What Is Your Company’s Buried Expense From Regulations?

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EPA Regulations Cost 4X As Much Per Employee For Small Contractors As For Large Ones

The ripple effect of unnecessary regulation is a perennial cause of concern for ACCA. We realize regulations are particularly burdensome to our members, many of whom lack the resources and personnel to keep up. Despite a change in political leadership in Washington, D.C. the regulatory burden on the HVACR industry continues to grow from years of standards and rulemakings, which are still being implemented. Congress and the administration must do more to curtail the ripple effect of costly regulations, particularly those that disproportionately impact small businesses.

Every one of us is probably a criminal, having violated some obscure regulation on the books of federal, state, and local municipalities at some point in our life. These regulations, once put in place, are rarely reviewed, and even more rarely removed when outdated. More often than not they expanded before any analysis is completed on the impact. In 2015, the pages of the Federal Register grew by a record 81,611 pages covering 3,378 final rules and regulations, nearly 600 of which directly impact small businesses. Most of these costs are “buried,” not showing up directly in your company’s books as a regulatory expense, but buried in the cost of new and misallocated labor, supplies purchased, legal costs, outside professional services, paperwork, and the like. For some contractors, these “buried” costs are estimated to be as high as nine times the observed cost of compliance.

The negative impact of these regulatory burdens varies significantly by a contractor’s size. Regulations do not have the same economic impact on a large contractor as a small contractor, the latter being less well-staffed and resourced to deal with the regulatory avalanche. It is estimated that compliance with EPA regulations cost four times as much per employee for small contractor as for large ones. Many employee hours are spent managing this process. None of this shows up in any contractor’s “cost of compliance,” including lost profits and jobs in the never-ending battle to become the successful bidder on job.

In a 2016 ACCA survey, the need for reduced regulations surfaced as a very serious concern for our members. The extra paperwork is the single greatest compliance problem, this was followed by the complexity of compliance, and understanding what is required. I think all of you would agree time delays caused by regulations is the egregious of all the negative effects.

We all know ignorance of the law is no excuse, and unfortunately neither is not being able to understand what a regulation means. This problem is compounded by each agency of our federal government operating as if it is the only one issuing regulations. Unfortunately, most contractors are still learning about regulations from interaction with regulators, inspectors, or notices. Trade publications like IE3 and ACCA’s other communication tools, like the weekly Insider and Standing Guard, as well as ACCA’s social media (If you and your company are not following ACCA on Facebook I strongly encourage it) are a major source of HVACR specific information on regulations, but the flood of new regulations that could impact your businesses makes it impossible for contractors to know if they are impacted, short of reading and understanding 80,000 pages of the Federal Register yearly.

Complying with the regulations or paying fines when caught up in the sporadic enforcement of regulations is very expensive relative to the resources of the contractor. Multiply these numbers by 650,000 HVACR contractors across the country, with the majority of those businesses having far fewer than 20 employees and the costs are staggering. That is why ACCA is based in Washington, D.C. and is on Capitol Hill each day and working across the Trump Administration fighting for you and your bottom-line, and shinning a spotlight on the need for significant regulatory reform.

For too long, the regulations you deal with have consumed immense amounts of your financial capital that could otherwise be productively deployed. They also drain millions of hours of the most valuable asset a contractor has, the owners’ time, diverting them from their primary function of providing quality service to your customers and jobs to the economy.

ACCA is committed to ensuring our government seriously addresses the question of whether the value of these regulations exceeds the costs imposed and the value of missed opportunities. As it stands, the presumption by far too many regulators is that by definition their regulatory activities are beneficial. The price we pay for this presumption is slower economic growth and job creation, all while impacting you, your employees, and the consumer.

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Posted In: ACCA Now, Government