The PRESIDING OFFICER. Under the previous order, we will now turn to S. 942.

The clerk will report.

The legislative clerk read as follows:

A bill (S. 942) to promote increased understanding of Federal regulations and increased voluntary compliance with such regulations by small entities, to provide for the designation of regional ombudsmen and oversight boards to monitor the enforcement practices of certain Federal agencies with respect to small business concerns, to provide relief from excessive and arbitrary regulatory enforcement actions against small entities, and for other purposes.

The Senate proceeded to consider the bill, which had been reported from the Committee on Small Business, with an amendment to strike all after the enacting clause and inserting in lieu thereof the following:

SECTION 1. SHORT TITLE.
This Act may be cited as the `Small Business Regulatory Enforcement Fairness Act of 1996'.

SEC. 2. FINDINGS.
Congress finds that--

(1) a vibrant and growing small business sector is critical to creating jobs in a dynamic economy;

(2) small businesses bear a disproportionate share of regulatory costs and burdens;

(3) fundamental changes that are needed in the regulatory and enforcement culture of federal agencies to make agencies more responsive to small business can be made without compromising the statutory missions of the agencies;

(4) three of the top recommendations of the White House Conference on Small Business involve reforms to the way government regulations are developed and enforced, and reductions in government paperwork requirements;

(5) the requirements of the Regulatory Flexibility Act have too often been ignored by government agencies, resulting in greater regulatory burdens on small entities than necessitated by statute; and

(6) small entities should be given the opportunity to seek judicial review of agency actions required by the Regulatory Flexibility Act.

SEC. 3. PURPOSES.
The purposes of this Act are--

(1) to implement certain recommendations of the 1995 White House Conference on Small Business regarding the development and enforcement of Federal regulations;

(2) to provide for judicial review of the Regulatory Flexibility Act;

(3) to encourage the effective participation of small businesses in the Federal regulatory process;

(4) to simplify the language of Federal regulations affecting small businesses;

(5) to develop more accessible sources of information on regulatory and reporting requirements for small businesses;

(6) to create a more cooperative regulatory environment among agencies and small businesses that is less punitive and more solution-oriented; and

(7) to make Federal regulators more accountable for their enforcement actions by providing small entities with a meaningful opportunity for redress of excessive enforcement activities.

SEC. 4. EFFECTIVE DATE.
This Act shall become effective on the date 90 days after enactment.

TITLE I--REGULATORY COMPLIANCE SIMPLIFICATION

SEC. 101. DEFINITIONS.
For purposes of this Act--

(1) the terms `rule' and `small entity' have the same meanings as in section 601 of title 5, United States Code;

(2) the term `agency' has the same meaning as in section 551 of title 5, United States Code; and

(3) the term `small entity compliance guide' means a document designated as such by an agency.

SEC. 102. COMPLIANCE GUIDES.
(a) Compliance Guide: For each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis under section 604 of title 5, United States Code, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as `small entity compliance guides'. The guides shall explain the actions a small entity is required to take to comply with a rule or group of rules. The agency shall, in its sole discretion, ensure that the guide is written using sufficiently plain language to be understood by affected small entities. Agencies may prepare separate guides covering groups or classes of similarly affected small entities, and may cooperate with associations of small entities to develop and distribute such guides.
(b) Single Source of Information: Agencies shall cooperate to make available to small entities through a single source of information, the small entity compliance guides and all other available information on statutory and regulatory

requirements affecting small entities.
(c) Limitation on Judicial Review: Except as provided by this subsection, an agency's designation of a small entity compliance guide shall not be subject to judicial review. In any civil or administrative action against a small entity for a violation occurring after the effective date of this section, the content of the small business guide may be considered as evidence of the reasonableness or appropriateness of any proposed fines, penalties or damages.

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SEC. 103. INFORMAL SMALL ENTITY GUIDANCE.
(a) In General: Whenever appropriate in the interest of administering statutes and regulations within the jurisdiction of an agency, it shall be the practice of the agency to answer inquiries by small entities concerning information on and advice about compliance with such statutes and regulations, interpreting and applying the law to specific sets of facts supplied by the small entity. In any civil or administrative action against a small entity, guidance provided by an agency to a small entity may be considered as evidence of the reasonableness or appropriateness of any proposed fines, penalties or damages imposed on such small entity.
(b) Program: Each agency shall establish a program for issuing guidance in response to such inquiries no later than 1 year after enactment of this section, utilizing existing functions and personnel of the agency to the extent practicable.

SEC. 104. SERVICES OF SMALL BUSINESS DEVELOPMENT CENTERS.
Section 21(c)(3) of the Small Business Act (15 U.S.C. 648(c)(3)) is amended--

(1) in subparagraph (O), by striking `and' at the end;

(2) in subparagraph (P), by striking the period at the end and inserting a semicolon; and

(3) by inserting after subparagraph (P) the following new subparagraphs:

`(Q) providing assistance to small business concerns regarding regulatory requirements, including providing training with respect to cost-effective regulatory compliance;

`(R) developing informational publications, establishing resource centers of reference materials, and distributing compliance guides published under section 102(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 to small business concerns; and

`(S) developing programs to provide confidential onsite assessments and recommendations regarding regulatory compliance to small business concerns and assisting small business concerns in analyzing the business development issues associated with regulatory implementation and compliance measures.'.

SEC. 105. MANUFACTURING TECHNOLOGY CENTERS.
The Manufacturing Technology Centers and other similar extension centers administered by the National Institute of Standards and Technology of the Department of Commerce shall, as appropriate, provide the assistance regarding regulatory requirements, develop and distribute information and guides and develop the programs to provide confidential onsite assessments and recommendations regarding regulatory compliance described in Section 104 of this Act.

TITLE II--REGULATORY ENFORCEMENT REFORMS

SEC. 201. SMALL BUSINESS AND AGRICULTURE ENFORCEMENT OMBUDSMAN.
The Small Business Act (15 U.S.C. 631 et seq.) is amended--

(1) by redesignating section 30 as section 31; and

(2) by inserting after section 29 the following new section:

`SEC. 30. OVERSIGHT OF REGULATORY ENFORCEMENT.
`(a) Definitions: For purposes of this section, the term--

`(1) `Board' means a Regional Small Business Regulatory Fairness Board established under subsection (c); and

`(2) `Ombudsman' means the Small Business and Agriculture Regulatory Enforcement Ombudsman designated under subsection (b).
`(b) SBA Enforcement Ombudsman:

`(1) Not later than 180 days after the date of enactment of this section, the Administration shall designate a Small Business and Agriculture Regulatory Enforcement Ombudsman utilizing existing personnel to the extent practicable. Other agencies shall assist the Ombudsman and take actions as necessary to ensure compliance with the requirements of this section. Nothing in this section is intended to replace or diminish the activities of any Ombudsman or similar office in any other agency.

`(2) The Ombudsman shall--

`(A) work with each agency with regulatory authority over small businesses to ensure that small business concerns that receive or are subject to an audit, on-site inspection, compliance assistance effort, or other enforcement related communication or contact by agency personnel are provided with a confidential means to comment on and rate the performance of such personnel;

`(B) establish means to solicit and receive comments from small business concerns regarding actions by agency employees conducting compliance or enforcement related activities with respect to the small business concern, and maintain the identity of the person and small business concern making such comments on a confidential basis; and

`(C) based on comments received from small business concerns and the Boards, annually report to Congress and affected agencies concerning the enforcement activities of agency personnel including a
rating of the responsiveness to small business of the various regional and program offices and personnel of each agency; and

`(D) coordinate and report annually on the activities, findings and recommendations of the Boards to the Administration and to the heads of affected agencies.
`(c) Regional Small Business Regulatory Fairness Boards:

`(1) Not later than 180 days after the date of enactment of this section, the Administration shall establish a Small Business Regulatory Fairness Board in each regional office of the Small Business Administration.

`(2) Each Board established under paragraph (1) shall--

`(A) meet at least annually to advise the Ombudsman on matters of concern to small businesses relating to the enforcement activities of agencies;

`(B) report to the Ombudsman on instances of excessive enforcement actions of agencies against small business concerns including any findings or recommendations of the Board as to agency enforcement policy or practice; and

`(C) prior to publication, provide comment on the annual report of the Ombudsman prepared under subsection (b).

