AB Baseline measurements

Laws and regulations are necessary, but regulating a society and an economy imposes costs on businesses and citizens. It is understandable that businesses and citizens complain about red tape and the various obligations they have to comply with. An administrative burden (AB) baseline measurement clearly provides policy-makers what these complaints are about, by quantifying total costs imposed and identifying reduction measures.

Administrative burden (AB)

AB are the costs for businesses and citizens which result from complying with Information Obligations (IO) laid down in government regulations. IO´s are the various obligations to provide information and data to the public sector or to third parties. Examples of IO’s are obtaining licences, filling out tax declarations forms, reporting about environmental parameters, providing statistical data, etc.

Complying with these obligations means that administrative activities have to be carried out, such as collecting, processing, registering, archiving and delivering information. These administrative activities have to be carried out and cost time and money. The sum of these costs is the AB and measured in cost per year.

Measuring for further improvement

In a baseline measurement the AB are quantified with the Standard Cost Model (SCM). The SCM is a systematic approach to identify information obligations, quantify all necessary administrative activities and identify reduction measures. The basic principles of the SCM are shown in the picture below:

Regulatory burden

 

We developed the SCM originally for the Dutch government so that they could carry out a baseline measurement of the total AB in the Netherlands. Nowadays the SCM is used broadly as a systematic approach to quantify and reduce regulatory burden (see also Reducing burden from regulations with the SCM and Reducing burden for business sectors with the CAR Methodology).

Working together in one team

Our consultants have assisted a variety of governments in conducting AB baseline measurements. Our approach is to work closely with your team. Together we conduct the baseline measurement and initiate an AB reduction program. In this collaboration we provide the tools, methodologies, knowledge and experience; you provide the resources and local legal knowledge. This ensures knowledge transfer and guarantees that tangible burden reductions are achieved.

Regulatory Impact Assessment (RIA)

A Regulatory Impact Assessment (RIA) provides insights in the impact of newly proposed (or changing) legislation on citizens and businesses. These impacts can be positive or negative. Examples are the need for new investments, significant market effects/impacts, or other socio-economic and societal effects. An understanding of the effects of proposed legislation is crucial if you want to improve legislation and government processes.

A practical approach

We have conducted many Regulatory Impact Assessments for a large number of clients. In the course of these assessments we put a variety of different policy-analysis methodologies into practice. With our pragmatic approach, we define which methodology is most suited for the RIA on an individual basis. This added layer of reflection helps prevent the RIA becoming a goal itself. By using the latest academically proven methodologies and techniques we ensure that the results are transparent, reproducible and directly lead to better regulation

Stakeholder consultation

Changes in legislation and regulations not only affect the primary target, but often also affect other parties down a chain. For this reason, we involve all relevant stakeholders when determining the effects of (changes in) policy and regulations. By conducting interviews, workshops and extensive stakeholder consultation, we determine, describe and analyse the effects of regulatory changes. By deploying established measurement methodologies and engaging in continuous consultation with stakeholders, we can guarantee that the results of the RIA are recognised by all parties as valid. This creates a broad base of support for the project findings and provides a solid base for decision making.

The CAR Methodology – A business sector approach

To determine the extent to which all regulatory costs impact on a business’ profit, we developed the CAR methodology. This methodology provides us with a clear insight into the impact of legislation on profitability and viability in a specific business sector. Sectors, in this way, can then bring specific regulatory pressures to the attention of government authorities.

The added value of the CAR methodology

The CAR methodology looks at the actual costs listed in a company’s accounting records. Regulatory burdens are traced back to the laws and regulations from which they originate. The result is a complete overview of all the (unnecessary) regulatory burdens imposed on a specific businesses sector and their impact on the viability of businesses.

The CAR methodology is focused on the impact of laws and regulations on a specific business sector. It measures the total regulatory burden on a business, and identified unnecessities. The CAR methodology is evidence-based and examines traceable business costs that are shown as cost centres in business accounts.

