the Final Standard for Confined Spaces in Construction
                                                                     [2009 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Affected                                                                Annualized   Annualized
                                               ----------------------------   Affected    Annualized    Average                  costs as a   costs as a
                                                                             firms as a   compliance   revenues      Average     percentage   percentage
 NAICS industry code        Industry name                                    percentage   costs per    per firm    profits per  of affected  of affected
                                                  Firms     Establishments    of total     affected       ($         firm ($        firm         firm
                                                                             (percent)       firm     thousands)   thousands)     revenues     profits
                                                                                (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
221310..............  Water Supply and                 22               65         0.61       $2,347      $2,235          $132         0.11         1.78
                       Irrigation Systems.
236115..............  New Single-Family             1,075            1,321         1.75          757       1,691            77         0.04         0.99
                       Housing Construction
                       (except Operative
                       Builders).
236116..............  New Multifamily Housing         830              883        19.22        1,151       5,774           262         0.02         0.44
                       Construction (except
                       Operative Builders).
236118..............  Residential Remodelers..      9,405            9,602         9.44          880         757            34         0.12         2.57
236210..............  Industrial Building              71              106         1.84       32,843       6,865           311         0.48        10.56
                       Construction.
236220..............  Commercial and                5,401            6,408        13.08        2,196       9,519           431         0.02         0.51
                       Institutional Building.
237110..............  Water and Sewer Line and      2,579            2,765        18.85        3,368       3,787           227         0.09         1.49
                       Related Structures
                       Construction.
237130..............  Power and Communication         127              341         2.49       16,733       6,968           417         0.24         4.01
                       Line and Related
                       Structures Construction.
237310..............  Highway, Street, and          3,486            4,275        31.83        4,479      10,230           612         0.04         0.73
                       Bridge Construction.
237990..............  Other Heavy and Civil           778              965        14.96        1,806       4,633           277         0.04         0.65
                       Engineering
                       Construction.
238190..............  Other Foundation,             1,163            1,182        20.40        1,399       1,243            57         0.11         2.46
                       Structure, and Building
                       Exterior Contractors.
238210..............  Electrical Contractors..      2,046            2,680         2.59          795       1,635            74         0.05         1.07
238220..............  Plumbing, Heating, and        2,264            2,934         2.28        1,092       1,688            65         0.06         1.68
                       Air-Conditioning
                       Contractors.
238310..............  Drywall and Insulation        1,640            2,284         7.53          992       1,941            89         0.05         1.12
                       Projects.
238910..............  Site Preparation                225              255         0.55        3,753       1,647            79         0.23         4.77
                       Contractors.
                                               ---------------------------------------------------------------------------------------------------------

                        Total                      31,112           36,066         6.27        1,939       2,559           121         0.08         1.60
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Labor, OSHA, Directorate of Standards and Guidance, Office of Regulatory Analysis-Safety.

Regulatory Flexibility Screening Analysis
    To determine if the Assistant Secretary of Labor for Occupational
Safety and Health can certify that the final standard for confined
spaces in construction will not have a significant economic impact on a
substantial number of small entities, the Agency applied long-standing
screening tests to consider minimum threshold effects of the final
standard on small entities. The minimum threshold effects for this
purpose are annualized costs equal to one percent of annual revenues,
or annualized costs equal to five percent of annual profits, applied to
each affected industry. OSHA applied these screening tests both to
small entities and to very small entities. For purposes of
certification, affected small entities or very small entities in any
affected industry cannot exceed the minimum threshold effects.
    Table IV-17 shows that the annualized costs of the standard do not
exceed one percent of annual revenues for small entities in any
affected construction industry, but they do exceed five percent of
annual profits for small entities in two construction industries--NAICS
236210 (Industrial Building Construction) and NAICS 238910 (Site
Preparation Contractors). Table IV-18 shows that the annualized costs
of the standard exceed one percent of revenues and five percent of
annual profits for very small entities in NAICS 236210 (Industrial
Building Construction), and exceed five percent of annual profits for
very small entities in two other construction industries--NAICS 237130
(Power and Communication Line and Related Structures) and NAICS 238910
(Site Preparation Contractors). OSHA is, therefore, unable to certify
that the final standard will not have a significant economic impact on
a substantial number of small entities in construction, and must
prepare a Final Regulatory Flexibility Analysis (FRFA) (see Chapter 8
below).

                      Table IV-17--Potential Economic Impacts for Small Entities Affected by the Final Standard for Confined Spaces
                                                                     [2009 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cost as a    Costs as a
                                                          Average         Average         Average      Costs as a   Costs as a   percentage   percentage
 NAICS industry                            Affected     compliance     revenues per     profits per    percentage   percentage   of overall   of overall
      code            Industry name         firms        costs per        firm ($         firm ($     of affected  of affected    category     category
                                                       affected firm     thousand)       thousand)        firm         firm         firm         firm
                                                            ($)                                         revenues     profits      revenues     profits
--------------------------------------------------------------------------------------------------------------------------------------------------------
221310..........  Water Supply and                16             894             713              42         0.13         2.13         0.00         0.01
                   Irrigation Systems.
236115..........  New Single-Family              942             614           1,255              57         0.05         1.08         0.00         0.02
                   Housing Construction
                   (except Operative
                   Builders).
236116..........  New Multifamily                719             742           3,600             163         0.02         0.46         0.00         0.08
                   Housing Construction
                   (except Operative
                   Builders).
236118..........  Residential                  9,384             837             736              33         0.11         2.51         0.01         0.24
                   Remodelers.
236210..........  Industrial Building             24          21,999           2,827             128         0.78        17.18         0.01         0.11
                   Construction.
236220..........  Commercial and               4,398           1,334           4,950             224         0.03         0.60         0.00         0.06
                   Institutional
                   Building.
237110..........  Water and Sewer Line         2,248           2,203           2,462             147         0.09         1.50         0.02         0.25
                   and Related
                   Structures
                   Construction.
237130..........  Power and                       95           7,347           3,012             180         0.24         4.08         0.00         0.08
                   Communication Line
                   and Related
                   Structures
                   Construction.
237310..........  Highway, Street, and         2,738           1,795           4,304             258         0.04         0.70         0.01         0.19
                   Bridge Construction.
237990..........  Other Heavy and Civil          579             884           2,085             125         0.04         0.71         0.00         0.08
                   Engineering
                   Construction.
238190..........  Other Foundation,            1,100             973             936              43         0.10         2.27         0.02         0.44
                   Structure, and
                   Building Exterior
                   Contractors.
238210..........  Electrical                   1,424             616           1,037              47         0.06         1.31         0.00         0.02
                   Contractors.
238220..........  Plumbing, Heating,           1,700             853           1,130              44         0.08         1.96         0.00         0.03
                   and Air-Conditioning
                   Contractors.
238310..........  Drywall and                  1,119             613           1,127              52         0.05         1.19         0.00         0.06
                   Insulation Projects.

238910..........  Site Preparation               167           3,352           1,223              58         0.27         5.74         0.00         0.02
                   Contractors.
                                        ----------------------------------------------------------------------------------------------------------------
                     Total.............       26,653           1,167           1,533              71         0.08         1.64         0.00         0.09
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Source: U.S. Department of Labor, OSHA, Directorate of Standards and Guidance, Office of Regulatory Analysis--Safety.

      Table IV-18--Potential Economic Impacts for Very Small Entities (Fewer Than 20 Employees) Affected by the Final Standard for Confined Spaces
                                                                     [2009 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cost as a    Costs as a
                                            Annual        Average         Average         Average      Costs as a   Costs as a   percentage   percentage
                                          number of     compliance     revenues per     profits per    percentage   percentage   of overall   of overall
NAICS industry code     Industry name      affected      costs per     affected firm   affected firm  of affected  of affected    category     category
                                            firms      affected firm   ($ thousand)    ($ thousand)       firm         firm         firm         firm
                                                            ($)                                         revenues     profits      revenues     profits
--------------------------------------------------------------------------------------------------------------------------------------------------------
221310.............  Water Supply and             11             794             532              31         0.15         2.54         0.00         0.01
                      Irrigation
                      Systems.
236115.............  New Single-Family           580             607             977              44         0.06         1.37         0.00         0.01
                      Housing
                      Construction
                      (except Operative
                      Builders).
236116.............  New Multifamily             271             644           1,650              75         0.04         0.86         0.00         0.06
                      Housing
                      Construction
                      (except Operative
                      Builders).
236118.............  Residential               7,104             611             545              25         0.11         2.47         0.01         0.18
                      Remodelers.
236210.............  Industrial                    8          21,999           1,471              67         1.45        31.92         0.00         0.08
                      Building
                      Construction.
236220.............  Commercial and            1,327           1,317           2,273             103         0.06         1.28         0.00         0.05
                      Institutional
                      Building.
237110.............  Water and Sewer             642           2,182           1,105              66         0.20         3.30         0.01         0.19
                      Line and Related
                      Structures
                      Construction.
237130.............  Power and                    17           6,232             945              57         0.66        11.02         0.00         0.05
                      Communication
                      Line and Related
                      Structures
                      Construction.
237310.............  Highway, Street,            601           1,766           1,814             109         0.10         1.63         0.01         0.12
                      and Bridge
                      Construction.
237990.............  Other Heavy and             166             879           1,007              60         0.09         1.46         0.00         0.06
                      Civil Engineering
                      Construction.
238190.............  Other Foundation,           706             607             552              25         0.11         2.40         0.01         0.32
                      Structure, and
                      Building Exterior
                      Contractors.
238210.............  Electrical                  544             607             575              26         0.11         2.33         0.00         0.02
                      Contractors.
238220.............  Plumbing, Heating,          655             842             622              24         0.14         3.51         0.00         0.03
                      and Air-
                      Conditioning
                      Contractors.
238310.............  Drywall and                 336             607             599              27         0.10         2.21         0.00         0.04
                      Installation
                      Projects.
238910.............  Site Preparation             64           3,312             681              33         0.49        10.18         0.00         0.02
                      Contractors.
                                        ----------------------------------------------------------------------------------------------------------------
                       Total                  13,032             863             827              38         0.10         2.27         0.00         0.07
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Labor, OSHA, Directorate of Standards and Guidance, Office of Regulatory Analysis--Safety.