`(3) Each Board shall consist of five members appointed by the Administration, after receiving the recommendations of the chair and ranking minority member of the Small Business Committees of the House and Senate.

`(4) Members of the Board shall serve for terms of three years or less.

`(5) The Administration shall select a chair from among the members of the Board who shall serve for not more than 2 years as chair.

`(6) A majority of the members of the Board shall constitute a quorum for the conduct of business, but a lesser number may hold hearings.
`(d) Powers of the Boards:

`(1) The Board may hold such hearings and collect such information as appropriate for carrying out this section.

`(2) The Board may use the United States mails in the same manner and under the same conditions as other departments and agencies of the Federal Government.

`(3) The Board may accept donations of services necessary to conduct its business.

`(4) Members of the Board shall serve without compensation, provided that, members of the Board shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business in the performance of services for the Board.'.

SEC. 202. RIGHTS OF SMALL ENTITIES IN ENFORCEMENT ACTIONS.
(a) In General: Each agency regulating the activities of small entities shall establish a policy or program to provide for the reduction, and under appropriate circumstances for the waiver, of civil penalties for violations of a statutory or regulatory requirement by a small entity.
(b) Conditions and Exceptions: Policies or programs established under this section may contain conditions or exceptions such as--

(1) requiring the small entity to correct the violation within a reasonable correction period;

(2) limiting the applicability to violations discovered by the small entity through participation in a compliance assistance or audit program operated or supported by the agency or a State, or through a compliance audit resulting in disclosure of the violation;

(3) exempting small entities that have been subject to multiple enforcement actions by the agency;

(4) exempting violations involving willful or criminal conduct; and

(5) exempting violations that pose serious health, safety or environmental threats or risk of serious injury.

TITLE III--EQUAL ACCESS TO JUSTICE ACT AMENDMENTS

SEC. 301. ADMINISTRATIVE PROCEEDINGS.
Section 504(b)(1) of title 5, United States Code, is amended--

(1) by striking `$75' in subparagraph (A) and inserting `$125';

(2) by striking `, or (ii)' in subparagraph (B) and inserting `, (ii)';

(3) at the end of subparagraph (B), by striking `;' and inserting the following: `, or (iii) a small entity as defined in section 601;';

(4) by striking `; and' in subparagraph (D) and inserting `;'; and

(5) by adding at the end the following new subparagraphs:

`(F) `prevailing party' includes a small entity with respect to claims in an adversary adjudication brought by an agency (1) that the small entity has raised a successful defense to, or (2) with respect to which the decision of the adjudicative officer is substantially less than that sought by the agency in the adversary adjudication, provided that such small entity has not committed a willful violation of the law or otherwise acted in bad faith, and

`(G) in an adversary adjudication brought by an agency against a small entity, in the determination whether the position of the agency, including any citation, assessment, fine, penalty or demand for settlement sought by the agency, is `substantially justified' only if the agency demonstrates that such position does not substantially exceed the decision of the adjudicative officer in the adversary adjudication, and the position of the agency is consistent with agency policy.'.

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SEC. 302. JUDICIAL PROCEEDINGS.
Section 2412 of title 28, United States Code, is amended in paragraph (d)(2)--

(1) by striking `$75' in subparagraph (A) and inserting `$125';

(2) by striking `, or (ii)' in subparagraph (B) and inserting `, (ii)';

(3) by striking `; and' subparagraph (G) and inserting `;';

(4) in subparagraph (H)--

(i) after `prevailing party,' by inserting `includes a small entity with respect to a claim in a civil action brought by the United States (1) that the small entity has raised a successful defense to, or (2) with respect to which the final judgement in the action is substantially less than that sought by the United States, provided that such small entity has not committed a willful violation of the law or otherwise acted in bad faith, and'; and

(ii) at the end of the subparagraph, by striking the period and inserting `; and'; and

(5) by adding at the end the following new subparagraph:

`(I) In a civil action brought by the United States against a small entity, a position of the United States, including any citation, assessment, fine, penalty or demand for settlement sought by an agency, is `substantially justified' only if the United States demonstrates that such position does not substantially exceed the value of the final judgement in the action, and the position of the United States is consistent with agency policy.'.

TITLE IV--REGULATORY FLEXIBILITY ACT AMENDMENTS

SEC. 401. REGULATORY FLEXIBILITY ANALYSES.
(a) Initial Regulatory Flexibility Analysis.--Section 603(a) of title 5, United States Code, is amended--

(1) by inserting after `proposed rule', the phrase `, or publishes a notice of interpretive rule making of general applicability for any proposed interpretive rule'; and

(2) by inserting at the end of the subsection, the following new sentence: `In the case of interpretive rule making involving the internal revenue laws of the United States, this section applies only to regulations as that term is used in section 7805 of the Internal Revenue Code of 1986 that impose a record keeping, reporting or paperwork requirement on small entities.'.
(b) Final Regulatory Flexibility Analysis.--Section 604 of title 5, United States Code, is amended--

(1) in subsection (a) to read as follows:
`(a) When an agency promulgates a final rule under section 553 of this title, after being required by that section or any other law to publish a general notice of proposed rulemaking, or otherwise publishing an initial regulatory flexibility analysis, the agency shall prepare a final regulatory flexibility analysis. Each final regulatory flexibility analysis shall contain--

`(1) a succinct statement of the need for, and objectives of, the rule;

`(2) a summary of the issues raised by the public comments in response to the initial regulatory flexibility analysis, a summary of the assessment of the agency of such issues, and a statement of any changes made in the proposed rule as a result of such comments;

`(3) a description of, and an estimate of the number of, small entities to which the rule will apply or an explanation of why no such estimate is available;

`(4) a description of the projected reporting, record keeping and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and

`(5) a description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency was rejected.'; and

(2) in subsection (b), by striking `at the time' and all that follows and inserting `such analysis or a summary thereof.'.

SEC. 402. JUDICIAL REVIEW.
Section 611 of title 5, United States Code, is amended to read as follows:

`611. Judicial review
`(a)(1) For any rule subject to this chapter, a small entity that is adversely affected or aggrieved by agency action is entitled to judicial review of agency compliance with the requirements of this chapter, except the requirements of sections 602, 603, 609 and 612.
`(2) Each court having jurisdiction to review such rule for compliance with section 553 of this title or under any other provision of law shall have jurisdiction to review any claims of noncompliance with this chapter, except the requirements of sections 602, 603, 609 and 612.
`(3)(A) A small entity may seek such review during the period beginning on the date of final agency action and ending one year later, except that where a provision of law requires that an action challenging a final agency action be commenced before the expiration of such one year period, such lesser period shall apply to a petition for judicial review under this section.
`(B) In the case where an agency delays the issuance of a final regulatory flexibility analysis pursuant to section 608(b) of this chapter, a petition for judicial review under this section shall be filed not later than--

`(i) one year after the date the analysis is made available to the public, or

`(ii) where a provision of law requires that an action challenging a final agency regulation be commenced before the expiration of the one year period, the number of days specified in such provision of law that is after the date the analysis is made available to the public.
`(4) If the court determines, on the basis of the rulemaking record, that the agency action under this chapter was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law, the court shall order the agency to take corrective action consistent with this chapter, which may include--

`(A) remanding the rule to the agency, or

`(B) deferring the enforcement of the rule against small entities, unless the court finds good cause for continuing the enforcement of the rule pending the completion of the corrective action.
`(5) Nothing in this subsection shall be construed to limit the authority of any court to stay the effective date of any rule or provision thereof under any other provision of law or to grant any other relief in addition to the requirements of this section.
`(b) In an action for the judicial review of a rule, the regulatory flexibility analysis for such rule, including an analysis prepared or corrected pursuant to paragraph (a)(4), shall constitute part of the entire record of agency action in connection with such review.
`(c) Except as otherwise required by this chapter, the court shall apply the same standards of judicial review that govern the review of agency findings under the statute granting the agency authority to conduct a rule making.
`(d) Compliance or noncompliance by an agency with the provisions of this chapter shall be subject to judicial review only in accordance with this section.
`(e) Nothing in this section bars judicial review of any other impact statement or similar analysis required by any other law if judicial review of such statement or analysis is otherwise permitted by law.'.

