Friday, April 30, 2010

Pre-Screen CFATS Inventory

In a couple of earlier blogs I looked at how DHS might help companies address changes in their inventory levels of chemicals of interest (COI). All of the situations discussed in those blogs involved reporting changes in inventory levels after they had occurred. This is fine from a regulatory point of view, but doesn’t make a lot of sense from a business point of view. The way things are currently set up, a company considering adding a new product line that requires the presence of a new COI, can’t determine the security needs for that new product until it is already on site; not a good way to run a business. The Problem When a company begins to consider making a new product, they have to determine what the manufacturing costs will be. The magnitude of those costs is a key determinate in the decision to move forward with the new project. If the costs are too high, the project will have to be killed. If the costs are substantially underestimated and the company proceeds with an unexpectedly costly new project, the result could be devastating. This is especially true in a recovering economy. For companies starting a project that includes the introduction of a COI into a facility, this is serious potential problem. If DHS were to determine that the facility had become a high-risk facility (or a higher tier rated facility) as a result of the new COI, the additional security costs could prove to be devastating to the financial health of the facility. One option would to assume that any project involving a new COI would result in being declared a high-risk facility. The facility could then factor in estimated security costs into their cost calculations. Unfortunately, that could result in projects being killed that would be financially feasible if the facility would not have been rated high-risk by DHS. In a recovering economy, it really doesn’t help if companies improperly kill potentially viable expansion projects. Because DHS refuses to disclose the details of their decision making process for determining the risk-status of a facility, companies do not have a reasonable process for making their decisions. I understand why DHS is reluctant to disclose these details, but it isn’t helpful to expanding chemical production. A Possible Solution Absent disclosure of the DHS decision model (unlikely), it seems to me that the best way to solve this problem is to provide a pre-screen capability to the Top Screen system. This would allow facilities to submit potential inventory levels to a Pre-Screen tool and to receive back a preliminary evaluation of their potential risk status. If the preliminary evaluation showed that they probably would become a covered facility, the added security costs could be factored into the cost model. To be truly effective this Pre-Screen tool would allow a facility to provide a number of different storage options and quantities to see how they would affect the outcome of the DHS evaluation. This way the facility could look at options for optimizing their use of the COI while minimizing their potential costs. While this would obviously be a benefit to the companies involved, it would also assist DHS in more effectively administering the CFATS program. This would allow companies to tailor their introductions of COI to ensure the lowest possible tier ranking. Since lower tiered facilities are re-inspected less frequently, this would help DHS reduce their inspection load. It would also help to reduce the work load associated with multiple subsequent Top Screens as facilities tried to reduce their security requirements by allowing those efforts to take place before DHS would have to officially recognize the issue. Include in Legislation As DHS is still (I suppose) working on their draft of CFATS reauthorization legislation, I think that these Top Screen issues should be addressed in that legislative draft. That is one of the good things about an executive agency drafting this type legislation. They can include those types of items that would be missed by legislators and their staffs. The regulators are closer to the real world and should understand the regulatory issues better.

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