D.  Cost to Industry and Mission Readiness

Comment: Seven respondents stated that this rule will increase costs but did not provide substantiation. In one case, the respondent indicated that "elimination of hexavalent chromium compounds * * * might result in increased level of performance risk and increased procurement costs." Another respondent referred to an increase in life cycle costs but did not appear to account for savings in using safer chemicals or the fact that substitutes must perform as well.

DoD Response: It should be noted that cost-related comments were made before revisions in the rule that address the most significant concerns such as plating, conversion coatings, and hexavalent chromium as a by-product of manufacturing. The final rule will not affect these activities. Only one respondent provided an estimate. That estimate is instructive and is discussed further below.

Based on numerous conversations with industry and small businesses, DoD believes that the rule will have a positive impact on industry and small business profits and, at worst, be revenue neutral over time. Web sites maintained under DoD's Strategic Environmental Research and Development Program (SERDP) contain briefings describing DoD and industry efforts to develop hexavalent chromium substitutes. For example, the 2010 SERDP conference had a special session on hexavalent chromium minimization. One of the presentations by the Aerospace Industries Association described the aerospace industry's minimization strategy. (Reference: http://symposium.serdp-estcp.org/Technical-Sessions/2B). The Web site at asetsdefense.org also contains briefings and summaries of DoD-industry conferences.

A number of small businesses have developed non-chromate processes but have been hindered in their ability to market these processes to DoD by existing DoD specifications. In one example, a small manufacturer of fasteners told DoD that they can provide non-chromate fasteners that can meet DoD performance requirements but the DoD specification calls for chromate and the requiring military office sees no reason to change it. The rule will help to remedy this problem. Subpart 223.7203 of the rule provides direction for DoD contracting officers. It prohibits contracts that include a specification or standard that results in a deliverable or construction material containing more than 0.1% hexavalent chromium by weight. In another example, a small family-run business has developed a non-chromate coating for aircraft. While the company has had success with marketing the process to commercial airlines and the Air Force, it has had limited success DoD-wide. Apparently, further motivation is needed for DoD program managers to change existing requirements for use of materials containing hexavalent chromium. The rule implements the DoD policy memo in the procurement world and will thus increase the adoption of this non-chromate coating and similar paints and coatings by small businesses DoD-wide. The rule will also help make businesses more competitive in the world market. Many large companies are requiring suppliers to provide products with a smaller "environmental footprint" by using lifecycle assessment of human health and environmental impacts. For example, over 1800 organizations are now reporting their sustainability status under the Global Reporting Initiative. (See http://www.globalreporting.org/Home.)

Non-hexavalent chromium processes should be less costly over the lifecycle of the process due to the use of less hazardous materials and related control and disposal cost. (See examples of documented cost savings in Section III.) The rule was modified so that plating and anodizing are not covered by the rule. Thus, capital costs for conversions are de minimis. For the most part, compliance with the rule will only require switching to non-chromate paints and primers.

The one respondent that provided an estimate indicated a cost of $384,000 to convert to non-hexavalent processes. The company produces lightweight shelters for the military and customers that are primarily Government agencies. The company's main processes are metal surface "cleaning and chemical conversion." The rule, as revised, will not affect cleaning and chemical conversion (conversion coatings) and thus there will be no cost to convert related to these processes. However, the respondent's main concern was not the conversion cost but the concern that one branch of the military will require a hexavalent chromium conversion coating and other branches will require non-hexavalent conversion coatings. The DoD policy and this rule are designed to reduce this problem of maintaining dual systems because they will cause DoD-wide changes in specifications to non-hexavalent processes. While this rule does not affect the respondent's conversion coating process, DoD has other initiatives underway to eliminate inconsistent requirements by DoD program managers by modifying DoD-wide specifications where hexavalent chromium has been required and suitable substitutes are available. As an example, DoD has qualified a non-hexavalent conversion coating for wide federal use (Reference Military Standard MIL-DTL-81706).

Comment: Four respondents stated that the rule will increase lifecycle cost due to less corrosion protection.

DoD Response: The rule does not necessarily require the use of substitutes for hexavalent chromium if lifecycle costs are higher. Lifecycle costs must be considered when deciding if proven substitutes exist (see factors listed in Section II A. above).

Many often overlooked costs (e.g., costs associated with the use of restrictive protective equipment and related productivity losses, air monitoring, reporting, medical surveillance programs, collection and treatment systems, and hazardous waste disposal) can be avoided with the use of less toxic chemicals.

Comment: Three respondents stated that the rule will decrease corrosion protection thereby adversely impacting mission readiness.

DoD Response: This rule does not decrease mission readiness as this factor must be considered when determining if proven substitutes exist. To eliminate any confusion, the factors to be considered have been added to DFARS 223.7305.

Comment: One respondent inquired about the funding strategy for research and development.

DoD Response: This comment is outside of the scope of this case. DoD has a robust program for developing and testing substitutes. (See the program area "Weapons Systems and Platforms" at http://www.serdp.org.)

Comment: Two respondents recommended that DoD limit review time of the waiver to not more than 30 days.

DoD Response: DoD assumes the respondent meant "authorization" for the use of hexavalent chromium vice "waiver." DoD program managers are establishing efficient procedures for reviewing and granting authorizations for programs they manage. Timing for reviews and authorizations will depend on the complexity of the system but program managers have an incentive to ensure that schedules are not adversely affected by the review process.