SEC. 403. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Section 605(b) of title 5, United States Code, is amended to read as follows:
`(b) Sections 603 and 604 of this title shall not apply to any proposed or final rule if the head of the agency certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. If the head of the agency makes a certification under the preceding sentence, the agency shall publish such certification in the Federal Register, at the time of publication of general notice of proposed rule making for the rule or at the time of publication of the final rule, along with a statement providing the factual and legal reasons for such certification. The agency shall provide such certification and statement to the Chief Counsel for Advocacy of the Small Business Administration.'.
(b) Section 612 of title 5, United States Code, is amended--

(1) in subsection (a), by striking `the committees on the Judiciary of the Senate and the House of Representatives, the Select Committee on Small Business of the Senate, and the Committee on Small Business of the House of Representatives' and inserting `the Committees on the Judiciary and Small Business of the Senate and House of Representatives'.

(2) in subsection (b), by striking `his views with respect to the' and inserting in lieu thereof, `his or her views with respect to compliance with this chapter, the adequacy of the rulemaking record and the'.

SEC. 404. SMALL BUSINESS ADVOCACY REVIEW PANELS.
(a) Small Business Outreach and Interagency Coordination: Section 609 of title 5, United States Code, is amended--

(1) before `techniques,' by inserting `the reasonable use of';

(2) in paragraph (4), after `entities', by inserting `including soliciting and receiving comments over computer networks';

(3) by designating the current text as subsection (a); and

(4) by adding the following new subsection:
`(b) Prior to publication of an initial regulatory flexibility analysis--

`(1) an agency shall notify the Chief Counsel for Advocacy of the Small Business Administration and provide the Chief Counsel with information on the potential impacts of the proposed rule on small entities and the type of small entities that might be affected;

`(2) the Chief Counsel shall identify individuals representative of affected small entities for the purpose of obtaining advice and recommendations from those individuals about the potential impacts of the proposed rule;

`(3) the agency shall convene a review panel for such rule consisting wholly of full time federal employees of the office within the agency responsible for carrying out the proposed rule, the Office of Information and Regulatory Affairs within the Office of Management and Budget, and the Chief Counsel;

`(4) the panel shall review any material the agency has prepared in connection with this chapter, collect advice and recommendations of the small entity representatives identified by the agency after consultation with the Chief Counsel, on issues related to subsection 603(b), paragraphs (3), (4) and (5);

`(5) the review panel shall report on the comments of the small entity representatives and its findings as to issues related to subsection 603(b), paragraphs (3), (4) and (5), provided that such report shall be made public as part of the rulemaking record; and

`(6) where appropriate, the agency shall modify the proposed rule or the decision on whether an initial regulatory flexibility analysis is required.
`(c) Prior to publication of a final regulatory flexibility analysis--

`(1) an agency shall reconvene the review panel established under paragraph (b)(3), or if no initial regulatory flexibility analysis was published, undertake the actions described in paragraphs (b)(1) through (3);

`(2) the panel shall review any material the agency has prepared in connection with this chapter, collect the advice and recommendations of the small entity representatives identified by the agency after consultation with the Chief Counsel, on issues related to subsection 604(a), paragraphs (3), (4) and (5);

`(3) the review panel shall report on the comments of the small entity representatives and its findings as to issues related to subsection 604(a), paragraphs (3), (4) and (5), provided that such report shall be made public as part of the rulemaking record; and

`(4) where appropriate, the agency shall modify the final rule or the decision on whether a final regulatory flexibility analysis is required.
`(d) An agency may in its discretion apply subsections (b) and (c) to rules that the agency intends to certify under subsection 605(b), but the agency believes may have a greater than de minimis impact on a substantial number of small entities.'.
(b) Small Business Advocacy Chairpersons: Not later than 30 days after the date of enactment of this Act, the head of each agency that has conducted a final regulatory flexibility analysis shall designate a small business advocacy chairperson using existing personnel to the extent possible, to be responsible for implementing this section and to act as permanent chair of the agency's review panels established pursuant to this section.

The PRESIDING OFFICER. The Senator from Missouri.

[Page: S2151]
Mr. BOND. Mr. President, my ranking member, Senator Bumpers, and I are very pleased to be able to bring to the floor this vitally important small business regulatory reform bill. I want to express at the beginning my heartfelt thanks to Senator Bumpers, to his staff, and to the many Members on both sides of the aisle and their staffs who helped us work on this measure. We will be presenting a managers' amendment very shortly, when they complete drafting all of the good ideas that came in.

We had a very good hearing on this in the Small Business Committee. Lots of people have had good ideas. We have been able to incorporate most of them. We are not able to handle all of them. But this measure is targeted clearly to small business.

As we come up on the first anniversary of the White House Conference on Small Business, I think it is very important that we move forward. I appreciate the Members who have allowed us to go forward today with this bill.

As most of my colleagues know, last June almost 2,000 delegates to the White House Conference on Small Business came to Washington to vote on an agenda of top concerns for small business. The top 60 recommendations were published by the conference last September as a report to the President and Congress entitled, `Foundation for a New Century.' Three of the top recommendations in the White House conference call for reforms in the way that Government regulations are developed, the way they are enforced, and reforms in Government paperwork requirements.

The common theme of all recommendations is the need to change the culture of Government agencies, the need to provide a responsive ear and a responsive attitude toward small business and small entities.

Let me emphasize, while we are talking about small business, many people just think maybe it is the business downtown on the square or the mom-and-pop operation or the small contractor, but this bill also includes small entities. We have many entities of local government, charitable entities, educational entities, that would be affected and would be protected by the provisions in this bill.

We held a hearing in Atlanta, GA, on small business. We were very graciously provided the facilities of Georgia Tech to hold that hearing. The president of Georgia Tech was kind enough to come and be with us. As he and I listened to the concerns of small business, he told me afterward, `It is amazing how many of these concerns actually affect small

colleges and universities as well.' So, while traditionally we think of the small for-profit entities, there are benefits as well for nonprofits, for governmental entities, and charitable organizations as well as educational entities.

One of the top recommendations of the conference of the White House and small business was to put teeth into the Regulatory Flexibility Act, to provide regulatory relief for small entities, small businesses, small towns, small school districts, small nonprofit organizations. Back in 1980, Congress passed what was called the Regulatory Flexibility Act. I suppose regulatory flexibility came from the idea that Federal agencies are supposed to look at the issuance of regulations and make them flexible, so the impact on the small entities could be made flexible enough to carry out the purpose of the underlying statute under which the regulations were issued, without imposing unnecessary burdens on those small entities, hence the name regulatory flexibility. `Be flexible,' is what Congress told Federal agencies, `in dealing with regulations impacting small entities, small businesses, and not-for-profits.'

There is a problem with that. Congress said we are not going to have any judicial enforcement of regulatory flexibility. With that, too many Federal agencies took that as a sign to say we are not going to pay any attention to it. When small businesses said, `Have you paid attention to regulatory flexibility,' they said, `No, it did not apply.' Even the advocacy council, the Small Business Administration, has been totally stiffed by many Federal agencies when it has gone before them and said, `Look, we serve small business and believe there is a problem. It is not a reg-flex-compliant, small-entity regulation that you have issued.'

We had hearings before the Small Business Committee in the past year, where the SBA's chief counsel for advocacy indicated that not only was regulatory flexibility being ignored, but that there is a tremendous burden on small business in many of these regulatory directives. In general, they say that the burden on small business is some 50 to 80 percent more per employee than it is for larger businesses.

Let me cite just one particular statistic that I found striking. In a manufacturing business, a large business can calculate that all the Federal regulations that I think we would all agree are designed to achieve worthwhile purposes of worker safety, a healthy environment, and a whole range of issues that we work on, cost about $2.50 per hour per employee.

For every hour that is worked, the manufacturing business pays the employee his or her salary, plus they have to calculate another $2.50. For a small manufacturing business with 50 or fewer employees, that costs $5 an hour. That means the small business starts off with a $2.50 an hour penalty over what the larger business has to pay. That makes our small businesses less competitive with larger businesses. It also makes our small businesses much less competitive with overseas competitors who may not have those burdens.

