August 13, 1998
Major General Mario F. Montero, Jr.
Commander
U.S. Army Military Traffic Management Command
5611 Columbia Pike (701 NAS)
Falls Church, VA 22041-5050
Dear Commander Montero:
On June 10, 1998, the Military Traffic Management Command (MTMC), as Program Director for the Department of Defense (DoD) Personal Property Program, announced its intent to utilize a new automated distance calculation product known as the Defense Table of Official Distances (DTOD) in the DoD personal property program. All other existing products used in distance calculation will no longer be recognized or accepted by DoD. DoD's goal is to streamline the program by having only one system of distance calculation for line-haul transportation.
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration was created in 1976 to represent the views and interests of small business in federal policy making activities.(1) The Chief Counsel participates in rulemakings when he deems it necessary to ensure proper representation of small business interests. In addition to these responsibilities the Chief Counsel monitors compliance with the Regulatory Flexibility Act (RFA), and works with federal agencies to ensure that their rulemakings demonstrate an analysis of the impact that their decisions will have on small businesses.
According to MTMC, the instant proposal will have "no significant impact on small businesses since those businesses currently use one or more similar distance calculation products." 63 Fed. Reg. at 31,762. MTMC goes on to state that "[t]his change is related to public contracts and is designed to standardize distance calculations . . . [and] is not considered rule making within the meaning of the Regulatory Flexibility Act." Id. (citation omitted).
The Office of Advocacy believes that MTMC has not considered adequately its obligations under the RFA. Moreover, based on the published notice, the Office of Advocacy does not have sufficient information to determine the accuracy of MTMC's assessment regarding impact. In other words, DoD's assessment regarding impact may be true, but the agency has not provided a factual basis to support its conclusions.
It is generally true that the RFA does not apply if a rule is not subject to notice and comment under the Administrative Procedure Act (APA).(2) Section 553(a) clearly states that there are exceptions to notice and comment rulemaking: (1) where a military or foreign affairs function of the U.S. are involved; or (2) where matters relating to agency management or personnel or to public property, loans, grants, benefits, or contracts are involved. MTMC apparently relies on the public contracts exemption to remove itself from notice and comment requirements.
However, even when notice and comment is not required under the APA, the RFA may still apply in one specific circumstance-when an agency is required to do notice and comment rulemaking pursuant to some other statute. Section 601(2) of the RFA reads: "the term 'rule' means any rule for which the agency publishes a general notice of proposed rulemaking pursuant to section 553(b) of this title, or any other law." (emphasis added). In the instant case, the "other law" is the Federal Procurement Policy Act, 41 U.S.C. § 418(b). The statute mandates the publication of a proposed procurement policy with a comment period of no less than 30 days on the proposal.
The request for comments published in the June 10 notice appears to be an after thought relating to an established policy rather than a request for comments on a proposal and its impact. Post hoc rationalization of established policy sets a dangerous precedent that typically has been viewed unfavorably by the courts. For instance, the third circuit has stated that:
"[i]f a period for comments, after issuance of a rule, could cure a violation of the APA's requirements, an agency could negate at will the Congressional decision that notice and an opportunity for comment must precede promulgation. Provisions of prior notice and comment allows effective participation in the rulemaking process while the decision maker is still receptive to information and argument. After the final rule is issued, the petitioner must come hat-in hand and run the risk that the decision maker is likely to resist change." Sharon Steel Corp. v. EPA, 597 F.2d 377, 381 (3rd Cir. 1979).
Since the Office of Advocacy believes that the RFA does apply, MTMC should have complied with its provisions and prepared an initial regulatory flexibility analysis (IRFA) in order to assess the impact of the proposal and to aid in the identification of less burdensome alternatives. To begin with, MTMC's assessment of "no significant impact" ignores the potential cost to a number of small businesses who have been able to pay as little as $100 annually in the past for mileage guides. (3)MTMC has not indicated in its proposal the estimated cost of the new software/guides, nor have they considered or analyzed the impact of the new requirements on small businesses. Simply stating that most businesses currently use similar products, and therefore will not experience a significant increase in costs, does not provide a sufficient factual basis upon which to effect such a drastic policy change. Moreover, MTMC's statement does not meet the standard established in section 605(b) of the RFA that requires agencies to provide a factual basis for certifying that a rule will not have a significant economic impact on a substantial number of small entities.
Placing the certification issue aside, the true course in this instance should have been to prepare an IRFA pursuant to section 603 of the RFA. Section 603(a) states:
"Whenever an agency is required by section 553 of this title, or any other law, to publish general notice of proposed rulemaking for any proposed rule, . . . the agency shall prepare and make available for public comment an initial regulatory flexibility analysis. Such analysis shall describe the impact of the proposed rule on small entities."
The requirements for an IRFA are fairly straightforward and are outlined in section 603(b) of the RFA. Of all the requirements, the description of significant alternatives which minimize significant economic impact of the proposed rule on small entities, is arguably the most important element in an IRFA. It is here that MTMC could have studied ways to accomplish its objectives, yet reduce the cost to small businesses. For instance, would hard copies be cheaper than acquiring and updating the software; and if so, will that be an option? Is the only reason for the change in policy to simplify the administrative process for MTMC; and if so, does the cost of the policy change outweigh the benefit? These are just a few questions that MTMC should have considered.
The Office of Advocacy submits these comments for MTMC's consideration and requests that the agency republish its proposal with an IRFA. We also request a meeting to discuss MTMC's present and future compliance with the RFA and other issues that relate to small businesses. This office is prepared to assist you in your compliance efforts. Please do not hesitate to contact us at 202-205-6533.
Sincerely,
Jere W. Glover
Chief Counsel for Advocacy
Shawne Carter McGibbon
Asst. Chief Counsel for Advocacy
cc: Lt. Col. Phyllis Cokley, Principal Assistant Responsible for Contracting (313 NAS)
ENDNOTES
1. Regulatory Flexibility Act, 5 U.S.C. § 601, as amended by the Small Business Regulatory Enforcement Fairness Act, Pub. L. No. 104-121, 110 Stat. 866 (1996).
2. 5 U.S.C. § 601(2).
3. Based on anecdotal evidence from a number of small businesses.
* Last Modified: 6/14/01