Guidance for Application of Economic Valuation Study Findings under the Chemicals Management Plan

Guidance for Application of Economic Valuation Study Findings to Substances under the Chemicals Management Plan

Introduction

This Statement of Work is intended for the procurement of consulting and professional services. Under the guidance of the Departmental Representative, the contractor will be required to undertake economic research to develop guidance on how to apply the findings from the Economic Valuation Study for Canada’s Chemicals Management Plan: Final Survey Implementation and Summary Analysis (The Valuation Study) to support economic analysis for individual toxic chemical substances.

Objectives

The objective of this project is to develop a framework and case studies for applying findings from the above Valuation Study when undertaking economic analysis for individual chemical substances with respect to regulatory measures under the Chemicals Management Plan. Guidance and case studies will be developed on application of The Valuation Study findings to different toxic chemical examples so that they would be suitable for use in cost benefit analysis (CBA) for chemicals regulations. The analysis will use primary data collected during The Valuation Study, economic models developed to analyse the survey data and other economic analysis techniques to estimate societal benefits of reducing the risk of harm to human health and the environment from toxic chemicals. The overall objective of the analysis will be to develop a framework and application guidance for use in undertaking cost benefit analysis supported by a few case studies, and not to evaluate existing regulatory measures, or measures that are under development.

Background and Scope

Chemical substances form the building blocks of almost all consumer and commercial products. Chemicals are used in almost all industrial processes. The production and use of chemicals provide significant social and economic benefits to Canadians. However, they sometimes also have negative effects on the environment and human health. These effects may include pollution and/or waste generated during production, consumption and disposal, with associated risks of harm to animals, plants or humans. Chemicals may also pose long-term risks to the environment or health. Through the Canadian Environmental Protection Act, 1999 and other enabling legislation, Environment and Climate Change Canada (ECCC) and Health Canada (HC) take actions to minimise and/or eliminate risks from harmful chemicals, including those new to Canada since 1987 (new substances), and the 23,000 legacy chemicals that were in use prior to 1987 (existing substances).

As per the Cabinet Directive on Regulatory Management (CDRM), a cost-benefit analysis (CBA) must be conducted for regulatory proposals and the results reported in a Regulatory Impact Analysis Statement (RIAS). Under the CDRM, regulatory measures must be supported by rigorous regulatory impact analyses that consider both the costs and the benefits associated with the proposed measures. The quantification and monetization of benefits from reduced chemical exposure, in most cases, has been challenging as the expected benefits are expressed in terms of outcomes for which no quantitative estimates of economic value exist. This leads to significant information gaps when trying to assess benefits and impacts of regulatory measures to adequately inform government decision making.

In an effort to address these data gaps, ECCC and HC have been collaborating to improve their analytical approaches and capabilities. To that end, a stated preference survey questionnaire using a choice experiments approach was developed and implemented to help better understand how Canadians respond to the risk of exposure to harmful chemicals, and their willingness to take actions or change their behavior to reduce or avoid negative impacts of these substances on the environment and human health. Analysis of survey findings produced valuation (willingness-to-pay) estimates intended to be suitable and defensible for use in benefits transfer when valuing the effects of eliminating the use of harmful chemicals with specific adverse characteristics or impacts. These estimates were intended to be applicable across an array of chemicals under the Chemicals Management Plan currently and in the future, and be suitable for use as part of developing Regulatory Impact Analysis Statements (RIAS).

Analysis of the survey data yielded several willingness-to-pay estimates, including unique valuation estimates for each attribute included in the survey. In order to allow greater transferability of willingness to pay estimates in benefits transfer for specific toxic substances, the survey design framework used did not identify specific chemicals under the CMP. A framework and guidance using case study examples is required to help in applying the estimates and other survey findings in cost benefit analysis (CBA). Specifically, individual toxic chemical substances may have characteristics/features that require unique consideration, attributes included in the survey are usually not uniformly applicable to all toxic substances targeted for regulatory actions, and incremental changes in substances were not valued in the survey.