As a result, there has been strong bipartisan support to provide for judicial enforcement of the Regulatory Flexibility Act. The President has called for it. The Administrator of the Small Business Administration has called for it. Leading Members on both sides of the aisle in this body have called for it.

Mr. President, I ask unanimous consent to have printed in the Record letters of support for S. 942 that come from the National Federation of Independent Business, the Small Business Legislative Council, the National Retail Federation, the National Association of Home Builders, Associated Builders and Contractors, the National Association of Towns and Townships, and the National Association of Manufacturers.

There being no objection, the letters were ordered to be printed in the Record, as follows:
NATIONAL FEDERATION OF

Independent Business,
Washington, DC, March 7, 1996.

Hon. Christopher Bond,
Chairman, U.S. Senate,
Washington, DC.

Dear Mr. Chairman: On behalf of the more than 600,000 small business owners of the National Federation of Independent Business (NFIB), I urge all your colleagues to support S. 942, the Small Business Regulatory Enforcement Fairness Act of 1996. The Bond-Bumpers legislation includes important provisions that have been top priorities for NFIB members for many years. It also includes provisions that were recommended by small business owners at the 1995 White House provisions that were recommended by small business owners at the 1995 White House Conference on Small Business. The bill has these important elements:

Strengthening the Regulatory Flexibility Act

Provisions that would encourage a more cooperative regulatory enforcement environment regulation.

Updating the Equal Access to Justice Act.

Providing for the judicial review of the Regulatory Flexibility Act of 1980 is of particular concern to the small business community because it has the potential to fulfill the promise of that 16 year old law. The purpose of `reg.flex.' was to fit regulations to the scale and resources of the regulated entity. A strong `reg.flex.' process will provide a substantial measure of the regulatory reform that small business owners have wanted for years.

The vote on S. 942 will be a `Key Small Business Vote' of the 104th Congress.

Sincerely,
DONALD A. DANNER,

Vice President,
Federal Government Relations.

--

--
SMALL BUSINESS

Legislative Council,
Washington, DC, March 7, 1996.

Hon. Christopher Bond,
Committee on Small Business, Washington, DC.

[Page: S2152]
Dear Mr. Chairman: On behalf of the Small Business Legislative Council (SBLC), I wish to express our strong support for your legislation to amend the Regulatory Flexibility Act (RFA) to add judicial review, and to make other small business regulatory process improvements.

As long-time supporters of the RFA, we know from first-hand experience that agencies have been able to ignore the law due to the lack of judicial review. At the time of the enactment of the original RFA, we thought it was a risk we could reluctantly accept in order for us to overcome the then formidable resistance of the bureaucracy to the entire law. Time has proven that the price was too much to pay.

The original concept of the original law is still sound. The goal is to have agencies undertake an analysis of proposed rules to determine whether they have an adverse impact on small business. If such a determination is made, then the agency must explore alternatives to mitigate the impact on small business. Unfortunately, agencies have simply ignored the law in the absence of judicial review.

Small business is at the regulatory breaking point. All too frequently, small business owners tell us, `I am not sure I can advise my son or daughter to join me in the business. It is not worth it, the hassles outweigh the joys. They just might be better off working for someone else.' It is time to reverse that trend.

Enactment of the judicial review amendment to the RFA was one of the priority recommendations of last year's White House Conference on Small Business.

Congratualtions on this initiative! We look forward to working with you towards the passage and enactment.

The SBLC is a permanent, independent coalition of nearly one hundred trade and professional associations that share a common commitment to the future of small business. Our members represent the interests of small businesses in such diverse economic sectors as manufacturing, retailing,
distribution, professional and technical services, construction, transportation, and agriculture. Our policies are developed through a consensus among our membership. Individual associations may express their own views. For your information, a list of our members is enclosed.

Sincerely,

Gary F. Petty,
Chairman of the Board.

Enclosure.

MEMBERS OF THE SMALL BUSINESS LEGISLATIVE COUNCIL
Air Conditioning Contractors of America.

Alliance for Affordable Health Care.

Alliance for American Innovation.

Alliance of Independent Store Owners and Professionals.

American Animal Hospital Association.

American Association of Equine Practitioners.

American Association of Nurserymen.

American Bus Association.

American Consulting Engineers Council.

American Council of Independent Laboratories.

American Gear Manufacturers Association.

American Machine Tool Distributors association.

American Road & Transportation Builders Association.

American Society of Interior Designers.

American Society of Travel Agents, Inc.

American Subcontractors Association.

American Textile Machinery Association.

American Trucking Associations, Inc.

American Warehouse Association.

Architectural Precast Association.

Associated Builders & Contractors.

Associated Equipment Distributors.

Associated Landscape Contractors of America.

Association of Small Business Development Centers.

Automotive Service Association.

Automotive Recyclers Association.

Bowling Proprietors Association of America.

Building Service Contractors Association international.

Business Advertising Council.

Christian Booksellers Association.

Council of Fleet Specialists.

Council of Growing Companies.

Direct Selling Association.

Electronics Representatives Association.

Florists' Transworld Delivery Association.

Health Industry Representatives Association.

Helicopter Association International.

Independent Bankers Association of America.

Independent Medical Distributors Association.

International Association of Refrigerated Warehouses.

International Communications Industries Association.

International Formalwear Association.

International Franchise Association.

International Television Association.

Machinery Dealers National Association.

Mail Advertising Service Association.

Manufacturers Agents National Association.

Manufacturers Representatives of America, Inc.

Mechanical Contractors Association of America, Inc.

National Association for the Self-Employed.

National Association of Catalog Showroom Merchandisers.

National Association of Plumbing-Heating-Cooling Contractors.

National Association of Private Enterprise.

National Association of Realtors.

National Association of Retail Druggists.

National Association of RV Parks and Campgrounds.

National Association of Small Business Investment Companies.

National Association of the Remodeling Industry.

National Chimney Sweep Guild.

National Electrical Contractors Association.

National Electrical Manufacturers Representatives Association.

National Food Brokers Association.

National Independent Flag Dealers Association.

National Knitwear & Sportswear Association.

National Lumber & Building Material Dealers Association.

National Moving and Storage Association.

National Ornamental & Miscellaneous Metals Association.

National Paperbox Association.

National Shoe Retailers Association.

National Society of Public Accountants.

National Tire Dealers & Retreaders Association.

National Tooling and Machining Association.

National Tour Association.

National Wood Flooring Association.

NATSO, Inc.

Opticians Association of America.

Organization for the Protection and Advancement of Small Telephone Companies.

Petroleum Marketers Association of America.

Power Transmission Representatives Association.

Printing Industries of America, Inc.

Professional Lawn Car Association of America.

Promotional Products Association International.

The Retailer's Bakery Association.

Small Business Council of America, Inc.

Small Business Exporters Association.

SMC Business Councils.

Society of American Florists.

Turfgrass Producers International.

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National Retail Federation,
Washington, DC, March 13, 1996.

Hon. Kit Bond,
Chairman, Committee on Small Business, U.S. Senate, Washington, DC.

Dear Kit: On behalf of the National Retail Federation (NRF) and America's 1.4 million U.S. retail establishments, I am writing to strongly support your bipartisan, `Small Business Regulatory Enforcement Fairness Act' (S. 942). For years Main Street retailers have been shouting for relief from the federal regulatory nightmare. The bipartisan legislation you've assembled should provide exactly that.

This bill includes important relief for small retailers--in particular strengthening the Regulatory Flexibility Act. Reg-Flex was designed to force federal regulators to consider the excessive burden regulations place on small businesses. The improvements included in this bill will give family-owned retailers the hammer necessary to break the regulatory juggernaut. It will help provide Main Street businesses with the common sense solutions they have been searching for.

Other features of the bill such as its `Plain English' requirement and its direction to agencies to set-up programs to waive civil penalties for first-time violations are also important and valuable. Small retailers simply cannot afford to spend valuable time in non-productive activities.

Again thank you on behalf of America's retailers and the one in five Americans employed in the retail industry for your leadership in important regulatory relief.

Sincerely,
JOHN J. MOTLEY III,

Senior Vice President,
Government and Public Affairs.

