Executive Summary

With the anticipated adoption of the revised regulations implementing Titles II and III of the Americans with Disabilities Act (ADA), including revised ADA Standards for Accessible Design (proposed standards), the Department of Justice (the Department) has commissioned this initial Regulatory Impact Analysis (RIA or regulatory analysis). The proposed standards are based upon the ADA/ABA Accessibility Guidelines (2004 ADAAG) published by the Architectural and Transportation Barriers Compliance Board (Access Board) on July 23, 2004. The Access Board conducted an assessment of the potential cost of its revised guidelines but did not assess benefits. This analysis develops and executes a method for estimating benefits and compares them with an update of the Access Board's work on costs.

This initial RIA is attached to the Notice of Proposed Rulemaking (NPRM). The NPRM includes additional regulatory proposals with benefit-cost implications. A final regulatory analysis will be published with a final rule adopting revised ADA Standards. The initial step in this process was the publication in the Federal Register of a proposed framework for the regulatory analysis, presented as Appendix A to the Advance Notice of Proposed Rulemaking (ANPRM), which was published by the Department on September 30, 2004.^[1]

Dimensions of the Regulatory Analysis

Incremental Effects

The economic costs and benefits of the revised regulations are estimated for existing and new facilities. Costs and benefits are measured on an incremental basis. That is, the economic impact of the proposed standard are represented by the change in benefits as compared to previously enacted access regulations. The primary baseline of the analysis is the 1991 ADA Standards. However, some States and smaller jurisdictions have enacted more current standards (such as International Building Code (IBC) 2000, IBC 2003, and IBC 2006) and these represent alternative baselines.

Type of Construction

The 2004 ADAAG imposes costs for different types of construction: new construction, alterations and architectural barrier removal. New construction and alterations apply to new construction of buildings and major renovations at existing sites, respectively. Such projects are thought to involve design opportunities for incorporating accessibility features called for in the proposed standards. Alterations projects take place on existing buildings but are expected to be undertaken on a regular schedule. By contrast, barrier removal projects are assumed to be smaller in scale and undertaken specifically to comply with the proposed standards.

Facilities Subject to Proposed Requirements

The proposed standards will apply to new construction and alterations for both Title II and Title III entities. Types of facilities include single purpose facilities, such as hotels and classes of facilities, such as retail stores (e.g. clothing, etc.) or service establishments (e.g., banks, dry cleaners, etc.). In some cases, facility groupings are defined based on the size of the facility (e.g., auditoriums and convention centers). Other groupings are based on economic characteristics, especially the responsiveness of average customers to changes in prices for goods and services at facilities. For example, gas stations and restaurants are in different groups because consumers would have less price responsiveness in buying gasoline than going to a restaurant due to the general necessity for many people to drive a car, while most people can cook at home. Finally, it must be noted that some facilities, such as exercise equipment and pools, may be elements in larger facilities, such as hotels. Benefits from using such elements are assumed to be conditional on facility use.

The Department is currently considering providing Safe Harbor (SH) for existing private (Title III) facilities already compliant with 1991 Standards. Under Safe Harbor, these facilities would not need to undergo barrier removal for revised requirements. Barrier Removal is not relevant for public (Title II) facilities. Instead, separate program accessibility or "program access" requirements ensure that programs or services offered by a public entity at existing facilities are, when viewed in their entirety, accessible to and usable by persons with disabilities. Program accessibility requirements, however, do not require that every existing facility be made accessible so long as the overall program is itself accessible. This analysis assumes that Title II entities will not need to make changes to existing facilities except in the limited context of public playgrounds, swimming pools, and saunas.

Description of Requirements

Over one hundred substantive changes to the 1991 Standards and ADA regulations are included in this analysis. These changes include two kinds of requirements -- supplemental (or "new") requirements and revised requirements. Supplemental requirements have no counterpart in the 1991 Standards and the Department is proposing to adopt them into the ADA Standards for the first time. They are comprised of provisions from the Board's supplemental guidelines relating to State and local government facilities (1998), play areas (2000), and recreation facilities (2002).[2] These requirements apply to elements and spaces that are typically found only in certain facility types, such as courthouses, jails, prisons and a variety of recreational facilities.[3] In some cases, elements subject to new requirements (e.g. swimming pools) are located in facilities that have been subject to the 1991 Standards.