8. Final Regulatory Flexibility Analysis
    The Regulatory Flexibility Act, as amended in 1996 and 2010,
requires that an agency prepare a final regulatory flexibility analysis
for any rule expected to have a significant economic impact on a
substantial number of small entities (5 U.S.C. 601-612). Under the
provisions of the law, such an analysis must contain:
    1. A description of the impact of the rule on small entities;
    2. A statement of the need for, and objectives of, the rule;
    3. The response of the agency to any comments filed by the Chief
Counsel for Advocacy of the Small Business Administration in response
to the

proposed rule, and a detailed statement of any change made to the
proposed rule in the final rule as a result of the comments;
    4. A statement of the significant issues raised by public comments
in response to the initial regulatory flexibility analysis, a statement
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;
    5. A description, and estimate, of the number of small entities to
which the rule will apply, or an explanation of why no such estimate is
available;
    6. A description of the projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of the
classes of small entities that will be subject to the requirements, and
the type of professional skills necessary for preparation of the report
or record; and
    7. A description of the steps the agency took to minimize the
significant economic impact on small entities consistent with the
stated objectives of the applicable statutes, including a statement of
the factual, policy, and legal reasons for selecting the alternative
adopted in the final rule, and why the agency rejected each of the
other significant alternatives to the rule considered by the agency
which affect the impact on small entities.
1. A Description of the Impact of the Final Rule on Small Entities
    As shown in Table IV-19, the estimated total annualized cost of the
final standard for all affected small entities in construction (as
defined by SBA) is $31.1 million. Also shown in that table are
annualized costs per affected small entity by industry. These costs per
affected small entity range from $613 for NAICS 238310 (Drywall and
Insulation Projects) to $21,999 for NAICS 236210 (Industrial Building
Construction). The average yearly cost per affected small entity is
$1,167.
    To assess the potential economic impact of the final rule on
affected small entities, OSHA calculated the ratios of these annualized
compliance costs to yearly profits and to yearly revenues. These
percentages for each construction industry are in Table IV-17 (see
Chapter 7 of this FEA). As shown, among small entities potentially
affected by the final rule, the annualized cost of the rule is equal to
approximately 0.07 percent of annual revenues. In no construction
industry does the annualized cost of the rule for affected small
entities exceed 0.7 percent of annual revenues. Accordingly, on
average, prices for affected small entities in construction would have
to increase by about 0.08 percent to completely offset the cost of the
final rule. For affected small entities in the most impacted industry,
NAICS 236210 (Industrial Building Construction), prices would have to
increase by about 0.8 percent to completely offset the cost of the
final rule.
    Only to the extent that such price increases are not possible would
there be any effect on the average profits of affected small entities.
Even in the unlikely event that entities could not pass the costs of
the final rule through in the form of higher prices, the entities could
absorb the costs completely through a reduction in profits of 1.64
percent, on average, for affected small entities (as shown in Table IV-
17). In all but two of the affected industries, the affected small
entities could absorb the compliance costs completely through an
average reduction in profits of less than 5 percent; the reduction in
profits would not exceed 17.2 percent for affected small entities in
any of the construction industries, again assuming these entities could
not pass through the costs.
    To further ensure that OSHA fully analyzed and considered the
potential impacts on small entities, the Agency separately examined the
potential impacts of the final standard on very small entities, defined
as those entities with fewer than 20 employees. As shown in Table IV-
20, OSHA estimated the total annualized cost of the final standard for
all affected very small entities in construction to be $11.2 million.
Also shown in that table are annualized costs per affected small entity
by industry. These costs per affected small entity range from $607 for
several construction industries to $21,999 for NAICS 236210 (Industrial
Building Construction). The average yearly cost per affected small
entity is $862.
    To assess the potential economic impact of the final standard on
very small entities, OSHA calculated the ratios of the annualized costs
of the final rule to yearly profits and to yearly revenues. These
percentages for each affected construction industry are in Table IV-18.
As shown, among very small entities potentially affected by the final
rule, the annualized cost of the rule is equal to approximately 0.10
percent of annual revenues. In no construction industry does the
annualized cost of the rule for affected very small entities exceed
1.45 percent of annual revenues. Accordingly, on average, prices for
affected very small entities in construction would have to increase by
about 0.10 percent to completely offset the cost of the final rule. For
affected very small entities in the most impacted industry, NAICS
236210 (Industrial Building Construction), prices would have to
increase by about 1.45 percent to completely offset the cost of the
final rule.

            Table IV-19--Annualized Compliance Costs Associated With the Final Confined-Spaces Standard for Small Entities, by NAICS Industry
                                                                     [2009 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Affected firms
                                                                                Affected       as a percentage     Annualized
     NAICS industry code                 Industry name            Affected firms   establishments       of total      compliance costs    Cost per firm
                                                                                (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
221310.......................  Water Supply and Irrigation                    16                18               0.5           $14,299              $894
                                Systems.
236115.......................  New Single-Family Housing                     942               953               1.5           578,128               614
                                Construction.
236116.......................  New Multifamily Housing                       719               728              17.1           533,573               742
                                Construction.
236118.......................  Residential Remodelers...........           9,384             9,468               9.4         7,853,017               837
236210.......................  Industrial Building Construction.              24                24               0.7           527,967            21,999
236220.......................  Commercial and Institutional                4,398             4,463              10.9         5,868,843             1,334
                                Building.
237110.......................  Water and Sewer Line and Related            2,248             2,272              16.8         4,956,577             2,205
                                Structures Construction.

237130.......................  Power and Communication Line and               95               112               1.9           697,984             7,347
                                Related Structures Construction.
237310.......................  Highway, Street, and Bridge                 2,738             2,784              26.8         4,915,948             1,795
                                Construction.
237990.......................  Other Heavy and Civil Engineering             579               584              11.6           513,278               886
                                Const..
238190.......................  Other Foundation, Structure, and            1,100             1,112              19.5         1,069,906               973
                                Building Exterior Contractors.
238210.......................  Electrical Contractors...........           1,424             1,446               1.8           877,857               616
238220.......................  Plumbing, Heating, and Air-                 1,700             1,722               1.7         1,450,572               853
                                Conditioning Contractors.
238310.......................  Drywall and Insulation Projects..           1,119             1,130               5.3           686,015               613
238910.......................  Site Preparation Contractors.....             167               169               0.4           559,703             3,352
                                                                 ---------------------------------------------------------------------------------------
                                 Total                                    26,653            26,985               5.4        31,103,667             1,167
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Labor, OSHA, Directorate of Standards and Guidance, Office of Regulatory Analysis-Safety.

         Table IV-20--Annualized Compliance Costs Associated With the Final Confined-Spaces Standard for Very Small Entities, by NAICS Industry
                                                                     [2009 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Affected firms as      Annualized
     NAICS industry code                  Industry name             Affected       Affected       a percentage of    compliance costs  Cost per firm ($)
                                                                     firms      establishments         total               ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
221310.......................  Water Supply and Irrigation                11                 11                0.3              8,738                794
                                Systems.
236115.......................  New Single-Family Housing                 580                580                1.0            351,851                607
                                Construction.
236116.......................  New Multifamily Housing                   271                271                7.2            174,635                644
                                Construction.
236118.......................  Residential Remodelers............      7,104              7,105                7.3          4,342,753                611
236210.......................  Industrial Building Construction..          8                  8                0.2            175,989             21,999
236220.......................  Commercial and Institutional            1,327              1,329                3.9          1,747,634              1,317
                                Building.
237110.......................  Water and Sewer Line and Related          642                642                5.7          1,400,582              2,182
                                Structures Construction.
237130.......................  Power and Communication Line and           17                 17                0.4            105,944              6,232
                                Related Structures Construction.
237310.......................  Highway, Street, and Bridge               601                601                7.5          1,061,237              1,766
                                Construction.
237990.......................  Other Heavy and Civil Engineering         166                166                3.8            145,898                879
                                Const.
238190.......................  Other Foundation, Structure, and          706                706               13.5            428,448                607
                                Building Exterior Contractors.
238210.......................  Electrical Contractors............        544                544                0.8            330,259                607
238220.......................  Plumbing, Heating, and Air-               655                655                0.7            551,757                842
                                Conditioning Contractors.
238310.......................  Drywall and Insulation Projects...        336                336                1.8            203,983                607
238910.......................  Site Preparation Contractors......         64                 64                0.2            211,959              3,312
                                                                  --------------------------------------------------------------------------------------
                                 Total                                13,032             13,035                2.9         11,241,667                863
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Only to the extent that such price increases are not possible would
there be any effect on the average profits of affected very small
entities. Even in the unlikely event that the entities could not pass
through the costs of the final rule in the form of higher prices, small
affected entities could absorb the costs completely through an average
reduction in profits of 2.27 percent (as shown in Table IV-18). In all
but three of the affected industries, the affected small entities could
absorb the compliance costs completely through an average reduction in
profits of less than 5 percent; the reduction in profits would not
exceed 32 percent for affected small entities in any of the
construction industries, again assuming that no costs could be passed
through.
    In practice, given the small incremental increases in prices
potentially resulting from compliance with the final standard and the
lack of readily available substitutes (including foreign competition)
for the products and services provided by the covered construction
industry sectors, OSHA believes demand to be sufficiently inelastic in
each affected industry to enable small and very small entities to
substantially offset variable compliance costs through minor price
increases

