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October 22, 2001

The Honorable Kirk K. Van Tine
General Counsel
Department of Transportation
400 Seventh Street S.W.
Washington, D.C. 20590

Dear Mr. Van Tine:

     On October 19, 2001, the Office of Management and Budget (OMB) completed review of a Federal Aviation Administration (FAA) draft proposed rule, titled "Traffic Alert and Collision Avoidance Systems" (TCAS) under Executive Order 12866. The rule would require Part 121 and 125 operators, primarily operators of cargo airplanes, to install and use an advanced collision avoidance system by November 2003. The expected benefit of the rule is a reduction in the risk of a midair collision (MAC) involving at least one airplane primarily used to transport cargo.

     We recognize the progress that has been made over more than a decade in the utilization of such equipment in eliminating mid-air collisions. Whereas Congress had initially exempted cargo aircraft from mandatory use of such equipment, legislation enacted in April 2000 directed the FAA to require all cargo planes of more than 33,000 pounds be equipped with advanced collision avoidance equipment by December 30, 2002. FAA has provided 60 days for comment on the rule, which would give approximately one year for final action consistent with the statutory requirements.

     During our review, our primary concern has been to encourage FAA to develop a sound and more transparent analysis of the benefits of the proposal. FAA has, in our view, accomplished much in developing reasonable measures of risks of midair collisions and responded to our suggestion that the regulatory analysis also quantify or "monetize" benefits based on these risk measures over the 20 year period of analysis. The FAA's regulatory analysis shows that the benefits may be small in comparison to the costs (approximately $176 million in present value) that FAA expects will be incurred.

     In the regulatory analysis, for example, FAA shows (under one set of assumptions) that there is a risk of approximately .5 of a midair collision over the 20 year period. When the risks are apportioned among three representative types of accidents (a MAC between two cargo planes for example), FAA derives a measure of approximately $26 million (undiscounted) in quantifiable benefits. When compared with most FAA regulations that we have evaluated (where FAA has attempted to quantify benefits in a comparable fashion), the costs appear to be disproportionate to the benefits.

     We recognize that FAA has limited alternatives available under the statute. In light of recent events, however, we encourage FAA to even more carefully assess the impacts on smaller entities and look at the collision avoidance and other safety rules in terms of the cumulative impact of these rules in relation to the financial health of the industry. In the present circumstances, it is reasonable to expect that that most rules pass a reasonable cost-benefit test. If not, the rules may warrant serious reexamination.

     We also anticipate, based on the rulemaking record, that the Department and FAA will share with the Congress any information made available by the public that bears on the reasonableness of implementing the statute. In addition, we anticipate working with your staff to further refine the regulatory evaluation at the final rule stage and to working affirmatively and effectively with you to implement this important effort.



John D. Graham
Office of Information and Regulatory Affairs