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4.1 GENERAL INFORMATION

The committee discussed if the recommendations noted in Chapter Five are economically feasible. After discussion of many issues, members discussed the economic feasibility of a PEL, systems management and medical surveillance as distinct items (M9:31-32). The third and sixth meeting primarily addressed economic feasibility and this issue was discussed at other meetings.

4.2 SPEAKERS AND PRESENTATIONS

Robert Burt, senior economist with the OSHA Office of Regulatory Analysis discussed OSHA initiatives, industry profiles and economics (M2:4). Dr. Hank Lick, committee member, noted costs in his description of systems management (M2:15). Stephen Gauthier, a machinist at a large East Coast manufacturer described his own experiences with potential economic loss due to dermatitis from MWFs and provided some cost saving data (M2:18). Dr. David Leith, University of North Carolina, explained mist collector performance and how it affects operating cost (M3:3-5). Robert Kramer, Ford Motor Company, Dr. William Watt and Jack Hartwig, Chrysler Corporation provided their companies' views of economic feasibility (M3:6,7-9,10). A panel consisting of Kramer, Watt, Hartwig, d'Arcy and committee members, Dr. Frank Mirer and Arthur McGee addressed the issue of economic and technical feasibility in the American auto industry (M3:11). Greg Piacitelli and Dr. Robert Hughes, NIOSH, discussed some limited cost information in their presentation on the NIOSH Small Business Study (M4:2-3). Tom Beeman, a machinist at a mid to large facility in the Western part of the US provided some limited information about his company's fluid management (M5:3). A panel of machine tool manufacturers, and ancillary companies that support the design and installation of machine tools and enclosures in machining facilities, discussed costs of enclosures and issues concerning their industry (M6:6). The panel consisted of Jeff Hedley of Tamer Industries, Stephen Stevens from Cross-Huller, William Fay from H.M. White, Dan McCarthy of Lamb Technicon, Ken Steele of Grob, and Al Woody of Giffels Associates (M6:6). Charles Carlson of the Association for Manufacturing Technology also joined this panel (M6:7). Michelle Lantz, Caterpillar Corp, discussed cost and systems management (M8:10).

4.3 BACKGROUND INFORMATION

Burt defined an action as economically feasible if the action does not substantially alter the competitive structure of the affected industries (M2:4). Burt explained, in the screening analysis OSHA does, the overall costs are compared to the revenues of a typical affected firm (M2:4). If these costs are relatively high, more economic analysis may be needed (M2:4). OSHA defines significant cost as more than 5% of profits or more than 1% of revenue, with the profit percentage more binding, according to Burt (M2:4). Burt takes the estimated cost for establishments by industry and size class and compares the cost to revenues and profits (M7:24).

Burt explained that data sources used by OSHA include Department of Commerce data, data provided by individual companies, and reports from Dunn and Bradstreet and Robert Morris Associates (M2:4). Only the additional cost of a standard is used, according to Burt (M7:25). He noted that typically, the engineering controls are 50-60% of the cost and the ancillary provisions are 2030% of the cost (M2:4).


4.4 REVIEW OF AVAILABLE INFORMATION

4.4.1 Experiences and Resources Related to Costs

4.4.1.1 Employee Job Transfer Costs

Gauthier explained that if his dermatitis had not been improved through systems management, he would have lost his $20/hour job and would have had to take a $11/hour job (M2:18). There would have been no cost of living adjustment based on his medical condition (M2:18).

Beeman explained that he had to transfer from machining to a lower paying job in assembly due to his asthma (M5:3). He had to take a $2.50 per hour pay cut and his seniority dropped from 9 years to 1.5 years (M5:3). He later found a better paying job in dry machining at another company (M5:3).

4.4.1.2 Costs to Provide Enclosures and Ventilation

Hartwig outlined the process for any power train project, noting the many steps involved that are economic and engineering (M3:8). Power train refers to the engine and transmission of a vehicle and requires substantial machining in its manufacture. Some steps in development are sequential while others are parallel, according to Hartwig (M3:8). He explained that the process typically takes 3 to 4 years to accomplish (M3:8).

Hartwig cited new OEM jobs that had been priced out by Chrysler (M3:8). He explained that one line was estimated to cost $4 million to have OEM enclosures (M3:8). On another job, the vendor estimated the cost to enclose and ventilate as $1 million, but with close attention given to checking the vendor, and tightening up the enclosure, the end cost was $540,000 (M3:4). The savings was due to less ventilation being needed (M3:4).