Revised requirements relate to elements or spaces that are currently either subject to a specific scoping or technical requirement or are specifically exempted in the 1991 Standards. They generally apply to elements and spaces that are found in a wide range of commonly used facility types, such as restaurants, retail stores, schools, hospitals, and office buildings. Some revised requirements apply to common building elements (such as windows) and commonly used facility types (such as residential dwelling units) that have no counterpart in the 1991 Standards, but have long been subject to specific accessibility requirements.[4] All of the revised requirements were adopted by the Board in 2004, and all were described in the Board's final regulatory assessment for the 2004 ADAAG.

Revised requirements fall into two categories, both of which are defined relative to the 1991 Standards: "more stringent" and "less stringent" requirements. Generally speaking, more stringent requirements increase accessibility compared to current requirements, potentially conferring a greater benefit to the general public and imposing a greater cost upon facilities. Less stringent requirements relax standards relative to the current requirement, potentially causing a loss of benefits from access but reduced costs for facilities.

In addition to supplemental and revised requirements, the Department is making several regulatory proposals. The regulatory proposals can be grouped into five different categories: 1) those modifying 2004 ADAAG requirements for barrier removal in an effort to decrease the burden on businesses, 2) additional requirements similar to the 2004 ADAAG for certain equipment or facilities, 3) new proposals regarding effective communications, 4) codifications of existing law, and 5) proposals expected to have no significant cost impact. Regulatory proposals in the first three categories have been incorporated into the benefit-cost model. Codifications of existing law and the proposals that are expected to have no cost impact have not been analyzed.

Analytical Scenarios

To assess the implications of the Safe Harbor proposal for existing facilities that are compliant with the 1991 Standards, this analysis provides two sets of results, one with and one without SH Under SH, barrier removal is not required and changes to facilities proceed on the alterations schedule. Under the safe harbor, the Department would deem compliance with the scoping and technical requirements in the 1991 Standards to constitute compliance with the ADA for purposes of meeting barrier removal obligations. Only elements in a covered facility that are in compliance with the 1991 Standards would be eligible for the SH.

To determine the proportion of existing elements that would undergo barrier removal or alterations, the analysis utilized the following factors:

• The number of buildings constructed before and after 1993. The proportion of building constructed before 1993 is represented by (c). The buildings constructed after 1993 would be "new" compared to the 1991 Standards and they are assumed to be compliant with the 1991 standards.
• Elements constructed before 1993 are then sub-divided into whether they have or have not been altered between 1992 and the projected date of implementation of the new standards. The proportion of facilities altered after 1992 is represented by the proportion (b).
• Elements are either subject to more stringent or less stringent requirements. Elements subject to less stringent requirement are not required to undergo barrier removal. Elements subject to more stringent requirement are classified by whether barrier removal is or is not readily achievable. If barrier removal is not readily achievable, the element will become compliant under its alterations schedule. The proportion of elements assumed to be readily achievable is (a).

These conditions imply different cost and construction processes depending on whether the requirement is less or more stringent and whether Safe Harbor is adopted. Data is used to determine (b) and (c); (a) is evaluated under different analytical scenarios.

The 2004 ADAAG was developed with the intent of harmonizing the revised requirements with the International Building Code (IBC). IBC baselines are applied where they are more stringent than the 1991 Standards and equivalent to the proposed standards. Separate analyses of these baselines are conducted as scenarios.

Methodology Overview

Approach to Benefits

Benefit-cost analysis principles are applied to help inform whether the incremental benefits of the proposed standards are justified in economic terms. The benefit consumers derive from changes in facility accessibility can be equated to the changes in the quantity and quality of time spent consuming goods and services at those facilities. Benefits are primarily represented by the creation of economic value from these changes in quantity and quality.

Benefits -- the economic value people derive from accessibility -- can be divided into three categories:

• Use value: the value that people with disabilities derive from the use of accessible facilities;
• Option value: the value that people both with and without disabilities derive from the opportunity to obtain the benefit of accessible facilities; and,
• Existence value: the value that people both with and without disabilities derive from the guarantees of equal protection and nondiscrimination that are accorded through the provision of accessible facilities.