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NATIONAL ASSOCIATION

of Home Builders,
Washington, DC, March 7, 1996.

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Dear Senator: It is my understanding that you may be considering S. 942, the Small Business Regulatory Enforcement Fairness Act of 1996. S. 942 was reported to the full Senate unanimously by the Senate Small Business Committee on March 6, and on behalf of the 185,000 member firms of the National Association of Home Builders (NAHB), I urge you to support this bill and oppose any weakening amendments.

S. 942 is based on several recommendations of the White House Conference on Small Business (the Conference) which addresses the regulatory burden currently faced by small businesses in the United States. First of all, S. 942 would require federal agencies to streamline and simplify their regulations. Secondly, this legislation would create a Small Business and Agriculture Enforcement Ombudsman to compile the comments of small businesses with respect to regulatory enforcement, and annually rate agencies based on these comments. While this is a step in the right direction, NAHB would respectfully suggest that the Ombudsman be given meaningful authority to intervene on behalf of an aggrieved small business.

Additionally, S. 942 would establish a meaningful judicial review process for regulations under the Regulatory Flexibility Act, enabling small business owners to challenge onerous regulations in court, forcing agencies to ensure that rules do not adversely impact small businesses.

Many of our members were active participants in the Conference. Hence, we feel strongly that the recommendations adopted by the Conference should be implemented by Congress. As the recent report of the Small Business Administration (SBA) points out, small businesses currently shoulder a disproportionate share of the regulatory burden and generally have the least amount of resources to devote to regulatory compliance.

Most NAHB members are truly small businesses, and we support the provisions of S. 942. This legislation has broad, bipartisan support, and we strongly urge you to pass this bill without any weakening amendments.

Thank you for considering our views.

Sincerely,

Randall L. Smith,
President.

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ASSOCIATED BUILDERS

and Contractors, Inc.,
Rosslyn, VA, March 11, 1996.

Hon. Christopher S. Bond,
U.S. Senate,
Washington, DC.

Dear Senator Bond: The Senate will soon be considering the Small Business Regulatory Enforcement Fairness Act of 1996 (S. 942). On behalf of Associated Builders and Contractors (ABC)--and its more than 18,000 contractors, subcontractors, material suppliers, and related firms from across the country--I urge you to support the legislation.

S. 942 will implement key recommendations from the 1995 White House Conference on Small Business aimed to facilitate compliance with federal regulatory and administrative requirements imposed on the private sector. ABC believes S. 942 is an important step in managing the increasing regulatory burden on U.S. companies and small businesses in particular.

In particular, the legislation would strengthen enforcement of the Regulatory Flexibility Act. It would grant judicial review to ensure regulatory flexibility requirements are carried out by allowing small businesses to challenge certain agency actions or inactions in court. This will help enforce the Regulatory Flexibility Act, which was intended to require that federal agencies `fit regulatory and informational requirements to the scale of the businesses.' It is critical that Congress enact this judicial `hammer' to enforce agencies to address regulatory impacts on small businesses.

Although the nation's regulations are intended to benefit the public, they in fact place a disproportionate burden on small businessmen and women--those who actually create the vast majority of jobs in America. The Small Business Regulatory Enforcement Fairness Act of 1996 will help alleviate this main obstruction to economic development and free America's small business owners to generate valuable jobs.

The majority of ABC's members are small businesses. The U.S. Small Business Administration has identified construction contractors as one of the top small business-dominated industries responsible for generating a significant number of new jobs annually. In fact, from 1993 to 1994, general building and specialty construction contractors created almost 290,000 new jobs.

Over-regulation is not only burdensome for small businesses, but also impacts the economy. For the construction industry, excessive regulation translates into higher costs that are eventually passed onto the consumer for private sector contracts. Over-regulation on public sector contracts costs the federal government and the taxpayer millions of dollars per year. An additional burden is placed on the nation's economy because the increased cost of doing business from excessive regulations results in fewer jobs.

Again, ABC urges you to vote in support of S. 942 to help improve the ability of small businesses to comply with federal regulations. The Small Business Regulatory Enforcement Fairness Act of 1996 will encourage small business participation in the regulatory process and provide the necessary opportunity for redress of arbitrary enforcement actions. Thank you for your consideration of this important matter.

Sincerely,
CHARLOTTE W. HERBERT,

Vice President,
Government Affairs.

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NATIONAL ASSOCIATION OF

Towns and Townships,
Washington, DC, March 7, 1996.

Hon. Kit Bond,
Chairman, Small Business Committee, U.S. Senate, Washington, DC.

Dear Senator Bond: The National Association of Towns and Townships (NATaT) would like to thank you for your leadership in developing legislation to strengthen the Regulatory Flexibility Act of 1980 (RFA). NATaT strongly supports S. 942, the Small Business Regulatory Enforcement Fairness Act of 1996. NATaT has long supported judicial review of the Regulatory Flexibility Act (RFA), which is a major component of S. 942.

NATaT represents approximately 13,000 of the nation's 39,000 general purpose units of local governments. Most of our member local governments are small and rural and have fewer than 10,000 residents. These small communities simply do not have the resources to comply with many mandates and regulations in the same fashion that larger localities are able. The impact of federal regulations on small localities was understood by the authors of the RFA and small localities were therefore included under the definition of small entities in that act.

NATaT has long recognized the failings of the RFA and has fought to strengthen it over the years. We have concluded that the only way to get federal agencies to take notice of their responsibilities under the RFA is to allow small entities to take an agency to court for failure to follow the provisions of the RFA. Strong judicial review language would do just that. NATaT strongly supports the judicial review language and would oppose any efforts to weaken it.

Tom Halicki,
Executive Director.

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NATIONAL ASSOCIATION

of Manufacturers,
Washington, DC, March 7, 1996.

Hon. Christopher S. `Kit' Bond,
U.S. Senate, Senate Russell Office Building, Washington, DC.

Dear Kit: The National Association of Manufacturers (NAM) is pleased to offer its strong support for S. 942, The Small Business Regulatory Enforcement Fairness Act of 1996. This measure, which may be considered on the Senate floor today, is an important down payment on improvements to the nation's regulatory system.

Senate passage of S. 942 would be an important first step toward lifting regulatory barriers to increased flexibility, productivity and growth, particularly for small companies. The measure would allow small companies to stay focused on growing their businesses and creating jobs by increasing the accountability of regulatory agencies and decreasing unnecessary compliance burdens.

A recent study commissioned by the U.S. Small Business Administration concludes that small businesses shoulder 63 percent of the total regulatory burden while accounting for 50 percent of employment and sales. According to the report, `The Changing Burden of Regulation, Paperwork, and Tax Compliance on Small Business,' the average cost of regulation per employee in firms with 500 or more workers is $2,979. That compares with $5,532 for firms with 20 or fewer employees, an intolerable burden that must be reduced.

We also support the Nickles/Reid amendment, which will provide Congress with an opportunity to review major regulations under a fast track procedure. This will encourage the Federal bureaucracy to do a better job of developing sensible regulations.

The NAM believes that this legislation will yield smarter regulations that protect health, safety and the environment and bolster economic growth and job creation. I strongly urge you to support S. 942 and the Nickles-Reid amendment as part of a continuing effort to modernize the nation's antiquated regulatory system.

Sincerely,

Jerry J. Jasinowski,
President.

Mr. BOND. Mr. President, there are a number of other important amendments and provisions in this bill, in addition to providing judicial enforcement of regulatory flex. We take a very simple step of saying, with respect to compliance guides, when you write a regulation, you have to tell the small entities how, in plain English, they are supposed to abide by the regulation, what it is supposed to do, and how they can comply with it.

If a regulatory agency brings an enforcement action against a small entity, the small entity has a right to take a look at those so-called plain English guidelines and present it to the court or the administrative hearing officer and say, `Hey, look, we are doing what they told us to do,' or if it is so confusing that they cannot figure it out, they have a case to make in the court or in the administrative hearing: `We had no idea what we were supposed to do to comply with this.'

Another area that we think is very, very important is to change the atmosphere of inspectors and examiners who go out into the field representing the Federal Government to administer regulations.

