Advocating for Small Business: A Report of the Chief Counsel Office of Advocacy U.S. Small Business Administration ----------------------------------- TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION Major Accomplishments WHAT THE OFFICE OF ADVOCACY IS DOING TODAY Guarding the Interests of Small Business Economic research: the facts behind the policies Ensuring a Level Playing Field for Small Business Analyzing regulatory impacts and developing policy options Shaping Small-Business-Friendly Legislation Protecting the interests of the small business owner Promoting Small Business through Major Initiatives In touch with the 21st century THE OFFICE OF ADVOCACY: MISSION, ORGANIZATION AND FUNCTIONS THE FUTURE OF ADVOCACY: THE NEED CONTINUES ----------------------------------------------- Dear Friend, As the Office of Advocacy celebrates its twenty-second year, I have the honor of serving as Chief Counsel for Advocacy. The two-decade milestone has given me the opportunity to reflect, assess and review the accomplishments and operations of the Office of Advocacy. I am pleased to report that the congressionally designed "advocate office for small business within the federal government" is working well. I personally am proud of my record since being confirmed in May 1994. We have worked to affect the rulemaking process early and often through increased interaction with federal agencies on proposals, frequent liaison with the Office of Management and Budget, and formal critiques of rules being promulgated by agencies. In addition, I, like previous chief counsels, have advocated positions contrary to the official Administration position numerous times during my tenure. In many of those cases, the Administration later supported our opinion-as in the case of estate tax reform initiatives. Of course, I have also advocated positions contrary to those of members of Congress on occasion. The ability to advocate independently on behalf of small business early in the process within the federal system has enhanced our success. The Congress has recognized that good data and research are vital to good legislation and regulatory policy development. The Office of Advocacy uses its resources to affect businesses at the grassroots level. For example, Advocacy presented data showing that the Environmental Protection Agency's recent reporting requirements under the Toxic Release Inventory rule resulted in costs that were too high for small businesses. As a result, the rule's implementation was postponed for a large number of small businesses, an action that will save these firms tens of millions of dollars. Thus, we are able to help small businesses by combining our economic data analysis and public policy roles. Since 1976, Congress has repeatedly affirmed and expanded Advocacy's powers to act on behalf of small business. The passage of the Small Business Regulatory Enforcement Fairness Act of 1996 has led to tremendous efforts by the small business community to work with Advocacy to effect change in agency behaviors--and sometimes that means challenging federal agencies in court. The Office of Advocacy continues to successfully carry out its congressional mandate, as evidenced by the accomplishments detailed in this report. As we approach the 21st century, small businesses continue to rely on us as an independent advocate to speak out on the obstacles to their growth in America's dynamic marketplace. I look forward to continuing our work in this important arena. Sincerely, Jere W. Glover Chief Counsel for Advocacy March 1998 ------------------------------- EXECUTIVE SUMMARY America is driven by an economic market that is constantly shifting resources to their best use and retooling old systems for new demands. It is a system made for small, fast-changing firms. But public policy often lags behind or favors the old large corporate model. With a mandate from Congress and support from the Administration, the U.S. Small Business Administration's Office of Advocacy has constantly identified areas where government needs to get out of the way or pave the way to ensure that small businesses prosper. In the last four years, the Office of Advocacy has broken new ground for economic research and public policy advancing small businesses. The paradigm of the economic workhorse in America has changed in the 1990s. Building on the solid foundation set by previous administrations, Advocacy's economic research has proven that small businesses dominate the economic landscape-they create almost all new jobs, hire a more diverse work force, contribute most of the gross domestic product, and contribute most new commercial innovations. The dominant players in today's economy are not the Fortune 500 companies, which contributed essentially no new jobs in recent years. Emerging and fast-growing small businesses created 92 percent of new jobs in 1992 and 1993. But Advocacy's independent research and analysis of the government's approach to small businesses has uncovered misperceptions about small businesses and identified major hurdles to small business growth. To address these issues, Advocacy has concentrated on changing public policy on several fronts. This report describes efforts that have brought about broad changes and delivered relief to specific sectors of small firms. The hallmark of Advocacy's efforts is addressing problems shared by small businesses of all types. Our research shows small businesses incur up to 50 percent more costs per employee for federal regulations, face credit hurdles in traditional bank lending, enjoy little access to venture capital, and encounter tax policies that do not fit small firm operations. While no problem has a single answer, Advocacy has taken on each of these overriding problems with public, and sometimes private, sector solutions. Research published by the Office of Advocacy in 1994 illustrated that the disproportionate costs of regulations on small business was real and dismissed too often by federal agencies. The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), enabled the Office of Advocacy to intensify its efforts to see that federal agencies comply with the Regulatory Flexibility Act. The 1980 law, amended by SBREFA, requires agencies to seriously consider the impact of their regulations on small firms and consider alternatives. Under the new law, the chief counsel for advocacy has exercised his right to file amicus curiae briefs in support of small businesses who challenge federal agencies in court. Importantly, the law has bolstered Advocacy's efforts to chip away misconceptions about small firms and minimize the impact on small firms, one regulation at a time. Using its small business statistics, Advocacy has given federal agencies a better understanding of the regulated industry-including its size structure, revenues across sizes, and geographic dispersion-and provided counsel on hundreds of regulations. As entrepreneurs encounter opportunities, they often cannot find capital to fund their growth. In fact, the Office of Advocacy found that traditional bank lenders and venture capital sources hesitated to support small business. Disclosure of bank lending patterns and breaking down the state regulatory barriers to venture capital deals have been two public attacks on the problem. By forcing information into the marketplace, Advocacy has improved the small business capital environment. In addition, Advocacy has launched the Access to Capital Electronic Network (ACE-Net) that links investors with small businesses seeking equity capital. Using the Internet, Advocacy has developed a beta site for this activity that will eventually be turned over to private enterprise. Since 1976, Congress has repeatedly affirmed and expanded the Office of Advocacy's power to act on behalf of small business. Advocacy continues to carry out its congressional mandate successfully, as evidenced by many significant accomplishments. One thing that has not changed, however: the need for the Office of Advocacy is greater than ever. As we approach the 21st century, small businesses continue to rely on an advocate to monitor the obstacles to small business growth that emerge in an ever-changing, regulated, but dynamic marketplace. The vital goals continue: be an effective guardian of small businesses and provide valuable information on small business contribution to the economy. Advocacy must engage in early identification of policy needs, such as addressing the impact on bank mergers on small business lending. And Advocacy must assure that small businesses can effectively hold the government accountable to them. INTRODUCTION The views and interests of America's corporate giants have long been adequately represented by the businesses themselves, but for many years, little