The "generalized use and access cost" of a facility visit is the basis for determining use value. The actual price paid for goods and services represents only part of this "generalized cost." Users also incur costs as a manifestation of the time spent traveling to a facility and the time spent within a facility accessing the spaces or features which constitute the primary purpose of the visit. For example, people go to movie theatres to watch a film. Likewise, one goes to a restaurant to eat or to a hotel (as a guest) to sleep. In such cases, the access time is the time that a visitor spends within a facility to move from say, the parking lot, to her or his seat, table, or bed. In contrast, use time refers to the time spent watching the movie, eating, or sleeping.

This distinction is important because changes in accessibility due to the proposed requirements have a direct impact on access time and the quality of the experience for users while visiting a facility. Users derive value from a visit from three distinct sources:

(a) Changes in access time;
(b) Enhanced quality of facility access; and
(c) Enhanced quality of facility use.

Each of these components of value is monetized with an appropriate "value of time," namely, an expression of a user's willingness to pay for changes at the facility. With regard to the first component, minutes saved in accessing a fishing pier, for example, are monetized by a value of time that depends on the reason for using a facility. That is, facilities that principally involve leisure activities have a lower value than ones involving work, including housework.

The components (b) and (c) identify benefits that are derived from a change in the experience of accessing and using a facility. For example, enhancing the quality of facility access means changing the experience of moving through doorways, getting a drink of water, or getting into a pool. With the proposed requirements, these common everyday activities will be easier for enable persons with disabilities, and may enable them to feel more like common people, not victims of discrimination. In particular, the supplemental, or "new" requirements, are designed to ensure independent access where independent access had not existed before (play areas, recreational facilities, specified courtroom elements, and detention facilities). Some revised requirements may have significant impact, as well. For example, the seemingly slight change in side reach requirements might well mean the difference between inaccessibility and independence for someone who could for the first time independently operate the lights in their rooms at night. Requirements that cause an incremental change in access time (addressed by component b) enhance value during the entire duration of access time change. Use time (addressed by component c) is enriched by requirements that fundamentally change the experience of using the facility. For example, requirements that enable users to fish off a pier, use an assisted listening device to better enjoy a lecture or exhibit, or place their wheelchair in a space that does not overlap a circulation path experience increased value throughout the time that they are participating in those activities.

Approach to Costs

The incremental cost of compliance for facilities includes initial and recurring costs. Initial costs refer to the capital costs incurred for design and construction at the facility to achieve compliance. Recurring costs include operations and maintenance (O&M) and the cost of lost productive space. In addition, to maintain compliance with some requirements, facilities will need to incur costs to regularly replace equipment. More stringent requirements involve increased capital costs whereas less stringent requirements offer facilities capital cost savings. Recurring costs follow the same cost structure as capital costs.

Lifecycle Analysis

Annual costs and benefits are computed over a long-run planning horizon and summarized by a lifecycle cost analysis. The Department expects that a new rule will be adopted in 10-15 years given the current congressional mandate. Accordingly, it is assumed that 15 years after this rule passes, approximately 2024, construction costs at new buildings and associated accessibility benefits will not be applied to this rule. It is also assumed that existing buildings undergo barrier removal in equal proportions each year as construction costs become potentially readily achievable.

Annual costs and benefits are assumed to extend for 40 years for each building that complies under the proposed standards. The rationale of 40 years is based on the premise that almost all buildings will have been substantially altered by then. The lifecycle analysis also assumes that (a) it takes several years before benefits at a facility reach their full potential; (b) some elements require replacement over and above maintenance costs; and (c) remaining value in the compliant element is captured as a salvage value. Real discount rates of 3.0% and 7.0% are applied to all future costs and benefits as a representation of how public and private sectors view investments.