Mr. President, you and I can cite many examples, I am sure. There are an overwhelming number of examples where dedicated public servants go out and work with the people they regulate to help them come into compliance. But I know we also can cite examples where a regulator goes out, an examiner goes out, and they think they have been sent from the king to impose fines, to impose sanctions and that their objective is to make life miserable. That is certainly the impression that too many of the witnesses before our hearings have held. They feel that there are some agencies in some areas or even some individuals who just have the wrong idea: They do not work for the people; they are there to collect fines and to impose penalties.

We set up fairness rules, and we set up an ombudsman. The ombudsman provision creates a small business enforcement ombudsman to provide a place where small businesses can complain and voice their concerns on excessive regulatory enforcement actions.

Right now, I have asked some of those small businesses why they do not complain to the guy's boss. They said, `Well, as soon as we do that, he is going to tell the inspector who is giving us so much trouble, who fined us $4,000 for not having a warning label on a bottle of kitchen dishwashing soap, and we are liable to get twice that fine the next time.'

We set up an ombudsman system, regional fairness boards where you can go to complain, and if a number of small entities

pinpoint a particular agency or even a particular inspector, then through the Small Business Administration, which knows the identity of the complaining witnesses, the attention of the supervisory personnel in the enforcing agency can be advised that this particular inspector or maybe this particular office is overreaching, is not performing its function of seeing that the purpose of the statute is carried out, that they are more interested in the enforcement sanctions and the fines.

We believe this will help change the culture so that regulators, examiners and inspectors know that their job, when they go out, is to see that the workplace is environmentally sound, healthful, safe and not to impose fines, and regulations. This does not take away any of the penalties. This says how you go about it should be designed to achieve compliance, not to impose penalties.

There is another measure which is included in this bill, one which was introduced by Senator Domenici as a result of hearings we had in New Mexico, to provide, on a pilot basis, in OSHA and EPA for the involvement of small businesses and small entities in the early stages of regulatory development, so you can have somebody sitting at the table as you look at the statute and you try to determine how best to carry it out. Somebody can say, `Well, to do this in the small entities, it will be easier to go this way to get the job done than to go that way.'

We think that offers great promise. It will be tested, and we will see if we can, in fact, make sure that we get the job done of complying with the law.

Finally, there is a change in the Equal Access to Justice Act. That act is supposed to provide compensation for small businesses and small entities who are subject to regulatory proceedings, the imposition of fines. If it turns out that the Federal Government has asked for much larger fines or penalties than are warranted in the case, they are supposed to get compensation. Under existing law, however, the standards are so strict that it is a promise without performance.

We amend the Equal Access to Justice Act to level the playing field to bring some accountability to the actions between an agency and a small business entity so that when the agency makes a demand, it is going to have to be in proportion to what the violation is worth and what can actually be proven in a hearing, either administrative or judicial, to allow them to recover costs for representing themselves against an overreaching agency.

These things, I think, make this a good starting point for

ensuring that Federal agencies give a hearing to small businesses and to small entities and take account of how their activities may impact those businesses.

With that, Mr. President, I hope that when we vote on this measure next Tuesday, we will have overwhelming support from this body. The House has considered but has not moved forward on legislation. I hope that by listening to Members on both sides and doing a tremendous amount of staff work--and I want to compliment not only the staff on this side, but on the minority side for their diligent work--we have a reasonably good piece of legislation.

We have made accommodations. There are a number of amendments we believe we can accept by voice vote. Senator Nickles and Senator Reid have one for congressional review that we think is vitally important. It has overwhelmingly passed the Congress. I think it was 100 to 0. That is about as good as you can get. It has already passed the Senate. I do not think we need another vote on that one, but we expect to accept that. And there will be a managers' amendment.

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PRIVILEGE OF THE FLOOR
With that, as I turn to my ranking member, I ask unanimous consent to allow Tom McCully, a legislative fellow in the Small Business Committee, privilege of the floor for the duration of the consideration of this bill.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. BOND. I thank the Chair.

Mr. BUMPERS addressed the Chair.

The PRESIDING OFFICER. The Senator from Arkansas is recognized.

Mr. BUMPERS. Mr. President, the chairman of the Small Business Committee, my colleague, Senator Bond, made a magnificent statement on this very comprehensive bill. As Mo Udall used to say, `Just about everything that needs to be said has been said, but everybody hasn't said it.' I know that what I have to say will be largely repetitious, but let me start, first, by just complimenting Senator Bond for his tenacity and determination in getting this bill out of the committee and getting it to the floor.

I believe I can truthfully say this is one of the two or three times since I have been in the Senate where Members, if this becomes law, will have an opportunity to go home and actually tell the small business community that we have done something for them that was actually meaningful, that they can relate to and that they will applaud.

Sometimes the small business community can get very volatile and vocal about the fact that nobody here hears them or really cares about their problems. And there is some merit to that. Very few of the recommendations they have made at these various White House conferences on small business have ever resulted in legislation here. In 1980, when we passed the Regulatory Flexibility Act, we patted ourselves on the back and gave ourselves the good government award and went home and told the small business community what we had done for them. Not much time elapsed before they said, `You didn't do anything for us.'

They were absolutely right about that. The Regulatory Flexibility Act simply has not worked. If it had, we would not be here this morning. So really the initiative taken by Senator Bond is to correct that, and to fulfill a promise to the small business community--oh, yes, if you want to put the political aspect to it--to enable the Members of the U.S. Senate to go home and appear before small business groups and tell them how much you love them, but this time you can actually justify it by pointing to this legislation, if it becomes law, which I feel sure it will.

Why did the Regulatory Flexibility Act not work? Because it had a provision in it that said the agencies who write the rules that govern the people subject to their jurisdiction, it said that those agencies, first of all, had to make a determination that the rules they were writing were or were not unduly burdensome on the small business community. If they were, of course, then they had to do a regulatory analysis of how it affected small business as opposed to others. They have to do that to make a determination anyway. If they found that this was burdensome on the small business community, then they had to go through a lot of hoops.

Agencies do not like to jump through hoops. So what did they do? Almost without exception they would simply say these regulations are not unduly burdensome on the small business community; therefore, they did not have to do anything more to accommodate the burden of that regulation on small business.

What was really the biggest omission of all in the Reg Flex Act of 1980 was that once the agency said, no, this does not hurt small business, small business could not do anything but stand there and take it because there was no judicial review. Under this bill, if they make a decision that a regulation is not burdensome, unduly harsh on small business, if they make that decision, they are going to have to defend it in court because the small business community has a right of judicial

review on that determination.

So they are going to be much more circumspect about the regulation and certainly going to be much more circumspect about finding that the rules are not harsh on small business.

There are people who do not much like the judicial review part of this and say, you are going to clog the courts up with small business people contesting every regulation that has ever been written. That is powerful nonsense. Small business people do not like to spend money in court more than anybody else does.

But let me tell you, if I were going to summarize the vitality and the effectiveness of this bill in one sentence, or the reasons for it, it is because the small business people of this country spend 60 to 80 percent more dollars per employee to comply with Government regulations than big business does. How would you like to be a small business making widgets, and let us assume General Motors, one of the biggest corporations in America, also makes widgets, and you have to compete with General Motors, and then they come out with all these burdensome regulations, which are a piece of cake to General Motors, but, you know, you are going to have to spend 60 to 80 percent more than they are per employee to comply with those rules?

That is what this is all about, Mr. President. It is going to sail through. If there is a vote against this bill I am going to be surprised because everybody here knows those things I just described to you make sense.

The equal access to justice, which gives the small business community the right to go two court and to challenge some of the findings of the agencies, is long overdue. The equal access to justice, which says if the Government sues you for $1 million, and they wind up getting an award of $10,000 or even $50,000, the Justice Department, the small business person can sue for his attorney fees. This is a point that the Justice Department helped us with. And we accepted it. I applaud the Justice Department for it because the language says that if the award is disproportionately smaller than that requested, you are entitled to attorney fees.

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Mr. BUMPERS. Mr. President, I am pleased to cosponsor S. 942 and the pending managers' amendment with the distinguished chairman of our committee, Senator Bond. This bill is one of the most significant accomplishments of the 104th Congress, and it is one of the best bills for the small business community in the last 15 years. It is important because it resolves major concerns to the small business community that have been unresolved for many years. And, it follows by less than 1 year the conclusion and recommendations of the 1995 White House Conference on Small Business.