consideration was given to small businesses' contributions to the economy or to the dramatic ways they were affected by legislative and regulatory initiatives. Small firms, in effect, had no voice. That paradigm began to shift in the mid-1970s, when Congress and the President formally recognized the need for more attention to small business concerns in the public policy arena. In 1976, under Public Law 94-305, the Congress established the Office of Advocacy in the U.S. Small Business Administration to be an independent voice for small business within the federal government. To ensure that the office would have appropriate visibility and leverage, the law provided for a presidentially appointed, Senate-confirmed chief counsel for advocacy. Since that time, the Office of Advocacy has done the research spadework to ensure that policymakers-and ultimately all Americans-know the treasure they have in the small business community. Advocacy commissioned research on small business contributions to economic growth, job creation, and innovation-and found that small business contributions were far greater than had ever been imagined. All or nearly all of the net new jobs were being generated by small firms. Small firms were creating 2.5 times as many innovations per employee as large firms, and more than half of private sector output came from small businesses. As this kind of information began to circulate, policymakers and the press also gave more attention to small business concerns. Books, articles and entire magazines began to focus on small business issues. The Congress and three presidents mandated White House Conferences on Small Business in 1980, 1986, and 1995 to hear from small business owners themselves about what they needed from the government. And the Office of Advocacy was responsive to small business' concerns, aggressively representing small firms before federal agencies and the Congress, and encouraging attention to small business in state governments. Major Accomplishments What has the Office of Advocacy done during the tenure of the current chief counsel for advocacy? That is the question this report will address. The United States Senate confirmed President Clinton's appointment of Jere W. Glover as chief counsel for advocacy on May 4, 1994. The following highlights some of the Office of Advocacy's achievements during the subsequent years. Implementation of the Small Business Regulatory Enforcement Fairness Act of 1996 Since the enactment of the Regulatory Flexibility Act (RFA) in 1980, the Office of Advocacy has had an oversight role in the implementation of the law. The RFA requires federal agencies to determine whether a proposed rule will have a disproportionate effect on small firms and other small entities and, if so, to explore alternative regulatory solutions. In 1996, Congress expanded Advocacy's role by passing the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA, Public Law 104-121). This law provides new avenues for small businesses to participate in and have access to the federal regulatory arena. The SBREFA gives small businesses: * a more meaningful voice in the development of regulations; * additional compliance assistance with respect to federal rules; and * new mechanisms for addressing enforcement actions by agencies. This new authority further empowers Advocacy on behalf of small businesses, allows small businesses to seek review of RFA compliance in court, and strengthens Advocacy's authority to file amicus curiae briefs in regulatory appeals. A landmark of the Office of Advocacy's contribution to the implementation of SBREFA was the chief counsel's decision to file an amicus curiae brief on January 7, 1998, in a case that is currently pending before the U.S. District Court for the District of Columbia, Northwest Mining v. Babbitt. Advocacy's strong support of a group of small businesses suing a federal agency has sent a message to agencies that: 1) small businesses matter; and 2) those that fail to comply with the RFA, as amended by SBREFA, run the risk of having their non-compliance reviewed by the courts. As a consequence, Advocacy has persuaded several agencies to comply with the RFA and SBREFA, and thus avoid similar challenges. Advocacy is publishing guidance that should help institutionalize the analytical processes mandated by the RFA. Immediately following the passage of SBREFA in March 1996, the Office of Advocacy issued a guide for small business. The office also held briefings for more than 600 federal officials on the requirements and procedures mandated by this amendment to the Regulatory Flexibility Act. Advocacy held a special conference for the economic analysts in each agency on how to size small businesses correctly and analyze the impact of agency regulations. Advocacy Support for Regulatory Changes in 1996-1997 Saved Small Firms an Estimated $2.4 Billion It is difficult to measure exactly what savings can be attributed exclusively to Advocacy's intervention in the regulatory process on behalf of small business, particularly given the wide range of issues the Office of Advocacy addresses, including taxes, procurement, banking, telecommunications, the environment, workplace safety, health care and food safety, fisheries, and many others. The Office of Advocacy is seldom the sole voice critiquing regulatory proposals or recommending changes. The comments it submits to agencies are often developed after a "reality check" with small business representatives to ensure that the small business impact assessments are correct. Having said this, however, the Office of Advocacy estimates that in the 1996-1997 period, regulatory changes supported by Advocacy saved small businesses about $2.4 billion in annual and one-time costs. This estimate is for only those changes where the cost savings are clearly measurable. Cost savings for other changes, although real, are less well defined. Study of Commercial Bank Lending to Small Business The Office of Advocacy has completed its fourth annual report focusing on small business lending activities of the nation's commercial bank lenders. This study is an analysis of the call reports filed by all federally regulated banks. The analysis determines which banks, large and small, are most likely to lend to small businesses, organized by state. The reports also categorize the banks by the percentage and dollar volume of their lending to small businesses. Advocacy's goal for this effort is twofold: to provide small businesses with an easy-to-use tool for locating the most likely sources of small business loans in their communities, and to stimulate competition among banks for increased small business lending. On the Internet: http://www.sba.gov/ADVO/lendinginus2.html. Creation of PRO-Net, A Small Business Contractor Internet List The Office of Advocacy successfully launched an Internet-based data base of small businesses called PRO-Net that is available to federal and state government agencies as well as prime and other contractors seeking small business contractors, subcontractors and partnership opportunities. PRO-Net, announced by Vice President Gore in June 1997, was created in response to Advocacy's concern that small businesses were not receiving a fair share of government contract dollars. After a successful demonstration period, information on approximately 200,000 small disadvantaged, women-owned and other small businesses seeking federal, state and private contracts will exist. PRO-Net systematizes make up-to-date information on small business and makes it readily and cheaply available to federal, state and prime-contracting officers and private companies. PRO-Net expedites and facilitates procurements for small businesses by customers including federal and state governments, prime contractors and even overseas buyers. On the Internet: http://pro-net.sba.gov. Creation of ACE-Net, an Internet Listing Service to Encourage Equity Investments in Small Firms The Office of Advocacy has created the first ever nationwide, centralized listing service to help make investments in small business less costly and more efficient. The Access to Capital Electronic Network (ACE-Net) is an exciting nationwide Internet-based listing service that provides information to potential investors on small, dynamic, growing businesses seeking $250,000 to $3 million in equity financing. ACE-Net, sponsored by the Office of Advocacy, was announced by President Clinton in October 1996. It is a major effort to expand and systematize, on a nationwide basis, information available to investors on firms, making an initial public offering of stocks. ACE-Net is a mechanism for addressing the critical gap in venture capital financing, identified by Advocacy's research, that America's growth companies face when