Incorporating Uncertainty

Uncertainty in the estimation of costs and benefits is addressed through risk analysis. Risk analysis principally involves quantifying the uncertainties in factors for estimating cost and benefit. Quantification involves defining probability distributions of possible values for each factor. Data used to quantify uncertainty comes in part from research and discussions with experts. The distributions of cost and benefit factors are inputs to the model, which is then solved using simulation. The simulation process varies all factors simultaneously so that interrelationships between variables are more realistically handled and the impacts of factors on final results are considered jointly. The results include all possible estimates according to their probability of occurrence. In addition, the analysis identifies which parameters are the key influences on results. Risk analysis addresses and in fact, encompasses the approach to sensitivity analysis called for in OMB guidelines.

Modeling Benefits

The model developed to estimate benefits follows directly from the methodology previously discussed. In fact, equating changes in benefit ("utility") to changes in the quantity and quality of time is convenient because it can draw from extensive literature on the value of time in various activities.

Due largely to data constraints, only use value has been quantified in this analysis. As such, the analysis is conservative -- it likely understates total value. Use value is derived from the anticipated reactions of people with disabilities to changes in access that are tangible and readily quantifiable. User data is generally obtainable through market research and expert opinion. Option and existence values are described instead in qualitative terms.

User benefits are estimated for facility visitors who use elements that are affected by the proposed requirements.[5] User benefits associated with a direct change in access time are monetized using standard assumptions about the value of time and the type of use. Facility users potentially gain or lose benefits depending on the type of change in access within a facility. Positive and negative benefits are summed for all annual visits to a facility to estimate total net annual benefits. Estimating benefits from changes in access time assumes that all facilities have some level of access.[6] In addition, it is assumed that existing facility users can directly assess the impact of the requirement as a change in access time. Such data consists of minutes saved per use of a facility element.

"Premiums" on the value of time are applied to capture changes in the quality of the user's experience, and are derived from studies that have documented the increased willingness to pay for improved access and use of transit facilities. For example, economic analysis and market research have shown that people with disabilities would pay a premium to use accessible transit systems if they were made available. In addition, transit riders would also value sitting more than standing without regard to any change in the time it takes to use the service. Data used to assign values to the user experience of changes in access time and use of facilities has been drawn from these sources.

A diagram of the economic model is shown in Figure ES-1. In the base case (e.g. assuming a baseline of the 1991 Standards), the generalized use and access cost is equal to P₀. A change in access time at the facility creates P₁, the generalized use and access cost of the new or revised standard. This change in generalized use and access cost stimulates additional facility visits, shown by an increase from Q₀ to Q₁. Total annual user benefits are represented by the shaded area [P₀ a b P₁.]

Figure ES-1: Economic Framework for Estimating Benefits from Changes in Access Time

Modeling Costs

Cost estimation is performed for a number of cost categories of buildings and requirements. The approach for each can be summarized in a simplified framework. Overall, the incremental cost of compliance for elements includes initial and recurring costs. Initial costs refer to the capital costs incurred for design and construction at the facility to achieve compliance. Recurring costs include operations and maintenance (O&M) and the cost of any lost productive space. Lost space occurs when compliance requires additional maneuvering room be set aside in an accessible space. In addition, to maintain compliance with some requirements, facilities will need to incur costs to regularly replace equipment. More stringent requirements involve increased capital costs whereas less stringent requirements offer facilities capital cost savings. Recurring costs follow the same cost structure as capital costs.

The framework for estimating costs is developed for three types of construction (new construction, alterations and barrier removal) and three categories of cost (capital construction costs; O&M; and lost productive space). Applied to the types of construction, the framework only differs in parameter values. The cost framework can be simply defined as:

Cost_ijkl = [# of facilities_ij]•[# of elements per facility_ik]•[cost per element_jkl]

Where the subscripts are defined as follows:

i denotes the facility;

j denotes the type of construction;

k denotes the requirement; and

l denotes the category of cost.

This framework applies to more and less stringent requirements by altering the sign (positive or negative) on the cost per element, as determined by the type of requirement. All unit costs are incremental to a baseline scenario. The number of elements per facility does not change by type of construction.

Capital Construction Costs

Construction costs per element by type of construction (new construction, alterations and barrier removal) differ on basic levels. Construction costs for new construction and alterations are estimated as the difference between the cost of complying under the 1991 standard and compliance with the 2004 ADAAG. This implies that in most cases, construction costs attributable to new construction or alterations would be subtracted from the costs of both standards, and thus, not be measured. New construction and alterations projects represent planned activities at a site, so the proposed standard represents only a difference in design specifications for projects that were being undertaken anyway. By contrast, compliance with the barrier removal requirement implies that whatever level of access is currently provided at a facility, if barrier removal is required, the full cost of retrofitting must be incurred.