Senators who support this bill can say to their small business constituents, `We not only hear you; we agree with much of what you are saying, and we are responding.' With this bill, Senators can do more than give platitudes for small business. We can do something that will effect the lives of every business owner who deals with a Federal regulator.

S. 942 makes important, positive changes in two statutes which grew out of the 1980 White House Conference on Small Business: The Regulatory Flexibility Act and the Equal Access to Justice Act. This is a bill--all too rare in this Congress--which I can assure my colleagues that we would be considering if my party were in the majority. Some of today's bill's issues--particularly the judicial enforceability of the Regulatory Flexibility Act, or Reg Flex--have been the subject of consternation among small business owners almost since the act was passed in 1980. The recommendations of the White House Conference, as well as the work done by the National Performance Review under Vice President Gore, are the foundations of today's bill.

I want to emphasize that the spirit of S. 942 is one of reforming the regulatory environment--a cause which President Clinton's administration has championed since its inception both in the National Performance Review and in Executive orders which the President has signed. We are not only endorsing the Clinton administration's new regulatory philosophy, we are writing some of its program into law so that this new attitude does not change under some future President. Section 202 of the bill is specifically based on an Executive order, which President Clinton signed, providing for waiver or reduction of penalties and fines for small businesses in certain circumstances. His Executive order is exactly that approach to take if we are to change the climate of animosity between Government and small business which has existed for years.

There are several specific provisions of this bill which deserve mention. First, however, I want to compliment the chairman for the way he has handled this bill in our committee and since it was reported. Although the administration did not testify on the bill before the Small Business Committee, in subsequent days the chairman, the staff and I have held literally dozens of consultations with various agency officials about the bill. More importantly, we have worked very hard to accommodate the views and suggestions of the Clinton administration. Without exception, the suggestions and requests both from the administration and from Senators on and off the committee have been constructive and helpful. The staffs of the Finance Committee and the Governmental Affairs Committee have been especially helpful in crafting this far-reaching bill.

The Managers' amendment incorporates dozens of changes, some quite significant, in either language or policy from the bill reported by the committee. However, it does not retreat in any way from the main purpose of the bill. In fact, the administration's views have helped us to make the bill stronger and more effective for small business. I want to dispel any notion that the so-called bureaucrats have opposed this bill for fear that it would create more work for their agencies. The General Counsels' offices at Treasury, Justice, Labor, and other departments have offered advice which has improved upon what our committee originally approved 2 weeks ago.

Allowing judicial enforcement of the rights created under the Regulatory Flexibility Act of 1980--which S. 942 for the first time does--removes a bone that has been stuck in the throat of small business owners for over 15 years. The original act did not permit anyone to go to Federal court to enforce the promise that agencies would: First, consider whether a proposed rule significantly affected a substantial number of small entities; and second, consider whether steps should be taken to account for the special problems of small entities. The only enforcement of the act was the moral authority of the law and SBA's Chief Counsel for Advocacy who is charged with monitoring agencies' implementation of Reg Flex.

Small firms, according to the GAO, pay between 60 and 80 percent more, per employee, for the cost of complying with Government regulations than do the big businesses who are often their competitors. Small business owners do not have armies of accountants, clerks, and lawyers to help them comply with the Government's endless demand for information and enforcement of rules.

For several years, the SBA Chief Counsel for Advocacy has reported to the Senate Small Business Committee on the performance of agencies in following the mandate of the Reg Flex Act. Some agencies have been conscientious, others sadly have not. That report, to date, has been almost the only means of enforcing agency compliance with the act. There is at least a perception that some agencies of the Government have routinely used the act's escape clause by saying that a significant number of small entities would not be substantially affected. This has occasionally been done when the facts were obviously to the contrary. Yet there was no legal recourse for businesses affected.

Today, all that changes. Those who should be protected by the Reg Flex Act will be. Small business owners, small town governments, and small nonprofit associations will be empowered to go into Federal court and obtain justice if a Federal agency has not followed the law. This law puts the Reg Flex Act on the same footing with other parts of the Administrative Procedure Act--which is to say that individuals are protected against actions which are arbitrary, capricious, an abuse of discretion, or otherwise not in accord with the law.

Judicial review of reg flex was one of the top recommendations of the 1995 White House Conference on Small Business, as was overall regulatory reform. Less than a year after the end of that conference, Congress is acting on those recommendations--a large part of them--by enacting these major changes in Federal regulatory law and policy. Important as judicial enforcement is, however, it is not the only big change made in this bill.

Perhaps the headline for this bill should be: IRS made subject to reg flex law. For the first time, the scope of the Reg Flex Act is being extended to cover so-called interpretative rulemakings. IRS and a few other agencies issue what are termed interpretative rules which, they say, merely explain the requirements of the statute. Nonetheless, these rules have great weight in the courts. They must be observed if the business owner wants to avoid a confrontation with the Government. Until the present moment, interpretative rules have not been subject to the requirements of the Reg Flex Act. Today, that also changes. IRS will be required to conduct an analysis under the act if a new rule substantially effects a significant number of small entities. And that finding will itself be subject to judicial review under section 5 of the Administrative Procedures Act.

Let me hasten to add that we do not believe allowing judicial review will result in a flurry of spurious lawsuits against the Government. Instead, we believe that agency rule writers will follow the new reg flex law and perform analyses which will avoid the necessity of anyone going to court. IRS particularly has a problem with tax protesters filing frivolous suits against the Government. The courts should deal summarily with such people, including imposing costs and fines in appropriate cases for those who sue to obstruct the Government.

The Equal Access to Justice Act [EAJA] which this bill amends deserves special mention. This important law allows individuals of small firms who have been sued by Government to recover their attorneys fees if they prevailed in the suit. This law has often failed of its purpose because it contained a two-part test which court decisions made nearly impossible to achieve. Under existing law, the small company must first show that he or she is a prevailing party. So, if the Government alleged 10 or 100 violations, and then only proved one minor one, the company was not a prevailing party.

Second, even if someone prevailed on each and every count, he has to show that the Government's action was not substantially justified. Courts have interpreted this phrase to mean that the Government's suit must have been without foundation in law or fact--virtually a frivolous suit under rule 11 of the civil rules. This is an almost impossible task, since the Government invariably has some basis for acting, even if it is not enough to persuade a judge or jury.

Our bill changes both these standards and makes it possible for the business owner to recover his fees by showing that the Government's final judgment was disproportionately less than an express demand by the Government during the course of the suit. So, if the Government sought $1 million to settle the case, and the judge or jury awarded, for example, $1,000 or $5,000, the defendant should be able to recover his fees. The phrase `disproportionately less' than an express demand by the Government was suggested by the Justice Department, and it was a very helpful suggestion. Obviously, this will not prohibit any agency from telling anyone the maximum legal penalty for a violation.

Additionally--and this should be emphasized by all who read and apply this section--the court or agency can deny attorneys fees if it finds that `special circumstances make such an award unjust.' This phrase also came from the Justice Department, and it is contained in the current law. Clearly, we do not want to pay attorneys fees for someone who escaped conviction on a mere technicality but who was, nonetheless, probably guilty.

It is certainly not our intention to pay the lawyers for people who are essentially bad actors but who escaped punishment by the grace of the Almighty. Many circumstances, such as an exclusionary rule challenge, can be imagined where it would be wrong for the taxpayers to reimburse someone's attorneys fees, and the courts are empowered to use some reasonable discretion.

Finally, the courts are not obliged to allow the maximum rate of $125 per hour in every case. This is an increase from the $75 per hour maximum in current law, a figure which has not been changed in many years. The courts should look to existing law under section 1988 of the Civil Rights Act for guidance. Fees should be set in relation to prevailing fees actually charged in the community. Moreover, courts should require attorneys to substantiate their fees through time-sheets or other appropriate records.

The Justice Department is still not entirely satisfied with this language, as the statement of administration policy indicates. But the administration has my assurance, and that of Senator Bond, that we will continue to work with them to improve upon this language in conference with the House.