without experiencing any significant reduction in total revenues or in
net profits.
    Further, it is important to note that cost assignment to entities
by size is approximate, and in some instances larger firms may bear the
burden, so the impacts on individual small entities is suggestive only,
not definitive. Indeed, the limitations of available economic data and
the Dodge report data make it impossible to assign small projects to
small firms in a way that represents economic reality. Because OSHA did
not assign fractions of projects to firms, it is likely that the Agency
overestimated the costs of the final rule on small and very small
entities. Accordingly, OSHA believes that it overstated its estimates
of impacts on small entities.
    With this important caveat, the Agency notes that there are
industries in which impacts are above the conventional thresholds of 1
percent of revenue and 5 percent of profit for some small and very
small entities. However, only a few firms account for the impacts as
shown from the fact that the costs are negligible when expressed as a
percentage of overall revenues and profits for the industry-size class
(see the last two columns of Table IV-17 and Table IV-18).
2. A Statement of the Need for, and Objectives of, the Rule
    The primary objective of the final rule is to provide an increased
degree of occupational safety for employees performing construction
work in confined spaces. Another objective of the final rule, in
support of the primary objective, is to provide updated, clear, and
comprehensive safety standards regarding construction work in confined
spaces to the relevant employers, employees, and interested members of
the public. The estimated 5.2 fatalities and 780 injuries annually that
the final rule would prevent (assuming full compliance) demonstrate the
need for the final rule.
    The legal basis for the rule is the responsibility given the
Department of Labor through the Occupational Safety and Health (OSH)
Act of 1970. The OSH Act authorizes and obligates the Secretary of
Labor to promulgate mandatory occupational safety and health standards
as necessary ``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). Additional legal authority for
this final rule includes 29 U.S.C. 653, 655(b), and 657; and 40 U.S.C.
3701.
3. The Response of the Agency to Any Comments Filed by the Chief
Counsel for Advocacy of the Small Business Administration in Response
to the Proposed Rule, and a Detailed Statement of Any Change Made to
the Proposed Rule in the Final Rule as a Result of the Comments
    In addition to the issues raised by the SBREFA panel, SBA's Office
of Advocacy provided recommendations for OSHA to consider (OSHA-2007-
0026-0119.1). The Agency provides the following responses to these
recommendations (quoted verbatim):
    SBA Recommendation 1: While the proposed rule is much improved from
the draft version of the rule reviewed during the SBREFA process, it is
still very complicated and difficult to understand. Advocacy recommends
that OSHA try to further streamline the rule and harmonize it as much
as possible with the existing general industry standard (or consider
adopting a single rule for both industries). Advocacy notes that many
employers operate on work sites that include both general industry and
construction confined spaces and employees may encounter both types of
confined spaces in close proximity. As many of the SERs pointed out to
the SBAR Panel, having two separate standards could double the cost of
their safety and training programs (especially if they contract out
these services) and cause unnecessary confusion on the job site.
Further, the distinction between ``maintenance'' and ``construction''
work in various facilities is often unclear. Having two different
standards increases the complexity of compliance and could ultimately
increase risk. This was, and remains, a key concern of the SERs.
    OSHA's Response: When possible, OSHA adapted requirements in the
general industry confined spaces standard to construction using
parallel language. For example, Sec.  1926.1205, Permitting process, in
the final standard contains provisions virtually identical to those in
Sec.  1910.146(e), Permit system, in the general industry standard,
rather than retaining the distinct classification system that OSHA
proposed. However, the final standard for confined spaces in
construction bears important distinctions from the general industry
standard due to:
     Advances in safety systems (for example, monitoring
procedures that detect increases in atmospheric hazards, as required in
Sec.  1926.1204(c)(5));
     Unique conditions associated with construction, such as
greater emphasis on assessing hazards at sewer worksites and the need
for information exchange in a complex multi-employer environment;
     Requests from stakeholders and commenters to allow greater
flexibility for employers, such as permitting employers to enter a
confined space under the alternative procedures specified by final
Sec.  1926.1203(e) if they isolate physical hazards within a space, or
permitting employers to suspend a permit (rather than cancelling it) in
response to certain temporary changes in conditions;
     Improvements in language for clarity and enforcement
considerations.
    SBA Recommendation 2: Advocacy is concerned about the host-employer
and controlling-contractor provisions of the proposed rule and remains
apprehensive about OSHA's imposition of legal obligations on employers
for employees who are not their own. This policy seems to emanate from
OSHA's Multi-Employer Citation Policy, which has never been promulgated
as a rule and whose legal status has been called into question in the
recent Secretary of Labor v. Summit Contractors, Inc. decision.
Advocacy filed a similar comment about the host-contractor provisions
in OSHA's proposed Electric Power Transmission rule. Some of the key
concerns of small businesses are that host employers may not even be
engaged in construction work (and therefore have no expertise on
confined spaces), and that contractors may be working in remote
locations with no interaction or oversight. Advocacy appreciates that
OSHA has tried to limit the scope of this provision by only requiring
host-employers or controlling contractors to provide information they
actually possess (as opposed to having to obtain information they do
not already have); however, these provisions are highly controversial
and are opposed by many small businesses. Advocacy recommends that OSHA
eliminate these requirements from the rule.
    OSHA's Response: The U.S. Court of Appeals for the Eighth Circuit
vacated the cited Summit decision in Solis v. Summit Contractors, Inc.,
558 F.3d 815 (8th Cir. 2009), and the Commission subsequently
reiterated its support for OSHA's multi-employer citation policy and
OSHA's authority to hold employers responsible for actions of employees
who are not their own. Solis v. Summit Contractors, Inc., 23 BNA OSHC
1196, 1202-03 (No. 05-0839, 2010). OSHA continues to believe, as stated
in the NPRM:

    On multi-employer worksites, an employer's actions can affect
the health and safety of another employer's employees. It is
critical for the safety of all employees on a

worksite that contractors and subcontractors communicate with each
other. Requiring communication between employers is an efficient way
to ensure that each employer learns important information about the
confined space hazards present so that all employees are adequately
protected. (72 FR 67358.)

    In this final rule, OSHA made every effort to minimize the impact
of the information-exchange requirements on host employers and
controlling contractors. OSHA believes that the affected parties
conduct such multi-employer communication currently with minimal
disruption to business operations, and that the obligations specified
by the final standard will become routine and easy to fulfill for
employers who must initiate a system for regular communication. OSHA
provided a detailed explanation of its decision to retain these
requirements, along with its authority for these requirements, in its
discussion of final Sec.  1926.1203(h) and (i).
    SBA Recommendation 3: Advocacy notes that there are no single-
family residential builders included in the economic analysis or the
Initial Regulatory Flexibility Analysis (IRFA); however, it appears
that there are confined spaces on these construction sites. If OSHA is
assuming that no single-family residential builders will incur costs or
be affected by the rule (possibly because OSHA is assuming that all of
this work is subcontracted out and these subcontractors are already
included), then OSHA should state this clearly in the rule. If not,
these costs should be included in the economic analysis and IRFA [sic
FRFA] (including the costs for the host-employer and controlling-
contractor provisions and the paperwork and recordkeeping requirements
associated with them). Advocacy notes that because the net benefits of
this rule (i.e., benefits minus costs) are only $8.2 million, the
additional costs for single-family residential builders could mean that
the costs of this proposed rule outweigh its benefits.
    OSHA's Response: In this FEA, OSHA analyzed the costs and impacts
to residential single-family builders for confined spaces in single-
family dwellings that are subject to the final standard (see Chapters
VI and VII of this FEA). OSHA determined that, even with these costs
included, the benefits of the final standard significantly exceed the
costs.
    SBA Recommendation 4: In the Regulatory Flexibility Act section, it
would be helpful if OSHA clarified in the first paragraph that ``an RFA
analysis is required for any proposed rule that is expected to have a
significant economic impact on a substantial number of small entities''
(rather than saying ``for certain proposed rules''). Further, OSHA
should affirmatively declare in the IRFA [sic FRFA] that OSHA expects
this proposed [sic final] rule will have a significant economic impact
on a substantial number of small entities.
    OSHA's Response: In the opening paragraph of this FRFA, OSHA made
the following clarifying statement: ``The Regulatory Flexibility Act,
as amended in 1996, requires that an agency prepare a final regulatory
flexibility analysis for any rule expected to have a significant
economic impact on a substantial number of small entities . . .''
However, the overall thrust of SBA's recommendation is inconsistent
with the RFA, as well as with OSHA's official procedures.\63\ According
to both the RFA and OSHA's official procedures, the Agency must prepare
an FRFA only if it is unable to certify that the final standard will
not have a significant economic impact on a substantial number of small
entities. In Chapter 7 of this FEA, the Agency explained that it was
unable to certify that the final standard will not have a significant
economic impact on a substantial number of small entities and that,
therefore, it must prepare an FRFA.
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    \63\ Available online at: http://www.dol.gov/dol/regs/appendix.htm.
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    Note that OSHA may prepare an FRFA even when it has no requirement
to do so. In fact, OSHA may, and has, voluntarily prepared FRFAs for
purposes of transparency even when the Agency is able to certify that
the final standard will not have a significant economic impact on a
substantial number of small entities.
    SBA Recommendation 5: Also, in Item 7 of the IRFA (Alternatives),
OSHA should have summarized the significant alternatives it considered
and invited public comment on them (OSHA simply mentions that some were
considered). Advocacy notes that a ``significant'' alternative is
defined as one that: (1) Reduces the burden on small entities; (2) is
feasible; and (3) meets the agency's underlying objectives. Since it
appears that none of the alternatives OSHA considered meets these
criteria, OSHA should have stated that fact and invited public comment
on its determination. This is a significant issue because many of the
SERs recommended that OSHA either adopt the general industry standard
or harmonize the two sets of rules as much as possible.
    OSHA's Response: OSHA did discuss, and request comment on, several
regulatory alternatives, including the major alternative supported by
the SBA of aligning the new rule more closely with the general industry
rule (see discussion at 72 FR 67396, which incorporates discussions of
regulatory alternatives in Table 6 on page 67397, and PEA Chapter 3 at
OSHA-2007-0026-0002). The Agency considered these alternatives in terms
of (1) reducing the burden on small entities; (2) feasibility; and (3)
satisfying the Agency's statutory obligations and objectives.
Furthermore, in referring the public, in Item 7 of the IRFA, to more
extensive discussions of the alternatives elsewhere, OSHA attempted to
comply with both the spirit and the letter of Sec.  605(a) of the RFA
to avoid duplicative analyses.
    OSHA believes that it addressed the recommendation to a large
extent by extensively reworking the proposed standard to this final
format, which closely reflects the general industry standard, and
thereby reduces the burden on small entities. In this FEA, OSHA
evaluated the impacts of more stringent and less stringent regulatory
alternatives. The final standard in large part reflects the general
industry standard, tailored to address the unique characteristics of
the construction industry. A more stringent regulatory alternative to
the final standard would require that employers identify and
distinguish the type of confined space according to the classification
system specified in the proposed rule. OSHA estimates that the more
complex classification system, present in the proposed rule but not in
this final standard, would increase compliance costs by $1.7 million,
not including any costs required for additional training.
    One less stringent alternative would relieve employers of the
requirement to have a written program for each permit-required entry,
and would instead require making a copy of the standard available to
employees. OSHA estimates that the requirement for a written program
imposes compliance costs of about $1.3 million. OSHA believes that
having a written program onsite maintains consistency with the general
industry standard and provides specific guidance about how employees
are to address hazards in the confined spaces; entry supervisors and
employees may need to refer to the program quickly during the entry.
The proposed rule allowed employers to simply keep a copy of the
standard at the worksite instead of a written program because the
proposed standard provided specific and detailed requirements for each
potential type of confined space; however, commenters criticized this