seeking relatively modest early-stage financing. Once fully operational, ACE-Net will be run as a private, independent, not-for-profit organization. On the Internet: http://www.sba.gov/ADVO/. Support for Legislative Advances for Small Business Following up on the recommendations of the 1995 White House Conference on Small Business, the Office of Advocacy provided research in support of a number of laws designed to reduce small business tax, regulatory, and paperwork burdens. In addition to the Small Business Regulatory Enforcement Fairness Act of 1996, Advocacy supported provisions in the Taxpayer Relief Act of 1997, the Small Business Job Protection Act of 1996, and the Health Insurance Portability and Accountability Act of 1996. The Taxpayer Relief Act of 1997, after extended negotiations, was passed with a number of provisions strongly supported by the Office of Advocacy: * estate tax reform, * targeted capital gains rollovers, * increased deductions for health insurance for the self-employed, * exclusions for most small corporations from the paperwork burdens of the Alternative Minimum Tax calculations, * expanded home office deductions, and * postponed penalties for failure to comply with the Electronic Federal Taxpaying System. The Small Business Job Protection Act of 1996 contained a number of reforms endorsed by the Office of Advocacy and delegates to the 1995 White House Conference on Small Business: * increased expensing for small business, * pension simplification and reform, * subchapter S corporation reform, * extensions of R&D tax credit, education tax credit and work opportunity tax credit, and * improved independent contractor protection. The Health Insurance Portability and Accountability Act of 1996 responded to small business concerns about the cost of providing health insurance with: * a Medical Savings Accounts pilot program with 750,000 initial participants and * a health insurance deduction increase for the self-employed up to 80 percent by the year 2006. Creation of the First Government-Sponsored Data Base to Study Job Creation by Firms of Different Sizes In cooperation with the Bureau of the Census, the Office of Advocacy has developed a long-term data base to study the important role of small firms in job creation. Small businesses created more than 12 million jobs during the period between 1992 and 1996. This data base is the first effort to study the dynamics of job creation over time, and provides support for public policies that recognize the vital role small firms play in this process. Research and Implementation Support for the 1995 White House Conference on Small Business The third national White House Conference on Small Business was held in June 1995 in Washington and was attended by nearly 2,000 delegates. Some 20,000 small businesses participated in 59 state conferences and six regional conferences leading to the national conference. In the legislation authorizing the conference, the Congress mandated that SBA monitor and report to the delegates on the progress in implementing their recommendations and on important small business issues. Advocacy established networks of delegates and provided information through "regional issue chairs." In September 1996 and September 1997, the Office of Advocacy sent annual implementation reports to Congress, the President and the delegates. These reports indicated the unprecedented progress, compared with previous conferences, in implementing the recommendations of the 1995 White House Conference on Small Business. WHAT THE OFFICE OF ADVOCACY IS DOING TODAY The Office of Advocacy focuses on advancing policies that support the development and growth of American small business. The office is effectively guarding the interests of small business, ensuring a level playing field for small business, shaping small-business-friendly legislation, and promoting small business through major initiatives. Guarding the Interests of Small Business Economic research: the facts behind the policies "...the existence of a large and healthy community of small enterprises... ensures dispersion of economic power and is a safeguard against monopoly; it provides an economic climate conducive to individual initiative and opportunity; and it furnishes a countervailing force against the influence on public policy of an elite composed of owners and managers of giant firms." Thomas A. Kleppe, SBA Administrator, 1973. Economic research is critical to Advocacy's efforts to perpetuate a healthy community of small businesses. The information that is collected, the data that are constantly analyzed and disseminated, and the research projects that are funded are all invaluable tools for supporting, defending or challenging the policies and laws that affect small business. This type of information gives small business a powerful role in policymaking in an age of government regulation and statutory change. Economic research is the backbone of the Office of Advocacy and enables Advocacy and small businesses to fight for policies and programs that will create a healthier economic environment for small business. Advocacy's economic research team is the only unit in the federal government that develops and maintains data exclusively on small business and studies the impact of federal policy on small business. Other federal agencies do not focus their research studies specifically on data by firm size and small business' impact on the American economy. These data enable Advocacy to respond to hundreds of inquiries each year from Congress, the executive branch, regulatory agencies, interested trade associations, economic research institutions, and major and local newspapers. Economic research has uncovered information about new sources of financing, the changing characteristics of the self-employed, opportunities for women business owners, the impact of state and local tax incentives on small and large firms, how small firms survive competitive challenges by mass markets, the impacts of government contract bundling on small business, the disproportionate burden of federal regulations, the burdens of workers' compensation, pension fund investment trends, and tax implications. These and many other vital studies provide the necessary facts behind small business policy. Over the years, Advocacy research has proven not only to be a rich resource for policymakers at every level of government, but has formed the intellectual underpinning for legislative and regulatory initiatives that have taken place in the intervening years. A number of recent economic research projects are making a difference in the public policy arena, among them studies focusing on the profile of small business, the small business effects of regulation, and sources of capital available to small firms: Profile of Small Business * Small business share of the gross domestic product by industry. * The number and percentage of small firms receiving federal contracts. * The characteristics of small firm employees. * The number of small firm exporters by firm size. * The characteristics of home-based firms. * Small business contributions to the economy through the Small Business Innovation Research program. Impacts of Regulations on Small Business * Regulations that interfere with small firm job creation can damage the economy. * The differential impact of state and local tax incentives on small versus large firms. * The effects of electric utility deregulation and restructuring on small business. * The cost of regulations across federal agencies. Sources of Capital for Small Business: * The new equity capital market for emerging ventures. * Microenterprise lending: a ranking of the leading banks in the United States that make loans under $100,000. * The effects of bank mergers on small business lending. * An annual ranking of the most "small-business-friendly" banks in each state. (This report was quoted in newspapers across the country.) * Financing of high-tech startup firms. Policymakers have heard many complaints, mostly anecdotal, from small businesses about the costs of federal regulations to their businesses. The Office of Advocacy documented the evidence of these burdens in a 1994 commissioned survey. The report revealed that small firms are disproportionately burdened by the cost of regulatory compliance. In fact, firms with 20-49 employees reported spending nearly 20 cents of every revenue dollar to pay for the paperwork and operating costs attributable to regulations. The very smallest firms, those with one to four employees, spend annually as much as $32,000 per employee on regulatory compliance. These burdens do not include the cost of capital investments required for compliance. In fact, the burden of compliance is as much as 50 percent more for small businesses