It is important to put costs in context. Lick cited the cost in the auto industry to replace one transfer line as $35 million and the cost to rebuild one plant as $800 million (M2:15). Hartwig explained that a totally refurbished Chrysler plant that cost $1 billion had to spend $4.4 million on OEM enclosures, ductwork and collectors (M3:8).

Watt explained the work needed to install a retrofit enclosure on an existing machine (M3:8). To limit the use of materials, the existing fixture could be used and sheet metal added to it, but even this would take 50 hours of labor (M3:8). He noted the limited number of tinnies available to do this work (M3:8).

McCarthy explained that the cost of putting on sheet metal on a machine is only half the cost (M6:8). The other half is the re-piping, rewiring and other changes related to control of the machine that enable the machine to work with the new design (M6:8).

Watt and Hartwig explained that one Chrysler plant spent $10 million increasing their general ventilation (M3:8). A typical installation of improved ventilation on a line cost $150,000 to $300,000, according to Watt (M3:8). A retrofit of an engine block line at Chrysler required $1.3 million and took more than four years (M3:8). Another similar line was also estimated to cost this much, and the plant has not committed to doing it because of the cost (M3:8). A smaller piston line project cost $51,000 to retrofit, according to Watt (M3:8). More specific examples along with exposures at these jobs can be found in Watt's handout (Watt, 1998).

Ninety percent of machining operations at Ford use MWFs (Kramer, 1998). Forty percent of machines have mist collection and less have total enclosure (Kramer, 1998). Kramer based his costs on what he would do if someone told him to retrofit a plant tomorrow and how much he would request to accomplish the job (M3:10). Costs would include: ductwork installation, enclosures for single machines, enclosures for transfer lines and maintenance and operating costs including makeup air (M3:10). Kramer based his estimates on data from the previous five years from seven machining plants, ranging in size from 1 to 3 million square feet (Kramer, 1998). Actual costs of individual items were from bid sheets on past jobs done for Ford (M3:10). He noted the importance of clearly written and detailed specifications for any component of the systems (M3:10).

Kramer estimated enclosure costs of $8000 for a single machine enclosure from the machine vendor (M3:10; Kramer, 1998). The cost of a retrofit version is $12,000, this cost is higher due to the redesign needed (M3:10, Kramer, 1998). Retrofit costs were based on the costs determined for over 30 machines recently enclosed by Ford (Kramer, 1998).

Costs for transfer lines have to include some idle stations on which money can be saved since the controls are the same (M3:10). Each station in a transfer line needs an average of 1000 CFM of air which has to be factored into cost, according to Kramer (M3:10). OEM installation is $8000/station and retrofits cost between $13,000 and $16,000/station (Kramer, 1998). These costs were based on 167 stations that were enclosed at Ford between 1994 and 1997 (Kramer, 1998).

Ductwork costs have to be factored into any ventilation job. Ductwork costs should average about $3.75/CFM of air moved (Kramer, 1998). For an average new machine ductwork costs an average of about $1,900 (Kramer, 1998). Overall installation costs have to be considered and for an average new machine this will be $15,900 (Kramer, 1998). Operating costs per year for one new machine average $900 and maintenance costs per year are $1,100 (Kramer, 1998).

OEM enclosures are better accepted, according to Kramer (M3:10). Retrofitting is only done when they have to do it (M3:10). Kramer explained that production can be affected to do a retrofit (M3:10). Replacement with OEM is an on-going process (M3:10). Many single machines get complete overhauls and a total enclosure is put on them (M3:10).

McCarthy stated the cost of enclosing a machine today is about 40-50% of what it was 10 years ago, due to standardization (M6:11). The guarding system of a machine represents about 2.5 to 3.5% of the total machine cost (M6:11). It is impossible to define the cost of the enclosure itself, according to McCarthy (M6:11).

Hedley estimated the cost of a standard enclosure for a screw machine or a high speed stamping press at 3-5% of the machine cost (M6:11). A floor mount system to only control mist and not splash, would not be as expensive as a machine mount custom enclosure (M6:11).

Stevens cited a 10% extra cost to add an enclosure or close the roof on small machining centers (M6:11-12). Stevens estimated enclosures costing as much as 30% of the cost of a large machine such as a vertical spindle machine due to the difficulties of enclosing such a machine (M6:12). Stevens noted that with the need to move in and out large parts, the price of enclosure goes up (M6:12). Stevens explained that transfer machines are easier to enclose since they have common stations (M6:12). Steele agreed with the 3 to 5% cost as did Carlson (M6:12).