approach as overly complex. The final standard is not conducive to
replacing a written program with a copy of the standard because it
takes a more generic approach to confined-space requirements than the
proposal; this approach is similar to the general industry standard,
which also requires employers to maintain a written program on site.
    SBA Recommendation 6: Advocacy recommends that OSHA include a list
of examples of confined spaces for each of the proposed categories to
make the proposed standard easier to understand. For example, the only
example cited for the Continuous System-Permit-Required Confined Space
category is a ``sewer.'' It would be helpful if OSHA provided
additional examples. Similarly, since the SERs and many small
businesses have said they find the existing categories to be too
complex and confusing, Advocacy recommends that OSHA consider providing
a table with four columns listing: (1) The category of confined space;
(2) examples of confined spaces under that category; (3) a sequential
list of the steps an employer must take to comply with the requirements
for that particular category; and (4) a cross-reference to the
regulatory citation. OSHA should include this table as an Appendix to
the rule as it has done for Entry Permits, which is very helpful.
    OSHA's Response: As noted earlier in this chapter, for the final
standard OSHA simplified the classification system for confined spaces,
making the recommended supplemental lists, tables, and examples
unnecessary. OSHA also plans to issue additional guidance documents to
help employers comply with this simpler standard.
    SBA Recommendation 7: Finally, OSHA should clarify the definition
of a ``confined space'' itself, which is currently unclear. For
example, it is unclear what is meant by ``not designed for continuous
employee occupancy.'' It would be helpful if OSHA provided some
examples for clarification. Also, OSHA should specifically state
whether foundations, attics, and crawl spaces in single-family
residential homes are considered confined spaces. Finally, OSHA should
clarify whether there is any legal distinction between ``enclosed'' and
``confined'' spaces, as the term ``enclosed'' spaces is also used in
the preamble.
    OSHA's Response: In the Summary and Explanation section of the
preamble to the final standard, OSHA clarifies its definition of a
``confined space,'' and Sec.  1926.1201(a) of the standard includes a
note with a non-exhaustive list of potential confined spaces that
commonly occur on a construction worksite. This list provides examples
for employers who may be unfamiliar with confined spaces in
construction. The same section of the preamble addresses the scope of
the standard with respect to affected spaces in single-family
residential construction. In the final rule, OSHA does not distinguish
between an ``enclosed space'' and a ``confined space'' because the
final rule does not include requirements for enclosed spaces. OSHA
amended the ``enclosed spaces'' provision of subpart V, Sec.  1926.953,
as part of this rulemaking, and defined that term for purposes of
subpart V. OSHA does not use the term in the preamble of the NPRM or
the final rule other than in response to SBREFA comments, the removal
of Sec.  1926.21(b), and the ACCSH recommendation to address enclosed
spaces, which OSHA did not adopt.
4. A Statement 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
    On September 26, 2003, OSHA convened a Small Business Advocacy
Review Panel (the Panel) for this rulemaking in accordance with the
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (Pub. L. 104-121), as codified at 5 U.S.C. 601 et seq. The Panel
consisted of representatives of OSHA, the Office of Information and
Regulatory Affairs in the Office of Management and Budget, and the
Office of Advocacy within the U.S. Small Business Administration. The
Panel received oral and written comments on a draft proposal and a
draft economic analysis from small entities (businesses) potentially
affected by the rule. The Panel, in turn, prepared a written report
which it delivered to the Assistant Secretary for Occupational Safety
and Health (and is available in the docket on Regulations.gov as OSHA-
2007-0026-0037). The report summarized the comments received from the
small-entity representatives (SERs), and included recommendations from
the Panel to OSHA regarding the proposal and the associated analysis of
compliance costs. OSHA sought comment in the NPRM on a variety of
issues of particular interest to small businesses as a result of the
recommendations of the Panel. Table IV-21 below provides the Panel
recommendations and a summary of OSHA's response to each of these
recommendations in light of comments made on the record.

   Table IV-21--OSHA Response to Recommendations by the Small Business
  Advocacy Review Panel for the Proposed Standard on Confined Spaces in
                              Construction
------------------------------------------------------------------------
          Panel recommendation                   OSHA's response
------------------------------------------------------------------------
1. The SERs generally believed that      The Agency relied, in part, on
 OSHA had underestimated the costs of     the comments and alternative
 the draft proposed standard. The Panel   cost estimates from the SERs
 recommended that OSHA revise its         to help ensure that the
 economic and regulatory flexibility      estimated costs of compliance
 analysis as appropriate to reflect the   with the final standard would
 SERs' comments on underestimation of     reflect the actual costs that
 costs, and that the Agency compare       businesses might incur when
 OSHA's revised estimates to              complying with the
 alternative estimates provided by the    requirements specified by the
 SERs. For those SER estimates that       standard. OSHA reduced or
 OSHA did not adopt, OSHA should          eliminated some requirements
 explain its reasons for preferring an    altogether (such as those
 alternative estimate, and solicit        addressing hazardous-enclosed
 comment on the issue.                    spaces) in light of the
                                          information provided and
                                          issues raised by the SERs. The
                                          Agency revised or clarified
                                          other requirements (such as
                                          those involving communications
                                          to/from controlling employers
                                          and the classification of
                                          spaces) to avoid the potential
                                          for misinterpretations
                                          regarding the applicability of
                                          the requirements and the
                                          specific actions necessary to
                                          ensure compliance. OSHA
                                          discusses the revisions in
                                          further detail below in the
                                          responses to specific Panel
                                          recommendations separately
                                          addressing each of these
                                          issues.

2. Many SERs observed that OSHA had      The Agency reviewed its
 underestimated the cost of training.     estimates of the costs of
 They were concerned particularly about   complying with the training
 the length of time required for          requirements in the proposed
 training, training the trainers,         standard in light of the
 renewal training, and multilingual       additional information
 training. The SERs also noted that       provided by the SERs. OSHA
 much retraining could be avoided if      understands that many
 OSHA adopted the general industry rule   businesses would have to
 because most firms already have          comply with both the general
 trained their employees on that rule.    industry and the construction
 Some SERs also noted that they still     industry versions of the OSHA
 need to train employees on the general   confined-spaces standards,
 industry standard because some of        depending on the
 their work would come under the          circumstances. Under the final
 general industry standard. In these      standard, OSHA decided not to
 situations, they would need to           allow compliance with the
 continue training on the general         general industry standard in
 industry standard while adding           lieu of compliance with this
 training on the construction standard,   final standard for
 and on how employees should determine    construction projects because
 which standard applies. Because OSHA's   there are situations where the
 economic analysis examined training on   general industry standard
 a project basis, it is difficult to      would not adequately protect
 compare OSHA's cost estimates to the     construction employees because
 estimates provided by the SERs. The      of the unique characteristics
 Panel recommends that OSHA carefully     of construction work (see
 analyze the SERs' comments on training   section II.B. (``History'') of
 costs by developing methods for          this document for a discussion
 comparing these cost estimates to        of this issue). However, to
 those estimates provided in OSHA's       simplify the process for
 economic analysis. OSHA then should      employers in confined spaces
 compare these costs to its present       where both general industry
 cost estimates, and revise its           and construction work is
 training costs as necessary based on     ongoing, OSHA provided a
 all of the available information.        statement of enforcement
                                          policy which has the effect of
                                          allowing all employers in that
                                          space to comply with a single
                                          set of rules: The construction
                                          standard. That policy, along
                                          with the changes that bring
                                          the construction rule closer
                                          in line with the general
                                          industry rule and address much
                                          of the information provided by
                                          the SERs, should reduce the
                                          training costs.
3. Many SERs stated that OSHA had        The Agency reviewed its
 neglected some elements of monitoring    estimates of the costs of
 costs, such as the need for a            complying with the atmospheric-
 competent person to conduct the          monitoring requirements in the
 monitoring, the need for the entire      proposed standard in light of
 crew to wait while a supervisor          the additional information
 performs the monitoring, the short       provided by the SERs. The
 life span in the field of monitoring     Agency decided not to revise
 equipment, and costs associated with     the use of a five-year useful
 calibrating the equipment. Those SERs    life of monitoring equipment
 affected by the hazardous-enclosed       absent additional evidence
 spaces portion of the draft proposed     demonstrating that a shorter
 rule were concerned particularly about   span was more appropriate. In
 increased monitoring costs. The Panel    any case, the effect on total
 notes that if the SERs' views about      costs of minor variances in
 the life of equipment and the need for   the life of equipment would be
 the entire crew to suspend work during   small. OSHA increased the
 monitoring are correct, and no other     costs associated with setting
 assumptions are changed, the costs of    up monitoring equipment to 20
 monitoring would be three to five        minutes (instead of 10
 times higher than OSHA estimated,        minutes) to reflect the
 adding $6 to $12 million to the cost     possibility of additional
 of the draft proposed standard. The      losses of productive work time
 Panel recommends that OSHA consider      by other employees. OSHA also
 these factors and revise its             doubled the costs associated
 monitoring cost estimates accordingly,   with periodic calibration of
 and that monitoring costs reflect the    the equipment to reflect
 total actual costs associated with       possible additional time,
 conducting monitoring, including the     costs associated with the
 cost of transporting and maintaining     transportation of equipment,
 equipment, and the costs associated      and other incidental expenses.
 with crew members waiting for the
 completion of monitoring activities.
4. Many SERs were concerned that the     As recommended by the Panel,
 hazardous enclosed spaces provisions     OSHA carefully examined the
 of the draft proposed rule would         hazardous-enclosed space
 result in extensive costs with few       portion of the draft proposed
 benefits. Some SERs thought the          standard. OSHA also reexamined
 provisions required little               applicable existing
 recordkeeping beyond what they           requirements, the extent of
 currently do. Also, some SERs noted      occupational risks involved,
 that OSHA had underestimated the costs   and the potential for risk
 associated with recordkeeping. The       reduction with the
 Panel is concerned that the hazardous    promulgation of additional
 enclosed spaces provision would          regulatory requirements for
 require major atmospheric testing and    hazardous-enclosed spaces.
 monitoring burdens not identified in     Based on this reexamination,
 the cost analysis. The Panel             the Agency decided not to
 recommends that OSHA carefully examine   promulgate any new or
 the benefits and costs of this portion   additional requirements for
 of the rule and compare these            hazardous-enclosed spaces.
 requirements carefully to what is        OSHA believes that other
 required under other existing            existing standards adequately
 regulations, and to existing             cover potential hazards
 construction industry practice.          associated with these spaces
                                          (for example, 29 CFR 1926.55).
                                          Therefore, OSHA eliminated all
                                          requirements involving
                                          hazardous-enclosed spaces, and
                                          no such requirements appear in
                                          the final standard.
5. Most SERs were concerned that the     The Agency clarified the duties
 treatment of controlling employers in    of the controlling employer in
 the draft proposed standard would        Sec.   1926.1203 of the final
 result in additional costs for           standard (General
 controlling employers in the form of     requirements). In its
 increased monitoring and supervision     explanation of paragraph (h)
 of subcontractor activities. SERs also   of this section, OSHA provided
 were concerned with the costs and time   additional information about
 required to meet the coordination and    the type of information that
 communication requirements of the        the controlling employer must
 draft proposed standard. The Panel       share with its subcontractors,
 recommends that, if OSHA does not        and OSHA further clarified in
 clarify these provisions, then it        a note to this paragraph that
 should examine further the possible      the controlling or host
 costs of the controlling-employer        employer do not have to enter
 provisions in the draft proposed rule.   a confined space to collect
 Also, OSHA should be certain that it     the specified information for
 has accounted for all of the burdens     its subcontractors. Therefore,
 associated with this provision.          the Agency believes that
                                          compliance with final Sec.
                                          1926.1203 would not result in
                                          a significant added cost to
                                          controlling employers. Its
                                          purpose is to aid them in
                                          their duties to safely
                                          coordinate the activities of
                                          their subcontractors within
                                          the space.
6. Many SERs were concerned that the     The Agency revised the
 increased complexity of the              classification system in the
 classification system would add not      final standard to clarify and
 only to the training costs but also to   simplify the classification of
 the costs associated with classifying    confined spaces. The Agency
 confined spaces. The Panel recommends    believes this system reflects
 that, if the classification process is   current practice under the
 not simplified, OSHA should further      general industry standard when
 analyze the costs associated with        employers apply it to
 classifying confined spaces.             construction work, thereby
                                          reducing the compliance burden
                                          for employers.