than their larger counterparts. In addition, a follow-up study in 1995 confirmed that tax compliance and payroll recordkeeping are the two largest components of regulatory burdens on small firms. These reports also identified small business compliance concerns later addressed in the Small Business Regulatory Enforcement Fairness Act, such as extensive outreach and assistance, interpretation of rules, and expanded flexibility of regulations to fit existing business practices. In recent years, the Office of Advocacy has intensified its efforts to increase small business access to capital. In 1997, the office published Small Business Lending in the United States, its third report on small business lending activities of the nation's commercial banks and holding companies. The report rates commercial lenders in each state on their performance in small business lending (defined as loans of less than $250,000). Another report, The Top Small Business Lending Banks in the United States, focuses on banks with portfolios of more than $1 billion in small business loans (loans of less than $250,000). The primary goal of both studies is to create an incentive for banks to increase the credit available to small business. Since publication of the "small-business-friendly" lender rankings, many large banks have started providing extensive services to new firms, helping them with the development of business plans and with assembling other necessary information required for loan approval. In addition, Advocacy annually summarizes all data available on small business in each state in State Small Business Profiles and Small Business Economic Indicators. These reports are the only sources of comprehensive, state-specific small business information in the United States. The most commonly asked economic questions about small business are compiled and widely disseminated in the Small Business Answer Card. Perhaps the most prominent and comprehensive publication is The State of Small Business: A Report of the President. The State of Small Business is submitted annually to the Congress by the President in accordance with the Small Business Economic Policy Act of 1980. The report contains the most recent economic and demographic statistics and information about small business trends. On the Internet: http://www.sba.gov/ADVO/stats. Ensuring a Level Playing Field for Small Business Analyzing regulatory impacts and developing policy options Responding to a concern that agency regulations were disproportionately burdensome on small businesses and therefore interfered with critical small business growth, Congress enacted the Regulatory Flexibility Act (RFA) in 1980. This act requires each federal agency to review its regulations, assess the impact on small entities, and develop alternatives to minimize the burden on small firms. In March 1996, the RFA was amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). These amendments increase opportunities for small businesses to participate in the regulatory process and create forums in which small businesses can be heard on agency enforcement actions and practices. Most important, this new law provides judicial review of an agency's failure to comply with the RFA and strengthens the chief counsel's authority to file amicus curiae ("friend of the court") briefs in cases on appeal. The chief counsel for advocacy is required to monitor agency compliance with the RFA, and possesses authority to intervene in appellate proceedings. Congress gave these responsibilities to the Office of Advocacy to leverage regulatory relief for small business. Advocacy reviews approximately 2,500 regulatory proposals per year-proposals dealing with taxes, the environment, workplace safety, procurement, fisheries, health care and food safety, and banking, among others. From these the office identifies the proposals that do not reflect the agency's compliance with the RFA and where the impacts could be significant, warranting Advocacy's intervention in the process to raise small business issues. Advocacy submits comments, often suggesting regulatory alternatives that an agency should consider. Many regulatory topics, it is fair to say, would not generate front page headlines, not even in the business section of the national media. But they are important to the small businesses affected-often in specific industries. For this reason, Advocacy works closely with a wide range of small business and industry trade associations to gather input on the practical impacts of regulations on small entities. Of particular importance is the Office of Advocacy's evaluation of proposals and intervention where there is little awareness by small businesses of a proposal or where the impact is so widespread that the small business sector is unlikely to coordinate efforts across industries. Advocacy relies heavily on the economic data compiled by its economic research team and the Bureau of the Census, and analyzed by its own economic staff, to evaluate agency actions. The value Advocacy adds to the regulatory process is the presentation of new, independently gleaned information on industry structure, profiles and impacts. How successful has Advocacy been? Over the last two years, changes supported by the Office of Advocacy produced an estimated $2.4 billion in annual and one-time cost savings. In some instances, the Office of Advocacy was not the sole voice critiquing a proposal or suggesting changes and cannot lay claim to the total savings achieved. In other instances, however, the office was involved in the earliest stages of regulatory development, arguing for changes that resulted in significant cost savings and changes to the proposal. The $2.4 billion estimate is for only those changes where the cost savings are clearly measurable. For example, Advocacy successfully argued that FCC should adopt a plan that telephone carriers would receive full funding to support universal service to high-cost and rural areas. Advocacy estimates that this change saved small business telephone users about $1.5 billion annually. In another instance, Advocacy argued that expansion of EPA's Toxic Release Inventory reporting requirements to seven industries should be postponed, an action estimated to have saved the industries $100 million in one-time costs. In other instances, the cost savings are less well defined. For example, the Office of Advocacy intervened with the Internal Revenue Service when it proposed that businesses with federal deposits greater than $50,000 begin filing electronically by January 1, 1997. The office successfully argued that the mandated filing should be postponed six months to give small businesses time to adjust their business practices and records to meet the new requirement. There is no way of measuring the costs this postponement saved the 1.4 million small businesses affected by the proposal. The Office of Advocacy has helped achieve regulatory advances for small businesses in a variety of areas, and this report provides a sampling of those achievements. Environmental Regulation OMB, EPA and Advocacy Make Key Progress In Implementation of the SBREFA Panels. The Office of Advocacy is working hard with the Office of Management and Budget (OMB) and the Environmental Protection Agency (EPA) to implement the small business advocacy review panels required under SBREFA. This process requires the EPA to solicit advice from small entities, including small businesses, even before proposing a rule with a major small business impact. The first panel report concerned a rulemaking that would set emissions controls for manufacturers of diesel engines for equipment that does not operate on the road (for example, farm equipment and forklifts). The panel, which consisted of representatives from EPA, OMB and SBA, presented to the EPA Administrator five recommendations for regulatory relief based on options presented by the small entities. All five suggestions were included in the agency's proposed rule, published September 24, 1997. The EPA also convened a panel for a water pollution rule affecting industrial laundries. The EPA proposed a small business exemption that would exclude approximately 7 percent of all laundries, based on the inconsequential discharges of these smallest facilities. Because of the Office of Advocacy's efforts, the panel and the EPA agreed to seriously consider and solicit comment on both a no-regulation option and a wider small business exemption. This rule was proposed in December 1997. Toxic Release Inventory Reporting Postponed for Seven Industries. As a result of Advocacy intervention, the Environmental Protection Agency agreed to make some key concessions for small businesses in light of expanded reporting requirements under the agency's Toxic Release Inventory