Fay noted that fitting the proper enclosure around an existing machine is expensive (M6:12). Hedley explained that retrofits are more expensive than OEM enclosures (M6:12). Steele noted that retrofitting is an unknown, and if a machine tool builder is busy making new machines, they will not go after the retrofit market (M6:12). Hedley agreed that it is easy to lose a lot of money retrofitting because it is similar to prototype work (M6:12). McCarthy explained that retrofitting an old machine may cost more than the machine is worth (M6:17).

Mirer stressed the importance of good general ventilation to reduce carryover and background values of mist (M3:11). He proposed a rule of thumb: $5 million enclosing would yield 0.1 to 0.3 mg/m3 carryover, so some machines operating at 0.7 mg/m3 would be in compliance (M3:11). He felt that using other methods in addition to enclosure would reduce the need for enclosure on every machine (M3:11). He noted that the number of machines that need to be enclosed is debatable (M3:11).

4.4.1.3 Capacity and Concerns of the Machine Tool and Enclosure Industry

Stevens stated for transfer lines the market is on the upswing (M6:7). McCarthy noted a backlog at his company of $450 million in orders and that all machine tool companies appear to be doing very well (M6:7). According to Steele, Grob's backlog is $600 million (M6:9). Both McCarthy and Steele explained that their companies' growth depended on the auto industry (M6:9). Carlson explained that AMT members are currently at 60-75% capacity, so there is room for growth (M6:8).

Turnover time is the time it takes for a machine to be replaced. According to Carlson, turnover time depends on how competitive the company buying the tool is (M6:8). Carlson noted it was important to look at how many tool makers there are, the total number of machines, and how many companies are available for design (M6:8).

How a machine tool company is organized affects how easily they can expand production. Vertically integrated companies cannot expand production easily, while others can out source, according to Steele (M6:9). Steele explained that Grob is vertically integrated and does all work in house (M6:9). According to McCarthy and Stevens, Lamb and Cross Huller do the basic work inside the company, and overflow can be handled by outside vendors (M6:9). Use of outside vendors allows for capacity expansion to meet demand, according to McCarthy (M6:9).

Cox asked about the warranties associated with retrofit work and most of the group was reluctant to address this issue (M6:12). Fay noted that it depended on the specification his company receives (M6:12). Fay explained the difficulties of trying to warranty work that is dependent on another vendor doing his job well (M6:12). McCarthy noted that enclosures are provided today due to cost and liability concerns (M6:10).

Carlson thought the cost issue was the concern, not technical feasibility (M6:16). Stevens noted that cost and maintainability of the enclosure and mist control equipment are concerns (M6:16). Preventive maintenance is essential and not done enough in customer companies, according to Stevens (M6:16).

4.4.1.4 Mist Collector Costs

The cost of operating a mist collector is a function of pressure drop and can be estimated from the pressure drop, according to Leith (M3:3,4). Trade offs occur between pressure drop and efficiency of the filter, although a high pressure drop does not always mean good efficiency (M3:4). Careful maximization of efficiency while minimizing pressure drop can reduce operating costs (M3:4). Reducing loading on the third stage HEPA filter by using a well designed mist collector, can reduce costs of replacing the HEPA filters (M3:3).

For recirculation, Woody noted that the economics of heating or cooling this air show no penalty (M6:15). He noted an exception to this was a plant that uses hot water or steam for heat, and does not air condition in the summer (M6:15). Lick noted it does not cost as much to cool air as it once did (M6:15).

O'Brien recommended a back up HEPA filter for mist collectors used in recirculation (M3:15). Lick noted that this would affect the housing and would probably double the cost of the collector (M3:15).

Kramer explained that collectors can cost $6000 for a 500 CFM capacity version and up to $12,000 for a 2000 CFM version (M3:10). HEPA filters need to be added to most collectors at Ford, according to Kramer (M3:10). He noted that operating costs are mostly electrical costs (M3:10). Twice yearly steam cleaning of collector screens is needed and take 30 minutes of labor (Kramer, 1998). Second stage filters cost $150 and HEPA filters cost $225 (Kramer, 1998). Fans, motors and belts have to be maintained (Kramer, 1998). Including labor, parts and electricity, it costs about $1,300 yearly to maintain a 2,000 CFM collector that is run for two shifts/day (Kramer, 1998). For $8 million dollars worth of collectors, it would cost about $0.5 million in operating costs (M3:10). Using the data he assembled on collectors and square footage of plant floor, Kramer estimated cost for collector purchases of $13 to $14 million in the next 10 years at Ford (M3:10). Additional criteria for collectors can be found in his handout (Kramer, 1998).

