Performance Based Standards
In a previous newsletter (No. 158, Appropriate Inquiry), we described the new EPA requirements of “All Appropriate Inquiry (AAI)” in property transfers. The EPA’s final rule requires more extensive inquiry. The EPA describes the AAI final rule as being “performance based” since findings and conclusions rely heavily on the environmental professional’s own personal judgment.
We thought it behooved us to add few more words on “performance based standards.”
A performance-based regulatory standard is a rule, regulation, or standard that specifies the desired outcome but gives discretion in how that outcome is met.
For example, the Federal Railroad Administration (FRA) requires that vegetation adjacent to railroad track be controlled so that it does not become a fire hazard or obstruct visibility.
FRA specifies an outcome (not being a fire hazard or an obstruction to visibility) but not how far from the track vegetation must be removed nor the methods firms need to use to control it.
Performance-based standards give discretion to regulated actors or firms. Regulated targets may meet these standards in whatever way they choose. Such an approach allows firms to innovate and search for the least costly means of achieving the desired outcome.
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