Statement of Work

To achieve the objectives of the study, the Contractor will be required to focus the work in the key areas described below. Although this section lists the major tasks, the Contractor will be expected to suggest to the Project Steering Committee additional or alternative tasks or work elements that would be needed to successfully achieve the study objectives.

1. Develop a sound framework to identify pertinent issues and assumptions that must be considered in order to apply the valuation estimates to selected chemicals, develop guidance on resolving the issues and specify/recommend the assumptions to be applied in different circumstances. The framework should be applicable for toxic chemicals in general, and be demonstrated specifically for each case study.

1. Review existing regulatory measures for selected toxic substances under the Chemicals Management Plan, and in consultation with the Project Steering Committee identify three or more toxic substances for use in developing case studies^[1]. The specific substances selected must provide latitude for quantitatively assessing societal benefits of reducing risks of harm to the environment and/or human health from toxic chemicals^[2]. They must enable consideration of different benefits analysis issues linked to toxic chemicals that are usually encountered in RIAS preparation, in order to provide an opportunity to develop suitable analytical guidance.
2. For each case study, develop the approach (methodology) for implementation of the framework including steps to follow in making adjustments to the valuation estimates so that they become suitable for use in benefits transfer for CBA and RIAS reports. Specific guidance on necessary adjustments in the context of benefits transfer for individual toxic chemical substances must be included.

1. Undertake quantitative analysis to derive valuation estimates and societal benefits for each case study substance under consideration. This should include identifying and obtaining the necessary data to enable case study analysis, and step by step guidance on deriving the adjusted substance specific valuation estimates.
2. For each case study example provide guidance on interpretation of adjusted valuation estimates and results, an assessment of their validity and accuracy, and identify limitations, data gaps and caveats linked to deriving suitable estimates for an individual toxic chemical substance when conducting benefits transfer.
3. Given that toxic chemicals may have environmental and human health effects linked to more than one attribute included in The Valuation Study, develop guidance on the adjustments that must be made to the valuation estimates to enable consideration of interaction effects, and/or reduce the chances of underestimating/overestimating societal benefits.

1. Provide sound guidance on extrapolating the survey valuation estimates to the national population, and steps to follow in making adjustments to ensure that valuation estimates are consistent with targeted populations for a specific toxic chemical.

1. Provide sound guidance on unique factors that must be integrated when using national estimates from the main effects model, the rural model and the urban model. Given that differences in valuation estimates across regions were found to be insignificant in The Valuation Study, provide guidance for occurrences where the application of estimates from the regional models could be suitable, such as cases where toxic chemical effects are localized within a geographic region^[3].

1. Assessing for up to three attributes for the main effects model, derive an overall estimate of the survey respondents’ willingness-to-pay taking these attributes into consideration. This must include identifying all assumptions used, and developing step by step guidance on deriving the overall adjusted valuation estimates.

1. Assess the feasibility of using the valuation estimates in breakeven analysis for a specific substance. If determined to be feasible, and using one of the toxic substances in the case studies, develop step by step guidance on its application, including caveats and limitations.
2. Recommend subsequent analysis using the valuation study primary data, and other future research that could enhance its usability and the quality of benefits transfer done using the study results.

Additional Requirements

• Preparation of summary tables with the revised general and the adjusted valuation estimates for the substances in the case studies.

• The Contractor will provide periodic progress update(s) based on a schedule agreed upon with the Project Authority.

Deliverables and Milestones

The Contractor will provide the Project Steering Committee with the following deliverables:

1. A detailed work plan covering all tasks and requirements contained in the Statement of Work. The work plan document should include details of the methodology to be used in developing the framework and undertaking the case studies. An outline of the final report table of contents must be submitted with the detailed work plan.
2. Draft framework including factors such as weights for WTP values, interactions terms and other potential adjustments. This should include the chemical substances proposed for case study analysis.
3. An Interim Report documenting the work conducted under tasks 1 to 4 above.
4. A draft report covering the work and analysis conducted under all tasks and including all documents generated. The draft report shall document all elements of the project including: a summary of the review and selection of suitable substances for case study analysis, the proposed framework, methodology and analytical approaches used, issues encountered and steps taken to address them, and recommendations for enhancing application of valuation estimates. The report will also outline approaches that should be used to generate the WTP estimates and aggregation of WTP to the population for urban/rural areas, provincially and nationally, if appropriate and necessary. In addition to the initial regression functions with demographic and/or revealed preference variables, WTP estimates generated by relaxing/changing selected assumptions will be provided to the Project Steering Committee. The report will document reasons for excluding any cases in the analysis, including exclusion in the estimation of WTP. The draft report should include tables summarizing revised general estimates and the adjusted substance-specific valuation estimates for each case study.