4.4.1.5 Medical Surveillance Costs

Lick presented the idea of not having to do medical surveillance if the mist is managed (M5:8). Newman noted that categories of workers with different exposures may have different needs for medical surveillance (M5:8).

Sheehan noted Valenite received quotes of $46/person for on site medical evaluations including history, physical data, heart-lung assessment, general skin appearance, pulmonary function testing and medical clearance for respirator use (M7:30). Frederick received a quote of $40/person for 40 people at a site for a similar assessment and Kushner cited $40/person from his source (M7:30). McGee thought these were reasonable prices (M7:31)

At the tenth meeting, Wegman explained some data he obtained from NIOSH studies. Spirometry done for clinical purposes is reimbursed by Medicare and third-party insurance carriers. The median charge for a spirometry test (without bronchodilator, but including a physician interpretation) is about $40, with a range of $20 to $60. This range may be used as a benchmark for the reimbursement of the tests done in the occupational setting. According to Wegman's interpretation of the NIOSH work, the test requires a total of 20 minutes (range 10-30 minutes) of technician time (at $1.20/hour salary). Overhead time for the technician is also needed to calibrate, clean, and maintain the spirometry system, perform biologic control tests, complete the forms (questionnaires), and enter the responses into the personal computer (distributed data entry). The cost of technician training and recertification courses must also be considered. The supply cost for clinical spirometry is about $2 per test for a disposable flow sensor. The only supply cost for occupational spirometry tests done using a volume spirometer is a 5 cent mouthpiece, but a $5 breathing tube must be cleaned daily and periodically replaced. The capital equipment cost for purchasing the spirometry system recommended for this program (including the personal computer and calibration syringe) is $3000 to $4000. The life of the volume spirometer is more than 10 years, but the $1000 personal computer will probably need replacement every 5 years. The annual maintenance costs are about $200 (including printer ink cartridges).

Sheehan noted that OSHA should obtain additional standard insurance costs (M6:25). Newman cited Medicare as a source, along with the medical departments of companies represented on the MWFSAC (M6:25).

Wegman agreed that medical surveillance costs would not be trivial (M5:8). Wegman noted that periodic medical monitoring that only included a questionnaire would decrease the cost burden of medical surveillance (M6:25). Fennelly thought that the cost of conducting a questionnaire would not be much because it could be folded into existing programs such as respiratory protection (M4:8). Mirer wanted to know what percentage of companies already do similar tests so the whole cost is not assessed as due to MWFs (M7:31).

4.4.1.6 Exposure Assessment Costs

White was concerned that a machine by machine assessment may be needed and this would be expensive (M8:25). Mirer noted that exposures are relatively homogeneous in highly automated plants, so less samples may be needed (M8:25).

Piacitelli cited analytical costs of $10/sample for total particulate and $5060/sample for the extraction method (M4:2). O'Brien gave a cost of $5-10/sample for total particulate (M7:19). Mirer cited $80/sample for extractable (M7:20). Other lab costs such as the need to purchase a microbalance were noted (M7:19).

Howell explained that the industrial hygienist's time is more of a factor than the analytical method (M7:21). According to the exposure assessment work group, sampling costs could be reduced by: OSHA consultation services, fluid supplier product stewardship, union efforts, and small grants (M8:25). After professional assessment, workers could be trained to take samples (M8:25). Mirer noted that at GM, workers are trained to take samples and this brings the cost down (M7:21). A primer on sampling is needed to make sure these people are sampling properly (M7:21).

4.4.1.7 Other Costs

The cost of obtaining and managing information was noted by the group. Howell investigated ways of packaging ASTM standards to reduce cost. Johnston noted that the cost of the ANSI document is $30 (M3:3).

The database system set up by Ford cost $12 million to develop but Reeve explained that the costs have come down due to improved technology (M6:6). He noted that development cost is immaterial today because programs are now available (M6:6). For companies of 10,000, Reeve thought a system would cost $50,000 plus licensing fees (M6:6).

Mirer noted that software for OSHA 200 log maintenance is available for a few hundred dollars (M6:6). Ford's system was expensive due to the integration with payroll and its size (M6:6).

Another issue is the cost of employee time managing fluids. Gauthier now spends two hours per day managing MWFs (M8:19). This value is much lower as compared to the time needed when the program was started (M8:19).