7. OSHA estimated that the draft         As noted in the response to
 proposed standard potentially affects    item 4 above, OSHA did not
 small entities performing construction   include the requirements
 work in confined and enclosed spaces.    addressing hazardous-enclosed
 Small entities in eight specific         spaces that the Panel believed
 construction industry classifications    may impose a burden on the
 were identified as being potentially     industrial sector for General
 affected by the draft proposed           Contractors for Single Family
 standard. These classifications          Homes in the final standard.
 include Residential Housing (SIC
 1522); Industrial Buildings (SIC
 1541); Other Nonresidential Buildings
 (SIC 1542); Highway and Street
 Construction (SIC 1611); Bridge and
 Tunnel Construction (SIC 1622); Water,
 Sewer, and Pipeline Construction (SIC
 1623); Other Heavy Construction (SIC
 1629); and Structural Steel Erection
 (SIC 1791). For each of these industry
 classifications, Table 3 in the Panel
 report shows estimates of the total
 number of small firms in the industry,
 the number of establishments operated
 by these firms, the number of
 employees of these firms, and the
 total sales of these firms. These
 figures represent the best available
 estimates for the numbers of
 potentially affected small entities
 meeting the definition of a small
 entity established by the Small
 Business Administration for these
 particular industry sectors. In
 summary, an estimated 86,012 small
 entities are potentially affected by
 the draft proposed standard. These
 firms operate an estimated 86,158
 establishments, employ an estimated
 921,831 employees, and generate total
 sales estimated at $192 billion. In
 addition to the small entities
 identified above.
8. Almost all of the SERs found the      In the final standard, OSHA
 draft proposed standard difficult to     addressed the concerns of the
 follow. The SERs stated that they        SERs about the difficulty in
 currently were using the general         following the text of the
 industry standard and were familiar      proposed standard. OSHA
 with it. A few SERs saw some             reorganized the regulatory
 advantages to the differences between    text to follow more closely
 the draft proposed standard and the      the general industry structure
 general industry standard, but even      preferred by the SERs. The
 these SERs did not believe that these    final standard specifies the
 advantages were sufficient to justify    general duties, the standards
 the amount of training the draft         pertaining to permit-required
 proposed standard would require. The     confined spaces, the
 Panel recommends that OSHA either make   permitting process, entry
 the standard easier to follow,           permits, training, rescue
 consider a standard closer to the        services, and specific duties
 general industry standard, or develop    assigned to entrants,
 a standard in which the classification   attendants, and supervisors.
 provisions that provide greater          OSHA recognized and addressed
 flexibility to employers are optional    problematic situations common
 rather than required.                    to construction sites not
                                          clearly addressed by the
                                          general industry standard
                                          (e.g., sites where there is no
                                          host, the kind of information
                                          that entities need to
                                          exchange, conducting the
                                          initial hazard assessment of a
                                          previously unclassified
                                          space). OSHA adopted many of
                                          the general industry
                                          provisions, and adjusted them
                                          for use on a construction
                                          worksite.
9. Most SERs were confused by the        In the final standard, OSHA
 distinctions between types of confined   greatly simplified the system
 spaces. One SER referred to the          for classifying confined
 distinctions as ``metaphysical.'' The    spaces (relative to that in
 Panel recommends that if these           the proposed standard) by
 distinctions are retained, they should   removing the series of
 be made clearer, or OSHA should          classifications in the
 consider making such classifications     proposed rule and simply
 optional.                                requiring that employers
                                          identify all confined spaces
                                          where their employees may
                                          work, and designate them as
                                          either permit-required
                                          confined spaces (i.e., permit
                                          spaces) or non-permit spaces.
                                          Within the subcategory of
                                          permit spaces, employers must
                                          identify and address the
                                          hazards, such as through
                                          hazard isolation or atmosphere
                                          control; the final rule
                                          addresses these
                                          responsibilities using
                                          performance language in Sec.
                                          Sec.   1926.1203 (General
                                          requirements) and 1926.1204
                                          (Permit-Required Confined
                                          Space Program) and does not
                                          require the additional
                                          classifications required by
                                          the proposed rule.
10. Many SERs noted that the hazardous-  See the Agency's response to
 enclosed spaces requirements would       item 4 above.
 result in a major recordkeeping
 burden. Some SERs believed that these
 requirements represented major new
 requirements for many contractors.
 OSHA notes that a few of the SERs
 seemed unacquainted with some of the
 requirements of existing regulations.
 The Panel notes that the requirement
 to evaluate each potentially hazardous
 space, implicit in Sec.
 1926.1225(a)(3), could radically alter
 the compliance requirements and the
 costs of the rule in ways not
 reflected in OSHA's Preliminary
 Initial Regulatory Flexibility
 Analysis. The Panel recommends that
 OSHA more carefully explain the
 relation of these requirements to
 existing requirements and practice,
 and explain the need for different
 requirements.