rulemaking. The final rule, issued by the agency on May 1, 1997, delayed reporting requirements until July 1999 for the seven new industry sectors, and the agency is reviewing the reporting requirements in order to decrease paperwork burdens. Environmental Achievements at a Glance. In recent years, environmental regulations have accounted for roughly one-third of all new regulatory costs imposed on the industry. Therefore, the Office of Advocacy has long focused on the environmental problems of small business. Among past achievements are the following: * The EPA reduced the costs of numerous water pollution rules for small businesses without significantly increasing water pollution. * Congress used an Advocacy proposal to eliminate an unnecessary provision in the 1990 Clean Air Act, saving the nation more than $1 billion, while preserving environmental protection. * The EPA eliminated unnecessary hazardous waste tank standards for small quantity generators of hazardous wastes. * The EPA agreed to advise states to use regulatory flexibility concepts in the development of state plans to attain the costly ozone and particulate matter standards, as required by federal law. Telecommunications Advocacy Leads Fight to Save Small Firms $1.5 Billion in Telephone Costs. In a major victory for small business, the Federal Communications Commission (FCC) rejected one major provision of the Recommended Decision of the Federal-State Joint Board on Universal Service, implementing universal service provisions of the Telecommunications Act of 1996. The Office of Advocacy persuaded the FCC to eliminate the proposed differential treatment of businesses with one line and those with multiple lines. The FCC then adopted a plan to ensure that telephone carriers that serve residential and business telephone users-even those with multiple lines in high-cost and rural areas-will continue to receive full funding support for universal service until other mechanisms are developed to fund the cost of providing service to high-cost and rural areas. This decision is an unqualified win for rural America and small business. FCC Includes Small Local Telephone Exchanges in Interconnection Order. For the first time, the FCC did not exclude the 1,300 small local exchange companies (which the FCC previously claimed were exempted from consideration under the RFA) in its Final Regulatory Flexibility Analysis Interconnection Order. Small local exchange carriers have since been able to participate in the FCC's regulatory flexibility analysis process and aid in discovering alternatives that would ease the economic burden on all small carriers. Relief for Small Stations from the Emergency Alert Systems Order. The Office of Advocacy successfully argued for the FCC to provide economic relief for small and wireless cable systems that must comply with the mandatory installation of emergency alert systems (EAS). The FCC extended the installation deadline for those small systems that have 5,000 or fewer subscribers. The original deadline would have had a significant adverse economic impact on small systems, given the tremendous cost of EAS equipment. Because of the assistance of Advocacy, small systems now have more time to pay for and install EAS equipment. Small, Minority-Owned, and Women-Owned Stations are Protected. An Advocacy letter successfully argued for a delay in the FCC's adoption of final rules for three inter-related proceedings on broadcast ownership until the FCC could complete analyses of the impact of mergers and acquisitions on small, minority-owned, and women-owned stations; of the impact of duopolies; and of the status of video programming distribution in the marketplace. Taxation Postponement of the Electronic Federal Taxpaying System. In July 1996, the Internal Revenue Service (IRS) began to notify 1.4 million small businesses (those with annual federal deposits of more than $50,000) that by November 1, 1996, they were required to register for electronic taxpaying, to begin by law on January 1, 1997. This announcement caught many small businesses unprepared. The small business community was concerned, in view of the penalties, that many small firms would be forced to divert time and resources to meet the deadline. The Office of Advocacy notified the IRS of this concern before the law was took effect and worked with the IRS commissioner to: * establish a postponement of the penalty imposition for six months, * educate small businesses on what the new law requires, and * develop materials and strategies to make sure no small business was caught unaware. IRS Responds to the Need for an Independent Contractor Manual. The Office of Advocacy, working with the small business community, urged the IRS to state its current position on worker classification (that is, the difference between an "independent contractor" and an "employee" where both are hired by the same business) because the classification can have significant tax implications for small businesses. Advocacy also urged the uniform enforcement of this definition nationwide and stressed that correction, rather than debilitating penalties, should be the goal. The IRS responded in March 1997, by issuing a new, comprehensive "Worker Classification Training Manual," which was submitted to the small business community for comment prior to publication. The IRS also instituted a centralized training course for all its field agents and set up a procedure for a quick, reduced-penalty settlement when a business complies with the laws it believes to be applicable and agrees to abide by the IRS's finding in the future. IRS Farm Products Regulation Inadvertently Affects Nurseries. The Office of Advocacy worked with the small business community to urge the IRS to exempt nurseries from an undue paperwork collection requirement imposed by a proposed IRS ruling on capitalizing costs associated with producing farm products. This rule would have required nurseries to keep an inventory of each plant and allocate costs to it. After Advocacy informed the IRS that a Regulatory Flexibility Act analysis should have been done, the IRS announced that it would clarify the rules to exempt nurseries. Industrial Safety Protecting the Small Air Tour Operator. After ongoing negotiations and Advocacy's notice of intent to file an amicus curiae brief with the U.S. Court of Appeals in the D.C. Circuit, the Federal Aviation Administration (FAA) admitted to the court erroneously certifying a final rule limiting tourist flights over the Grand Canyon National Park and agreed to conduct thorough RFA analyses on the small business impact before proposing rules in the future. Protecting Small Steel Operators. At the Office of Advocacy's insistence, the Occupational Safety and Health Administration (OSHA) agreed to analyze the feasibility and cost to small business steel of fabricators of changing steel beams to comply with a proposed rule regarding steel erection in the construction workplace. Procurement Small Entities and Contract Negotiations with the Government. The Office of Advocacy responded to a Federal Acquisition Regulation (FAR) Council proposed rule that attempted to implement major changes in how the government negotiates contracts. The small business community, along with the Office of Advocacy, voiced strong concerns about this rule and the proposal's expected impairment of small business competition. After providing testimony and filing comments, Advocacy was able to persuade the FAR Council to make changes to the proposal and undertake a much more detailed regulatory analysis of the impact of the proposal on small businesses. Commerce Atlantic Spotter Planes. The Office of Advocacy developed a good working relationship with the National Oceanic and Atmospheric Administration (NOAA) and made major steps toward bringing NOAA into Regulatory Flexibility Act compliance. NOAA proposed a rule that would eliminate more than 80 percent of the spotter plane industry. The Office of Advocacy intervened and NOAA modified the rule so that it affected less than 20 percent of the industry. Right Whales. An initial NOAA proposal regarding right whales contained extensive regulations that would adversely affect several of the fisheries in the mid-Atlantic and the Northeast Atlantic. After the Office of Advocacy expressed its concerns about the proposed rule, NOAA agreed that the regulation was far more extensive than necessary for protecting the right whale. NOAA made adjustments to the rule to lessen the impact on the fisheries, to allow for flexibility in compliance, and to minimize the area affected by the rule. International Trade Quota for Watches from the Virgin Islands. The Office of Advocacy submitted comments to the Department of Commerce concerning a proposal to reduce