The House previously passed a bill allowing for some judicial review of reg flex decisions, but our bill is broader. Moreover, the House bill does not amend the EAJA, does not contain an ombudsman provision, and does not allow for Regulatory Advisory Boards. It is a rather narrow bill, and I hope that we will be able to persuade the House to substantially broaden it or, better yet, to accept our bill. To this point, the House has not been able to bring major regulatory reform to a conclusion, just as the Senate failed to complete debate on S. 343 earlier in this session. This bill, however, can and should go forward regardless of the outcome of those debates. This bill can only help our economy's small business sector, and I hope our colleagues in the other body will move expeditiously to send this bill to the President for his signature.

I urge my colleagues to support this important bill. The small business community will undoubtedly appreciate those who have helped us today.

Again, I want to thank Senator Bond and his staff, particularly Keith Cole and Louis Taylor, for their cooperation and support during the development and consideration of this bill. This bill shows that reasonable people of good will can still accomplish a great deal in this Congress, and I hope it will be a precedent for other bills.

Mr. President, on the equal access to justice, I point out it was the Justice Department that came up with the phrase which I think is almost a stroke of genius when they said, `Why don't you use the term `disproportionate award'?' That is, if the Government sues for $1 million and they get a disproportionately smaller amount than that, then the small businessperson is entitled to his attorney fees. There are some exceptions to that, of course--if he has been guilty of a criminal act or willful wrongdoing or something like that--but normally he not only will be entitled to attorney fees, but the equal-access-to-justice provision, which is essentially incorporated here with Senator Feingold, essentially the amendment he offered on the floor--I think it passed 98-0--that increased the amount the small businessperson could recover from $75 an hour to $225 an hour. We have put that in this bill.

Now, Mr. President, there are some cases in which offenses can be waived, penalties can be waived, under a certain set of conditions. If you really want, sometimes, to enforce a regulation, no exception, cross every `t' and dot every `i', you can still make things a little tough for some small business people.

The National Performance Review Group headed up by Vice President Gore had recommended that there be a provision in here that some people could be excused from burdensome penalties if it was rather unintentional and had been corrected. That ought to be a source of some strength. I, frankly, thought that labor might oppose that, but they did not. It is not designed to ratify or condone bad conduct on the part of some small businessman but just to keep it from being too harsh.

Now, Mr. President, the final thing that I want to mention, there is a provision in here--and it may not be perfect; some people have voiced considerable reservation about it--but the provision is that the Small Business Administration will be home to an omsbudsman, and that ombudsman is there to take complaints from the small business community.

You have heard that classic joke for 100 years, `I'm here from the IRS and I am here to help you,' and people are terrified when the IRS walks in. Usually if that agent happens to be abusive--and I use the IRS because they are everybody's favorite whipping boy--if that agent happens to be abusive on top of the fact you know that he is there to get in your pocketbook, it makes it doubly troublesome. This is also true of a lot of people who come into your plant to enforce the OSHA laws or all the other regulations that they write. If a small business man or woman feels that he or she has been put upon in

an unfair, burdensome, and abusive way, they will have somebody to report that to.

It just occurred to me, Mr. President, one of the biggest cases I ever had involved a defense contract. My client was a manufacturer of tent pins. Tent pins came in different sizes, anywhere from 18 inches to 24 inches, and they were designed, of course, to drive in the ground to hold a tent up for the army, for the troops. Now, you have to understand the tent pins had to be absolutely perfect--sanded. You would not believe the regulations that my client had to comply with to build a tent pin which, when used, was going to be hit by a sledgehammer.

He had one of those crazy, as luck would have it, a crazy inspector. The guy used to go through his trash at night after he would leave to see if he could find something. The reason I am telling you that--it is humorous now because that happened 35 years ago; it was not funny then--it bankrupted my client. It took 7 years--I had never had a case in the U.S. Court of Claims before. They sent a referee down to Fort Smith, AR, and we tried that thing. It took a week. Happily, the referee of the Court of Claims was a very attentive judge. He was an elderly man. He understood the problem. He listened very carefully. He awarded my client, I believe, $100,000, one of the biggest judgments I ever got. You would think I could remember to the penny what it was.

It turned out, as a personal note, that Betty and I were getting ready to take our daughter to Boston to Children's Hospital for what we knew was going to be a tremendous expense and we did not know how to pay for it, and I collected on that judgment 3 days before we left. It saved my life.

I have had firsthand experience with the Government inspector who bankrupted my client. We did get that amount of money. But that was after 7 years. We did not get a dime of interest. We did not get a dime of penalty. We did not get a dime in attorney fees. All we got were actual damages.

Now, as a country lawyer in a town of 2,000 people, I could not believe the Government treated people like that. They admitted they were wrong, but no attorney fees, no interest, no penalty, after 7 years. Well, at least these people are going to be entitled to attorney fees.

Mr. President, I ask unanimous consent to add Senator Carol Moseley-Braun as a cosponsor.

The PRESIDING OFFICER. Without objection, it is so ordered.

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Mr. BUMPERS. I yield the floor.

Mr. BOND. Mr. President, I yield myself 2 minutes. I would like to add--to make sure we have a list of cosponsors, I will read for the record the cosponsors:

In addition to Senator Moseley-Braun, Senator Bumpers and myself, we have Senator Burns, Senator Coats, Senator Coverdell, Senator DeWine, Senator Dole, Senator Domenici, Senator Faircloth, Senator Frist, Senator Grams of Minnesota, Senator Grassley, Senator Hutchison, Senator Kempthorne, Senator Kerry of Massachusetts, Senator Lieberman, Senator Lott, Senator Lugar, Senator Pressler, Senator Robb, Senator Stevens, and Senator Warner.

I also note that a number of these people, including Senator Robb, are working very actively with us, with Senator Nickles, with Senator Johnston, Senator Dole and others on a broader regulatory reform package. I think they want it understood, as I certainly do, that this does not supplant the need for other regulatory reform efforts, and it in no way is a substitute for them. We think this is a very important rifle shot to deal with the problems of small business, and we believe it does not deal with the broader regulatory issues.

Now, Mr. President, I ask unanimous consent to have printed in the Record a statement of the legislative history of this measure which is prepared by staff for Senator Bumpers and me on behalf of the committee.

There being no objection, the material was ordered to be printed in the Record, as follows:

Committee Legislative History for S. 942
I. SUMMARY OF THE LEGISLATION
The final version of the bill, embodied in a managers amendment, makes a series of technical and other amendments to S. 942, the Small Business Regulatory Enforcement Fairness Act of 1996. The amendment resolves many of the questions raised by the Administration with the bill as reported by the Small Business Committee. The amendment also makes changes for better implementation of certain recommendations of the 1995 White House Conference on Small Business regarding the development and enforcement of Federal regulations, including judicial review of agency actions under the Regulatory Flexibility Act (RFA). The scope of the RFA requires a regulatory flexibility analysis of all rules that have a `significant economic impact on a substantial number' of small entities. Under the RFA, this term `small entities' includes small businesses, small non-profit organizations, and small governmental units.

As amended, S. 942 provides a framework to make federal regulators more accountable for their enforcement actions by providing small entities with an opportunity for redress of arbitrary enforcement actions. The goal of the Act is to foster a more cooperative, less threatening regulatory environment between agencies and small businesses and other entities. In addition, S. 942 provides a vehicle for effective and early participation by small businesses in the Federal regulatory process by incorporating amended provisions of S. 917, the Small Business Advocacy Act.

II. SECTION-BY-SECTION ANALYSIS
Section 1

This section entitles the Act the `Small Business Regulatory Enforcement Fairness Act of 1996.'

Section 2

The bill makes findings as to the need for a strong small business sector, the disproportionate impact of regulations on small businesses, the recommendations of the 1995 White House Conference on Small Business, and the need for judicial review of the Regulatory Flexibility Act.

Section 3

This section outlines the purposes for the bill. The bill addresses some key federal regulatory recommendations of the 1995 White House Conference on Small Business. The White House Conference produced a consensus that small businesses should be included earlier and more effectively in the regulatory process. The bill provides for a more cooperative and less threatening regulatory environment to help small businesses in their compliance efforts. The bill also provides small businesses with le