11. SERs were concerned that the         As stated above, OSHA clarified
 provisions addressing controlling        the responsibilities of
 employers would require general          controlling employers in final
 contractors to develop confined-space    Sec.   1926.1203. In addition
 expertise and provide confined-space     to sharing specific
 supervision. OSHA's intent with these    information that it may have
 provisions was not to change existing    about the space with its
 relations between general contractors    affected subcontractors, the
 and their subcontractors, but rather     note to that section clearly
 to assure that general contractors       states that employers do not
 provide subcontractors with the          have to enter a confined space
 information they possess relevant to     to gather such information for
 confined spaces. Some SERs agreed that   its subcontractors. The
 additional information could be          purpose of this section is not
 useful. The Panel recommends that OSHA   to change existing relations
 clarify this requirement to indicate     between general contractors
 that the role of the controlling         and their subcontractors, but
 employer is only to provide any          rather to assure that general
 information they possess concerning      contractors provide
 confined spaces.                         subcontractors with
                                          information relevant to the
                                          safety of their
                                          subcontractors' employees
                                          working within a confined
                                          space. The proposed standard
                                          did not require controlling
                                          employers to develop confined-
                                          space expertise to fulfill
                                          their duties, and neither does
                                          the final standard.
12. OSHA's Hazard Communication          OSHA recognized that the
 standard also provides guidance to       confined spaces standard may
 employers on the use of certain          overlap with provisions in
 chemicals in the workplace. However,     other part 1926 standards. In
 OSHA does not see any conflict between   the preamble discussion of
 this standard and the draft proposed     this final rule, OSHA
 standard. The Hazard Communication       clarified the relationship
 standard provides general                between this standard and
 precautionary information regarding      other pre-existing
 the use of certain chemicals and         construction standards which
 products; the draft proposed standard    may be applicable in a
 provides more explicit requirements      confined space. In Sec.
 for conditions specific to confined      1926.1201(c) of the final
 and enclosed spaces. Also, many          standard, OSHA explains how
 construction contractors still will      overlapping standards would
 need to follow the general industry      interact with each other, and
 standard [for confined spaces] in some   the obligations of an employer
 types of work, and thus need to train    in such situations. OSHA also
 their workers in using two different     explains in the preamble of
 standards, and when to apply each        the final rule how employers
 standard. The SERs identified other      would evaluate practical
 federal standards that they believe      situations under the
 address the hazards associated with      requirements of the final
 confined and enclosed spaces,            standard when it overlaps with
 including OSHA standards for             another OSHA requirement. In
 Ventilation (Sec.   1926.57) and for     its explanation of the scope
 Gases, Vapors, Fumes, Dusts, and Mists   of the final rule, OSHA also
 (Sec.   1926.55), and EPA and HUD        provided additional guidance
 rules on abatement work. Accordingly,    about the potential overlap
 the Panel recommends that OSHA clarify   with part 1926, subparts J, P,
 the exact relation between the draft     S, and Y. In addition, OSHA
 proposed standard and other standards    made a minor modification to
 affecting work by construction           29 CFR part 1926, subpart V,
 employers in confined or enclosed        to ensure that it provides
 spaces, including the Hazard             clear guidance to employers
 Communication standard, the general      about the interaction of that
 industry standard, the Permissible       standard with the confined
 Exposure Limit standards, the            spaces in construction
 Ventilation standard, the Gases,         standard. OSHA is currently
 Vapors, Fumes, Dusts, and Mists          unaware of any other Federal
 standard, and applicable EPA and HUD     agency standards that overlap
 standards.                               or conflict with the final
                                          OSHA standard.
13. Alternatives to adopting the draft   OSHA considered alternatives to
 proposed standard developed by OSHA      drafting its own confined
 include adopting the draft proposed      space standard for
 standard developed by the Advisory       construction. The Agency
 Committee for Construction Safety and    considered the general
 Health, the industry consensus           industry standard for confined
 standard developed by the American       spaces, but found it to be
 National Standards Institute, or the     unsuitable for the
 existing OSHA general industry           construction industry. OSHA
 standard [for confined spaces].          believes that the general
 Additional alternatives include          industry standard does not
 modifying the OSHA draft proposed        adequately address some
 standard by removing provisions          problematic situations common
 addressing hazardous-enclosed spaces,    on construction sites. These
 removing the requirement to classify     concerns include multiple
 spaces in the least hazardous            subcontractors working within
 category, revising requirements for      one space, and hazards created
 atmospheric monitoring to allow          by a confined space built
 periodic monitoring instead of           around employees. OSHA drafted
 continuous monitoring, and/or reducing   the final standard to be
 or eliminating recordkeeping             similar to the general
 requirements. The Panel recommends       industry standard in terms of
 that OSHA continue to consider these     organization and most of the
 alternatives, and discuss and solicit    requirements. ANSI is
 comment on them in the proposed rule.    presently considering whether
                                          it is feasible to begin
                                          drafting a confined-spaces
                                          standard for application
                                          specifically to construction.
                                          OSHA addressed major concerns
                                          of the SERs regarding the
                                          hazardous-enclosed space
                                          requirements in the draft
                                          proposed standard by removing
                                          that section completely from
                                          the proposal and final
                                          standard. As previously stated
                                          above, OSHA also simplified
                                          classification as either
                                          permit-required or non-permit
                                          required. Finally, OSHA
                                          reduced employers'
                                          recordkeeping requirements by
                                          minimizing the time necessary
                                          for employers to maintain
                                          documentation. For example, in
                                          Sec.   1926.1205 of the final
                                          standard, an employer will
                                          only have to maintain entry
                                          permits for one year.

14. Most SERs indicated a preference     As stated before, the draft
 for using the general industry           proposed confined-spaces
 standard for construction work, as       standard for construction
 opposed to the draft proposed            addresses some concerns that
 standard. OSHA is concerned that not     are unique to the construction
 all construction employers are as        industry. OSHA believes that
 familiar with the general industry       the reorganization of the
 standard as the SERs are, and that       proposed standard and the
 some employers might benefit from a      elimination of the section on
 standard designed to provide greater     hazardous-enclosed spaces will
 compliance flexibility. The Panel        make the final standard easier
 recommends that OSHA consider the        to read than the general
 alternative of adopting the general      industry standard for confined
 industry standard and, if this           spaces, thereby expediting
 alternative is not adopted, discuss      employer compliance. OSHA
 and solicit comment on this              requested that the public
 alternative in the proposed rule. If     submit comments regarding the
 OSHA does not adopt a standard closer    degree of flexibility granted
 to the general industry standard, the    to employers in classifying
 Panel recommends that OSHA revise its    confined spaces, as well as
 comparative cost analysis of the         other alternatives to the
 general industry rule and the draft      proposed rule in general. In
 proposed standard to take account of     the final standard, OSHA
 SERs' concerns about the increased       adopted a classification
 training, communication, and             system based on identifying
 classification costs associated with     permit-required spaces (i.e.,
 the draft proposed standard. The Panel   permit spaces). This system
 also recommends that OSHA solicit        reflects the classification
 comment on how an alternative standard   system used widely under the
 similar to the general industry          general industry standard.
 standard could be adapted to the         OSHA rejected the alternative
 construction sector. In addition, the    of not issuing a final
 Panel recommends that OSHA analyze and   standard because the record
 solicit comment on the non-regulatory    demonstrates that the existing
 alternative of not issuing a final       standards, even with improved
 standard, relying instead on existing    outreach, would be inadequate
 standards and improved outreach.         to prevent the fatalities and
                                          injuries identified earlier in
                                          this analysis. The earlier
                                          discussion in this FEA under
                                          ``Need For Regulation''
                                          includes additional
                                          information on the need for
                                          this new standard.
15. The SERs were confused by the        In the proposed rule, the
 variety of distinctions among confined   Agency reduced the number of
 spaces, and generally believed that      classifications by removing
 the training required by these           the classification for
 provisions negated any advantages that   hazardous-enclosed spaces. In
 might arise from the flexibility of      the proposed rule, OSHA
 different types of confined spaces.      further clarified the four
 The Panel recommends that OSHA examine   remaining categories by
 and solicit comment on alternatives      reorganizing the text of the
 that reduce the number of types of       proposed standard to ensure
 confined spaces, and that OSHA           that all requirements for each
 consider alternatives that would allow   classification type were
 employers the choice of using or         available in one section. OSHA
 ignoring these provisions.               requested that the public
                                          submit comments regarding
                                          other alternatives to the
                                          proposed rule. In the final
                                          standard, OSHA further reduced
                                          the number of confined-space
                                          classifications by adopting
                                          the approach used in the
                                          general industry standard to
                                          designate permit-required
                                          spaces. The Agency believes
                                          that, because the final
                                          standard closely mirrors the
                                          general industry standard,
                                          there will be minimal
                                          additional costs for employers
                                          to train their employees on
                                          the final construction
                                          standard.
16. Many SERs viewed the requirements    As recommended by the Panel,
 for hazardous-enclosed spaces as         OSHA removed the provisions
 highly burdensome. The Panel             for hazardous-enclosed spaces.
 recommends that OSHA remove this
 provision unless OSHA can (1) clarify
 exactly how the requirements of this
 provision are different from other
 existing requirements and practices;
 (2) develop a detailed cost analysis
 of this provision; (3) quantify the
 hazards associated with hazardous-
 enclosed spaces; and (4) explain how
 the hazardous-enclosed space
 provisions can serve to reduce these
 hazards. If OSHA retains this
 requirement or one like it, OSHA also
 should solicit comment on the need for
 the recordkeeping requirements in the
 provision. In addition, OSHA should
 solicit comment on removing this
 provision entirely.
17. Most SERs were concerned that the    As stated previously, Sec.
 provisions for controlling contractors   1926.1203(h), and the note to
 would alter the existing relationship    that section, clarify the
 between contractors and subcontractors   duties of the controlling
 with little gain in reduced risk to      contractor and explain that a
 employees. OSHA notes that the purpose   controlling contractor will
 of this provision was only to ensure     not have to enter a confined
 that contractors share available         space to gather the specified
 information at multi-employer            information for the
 worksites. Some SERs agreed that         subcontractor.
 information sharing would be helpful,
 but were concerned that the OSHA draft
 went far beyond this purpose. The
 Panel recommends that OSHA consider
 removing this provision or clarifying
 the purpose of this provision, and
 solicit comment in the proposal on the
 need for this provision.
------------------------------------------------------------------------

    OSHA received no significant comments in response to the Initial
Regulatory Flexibility Analysis for the proposed rule, but it did
receive two comments on whether elements of the proposed standard were
feasible for small entities. First, the National Association of Home
Builders (NAHB) claimed the proposed rule required controlling
contractors to supervise all entries into permit spaces, and argued
that it was not economically feasible for small home builders to do so
(ID-219.2). In addition, NAHB claimed the information coordination
duties of the proposed rule were not economically feasible for small
home builders.
    OSHA finds these arguments misguided. First, neither the proposal
nor the final rule required controlling employers to supervise the
entries of other employers. Nor did NAHB provide convincing evidence
that the coordination duties placed on contractors were infeasible.
    Among the evidence cited in the published study NAHB used to
support this economic infeasibility conclusion is a profit rate (profit
as a percentage of revenue) of 7.7 percent for NAHB builder members in
2006, which is significantly higher than the more conservative rate
OSHA used in its calculations: 4.53 percent. If the actual profit rate
is higher than OSHA's