Operations and Maintenance Costs

Incremental costs of compliance are not complete without including incremental annual O&M costs. O&M is commonly expressed as a percentage of the unit costs. Requirements can be grouped by the level of use and/or equipment involved in O&M. These O&M categories include (at an increasing level of cost) standard maintenance, high-use maintenance, extraordinary wear and tear, and equipment maintenance. O&M costs are applied for all types of construction. O&M costs start the year after construction has concluded.

Loss of Productive Space

Some requirements also impact (reduce or increase) the space available for productive uses at a facility. The cost to a facility from lost productive space is included in the analysis because it reflects an annual loss in productivity. This cost is assumed to be larger for barrier removal and alterations than for new construction because existing buildings cannot expand the shell and design options may be limited. Loss of productive space is estimated only for the impact of permanent losses of space that directly affect specific facilities' revenues. It was assumed that barrier removal would be able to be scheduled and/or managed in such a way as to make any losses due to the temporary unavailability of productive space negligible relative to total impact on revenues.

The cost of lost productive space is the amount of lost space (in terms of square feet) multiplied by the value of building space (per square foot). Data on lost space has been developed by the Department's architects and independent certified professional cost estimators using standard industry practices. The value of building space has been derived from facility-specific data. Similar to O&M, these costs are applied each year.

Replacement Costs

Some elements added to a building strictly to meet compliance are likely to require replacement during the 40 year period. The cost of replacing the elements adds to the total costs to facilities. For those elements likely to need replacement, the replacement cost is assumed to be equal to the full cost of construction under alterations, except in the case of playgrounds for which unit costs estimates for new construction were used. Only the incremental cost of replacement due to compliance is included.

Results

The primary determination of whether the benefits of the proposed standards exceed costs is the discounted net present value (NPV). A positive net present value increases social resources and is generally preferred. An NPV is computed by summing monetary values to benefits and costs, discounting future benefits and costs using an appropriate discount rate, and subtracting the sum total of discounted costs from the sum total of discounted benefits. All quantified costs and benefits to facilities and the general public are included in this result.

Table ES-1 and Figure ES-2 present total NPV for a baseline scenario: Safe Harbor (SH), barrier removal is readily achievable for 50% of elements (RA50) and the baseline is the 1991 Standards (B1991). Results for both the 3% and 7% discount rates are shown. Each cost curve is a joint distribution of all uncertainties in the model based on a simulation of over 1,000 Monte Carlo simulations.

Under the assumptions used to construct this analysis, these results indicate that the proposed regulations have a net positive public benefit -- the benefits exceed the costs. For the uncertainties modeled, the risk analysis indicates zero probability that costs would exceed benefits. The latter is seen from the numbers on the chart represent the 10^th, 50^th and 90^th percentiles of the distribution. The range between the 10^th and 90^th percentiles represents an 80% confidence interval. This interval can be interpreted as having 80% confidence that the true NPV would be within this range. The most likely NPV is the median (50^th) percentile (in the middle of this range).

The 7% discount rate indicates that the 80% confidence interval ranges from $4.7 B to $11.0 B, with a median of $7.6 B. At 3%, this range ($23.2 to $40.6 B) is much wider and more skewed towards positive NPVs. These results indicate a probability of near zero that costs would exceed benefits. Table ES-1 indicates the expected total benefits and costs from users and facilities, respectively. Differences between the Total expected NPV in Table ES-1 ($7.5 B at a 7% discount rate) and the median NPV in Figure ES-2 ($7.6 B) are caused by the skewness of the distribution of NPVs.

