Methodology
The Standard Cost Model maps the administrative burdens in government regulation by measuring the costs that are imposed on businesses. The costs are primarily determined through interviews with a large number of companies. Through these interviews it is possible to specify the time companies use to fulfil the government regulation.
The Standard Cost Model is a method that breaks down the regulation into demarcated parts, so that it is possible to determine the costs for each part of the regulation precisely. That way you will get an accurate picture of all the costs caused by the regulation. Furthermore the method is useful because it emphasizes which regulation or which parts of a regulation that in particular brings administrative burdens to the businesses.
In the Standard Cost Model time and cost estimates are standardised for the normally efficient business. A normally efficient business is a company which handles its administrative tasks in a normal way. In other words the company neither conducts its tasks better or worse than could be expected.
Information obligations, messages and administrative activities
By use of the method it is possible to examine which information obligations the regulation, for instance a law, consist of. It is a duty for the businesses to produce or prepare an information obligation and subsequently make it available to either the public or a third party. The businesses cannot decline this obligation without coming into conflict with the law. An example of an information obligation is the obligation for pension funds to provide information to participants.
Each information obligation consists of a number of required pieces of data, called messages, which businesses have to report. These messages could for instance be name, address, VAT registration number on forms etc.
In order to be able to deliver these messages, businesses have to carry out certain administrative activities. Examples of administrative activities are gathering the necessary information, filling in or entering the necessary information or carrying out calculations.
The costs of regulation
In order to identify the total costs of regulation, it is necessary to find out how much time it takes for a normally efficient business to conduct an administrative activity.
The calculated time is multiplied with the hourly rate of the person(s) in or outside (outsourcing) the company, who deals with the administrative activity. This is an expression for the cost in a single company. The next step is to identify the number of times the businesses have to carry out the information obligation every year, and the number of companies that are subject to the information obligation.
By adding together the costs, you can get a picture of the costs for an administrative activity, a message, an information obligation, a law and finally the total costs of all regulation.