estimate, OSHA's impact estimates may overstate the effect of this rule
on revenues and profits in the homebuilding industry. As previously
demonstrated in Chapter 7 of this FEA, these potentially inflated
estimates of revenue and profit impacts for the new single-family
housing-construction industry (NAICS 236115; all affected firms) are
well below the threshold of economic infeasibility at 0.04 percent and
0.99 percent, respectively (0.05 percent and 1.08 percent,
respectively, for small entities).
    As noted in Chapter 6 of this FEA, OSHA assigned typical unit-time
estimates for the multi-employer (information-exchange) provisions of
the final standard and demonstrated there, and in this chapter, that
the costs incurred by home builders would not be excessive or
unreasonable. Despite assertions by NAHB that the demands of
coordinating subcontractors would be economically infeasible as
prescribed by the multi-employer provisions of the rule, there is
evidence (ID-211, Tr. pp. 123-127) to suggest that home builders often
find that they must coordinate and communicate efficiently with
subcontractors across construction sites of varied size and complexity.
Therefore, OSHA believes that, based on the evidence in the record as a
whole, the multi-employer information-exchange requirements of the
final standard would not impose an unreasonable burden on home
builders, and would not threaten the competitive stability of the
industry or otherwise create conditions of economic infeasibility.
    Another commenter asserted that the impact of the proposed rule on
small businesses would be ``staggering'' and would drive some
contractors out of business, arguing that several of the costs of the
proposed standard were disproportionate to its benefits (ID-112). This
commenter suggested that OSHA withdraw the proposed standard or that
compliance with the general industry standard constitute compliance
with the construction standard. OSHA revised the final rule by
harmonizing it with the general industry standard to a substantial
degree. Therefore, the final standard in large part reflects the
general industry standard, tailored to address the unique
characteristics of the construction industry. In revising several
provisions of the final rule to reflect the general industry standard,
OSHA sought to minimize the impact on small entities by minimizing the
costs involved in distinguishing between the two rules and complying
with both standards, as well as the costs involved in retraining
employees on new procedures.
5. A Description, 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
    OSHA completed an analysis of the economic impacts associated with
this final rule, including an analysis of the type and number of small
entities to which it would apply, as described previously in this
section (See Tables IV-19 and IV-20). To determine the number of small
entities potentially affected by this rulemaking, OSHA used the
definitions of small entities developed by the Small Business
Administration (SBA) for each industry.
    For the construction industry generally, SBA defines small
businesses using revenue-based criteria. For most of the affected
construction industries, including those industries that mostly consist
of general contractors, OSHA classified firms with annual revenues of
less than $33.5 million as small businesses. For specialty contractors,
such as structural-steel erection contractors, the Agency considered
firms with annual revenues of less than $14 million to be small
businesses. Based on the definitions of small entities developed by SBA
for each industry, the final rule would potentially affect a total of
490,000 small entities, as shown in Table IV-4. Included in this number
are an estimated 451,000 entities with fewer than 20 employees, as
shown in Table IV-5.
6. A Description of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements of the Rule, Including an Estimate of the
Classes of Small Entities That Will Be Subject to the Requirement, and
the Type of Professional Skills Necessary for Preparation of the Report
or Record
    OSHA is issuing a standard that addresses the work practices
employers must use and other requirements they must follow when
performing construction work in confined spaces. Table IV-14 of this
FEA shows the unit costs for these requirements.
    Employers must keep records associated with work in confined spaces
as specified by the final standard. Records include entry permits and
verification documents. The final standard does not require regular
reporting; however, employers must demonstrate compliance with the
recordkeeping requirements as part of OSHA compliance inspections.
    Other compliance requirements of the final standard include
evaluating and classifying confined spaces, eliminating or isolating
hazards, providing sufficient ventilation, conducting atmospheric
monitoring, providing an attendant, providing respiratory protection,
preventing unauthorized entry, planning and providing rescue
capability, and providing training.
    The preamble to the final standard provides a comprehensive
description of, and further detail regarding, the provisions of the
final rule. The preceding chapters of this FEA provide a description of
the types of entities subject to the new and revised requirements, and
the types of professional skills necessary for compliance with the
requirements.
7. A Description of the Steps the Agency Took To Minimize any
Significant Economic Impact on Small Entities Consistent With the
Stated Objectives of the Applicable Statutes, Including a Statement of
the Factual, Policy, and Legal Reasons for Selecting the Alternative
Adopted in the Final Rule, and Why the Agency Rejected Each One of the
Other Significant Alternatives to the Rule Considered by the Agency
Which Affect the Impact on Small Entities
    OSHA took a number of steps to minimize economic burdens on small
entities. In response to the SERs' suggestion that the Agency harmonize
the construction standard with the general industry standard to the
greatest extent possible, the final standard in large part reflects the
general industry standard, tailored to address the unique
characteristics of the construction industry. In revising several
provisions of the final rule to reflect the general industry standard,
OSHA sought to minimize the impact on small entities by reducing the
need to comply with different confined-space requirements for
construction and general industry, and to train employees on new
procedures. The vast majority of commenters believed that the
classification system in the proposed rule would not contribute to
worker safety, and would result in confusion among employers.
Therefore, OSHA decided to adopt the system reflected in the general
industry standard for classifying confined spaces as permit-required
confined spaces.
    In addition, OSHA did not include a proposed provision in the final
rule that required an employer to summon an entry-rescue service
whenever the employer initiated a non-entry rescue. OSHA also allows
employers to use the alternative ventilation-only procedures under
final Sec.  1926.1203(e) if an employer is able to isolate all physical

hazards in the space, which provides more flexibility to an employer
than the general industry standard. Furthermore, OSHA allows employers
to suspend a permit in certain circumstances, rather than cancelling
and developing a new permit. Each of these options has the potential to
significantly reduce the economic impact on employers, including small
entities. The preamble for Sec. Sec.  1926.1203(e) and 1926.1205(e)
includes an in-depth explanation of the specific steps taken to
minimize employer burden.
    Another less stringent alternative would relieve employers of the
requirements specified in the final standard for information exchange
between host employers, controlling contractors, and entry employers on
worksites; these requirements are absent from the general industry
standard. While OSHA notes that host employers must share this
information under the general industry standard, and believes that this
exchange of information occurs as a matter of usual and customary
practice on general industry and construction worksites alike, the
general industry standard does not explicitly impose information-
sharing requirements on controlling contractors. OSHA estimates that
compliance with the information-exchange requirements of the final rule
will result in compliance costs of about $9.3 million, and that the
less-stringent alternative, reflected in the general industry standard,
would reduce compliance costs by about $5.9 million. However, OSHA
believes that, given the unique characteristics of the construction
industry that include continually changing projects and multiple
employers onsite, the specific information-exchange requirements
contained in the final rule will contribute to an effective exchange of
information about confined-space hazards and will, therefore, increase
worker safety on construction sites. Another, less stringent,
alternative would relieve employers of the requirement in the final
standard to develop a written program for each permit-required entry,
and would instead require that a copy of the standard be made available
at the worksite. OSHA estimates that the requirement for a written
program will result in compliance costs of about $1.3 million. OSHA
believes that having a written program onsite maintains consistency
with the general industry standard and provides site-specific
information about the confined spaces. The proposed rule allowed
employers to simply keep a copy of the standard at the worksite instead
of a written program because the proposed standard provided specific
and detailed requirements for each potential type of confined space.
The final standard is not conducive to replacing a written program with
a copy of the standard because it takes a more generic approach to
confined-space requirements than the proposal; this approach is similar
to the general industry standard, which also requires employers to
maintain a written program on site.
9. Sensitivity Analysis
    In this chapter, OSHA presents the results of two different types
of sensitivity analysis to demonstrate how robust the estimates of net
benefits are to changes in selected cost and benefit parameters. In the
first set of sensitivity tests, OSHA makes a series of isolated changes
to individual cost- and benefit-input parameters to determine their
effects on the Agency's estimates of annualized costs, benefits, and
net benefits. In the second set of tests--a so-called ``break-even
analysis''--OSHA also investigates isolated changes to individual cost-
and benefit-input parameters, but with the objective of determining the
magnitude of the changes needed for annualized costs to equal
annualized benefits. The Agency conducted these calculations for
informational purposes only, and is not relying on these calculations
to justify this final rule.
Effects of Isolated Changes to Specific Input Parameters
    OSHA provides below a sensitivity analysis of several assumptions
underlying the Agency's estimates of the annualized costs and benefits
of the final rule. The calculations underlying the estimation of
compliance costs, benefits, and economic impacts associated with this
rulemaking are generally linear and additive. Accordingly, the changes
in the costs or benefits will generally be proportional to variations
in the relevant input parameters. For example, if the estimated time
for supervisors to evaluate and classify confined spaces increased by
50 percent, the corresponding labor costs would also increase 50
percent.
    OSHA evaluated a series of such changes in input parameters to test
the extent to which the general conclusions of the economic analysis
remained stable. On the whole, OSHA finds these conclusions to be
robust, as even sizeable changes in the values of several input
parameters did not greatly alter the estimates of the costs, benefits,
or net benefits. Furthermore, this final rule produces significant
positive net benefits regardless of the individual revisions to costs,
benefits, or discount rate. Table IV-22 below summarizes the results of
the individual sensitivity tests. In all the sensitivity tests, the
parameters remained unchanged except for the one tested.
    In the first sensitivity test on costs, when OSHA increased by 100
percent the estimated time for supervisors to evaluate and classify
confined spaces, the estimated total costs of compliance increased by
$0.7 million annually, or by 1 percent. In a second sensitivity test,
OSHA increased by 100 percent the time estimated for information
exchange on a multi-employer project. This test led to an increase in
the estimated annualized compliance costs of $9.3 million, or of about
17 percent. In a third sensitivity test, OSHA increased by 100 percent
its estimate of the time needed to issue entry permits and verify the
safety of entries into confined spaces, which resulted in an increase
in the estimated annualized compliance costs of $2.3 million, or of
about 4 percent. Finally, in a fourth sensitivity test, when OSHA
increased by 100 percent the estimate of the time devoted to training
entrants and attendants, the estimated compliance costs rose by $1.5
million, or by about 3 percent.
    In addition, OSHA examined the effect of a change in the discount
rate on annualized costs and benefits. Changing the discount rate from
7 percent, used in the base case, to 3 percent lowered the estimated
costs of the final rule from $60.3 million to $59.2 million per year
(while leaving estimated annual benefits unaffected), thereby
increasing the estimate of net benefits by $1 million.
    OSHA also performed a sensitivity test on an input parameter used
to estimate the benefits of the final rule. In particular, OSHA assumed
that there were 100 injuries for every fatality instead of 150 injuries
per fatality, the value used in the main analysis. As a result, the
estimated benefits of the final rule fell by $15.6 million, or by about
17 percent.
    In conclusion, these sensitivity tests demonstrate that even with
relatively large variations in the input parameters, there are no large
changes in the estimates of compliance costs or benefits.