Table ES-1: Total Net Present Value in Baseline Scenario at Expected Value (billions $)
(Under Safe Harbor, 50% Readily Achievable Barrier Removal, 1991 Standards for baseline)

Discount Rate	Expected NPV	Total Expected PV(Benefits)	Total Expected PV(Costs)
3%	$31.1	$53.9	-$22.8
7%	$7.5	$19.5	-$11.9

 

Figure ES-2: Total NPV - Baseline Scenario: SH/RA50/B1991; 3% and 7% Discount Rates

The following Figures (ES-3, 4, and 5) show the NPV results for other scenarios. Figure ES-3 compares SH and NSH policies. The difference in NPV is significant. Without SH, benefits are most likely to exceed costs by about $3.3 B whereas with SH, benefits exceed costs by over $7.6 B. Part of the explanation for this discrepancy is that because of NSH, barrier removal costs are applied to a number of more stringent requirements and the level of benefits for many elements' barrier removal are lower than costs. The larger costs are then magnified because of the larger numbers of facilities that would be required to undertake barrier removal before the next rule-making occurs. It is also worth noting that the wider range in NPV for NSH compared to SH reflects a proportionally larger nominal range of costs for barrier removal compared to alterations construction scenarios.

Figure ES-3: NPV Comparison -- Safe Harbor Policy: SH/RA50/ B1991, NSH/RA50/ B1991

Figure ES-4 provides an assessment of how NPV changes with different RA assumptions. The chart shows RA at the 0, 50, and 100% levels. There is little variation among the three RA scenarios: One of the reasons that the results of the RA scenarios do not vary significantly under safe harbor is that there are three offsetting effects working simultaneously. The first effect that pushes costs up as the RA% increases is a higher barrier removal cost due to a higher number of elements subject to new requirements undergoing barrier removal. The second effect reduces costs because a higher RA% implies fewer alterations on elements subject to new requirements. Finally, the third effect increases the benefits as the RA% increases, because the rate of completion of elements related to new requirements is higher, and so are the benefits derived from them (benefits can be shown to increase at a decreasing rate). The combination of these three effects keeps the RA curves close to one another.

Figure ES-4: NPV Comparison -- Alternate Readily Achievable %: SH/ RA0, RA50, RA100/ B1991

Figure ES-5 represents differences in NPV for different baselines, including the various IBC editions. These probability curves indicate that the effect of changing the set of requirements that apply. The results indicate that B2000 (IBC 2000) has the highest NPV and B2006 (IBC 2006) has the lowest and B1991 is less than B2003 (IBC 2003). These results are due to changes in the make-up of the set of requirements that are included in each alternative baseline.

Figure ES-5: NPV Comparison -- Alternate Baselines: SH/RA100/ B1991, B2000, B2003, B2006

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[1]Federal Register, Vol. 69, No. 189: 58768-58786.

[2] New requirements include standards that are not currently being enforced. Among the requirements that are currently being enforced, and therefore do not represent a change and are not included in the assessment, are many of the otherwise "new" requirements applicable to State and local government judicial, detention and correctional facilities

[3] The With respect to elements that are not subject to specific scoping or technical standards in the 1991 Standards, the Department's current Technical Assistance Manual for Title III provides that "a reasonable number, but at least one" element should be accessible and on an accessible route. Many of the "new" requirements applicable to exercise facilities provide essentially the same thing -- that 5% or at least one of each element (exercise machines, lockers, saunas, etc.) be accessible and be on an accessible route. If the "reasonable number but at least one" requirement were to be used, such requirements would not be new, and would in some cases only represent a change for facilities that have more than 20 of a particular element. For purposes of this analysis, however, requirements relating to exercise equipment are modeled as new or "supplemental" requirements.

[4] Such standards include UFAS, another Federal accessibility standard (for example, under the Fair Housing Act or Section 504 of the Rehabilitation Act) or the IBC.

[5] Employees with disabilities are also beneficiaries of requirements that increase access at facilities. However, since limited employment data is available by facility type, most of the assessment of benefits for employees is discussed in the section on unquantified benefits. See Section 5.4.

[6] Initial assumptions on the impact on use of recreational facilities due to new requirements are that they would permit new independent access where it is currently not possible under the current standard. Evidence from the expert panel suggests that some people with disabilities use such facilities. Their comments however also indicate that the new requirements would generate increased use -- potentially dramatic increases in use -- because of latent demand. These features of demand are captured in the development of the demand curve.

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last updated December 9, 2010