the quota for watches being imported from the Virgin Islands. The Office of Advocacy pointed out that the proposed reduction in the quota would significantly affect small firms relying on these imports, and the proposal exceeded the statutory limit of no more than 10 percent per year. As a result, the agency revised the rule to bring the reduction within the statutory limit. A full accounting of the Office of Advocacy's Regulatory Flexibility Act work can be found in the annual editions of The Annual Report of the Chief Counsel for Advocacy on Implementation of the Regulatory Flexibility Act. On the Internet: http://www.sba.gov/ADVO/laws/flex/. Shaping Small-Business-Friendly Legislation Protecting the interests of the small business owner Since Chief Counsel for Advocacy Jere Glover's appointment in 1994, the Congress has requested his testimony 25 times on a wide variety of issues ranging from health care deductions to the flat tax; from procurement incentive programs to the cost of government regulation; and from EPA's particulate matter and ozone rules to small business credit availability. Many positions of the chief counsel are drafted after economic research by the Office of Advocacy has revealed a need for new policy. On the Internet: http://www.sba.gov/ADVP/laws. Legislative Progress Since the 1995 White House Conference on Small Business The 1995 White House Conference on Small Business, held in June 1995, developed an action agenda for small business-60 public policy recommendations submitted to the Congress and the Administration. Before the national conference, the Office of Advocacy held a series of 15 focus groups to tap the insights, experiences, and perspectives of a diverse group of experts who were knowledgeable about small business issues. The Office of Advocacy then prepared an issue book summarizing the research available on those issues. Almost 20,000 small business people participated in 59 state conferences held across the country, where 2,000 delegates were elected to represent their states' small business interests. The Office of Advocacy facilitated the organization of regional implementation teams. These delegates have remained committed to working in their issue areas to promote the final 60 recommendations. The Office of Advocacy re-convened the delegates for a strategy summit in December 1996 to develop an action plan to achieve further implementation of the issue recommendations. Since the conference, the Congress and the president have directed the Office of Advocacy to provide the necessary support for monitoring issues, reviewing and reporting on various items, and reporting to the delegates. As part of this responsibility, the Office of Advocacy publishes an annual report on the White House Conference on Small Business featuring a matrix that highlights administrative and congressional response to the White House Conference issue recommendations. This constant interchange with the delegates and highlighting of conference recommendations often provides the background for working on proposed rules and legislation that affect small businesses. To date, the number of 1995 White House Conference recommendations that have contributed to administrative policy changes and resulted in legislation exceeds that from any previous White House Conference on Small Business. Legislation passed pursuant to the White House Conference recommendations includes the following: 1997 * Balanced Budget Act * Taxpayer Relief Act 1996 * Small Business Regulatory Enforcement Fairness Act * Small Business Job Protection Act * Health Insurance Portability and Accountability Act * Economic Growth and Regulatory Paperwork Reduction Act * Telecommunications Act * Federal Acquisition Reform Act * National Securities Markets Improvement Act * Small Business Programs Improvement Act 1995 * Small Business Lending Enhancement Act Promoting Small Business through Major Initiatives In touch with the 21st century The Office of Advocacy utilizes all available technological resources to support the small business community. Advocacy's major initiatives respond to critical needs within the small business community for additional sources of capital; new avenues for partnerships with federal, state and local governments; and easier access to the federal government and its many resources. In particular, the Office of Advocacy is proud of the newly created PRO-Net and ACE-Net systems. Creation of PRO-Net: The Procurement Marketing and Access Network The Procurement Marketing and Access Network (Pro-Net) is a nationwide Internet data base of information on small, disadvantaged, minority-owned, and women-owned businesses. Pro-Net is available to federal and state government agencies, as well as prime and other contractors seeking small business contractors, subcontractors, and/or partnership opportunities. Announced by Vice President Gore in June 1997, the interactive data base is expanding daily to include all small businesses seeking federal, state, and private contracts. Background.The federal government spends about $200 billion a year on the procurement of goods and services; state and local governments spend an additional $200 billion in acquisitions. Taken together, state and federal purchases amount to about $1,600 per American. Small firms annually receive about 20 percent of all federal prime contract dollars and another 14 to 19 percent of the federal procurement pie in subcontracts. Large firms, representing less than 5 percent of businesses, receive more than 60 percent of all federal procurement dollars. The Need. It is difficult and time-consuming for federal and state governments and prime contracting officers to locate small firms that are interested, capable, and available to perform specific contract or subcontract functions. It is even more difficult to find small disadvantaged, minority-owned, and women-owned firms. Recent procurement reforms favoring government efficiencies, contract consolidation, increased goals for women-owned businesses, and race-neutral mandates for expanding procurement opportunities exacerbate the difficulties and shorten time-frames for finding capable and competitive small, small disadvantaged, minority-owned, and women-owned businesses. The Solution. Pro-Net provides efficient Internet access to business and marketing information on thousands of small, small disadvantaged, minority-owned, and women-owned businesses. The system also provides easy interactive communications among federal and state governments, prime contracting officers, and prospective vendors. The Pro-Net system facilitates electronic commerce between government and private buying entities and small business vendors. This new system provide "one-stop shopping" for government agencies and prime contractors and gives them a powerful state-of-the-art tool to efficiently access small, disadvantaged, minority-owned, and women-owned businesses. PRO-Net also provides a new low-cost marketing dimension for small firms, since they can update their firm information at will and keep it current with the touch of a button. On the Internet: http://pro-net.sba.gov/. Creation of ACE-Net: The Access to Capital Electronic NetworkSM The Access to Capital Electronic Network (ACE-Net) is a nationwide Internet-based listing service that provides information to "angel" or accredited investors on dynamic, growing businesses seeking $250,000 to $5 million in equity financing. President Clinton announced ACE-Net in October 1996. It is a major effort by the Office of Advocacy to systematize on a nationwide basis and expand information available to investors on firms seeking equity financing. The Need. ACE-Net was developed in response to a critical need faced by growing U.S. companies and identified through Advocacy-sponsored research. While many businesses are able to raise up to $250,000 through family, friends, and founders, they have significant difficulties finding capital as they move into the next round of financing when they typically seek between $250,000 and $5 million. The venture capital industry is no longer providing financing in this range: the size of the average venture financing deal has grown to approximately $6.5 million. This leaves a critical gap for the majority of America's growth companies seeking relatively modest early-stage financing. The Solution. ACE-Net solves the financing gap problem by allowing accredited "angel" investors to view the securities offerings of small, growing companies via the Internet. Angel investors are typically wealthy individuals with significant business experience. It is estimated that 250,000 angel investors invest upwards of $20 billion annually in more than 30,000 ventures. Estimates also suggest that the number of potential