The per item cost for centrifuges to remove tramp oil from MWFs is $133,000 (Watt, 1998). Mist suppressants have cost $120,000/year for 2 machining lines at Chrysler (Watt, 1998). Segregation of assembly areas could cost $400,000 to build one wall (Watt, 1998). A new air supply house can cost $10 million (Watt, 1998). Burke provides some factors that influence the cost effectiveness of machining processes (Burke, 1998).

4.4.1.8 Estimates of Total Costs

The 1998 value of the baseline costs required by Ford to achieve the NIOSH REL in its US and Canadian plants would be approximately $328 million (Henry, 1998). This value assumes a 20 year useful life of the enclosures and collection equipment and a discount rate of 8%, (Henry, 1998). Initial investment costs are estimated at $205.2 million and annual operating and maintenance cost add $12.5 million (Henry, 1998). Issues such as delayed supplier availability, training, monitoring and medical surveillance costs could increase the regulatory burden to $433 million (Henry, 1998). Plants that already have most machines fully enclosed were not included in these estimates (Henry, 1998). A specific plant by plant cost breakdown can be found in Henry's report (1998).

Using Ford's estimates, the American Automobile Manufacturer's Association (AAMA) calculated estimated costs for DaimlerChrysler and GM (Felinski, 1998). Total estimates for DaimlerChrysler were based on before merger conditions for the former Chrysler Corporation (Felinski, 1998). The direct estimated cost for DaimlerChrysler is $250 million with estimated indirect costs of $250 million for a total of $500 million (Felinski, 1998). The direct estimated cost for GM is $560 million with estimated indirect costs of $420 million for a total of $980 million (Felinski, 1998). Adding these costs to Ford produces an overall estimate of $1.9 billion for the "Big 3" (Felinski, 1998). Earlier less refined estimates indicated a cost of $1.5 billion for the "Big 3" (Card, 1997). Voluntary exposure reduction efforts since the early 1980's of the "Big 3" are estimated at over $1 billion (Felinski, 1998). Using Burke's estimates that large industry represents about 10% of the whole, overall costs are estimated at more than $19 billion (Felinski, 1998).

Mirer submitted the UAW's interpretation of the automaker's cost estimates (Mirer, 1999). He viewed the values presented by Ford, Daimler-Chrysler and GM as overestimates (Mirer, 1999). According to Mirer, the overestimation is due to: charges for installing controls on equipment already in compliance, failure to take into account the exposure reductions from installing controls on some but not all emission sources, charges for controls that will reduce exposures substantially below the proposed PEL, and possible higher than actual unit costs (Mirer, 1999).

Allen estimated costs across several industries (Allen, 1998). She assumed a machine enclosure cost of $11,750 based on UAW estimates (Allen, 1998). American Machinist was cited as estimating that 57-78% of machines used in the US are over 10 years old, and that there are 1.9 million machines in use (Allen, 1998). Allen noted that these older than 10 year old machines are probably not well enclosed (Allen, 1998). Using these values, an estimated range of overall US cost between $13 billion to $18 billion was determined to enclose 1.1 to 1.5 million machines (Allen, 1998). If machines were replaced with new machines, with an average cost of $139,500/machine, the estimated cost would be between $150 to $200 billion with over $100 billion of this spent by small businesses (Allen, 1998). In 1997, all industries in the US purchased approximately $5 billion in new machine tools (Allen, 1998). Allen noted that these estimates are high because not every machine would have to be replaced to meet 0.5 mg/m3 (Allen, 1998). She also noted another concern, that since 1980, the population of metal cutting production workers has dropped 54% (Allen, 1998).

Additional data about specific SIC codes including number of employees, sizes of businesses, and number of businesses in each code can be found in tables provided by the OSHA Office of Regulatory Analysis (Corsey, 1999). These tables include specific characteristics about MWF using companies and have information such as the number of employees, machine tool characteristics and number of potentially affected industries (Corsey, 1999). Factors such as planned machine purchases can affect potential cost. According to Burt, based on a 1994 study by American Machinist, 73% of businesses in the affected SIC codes expected to add new machines in 1995 (Burt, 1998). 75% planned to replace some of their machines and 82% expected to either add or replace some machines in 1995 (Burt, 1998). Additional costs are provided in some letters sent to trade groups (PMPA, 1999).

4.4.2 Experiences and Resources Related to Offset Costs

Burt explained that OSHA does not usually include offsets in its considerations of cost (M2:5). Not including these offsets has contributed to OSHA's historical overestimation of costs of compliance, according to Burt (M2:5). The Office of Technology Assessment's report also indicates this limitation (OTA, 1994).

