sectors in which serious risk of harm justifies the cost burden of imposing third-party assessment.
Unregulated products may also be subject to third-party assessment as a result of marketplace demands. Purchasers may choose to demand independent, private assessment of product safety. They may, for example, buy only products bearing a recognized third-party certification mark, such as the Underwriters Laboratories UL mark or the American Gas Association Laboratories seal. One major retail chain, as a matter of policy, rarely markets electrical appliances not bearing the UL label.13 Many voluntary product safety standards, and the institutional mechanisms that assess conformity to them, were in fact developed to meet needs not covered by government regulations. In some cases, private certification programs are developed by an industry to forestall government regulatory intervention.14
The second category of demand for independent assessment applies primarily to the relationship between manufacturers and their primary, secondary, and tertiary suppliers of parts and materials. As noted previously, purchasers may demand prior assurance that parts will conform to contract specifications, rather than relying on postdelivery inspection. The purchaser may choose to rely on a neutral third party to provide this assurance, rather than performing these assessments directly. Whether assessment is second party or third party, a range of approaches is available. For completeness, every single part could be inspected for conformity to the contract specification. Inspection of 100 percent of the parts is costly, however, and justifiable only if the consequences of a single nonconformity would be severe. An intermediate form of assessment involves inspection of samples of the supplier's product, combined with an assessment of the supplier's overall system for maintaining consistent product quality.
In select circumstances, third-party conformity assessment has advantages over second party for meeting the needs of suppliers and manufacturers. In an industry in which each supplier sells to many purchasers, it is redundant for each supplier to be audited and approved by every manufacturer, all performing essentially the same assessment. A single assessment of the supplier by a competent third party can, in this case, replace multiple second-party assessments.15
The remainder of this chapter focuses on third-party conformity assessment, rather than second party or manufacturer's declaration. There are two reasons for this focus. First, the activities of a manufacturer and purchaser to assess conformity are less a matter of public policy than they are the internal, competitive concern of the firm. They are intimately tied to research and development, testing, manufacturing process management, inventory control, and other activities within a firm's operations. As such, they are not directly within the scope of this study. Second, third-party assessment is the portion of the system in which the greatest growth and complexity have appeared, as discussed in the next two sections.