investors exceeds that number by a factor of five to ten. While angel financing often ranges from $100,000 to several million dollars, until ACE-Net, there had been no nationwide, centralized listing service identifying small, dynamic, growing companies for angel investors to investigate and examine. Advocacy has helped break down many of the state regulatory barriers to interstate investments with the development of ACE-Net. Once fully operational, ACE-Net will be run as a private, independent, not-for-profit organization. On the Internet: http://www.sba.gov/ADVO/ace-net.html. Model Stock Purchase Agreement Continuing in its aggressive efforts to reduce the cost of capital and improve access to capital for small businesses, the Office of Advocacy developed a model stock purchase agreement for private placements. While most private placement stock purchases share the same terms and conditions, there was no standardized agreement. Retaining counsel to draft an agreement tailored to each separate transaction is exceedingly expensive. With this new model agreement, small businesses may tailor the form to suit their needs, like a residential sales contract, and avoid unnecessary costs while protecting their interests. On the Internet: http://ace-net.sr.unh.edu/. The U.S. Business Advisor: One-Stop Internet Information Center Another way the Office of Advocacy promotes small business is through its partnering with other agencies to create valuable resources. Advocacy teamed with the Department of Commerce, working in conjunction with the Vice President's Office of National Performance Review, to develop the U.S. Business Advisor. This on-line Internet program is small business' one-stop computerized shop for laws, regulations, and compliance aids issued throughout the federal government. The system also is hyper-linked to other federal home pages that can instantly provide resource material, even cyber-comments and feedback, to small business owners. On the Internet: http://www.business.gov. Office of Advocacy Internet Homepage The Office of Advocacy has established its Web site, the premier site for small business statistics and research. Information at the site includes Advocacy comment letters, congressional testimony, publications, facts and data on small firms, research reports, and documents of interest to small business. The Advocacy Homepage includes information about Office of Advocacy initiatives and White House Conference progress. In addition, it is linked to a variety of other sites that have helpful information about relevant laws, and statistics and data of help to those who support the small business community. On the Internet: http://www.sba.gov/ADVO/. THE OFFICE OF ADVOCACY: MISSION, ORGANIZATION, AND FUNCTIONS Authority Public Law 94-305 enacted June 4, 1976, established the Office of Advocacy within the U.S. Small Business Administration to represent and advance small business interests before Congress and federal agencies. The Office of Advocacy was designed to enhance small business competitiveness in the American economy. The law establishes a number of broad mandates for the Office of Advocacy. Among its primary responsibilities, the office is required to: "examine the role of small business in the American economy and the contribution small business can make in improving competition . . .stimulating innovation and entrepreneurship, and providing an avenue through which new and untested products and services can be brought to the marketplace. . . . measure the direct costs and other effects of government regulation on small business and make legislative and non-legislative proposals for eliminating excessive or unnecessary regulation of small businesses: . . . study the ability of financial markets and institutions to meet small business credit needs. . . recommend specific measures for creating an environment in which all businesses will have the opportunity to compete effectively and expand to their full potential, and to ascertain the common reasons, if any, for small business successes and failures: . . ." counsel small businesses on how to resolve questions and problems concerning the relationship of the small business to the federal government . . . represent the views and interests of small businesses before other Federal agencies whose policies and activities may affect small business; and enlist the cooperation and assistance of public and private agencies, businesses and other organizations in disseminating information about the programs and services provided by the Federal Government which are of benefit to small businesses." To carry out its mission to "counsel, assist, and protect small business, "the Office of Advocacy works with small businesses and small business organizations, the Congress, the Administration, trade associations, and other groups to develop government policy in support of small business. The Chief Counsel for Advocacy The Office of the Chief Counsel consists of the chief counsel for advocacy, a presidential appointee, confirmed by the Senate. The chief counsel for advocacy has a unique position in the federal government, charged by Congress to represent the views and interests of the nation's 23.2 million business owners before federal policy makers. Chief Counsel for Advocacy Jere W. Glover was confirmed by the Senate in May 1994. Mr. Glover worked for the Federal Trade Commission and then the House of Representatives in the 1970s and in the Office of Advocacy as deputy chief counsel. Subsequently, Mr. Glover was in the private practice of law where he represented small business clients and trade associations. Working under the direction of the chief counsel, the Office of Advocacy is divided into three primary offices: the Office of Economic Research, the Office of Interagency Affairs, and the Office of Public Liaison. In addition, the chief counsel oversees the work of a regional advocate in each of the SBA's ten regions. Economic Research The Office of Economic Research is the only unit of the federal government to develop and maintain data on exclusively small business and to study the impact of federal policy on small businesses. Other federal agencies, such as the Bureau of Labor Statistics (BLS) or the Census, study the entire economy by establishment or place of business, regardless of the owner, while others such as the Department of Agriculture's Economic Research Service study the farm economy only. By law, the economic research team must: * maintain a thorough small business data base and statistics, * provide the statistical underpinning for Advocacy's comments on the impact of regulations on small business, * prepare annually The State of Small Business: A Report of the President, * collect and disseminate statistics on minority- and women-owned firms, * analyze minority and small business procurement statistics, and * provide data on the debt and equity markets for small firms. The Office of Economic Research collects and disseminates data on the nation's small businesses from various federal agencies and conducts studies on issues that affect small business. This information is combined with statistics from a data base at the Bureau of the Census, in which 1,200 industries are catalogued by four-digit SIC code and 90 industries state-by-state by two-digit SIC code. These vital statistics are needed so that Congress, policymakers, and the small business community can use them to make informed decisions about existing laws, proposed legislation, trends in the economy and their impact on small business. Interagency Affairs With this research, the Office of Advocacy is able to fill a unique role in government: its mission is to ensure that federal policymakers are aware of the impact of their decisions on small businesses. The Office of Interagency Affairs is responsible for preparing formal statements on proposed regulations, which are typically communicated in the form of regulatory comments to federal agencies or testimony before Congress. In the past two years, the Office of Interagency Affairs has submitted more than 100 comments on regulations. Since his confirmation, Chief Counsel Glover has testified before Congress on numerous occasions. The policy positions delineate the impact of policy on small business and often provide alternatives that will be less burdensome on or better suited to small business. The result of Advocacy's participation is a savings to many small businesses and/or an increased position in the marketplace. Participation in these formal and informal forums allows the Office of Advocacy to help fashion federal policy to the needs of small business. In addition, the office represents small business interests working with numerous policymaking boards and organizations. One