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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
2 5 1993
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
OSWER Directive No. 9355.3-20
MEMORANDUM
SUBJECT:
FROM:
TO:
Revisions to OMB Circular A-94 on Guidelines and
Discount Rates for Benefit-Cost Analysis
Henry L. Longest II, Director HLL-M, I
Office of Emergency and Remedial* Response
Waste Management Division Directors
Regions I, IV, V, VII
Emergency and Remedial Response Division Director
Region II
Hazardous Waste Management Division Directors
Regions III, VI, VIII, IX
Hazardous Waste Division Director
Region X
PURPOSE
This memorandum revises the discount rate used in cost
estimation for Superfund activities to 7%. This discount rate
should be used in estimating the present worth value for
potential alternatives in the remedial investigation/feasibility
study and for remedial actions.
BACKGROUND
The Office of Management and Budget (OMB) revised Circular
A-94 which provides guidance on conducting benefit-cost, cost-
effectiveness, and lease-purchase analyses. Circular A-94 also
revises the discount rates to be used in conducting such
analyses. The previous OMB guidance, issued in 1972, directed
federal agencies to use a 10% discount rate; the current
guidance, issued on October 29, 1992, directs agencies to use a
7% discount rate.
In the preamble to the National Oil and Hazardous Substances
Contingency Plan (March 8,1990), EPA stated that it would follow
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Circular A-94 and that if OMB revised Circular A-94, then EPA
would address the matter in program guidance to ensure
consistency with Circular A-94. Therefore, the Office of
Emergency and Remedial Response (OERR) is revising the Guidance
for Conducting Remedial Investigations and Feasibility Studies
(1988) to reflect the use of the 7% discount rate instead of the
5% discount rate published in the 1988 guidance.
OBJECTIVE
OERR recommends that the 7% discount rate be adopted for the
present worth calculations to determine the cost-effectiveness of
potential remedies in the RI/FS to be consistent with the OMB
directive and other federal agencies.
IMPLEMENTATION
The 7% discount rate will apply to sites which have a
Record of Decision (ROD) targeted for FY 94 and thereafter.
Fiscal year 1993 is to be considered a transition year — where
the cost-effectiveness analysis is underway and the discount rate
can be changed or for those cost-effectiveness analyses that have
not yet been initiated, the 7% rate should be used. If a ROD is
ready to be signed, then the cost-effectiveness analysis does not
have to be revised.
The revised OMB Circular A-94 is enclosed for your
reference. If you have any questions concerning the circular or
the discount rate, please call Sherri Gill of the Remedial
Operations Guidance Branch at (703) 603-9043.
enclosure
cc: Bruce Diamond
Sally Mansbach
David Bennett
Superfund Regional Branch Chiefs
Superfund Regional Section Chiefs
Superfund Document Center

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