In addition, the CAR methodology identifies unnecessary burdens that are not directly quantifiable, such as impediments or bottlenecks encountered by businesses that want to expand, innovate or further develop their business. The removal of unnecessary burdens can make a noticeable contribution to the viability of businesses and hence to economic growth and employment – often not just for the sector in question, but for other sectors too.

The CAR methodology in practice

The CAR methodology has been used successfully at both national and international level in:

  • The chemical sector (designated as a Top Sector by the Dutch government);
  • The mental healthcare sector;
  • The bakery sector;
  • The apothecary sector;
  • The catering and hospitality sector.

The results of the CAR methodology provide businesses with hard data which they can then use to engage in a dialogue with public authorities. The experiences gained in these projects have been incorporated in a CAR manual made available by the Dutch Ministry of Economic Affairs.

The Standard Cost Model (SCM) – A national approach

Businesses and citizens spend time and money annually in order to comply with (information) obligations laid down in laws and regulations. Sira Consulting can provide you with the tools and/or the capacity needed to measure these regulatory burdens on a national level and to identify reduction measures. By implementing these reduction measures it is possible to achieve more effective and efficient regulation, and create space for innovation, economic growth and active public participation. In addition, reducing regulatory burdens also cuts the costs required for public administration, increases transparency and reduces corruption.

An evidence-based, systematic approach

The SCM is an evidence-based, systematic approach to quantify and reduce the regulatory burdens imposed by national legislation. The SCM methodology was developed by Sira Consulting in close collaboration with the Dutch Ministry of Economic Affairs.

We have improved the SCM methodology over the years. We now use an integrated approach to measure, analyse, explain and reduce unnecessary regulatory burdens. This gives insights into

  • The administrative burdens imposed on businesses and citizens.
  • The compliance costs imposed on businesses and citizens.
  • The costs incurred by public administrations.
  • The obstacles legislation introduces to competition, innovation and growth.

The SCM methodology is used to measure regulatory burdens for existing regulations (ex-post) and for proposed legislation (ex-ante). All measurements are accompanied by a thorough analysis and concrete suggestion on how to reduce or prevent regulatory burden. The SCM methodology is also used to design better regulation and to decide what policy tools are most effective and efficient. A key component is the active engagement of all relevant public authorities and stakeholders.

Tangible results

Our SCM projects have enabled us to contribute greatly to the reduction of unnecessary regulatory burdens and the improvement of processes and compliance. Whenever and wherever we applied the SCM methodology, it has resulted in a tangible burden reduction for businesses, citizens and public administrations.

An alternative approach

The SCM methodology is focused on the national impact of laws and regulations. We recently incorporated the benefits of this approach into the Cost driven Approach to reduce Regulatory burden (CAR). The CAR methodology is focused on the impact of laws and regulations on a specific business sector. We developed the CAR methodology together with the Dutch government.

Designing regulatory reform

Regulatory reform concerns the improvement of the quality of government regulation. It is about designing and evaluating policies and regulations transparently, with evidence, and backed up by the views of businesses, citizens and other stakeholders. Regulatory reform can cover each policy area and aims for targeted regulation, achieving targets cost-effectively.

A combined (quantitative and qualitative) evidence-based approach

The aim of regulatory reform projects is to provide an accurate insight into the quantitative and qualitative impact of rules and regulations and identify regulatory burden reduction measures. We piece together a complete picture of all the effects of policies and regulations and do this together with all relevant stakeholders. We are then able to identify and help implement reduction measures designed to achieve direct and tangible improvements. In our experience, regulatory reform projects contribute directly to the prevention of future regulatory burden.

Objectives of regulatory reform

In case you engage us for a regulatory reform project, we aim to achieve the following objectives in close cooperation with you and your team:

  • Policies and rules are based on evidence and a good understanding of their impacts.
  • Policies and rules are formulated in such a way that regulatory burdens are kept to a minimum.
  • The decision-making process is open and transparent.
  • All stakeholders can contribute throughout the policy and law‑making process.