                                                             Table IV-22--Sensitivity Tests
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Percentage
                                                          Change in     Change in annualized     change in
           Variable             OSHA's Best estimate      variable              costs           annualized      Annualized  costs        Net benefit
                                                                                costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Cost Parameters
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               OSHA's Best Estimate of Total Annualized Costs                                 $60.3 million.......  $33.3 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
s,s,s,s,nSupervisor Time to    Average of 12 minutes  Increase by 100   $0.7 million........               1  $61 million.........  $32.6 million.
 Evaluate and Classify          per confined space.    percent.
 Confined Spaces.
--------------------------------------------------------------------------------------------------------------------------------------------------------
s,s,s,nTime for Information    Per project: 8         Increase by 100   $9.3 million........              17  $69.6 million.......  $24 million.
 Exchange on a Multi-employer   minutes of             percent.
 Project.                       supervisor time for
                                exchange information
                                between host
                                employer and
                                controlling
                                contractor, 20
                                minutes of
                                supervisor time each
                                for the controlling
                                contractor, employee
                                representative, and
                                every entry
                                employer, 5 minutes
                                of supervisor time
                                each for the
                                controlling
                                contractor and 10
                                percent of other
                                (non-entry)
                                employers on the
                                work site, and 10
                                minutes of
                                supervisor time each
                                for the controlling
                                contractor and two
                                other employers on
                                the work site for
                                coordinated entries.
Time to Issue Entry Permits    Per permit issued: 10  Increase by 100   $2.3 million........               4  $62.6 million.......  $31 million.
 and Verify Safety of Entries.  minutes of             percent.
                                supervisor time and
                                5 minutes of
                                clerical time.
                               Per entry not
                                requiring a permit:
                                5 minutes of
                                supervisor time and
                                5 minutes of
                                clerical time.
Employee Training............  Per project: 15        Increase by 100   $1.5 million........               3  $61.8 million.......  $31.8 million.
                                minutes of worker      percent.
                                time and 1.5 minutes
                                each of supervisor
                                and clerical
                                employee time for
                                each entrant, 15
                                minutes of attendant
                                time and 1.5 minutes
                                each of supervisor
                                and clerical
                                employee time for
                                each attendant.
Discount Rate................  7 percent............  Change to 3       -$1 million.........              -2  $59.2 million.......  $34.3 million.
                                                       percent.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Benefit Parameter
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              OSHA's Best Estimate of Total Annualized Benefits                               $93.6 million.......  $33.3 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
s,s,s,s,nNumber of injuries    150..................  100.............  -$15.6 million......             -17  $78 million.........  $17.7 million.
 per fatality.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Break-Even Analysis
    OSHA also performed sensitivity tests on two other parameters used
to estimate the net costs and benefits of the proposed rule. However,
for these tests, the Agency performed a break-even analysis that asked
the extent to which the various cost and benefits inputs would have to
vary for the costs to equal benefits.
    In the first break-even test addressing cost estimates, OSHA
examined how much costs would have to increase for costs to equal
benefits. This point would occur when costs increased by $33.3 million,
or 55 percent.
    In a second break-even test, on benefits, OSHA examined the
reduction needed in the rule's estimated aggregate benefits (in terms
of avoided fatalities and injuries) for the costs to equal the
benefits. The point would occur when OSHA's estimates of the number of
avoided fatalities and injuries fell by 59 percent. The break-even
point would, thus, require reducing the estimated benefits of the final
rule by 2.18 fatalities and 326 injuries prevented annually (relative
to OSHA's estimate of 5.2 fatalities and 780 injuries prevented
annually).

    In summary, according to these two break-even tests, there would
have to be a fairly significant increase in costs or reduction in
benefits for the rule to no longer produce positive net benefits.
Further, OSHA notes that some of the other benefits of the rule are
non-quantifiable, such as those benefits associated with making the
general industry and construction provisions as compatible as possible.
These benefits would increase the overall net benefits of the final
rule.
10. References
ACCSH Confined Spaces Work Group (ACCSH, 1994). ``Work Group Report:
Confined Spaces,'' submitted to the Advisory Committee on
Construction Safety and Health, May 17, 1994. Available at: https://www.osha.gov/doc/reference_documents.html.
Ahluwalia, G. (Ahluwalia, 2003). ``Subcontracting and Channels of
Distribution,'' Housing Economics, May 2003. (Attached to OSHA-2007-
0026-0117.)
Ashford, N. A., 2006. ``Workers' Compensation,'' in Environmental
and Occupational Medicine, Fourth Edition, W.N. Rom and S. Markowitz
(Eds.), Lippincott-Raven Publishers, Philadelphia: pp. 1712-1719.
CONSAD Research Corporation (CONSAD, 2005). ``Rulemaking Support for
the Proposed OSHA Confined Space Standard for Construction,''
prepared for the U.S. Department of Labor, Occupational Safety and
Health Administration, Office of Regulatory Analysis, June 8, 2005.
(OSHA-2007-0026-003.)
Dong, X., et al. (Dong, et al., 2011). ``Lifetime Risk of
Occupational Injuries and Illnesses among Construction Workers,''
American Public Health Association, Washington, DC, October 31,
2011.
Hintermann, B., A. Alberini, and A. Markandya (Hinterman, Alberini,
and Markandya, 2010). ``Estimating the Value of Safety with Labour
Market Data: Are the Results Trustworthy?,'' Applied Economics, 42
(9): pp. 1085-1100, 2010.
IRS (Internal Revenue Service), 2012. Publication 525, ``Taxable and
Nontaxable Income.'' Available at: http://www.irs.gov/uac/Publication-525,-Taxable-and-Nontaxable-Income--1.
IRS (Internal Revenue Service), 2013. Topic 751, ``Social Security
and Medicare Withholding Rates.'' Available at: http://www.irs.gov/taxtopics/tc751.html.
Leigh, J. P., and J. P. Marcin, 2012. ``Workers' Compensation
Benefits and Shifting Costs for Occupational Injury and Illness,''
Journal of Occupational and Environmental Medicine, April, 54(4):
pp. 445-50.
NASI (National Academy of Social Insurance), 2012. ``Workers'
Compensation: Benefits, Coverage, and Costs, 2010,'' August.
Available at http://www.nasi.org/research/2012/report-workers-compensation-benefits-coverage-costs-2010.
NCCI (National Council on Compensation Insurance), 2013. ``ABCs of
Experience Rating.'' Available at https://www.ncci.com/NCCIMain/Education/ExperienceRating/Pages/default.aspx.
Neuhauser, F.W., S.S. Seabury, and J. Mendeloff, 2013. ``The Impact
of Experience Rating on Small Employers: Would Lowering the
Threshold for Experience Rating Improve Safety?,'' Rand Working
Papers WR-955. Newsletter discussion available at: http://www.rand.org/jie/centers/workplace-health-safety/projects/experience-rating.html. Full paper at: http://www.rand.org/pubs/working_papers/WR955.html.
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Undercounts Workplace Injuries and Illnesses,'' Monthly Labor
Review, 131 (8): pp. 20-32, August 2008.
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Construction Draft Standard (SBREFA Panel, 2003). ``Report of the
Small Business Advocacy Review Panel on the Draft OSHA Standard for
Confined Spaces in Construction,'' submitted to Mr. John Henshaw,
Assistant Secretary for Occupational Safety and Health, U.S.
Department of Labor, Occupational Safety and Health Administration,
November 24, 2003. (Exhibit 2-1 in OSHA docket S107A.)
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C. Office of Management and Budget Review Under the Paperwork Reduction
Act of 1995

    The final Confined Spaces in Construction Standard contains
collection of information requirements (paperwork) that are subject to
review by the Office of Management and Budget (OMB) under the Paperwork
Reduction Act of 1995 (PRA-95) (44 U.S.C. 3501 et seq.) In accordance
with 44 U.S.C. 3506(c)(2) of the PRA-95, OSHA solicited public comments
on the Confined Spaces in Construction (29 CFR 1926, subpart AA)
Information Collection Request (ICR) (paperwork burden hour and cost
analysis) for the proposed rule. The Department also submitted this ICR
to OMB for review in accordance with 44 U.S.C. 3507(d) on November 28,
2007. On February 15, 2008, OMB authorized the Department of Labor to
use OMB Control Number 1218-0258 in future paperwork submissions
involving this rulemaking. OMB commented, ``This OMB action is not an
approval to conduct or sponsor an information collection under the
Paperwork Reduction Act of 1995.'' OMB also stated that ``OMB will
review

the associated collection requirements in parallel with the final
regulation prior to approval.''
    OSHA received no public comments on the proposed ICR. However, a
number of comments received in response to the Notice of Proposed
Rulemaking (NPRM), described earlier in this preamble, contained
information relevant to the burden-hour and cost analysis that OSHA
considered when it developed the revised ICR associated with this final
rule.
    In accordance with 44 U.S.C. 3507 of the PRA-95, OSHA requested OMB
approval of the collection of information requirement described below.
A copy of the ICR is available at http://www.reginfo.gov. OMB is
preapproving the collection of information requirements under OMB
Control Number 1218-0258 and they will take effect on the same date as
other parts of this rule.
    The Department of Labor notes that, under the PRA-95, a Federal
agency cannot conduct or sponsor a collection of information unless OMB
approves it and the collection of information displays a currently
valid OMB control number. Also, notwithstanding any other provision of
law, no employer shall be subject to penalty for failing to comply with
a collection of information if the collection of information does not
display a currently valid OMB control number.
    The collection of information requirements in this final rule
impose duties on employers to communicate, produce and maintain
records, and take other measures to protect employees from confined-
space hazards in construction. These provisions are necessary to
protect the health and safety of employees who are engaged in
construction work in confined spaces. Accordingly, each employer
engaged in construction who has employees who enter a permit-required
confined space (PRCS) must have, as applicable, the following
information posted in accordance with the standard or on file and
available at the job site: Danger signs and other means of notification
of PRCSs; a written PRCS program; entry permits that document