major force driving Advocacy's Office of Interagency Affairs is the Regulatory Flexibility Act, which requires agencies to review their rules to assess their impact on small entities. When the impact will have a significant effect on a substantial number of small entities, the agency must analyze the ramifications of the rule and examine alternatives that will reduce adverse impacts or enhance beneficial impacts. In 1996, the Small Business Regulatory Enforcement Fairness Act was signed into law. (P.L. 104-121). This law provides for judicial review of regulations where an agency has failed to comply with the Regulatory Flexibility Act. The Office of Interagency Affairs has developed procedures to review proposed federal regulations, determine whether the RFA applies, and examine whether the agency complied with the RFA. When agencies do not comply, the office informs the agency of its failure. In some cases the failure is procedural, but in most cases where the office intervenes formally, the office files substantive comments about the agency's proposal, its impact on small entities, and alternatives that should have been examined by the agency. The new law affirms the authority of the chief counsel for advocacy to file an amicus curiae brief in cases under appellate review. Finally, the work of the Office of Interagency Affairs is reported to Congress in the Annual Report of the Chief Counsel for Advocacy on Implementation of the Regulatory Flexibility Act. The Office of Interagency Affairs also serves as a resource to other parts of the SBA on matters of federal policy. This function usually takes the form of preparing responses to the Office of Management and Budget on proposed legislation or assisting SBA in analyzing its own rules. The office served and continues to serve as an informational resource to the delegates of the 1995 White House Conference on Small Business. Public Liaison Public Law 94-305, which established the Office of Advocacy, has broad implications for Advocacy outreach and reporting efforts. Among other things, the law requires the office to "(1) examine the role of small business in the American economy and the contribution which small business can make in improving competition...(2) assess the effectiveness of existing Federal ...assistance programs for small business...(3) measure the direct costs and other effects of regulation on small businesses." The Office of Public Liaison is a key player in meeting the Office of Advocacy's mandate to conduct outreach to small businesses and trade associations, disseminate information of benefit to small business, and to publish the results of the office's research on small business contributions to the economy. The Small Business Advocate, a monthly newsletter which is also produced by Advocacy's Office of Public Liaison, reports on key legislative and regulatory concerns, economic trends, and state and local developments affecting small businesses. Regional Advocates A significant part of Advocacy's mission is accomplished by interaction with key participants in small business legislative and regulatory developments at the state and local level. Regional advocates located in the 10 SBA regions throughout the nation support this effort. The regional advocates serve as the "eyes and ears" for Advocacy's chief counsel in the field and play an important role in identifying topics of concern to the small business community. Regional advocates played a major role in the 1995 White House Conference on Small Business, ensuring that state delegations to the national conference represented a balanced cross-section of the small business community. They maintain an ongoing liaison with delegates, regional implementation and issue chairs to pursue implementation of the 60 recommendations adopted by the conference. Regional Advocates are the mainstay in the Offices of Advocacy's effort to communicate information directly to small businesses across the country, thus ensuring small business knowledge of and participation in policy decisions. The regional advocates bring the tools and products developed by the Office of Advocacy and the federal government to the front door of business and make the knowledge gained available to state and local legislatures and councils. THE FUTURE OF THE OFFICE OF ADVOCACY: THE NEED CONTINUES Looking to the future, the Office of Advocacy will continue to play a critical role within the small business community as an independent voice before the Congress and other branches of government. The vital goals continue: be an effective guardian of small businesses and provide valuable information on small business contribution to the economy. But importantly, Office of Advocacy must get ahead of the curve with early identification of small business policy needs. And Advocacy must identify new ways for small businesses to participate in policy making and holding their government accountable. The facts are indisputable. Small firms are a driving force in the economy and should be a focus in 21st century policy developments. The number of small businesses in the United States has increased 49 percent since 1982. Small businesses employ 53 percent of the private work force, contribute 47 percent of all sales in the country, and are responsible for 51 percent of the gross private domestic product. Industries dominated by small firms produced an estimated 75 percent of the 2.5 million new jobs created during 1995. Women and minorities are entering the small business community in ever- increasing numbers. More than 7.7 million women-owned firms provide jobs for 15.5 million persons, more than are employed in the Fortune 500 industrial firms. During the 1987-1992 period, the number of women-owned businesses increased 43 percent, while the number of black-owned businesses rose by 46 percent. Hispanic-owned businesses are among the fastest growing segments of the U.S. business population. Businesses owned by Asian Americans, American Indians, and other minorities increased by 87.2 percent. The Office of Advocacy monitors these numbers year to year and reports the changes in this critical sector of our economy. Without the Office of Advocacy playing a pivotal role in protecting the interests of small businesses, * important data on small business trends and statistics would not be tracked and analyzed, * 21st century technologies would not be used to address the market deficiencies that affect small business, * legislation would not be made more small-business-friendly, * government regulations would adversely affect numerous small entities and industries, diminishing the nation's small businesses and work force, and * vital publications and information would not be communicated to the small business community, members of Congress and the Administration, state legislators and officials, trade associations, the press, economic researchers, and the general public. Congress, in its wisdom, created the Office of Advocacy to work on behalf of small businesses. The Congress recognized that the marketplace did not automatically create a level playing field: what was needed was an advocate, a watchdog for small business. Despite successes, small businesses still need assistance in locating access to capital, identifying government resources, remaining in touch with changing policies, and staying on top of increasing regulation that affects their operations. Now more than ever, the Office of Advocacy is needed to protect, represent, and advance small business interests before Congress and federal agencies. To prepare for 21st century policy debates, legislative initiatives and proposed agency rules, the Office of Advocacy must focus its efforts on the important tasks and questions at hand, including the impact on small business of: * bankruptcy reform, * bank mergers, * rapid growth in women-owned firms, * new tax proposals, * electricity deregulation, * health care market changes, and * technology advances. These and other issues are crucial to the growth and survival of many small businesses. The U.S. economy is a changing landscape with new challenges and public policies constantly emerging to affect small firms. If history and the technological changes of the past 10 years are any indication of the future, the Office of Advocacy will have to advance future-oriented century policies that address small business impacts of the fast-changing markets. The Office of Advocacy will continue in its mission to be the small business community's link to the federal government, to affect public policy deliberations, enhance economic opportunities for entrepreneurs, identify economic trends, ensure that regulations do not impose undue burdens, and fulfill its congressional mandate on behalf of small business.