Frederick noted potential offsetting costs such as productivity increases due to new machine purchases (M2:4). Gauthier cited less down time (M8:19). Lantz noted higher productivity and less down time with well managed fluids (M8:10).

Gauthier showed cost savings because less MWF was needed to make up what is wasted (M2:18; 8:18). This also resulted in lower waste management costs (M2:18; 8:18). He cited waste reduction savings of $100,000. McGee also noted less waste due to fluid management (M3:12). Gauthier listed 54% less water use and longer tool life as important savings (M8:19). He was allowed to re-invest $500,000 in equipment due to overall savings from fluid management (M8:19). Methods of calculating savings can be found in Gauthier's handout (Gauthier, 1997).

Microorganisms in the fluid are an economic concern, according to Rossmoore, because they degrade the fluids (M5:19). McGee explained that money would be saved by better control of systems, resulting in less contamination of MWFs, less fluid use, less downtime and less use of biocide (M3:12).

According to Burke, implementing a very basic MWF management system for his company saved the company $15 million in their US plants (M6:34). Burke stated that if a company is doing nothing for MWF management, doing something will save them a substantial amount of money (M6:34).

Teitelbaum thought there would be reduced medical costs such as less lost time due to dermatitis (M2:5; 3:13). O'Brien cited an article by Leigh and Miller in the December, 1997 issue of the Journal of Occupational and Environmental Medicine (M4:6). This article explained the costs of job related injuries and illnesses, noting that lathe and turning machine operators were number 18 on the list (M4:6). The estimated cost per worker was $1026/year and for a plant of 85 people, O'Brien calculated a cost of $85,000 per year (M4:6). According to O'Brien, this cost could be reduced by reducing health costs by enclosing the mist, and reducing injuries by keeping the floors dry (M4:6). Burch criticized O'Brien for making a leap from a per person cost to a whole plant cost and O'Brien agreed that plants the work groups visited were probably better than this average (M4:6).

The article by Leigh and Miller ranked machinists as 38th in a list of cost of injuries and illnesses by specific occupation (Leigh,1997). Annual costs based on 1985-1986 data, were estimated for all machinists at over $41 million (Leigh, 1997).

Reeve stated there were 148 respiratory cases at MWF plants compared to 13 in control plants (M6:2). He estimated a lost time case rate of 0.05 per 200,000 hours, a severity rate of 0.54 per 200,000 hours at MWF plants, and 121 lost days of work (M6:2). There were no lost days of work at the control plants in Reeve's study (M6:2). Howell cited work done at Kodak indicating that keeping workers working saves money (M6:41).

Burke cited the financial importance of protecting workers due to the need for a skilled workforce and decreased medical costs (M6:29). Howell noted that good fluid management reduces health effects and companies will do the fluid management because of the cost and time involved in solving fluid management problems (M6:40).

Medical costs can cause liability problems. Fennelly cited liability costs such as latex allergy cases that were settled for $0.25 to 1.5 million (M5:8).

Lantz cited recordable incidents reduced (M8:10). Teitelbaum noted being able to detect problems early and solve them would reduce workmans' compensation costs (M8:16).

Lick summarized, noting that MWF management can save a company money (M3:16). These savings would make sense to most managers (M3:16).

4.4.3 Other Resources Related to Costs

Lost work days were analyzed by the OSHA Office of Regulatory Analysis, 1998, using BLS 1996 data (OSHA Office of Regulatory Analysis, 1998). SIC codes 33-37 had 1,099 recordable cases of dermatitis accounting for 16% of all lost workday cases of dermatitis in private industry (OSHA Office of Regulatory Analysis, 1998). The median lost work days per case of dermatitis was three for SIC codes 33-37 (OSHA Office of Regulatory Analysis, 1998). Machinists experienced 660 lost workday cases of dermatitis, assemblers potentially exposed to MWFs experienced 205 lost workday cases of dermatitis, for a total of 865 cases (OSHA Office of Regulatory Analysis, 1998).

The OSHA Office of Regulatory Analysis cited Argonaut insurance data for 1992-1994 stating that the average cost of a worker compensation claim for dermatitis for Argonaut was $661. This average costs includes medical only and indemnity claims (OSHA Office of Regulatory Analysis, 1998). Using the system developed for OSHA's Safety Pays program which is based on studies of the Business Roundtable, the average indirect costs for a claim of the size noted by Argonaut are $2,710 (OSHA Office of Regulatory Analysis, 1998). The total costs of claim and indirect costs are $3371 per claim. These costs represent costs to employers and insurers, not employees (OSHA Office of Regulatory Analysis, 1998). If all 1,099 recordable cases of dermatitis noted in the BLS data cost the amount Argonaut projected, this would represent a total annual cost of $3.7 million.

