A benefit cost analysis on the use of fire barriers in upholstered furniture

In 2014, California’s Bureau of Electronic and Appliance Repair, Home Furnishings and Thermal Insulation (BEARHFTI) amended its Technical Bulletin 117, concerning flammability standards of upholstered furniture intended for residential occupancy in the state (BEARHFTI, n.d.a). This amendment committed BEARHFTI to a further evaluation of its flammability standards through testing, research of fire resistant technologies, and the possible adoption of new regulatory standards as outlined in Technical Bulletin 117-2013 (BEARHFTI, 2015). Part of this ongoing review is a commissioned Benefit Cost Analysis (BCA) of the adoption of a fire barrier performance standard for upholstered furniture, which requires a flame-resistant fire barrier that is not chemically treated with flame retardants, to improve the resistance of upholstered furniture to an open flame (BEARHFTI, n.d.b). Such a BCA accounts for the likely benefits of the adoption of a fire barrier performance standard for the residents of California, and the likely costs to furniture manufacturers of implementing it for home furniture sold in the state. If the benefits exceed the costs, given a reasonable range of sensitivity analyses, then evidence exists regarding the social efficacy of adopting such a fire-barrier regulation. Alternatively, if expected benefits fall below projected costs, there is less economic justification for the adoption of this regulation. The paper contains a summary of the results of this BEARHFTI commissioned BCA. From these results we offer two distinct conclusions: (1) the combination of benefits and cost circumstances required to obtain net present values greater than zero are unlikely to occur, and (2) if the true average costs per household is underestimated by even a small percentage, then the benefits, discount rate, and product life cycle assumptions required to pass a BCA are unrealistically high. Regardless of the inherent uncertainty in either the benefit or cost data, we demonstrate that any reasonable variation in benefits and costs fails to produce a net present value outcome that is efficient.