   The Contractor will submit in electronic format all cleaned datasets and spreadsheets (unweighted and weighted) used for the data analysis. The Contractor will also submit the computer codes used in the statistical software to generate the WTPs in a way that can be easily replicated and modified by the Project Steering Committee.

5. The Contractor will submit a final report that addresses all comments from the Project Steering Committee on the draft report. Related documents such as variables used in economic and statistical analysis must also be submitted. The contractor shall also submit all other background information (e.g.: raw datasets, spreadsheets, coding, etc.) generated as a result of undertaking the contract.

Milestone

Activities

Proposed Dates

Payments

1

Kick off meeting

1 week after contract award

2

Work Plan as per A

2 weeks after contract award

3

Draft Framework per B

10 weeks after contract award

4

Interim Report as per C

14 weeks after contract award

50%

5

Draft report as per D

21 weeks after contract award

6

Final report as per E

25 weeks after contract award

7

End of contract

26 weeks after contract award

50%

Duration of Work

This study is estimated to be completed within a 6 months period and before March 31, 2018. The final completion date will be adjusted to reflect the contract award date.

Deliverables Format

All Deliverables shall be provided in electronic format: Microsoft Word, Microsoft Excel, SPSS or SAS, or as otherwise specified. Hard copies (bounded copies of professional quality) of the final report shall also be provided. All deliverables shall be submitted in English or French.

Technical, Operational and Organizational Environment

The Contractor(s) must ensure that all deliverables are compatible with the technical specifications identified. Product(s) realized under this Contract will be as described in the deliverables format above, and all embedded objects in these reports (pictures, tables, graphs, etc.) shall be provided to the Project Authority in separate editable electronic files in an acceptable format.

Method and Source of Acceptance

All reports, deliverables, documentation and services rendered under this requirement are subject to inspection by the Departmental Representative or a designated representative (i.e. Project Authority). Should any report, document or service not be to the satisfaction of the Departmental Representative, as submitted, the Departmental Representative shall have the right to reject it or require correction before payment is authorized. 

Should the Contractor at any time be unable to provide the services described within the contract resulting from this RFP, the Contractor shall be responsible for providing replacement services and/or personnel at the same cost and which shall be of similar or greater ability and attainment, and who shall be acceptable to the Departmental Representative.

In advance of the date upon which replacement resources and/or service delivery means are to commence, the Contractor shall notify the Departmental Representative in writing the reason for the unavailability of the resource(s) and/or services named in the contract.

The Contractor shall then provide to the Departmental Representative the name(s) and/or an outline of the qualifications and capabilities of the proposed replacement resources/services, and their security screening level if applicable.

Under no circumstances shall the Contractor allow performance of replacement services that have not been authorized by the Departmental Representative.

Proposal Selection

Proposals will be evaluated in accordance with the requirements listed below. Proposals that do not obtain a minimum score of 75% will be rejected. Proposals will be evaluated on both technical and cost considerations. The contract will be awarded to the firm with the best proposal (i.e. highest overall score).

[1] The number of case studies to be developed will depend on the available budget. 

[2] Assessment of societal costs for the selected substances for the purpose of re-doing CBAs completed previously, or to evaluate whether the instrument (regulatory measure) attained the intended policy outcomes are excluded from this analysis.

[3] Results from the regional models indicated that there was no systematic variation across regions, however there may be instances where statistically significant estimates for specific attributes in a region could be appropriate to use, particularly given that there is a general dearth of population-based regional data linked to toxic chemicals.