Additional information can be found in material submitted by Ford Motor Company, the AAMA, Allen as well as Gauthier (Henry, 1998; Felinski, 1998; Allen, 1998; Gauthier, 1997). Additional references are cited in Chapter Eight, Medical Surveillance and are also found in Attachment #6.

4.5 CONCERNS AND LIMITATIONS

4.5.1 Size of Business

The Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act (SBREFA) require an assessment of other options to alleviate significant effects or costs on companies, according to Burt (M2:4). Advocacy panels and guidance for small business are part of SBREFA (M2:4). Burt thought the SBREFA requirements may be triggered by one of the 169 sectors associated with MWFs (M7:24).

In discussions of the NIOSH Small Business Study, Teitelbaum noted that the economic impact of improvement may be different for different companies (M4:3). Burch noted Chrysler's concems about spending $20 million to comply and that small businesses the work groups visited were at this level without much effort (M4:6). Shortell thought that small plants were already close to the REL without any further expenditure (M4:6). Mirer thought it would be cheaper and easier to control exposures at small plants (M3:16).

Burch explained that systems management may be more important to small business due to cost effectiveness and slimmer profit margins (M2:16). Goon noted there was a cost difference between dumping large systems of 40,000 to 50,000 gallons versus a 40 to 100 gallon one (M5:26).

Reeve did not think a small business of a few hundred workers would need a computerized medical data tracking system (M6:6). He recommended using a good medical services vendor who had a tracking system (M6:6).

Cox noted that member companies in his organization have their own insurers so medical costs determined from large company estimates may be different (M6:25).

Cox noted the difficulty small business would have bringing a professional in to take samples (M7:22). Mirer noted in Michigan, the state provides small businesses with sampling pumps and mail back media to decrease cost (M8:25).

Other factors influence costs. Cox noted the slowdown in some small companies due to the Asian financial crisis (M6:8). Burch explained that the "Big 3" require a 3-5% annual reduction in cost by parts manufacturers (M6:39). Burke cited the increased competition in mid size companies that require more efficient operation and higher production rates (M6:28). The competition and requirement by customers such as the "Big 3" to keep costs down, may work against health and safety, according to Burke (M6:30).

McCarthy noted that small shops have a lot of old machines (M6:17). Woody cited cash flow problems in small and medium size businesses that make it difficult for them to run ventilation systems in the winter (M6:17). Burch cited data for one of the companies, the work group visited (M4:6). The company had $8 million in sales, $500,000 in capital expenditures per year and a profit margin of 1 to 3% (M4:6). PMPA members have a total annual shipment of goods of about $3.66 billion (Burch, 1997). This does not provide much money for enclosures or any other improvements, according to Burch (M4:6).

Cox noted that if small business had to purchase new machines, the financial burden would be obvious (M4:6). Allen estimated a cost of over $100 billion for small business if this approach was used (Allen,1998). Companies have to balance the costs of expansion, new machine purchases, regulatory issues and obtain financing (M4:6). Cox was concerned how the IRS would view certification of MWF managers or any other enhancement of business activities (M6:32). Burch explained the difference between a small and large business, noting that for the small business the expenditure for regulatory compliance comes out of the owner's pocket, not some unknown corporate entity (M4:6).

4.5.2 Time Factors

This topic is addressed in this section of the previous chapter. Related to both economic and technical feasibility, some members (Burch, Lick, Teitelbaum, Mirer, O'Brien, White) addressed the issue of phasing in any compliance requirements (M9: 30-31). Lick and Teitelbaum cited the machine tool builder discussions and Lick cited Ford Motor Company data that showed the timing issue was critical (M9:30,32).

Lick commented on the Chrysler Kenosha plant retrofit that took 5 -7 years to complete (M9:32). Lick noted at large companies, retrofit work is restricted to holiday shutdowns (M9:32-33). Lick explained the difficulty obtaining sheet metal workers and other construction personnel due to the number of operations to improve, and the booming economy (M9:33).

Lick noted that large companies have timing constraints while small companies have capital constraints (M9:33). White suggested that middle size companies may need a long phase-in as well (M9:30). Lick urged a 10 year phase-in and O'Brien agreed with the proviso that the clock starts immediately (M9:33). Mirer was concerned that we should not provide any incentives to have junk equipment kept on the shop floor (M9:33). Mirer explained that many companies will not act until the phase in time is almost completed (M9:33). Burch urged that data collection on all issues continue during any phase in period (M9:33).

4.6 LINKAGE OF DISCUSSIONS TO OSHA ACTION

Burke estimated costs for the 40 plants in his mid size company, Eaton, to reduce all exposure to below 1.0 mg/m3 would be $7.5 million (M6:29). To reach 0.4 mg/m3 would cost $17 million (M6:29). To comply with 0.25 mg/m3 would cost $35 million (M6:29). These costs would not put them out of business, but the money would have to come from profits and could not be passed on to customers to stay competitive (M6:28-29).

Hartwig noted that the newly refurbished Chrysler plant that cost $1 billion with $4.4 million in exposure controls, had exposures of less than 0.5 mg/m3 during intermittent operation (M3:8). Hartwig estimated the overall cost of reducing exposure to 0.5 mg/m3 would cost Chrysler about $40 million with a long lead time (M3:9).

About two thirds of Ford's machines do not have enclosure, according to Kramer (M3:10). Ford's estimate of enclosure related costs is $328 million (Henry, 1998). Kramer explained that some retrofit jobs take three years due to production and still may not work well (M3:10). Mirer cited Hands study's median for old equipment, indicating that about half the exposures were below the REL (M3:11). Because only half of the equipment did not meet the REL, Mirer felt that the cost estimates should be cut in half (M3:11).

Mirer stated that based on Ford Motor Company estimates, the cost of a potential standard is similar to those OSHA has promulgated in the past (M3:11). O'Brien noted that Chrysler's estimate of $50,000 per station were higher than Ford's estimates of $10,000 to $15,000 per station (M3:9).

In the context of explaining that not everyone is at 0.5 mg/m3, Lick opined it will be costly to improve but there is not a financial incentive to do it yet (M6:34). Lick thought MWF control would be more expensive than ergonomics (M4:15). White questioned if feasibility can be demonstrated and if OSHA can justify the cost (M3:16).

4.7 COMMITTEE DECISIONS AND RATIONALE

The majority (12) viewed that achieving the PEL was economically feasible (M9:31-32). O'Brien cited data submitted by Ford and an Office of Technology Assessment report (M9:31). Mirer viewed the Ford data as a high estimate, noting that many exposures at Ford were below 0.5 mg/m3 (M9:32). Mirer stated that small companies would have lower ventilation system costs and that all companies would benefit from less expensive improvements in general ventilation (M9:30,32). Sheehan noted that not every work station has to be improved for the overall exposure to be reduced and urged a focus on the worst machines (M9:32). Day explained that companies find the money when OSHA puts pressure on them (M9:32). Lick and White stated that achieving the PEL was economically feasible with enough time allowed to phase in changes (clarification provided at tenth meeting).

The minority (Burch, Cox) stated that achieving the PEL would be very expensive and economically infeasible (M9:31-32). Burch cited the evidence provided by Ford (Henry, 1998) and the American Automobile Manufacturer's Association (Felinski,1998) (M9:31).

There was one abstention (Howell) who noted that there was not adequate information to reach a decision on the question of the economic feasibility of a PEL (M9:31-32).

White stated that the costs could be on par with the proposed ergonomics standard (M9:32). Cox cited small business problems with cash flow and tax laws related to regulatory compliance (M9:32). Lick estimated that ventilation costs for some small businesses would be a few thousand dollars (M9:33). There was general agreement that more information is needed on this issue (M9:31-32).

All members (15) viewed that systems management was economically feasible (M9:31-32, corrections noted at tenth meeting). The committee stated that it was economically infeasible not to do systems management (M9:31-32). O'Brien cited clear economic benefits of systems management including: reduced painting, reduced accidents due to slippery surfaces, and improved retention of employees (M9:32). White cited Gauthier's presentation as showing cost effectiveness of systems management (M9:32). Mirer noted that systems management may enhance exposure reduction and provide jobs (M9:32).

The majority (12) thought that medical surveillance as outlined in the best practices document was economically feasible with some limitations (M9:31-32, corrections noted at tenth meeting). Members noted the per test costs, and their own experiences with medical surveillance as rationale. White cautioned that his decision was based on the high threshold defined for economic feasibility (correction noted at tenth meeting).

The minority (Burch, Howell, Cox) stated that the medical surveillance as outlined in the best practices document was not economically feasible (M9:31-32). Burch noted that the cost would depend on the level of detail required (M9:32). Howell refined his minority opinion that some degree of medical surveillance was economically feasible but not the one stated in the best practices chapter (correction noted at tenth meeting).