RFA@30 logo Annual Report of the Chief Counsel for Advocacy on Implementation of the Regulatory Flexibility Act and Executive Order 13272February 2011 Report on theRegulatory Flexibility ActFY 2010 SBA Advocacy Logo The full text of this report is available on the Office of Advocacy’s Internet site at http://www.sba.gov/advo. Reprints in paper or microfiche are available for pur- chase from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161. Federal Recycling ProgramPrinted on recycled paper. Report on the Regulatory Flexibility Act, FY 2010 iReport on the Regulatory Flexibility Act, FY 2010 To the President and the Congress of the United StatesI am pleased to present to the President and Congress the fiscal year (FY) 2010 Report on the Regulatory Flexibility Act. In this report, the U.S. Small Business Administration’s Office of Advocacy provides the status of federal agencies’compliance with the Regulatory Flexibility Act of 1980 (RFA) and Executive Order 13272. Thir- ty years ago, Congress enacted the RFA, which required federal agencies to review proposed regulations that would have a significant impact on small entities—small businesses, small gov- ernmental jurisdictions, and small nonprofits. Federal agencies were also required to consider significant alternatives that would minimize the impacts on small entities. In the past three de- cades, the RFA has been significantly and quanti- fiably effective in reducing the regulatory burden on small businesses. The Office of Advocacy (Advocacy) continues to make steady progress in its efforts to improve federal agencies’ compli- ance with the RFA. Advocacy has taken a proactive approach to assist federal agencies in meeting their regula- tory goals while reducing the disproportionate burden of regulations on small entities. Advo- cacy accomplishes this through comment letters, providing testimony to Congress, RFA compli- ance training, participation in Small Business Advocacy Review (SBAR) panels, advocacy for legislative reform, and vital research on small business issues. It is important that our actions on behalf of small businesses are accessible to both government and nongovernmental entities. Advocacy use of web-based tools such as RSS feeds, email alerts, blogs, Regulatory Alerts, and the newsletter, The Small Business Advocate, are some of the ways we communicate with our stakeholders about rules that will have a signifi-Winslow Sargeant signature small entities. In FY 2010, Advocacy’s work to bring small entity concerns to rulemaking saved nearly $15 billion in regulatory costs. This was accom- plished without undermining the goals outlined by federal agencies. In the current economic climate, as small businesses are called upon to be the job creators and to lead in providing innova- tive new products and services to the American economy, minimizing unnecessary regulatory burden on the economic sector will continue to be a high priority for Advocacy. In 2010, as part of the Dodd-Frank Act, Ad- vocacy saw an additional covered agency added to the SBAR process. The Consumer Financial Protection Bureau (CFPB) joined the ranks of the Environmental Protection Agency and the Occupational Safety and Health Administration. We look forward to working with CFPB to help it comply with its RFA obligations. Advocacy is also mindful that not all agen- cies seek consultations with small businesses prior to publishing or finalizing proposed rules. The challenges associated with RFA compliance deficiencies are noted in Section 3. As we celebrate the RFA’s thirty-year an- niversary, my office and I will work to make sure federal agencies recognize that rules and regula- tions are stronger when small businesses are part of the rulemaking process. In FY 2011, Advo- cacy will continue to support federal agencies seeking to reduce the impact of their regulations on small entities by providing further training and conducting more outreach to the small firm communities affected by federal regulations. For small business issues to be relevant, small busi- nesses must have a strong Advocate. We will continue to be the watchdog of the RFA. Winslow Sargeant, Ph.D. Chief Counsel for Advocacy iiiReport on the Regulatory Flexibility Act, FY 2010 ContentsTo the President and the Congress of the United States i1 History and Overview of the Regulatory Flexibility Act 1The First Ten Years 1The Second Decade 1The Third Decade 1High Regulatory Costs Show Ongoing Need for RFA22 The RFA and E.O.13272: Compliance and the Role of the Office of Advocacy 3Executive Order 13272 Implementation 3Interagency Communications 4Roundtables 4A New Agency is Added to the SBAR Panel Process 4Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, FY 2010 5Regulatory Review 5Judicial Review 5Advocacy and the RFA in FY 2010 5Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy, FY 2010 6Table 2.2 Regulatory Cost Savings, FY 2010 10Table 2.3 Summary of Cost Savings, FY 2010 (dollars) 153 Advocacy Review of Agency RFA Compliance in Fiscal Year 2010 17Department of Agriculture 17Department of Commerce 17National Oceanic and Atmospheric Administration 17U.S. Patent and Trademark Office 19Department of Defense 20Department of Education 20Department of Health and Human Services 21Centers for Medicare and Medicaid Services 21Department of Homeland Security 22U.S. Coast Guard 22Department of Housing and Urban Development 23Department of the Interior24Fish and Wildlife Service 24Office of Surface Mining Reclamation and Enforcement 25Department of Justice 25Department of Labor26Occupational Safety and Health Administration 27Employee Benefits Security Administration 27Department of State 28Department of Transportation 28Federal Aviation Administration 28Department of the Treasury 29 ivReport on the Regulatory Flexibility Act, FY 2010 Department of Veterans Affairs 30Consumer Product Safety Commission 30Environmental Protection Agency 31Equal Employment Opportunity Commission 32Federal Acquisition Regulation Council 32Federal Communications Commission 33Federal Reserve Board 34Office of Management and Budget 35Securities and Exchange Commission 35Small Business Administration 35Conclusion 36Appendix ASupplementary Tables 37Table A.1 Federal Agencies Trained in RFA Compliance, 2003-2010 37Table A.2 RFA Related Case Law 39Table A.3 SBAR Panels through Fiscal Year 2010 40Appendix B The Regulatory Flexibility Act 45Congressional Findings and Declaration of Purpose 45Regulatory Flexibility Act 46 § 601. Definitions 46 § 602. Regulatory agenda 47 § 603. Initial regulatory flexibility analysis 47 § 604. Final regulatory flexibility analysis 48 § 605. Avoidance of duplicative or unnecessary analyses 49 § 606. Effect on other law 49 § 607. Preparation of analyses 49 § 608. Procedure for waiver or delay of completion 49 § 609. Procedures for gathering comments 50 § 610. Periodic review of rules 51 § 611. Judicial review 52 § 612. Reports and intervention rights 52Appendix CExecutive Order 13272 55Appendix DAbbreviations 57Appendix E The RFA at 30 61 1Report on the Regulatory Flexibility Act, FY 2010 1History and Overview of the Regulatory Flexibility ActIn September 2010, the Office of Advocacy com- memorated the 30th anniversary of the enactment of the Regulatory Flexibility Act (RFA). Since it was passed in 1980, the law has been amended several times, most notably by the Small Busi- ness Regulatory Enforcement Fairness Act in 1996. Today, the RFA continues to give small business entrepreneurs an important role in the development of a regulatory environment that is more conducive to starting and growing small businesses. The First Ten Years In 1980, the first White House Conference on Small Business was held. The Report to the President of that first confer- ence noted the “explosive” growth of government regula. tion, issued by 90 agencies adding thousands of new rules each year. Following that con- ference and report, and after several hearings on Capitol Hill, Congress passed the RFAin 1980. In passing the RFA, Congress told the nation that the federal agencies must “fit regulatory and informational requirements to the scale of businesses.” To make this happen, the agencies must “consider flexible regulatory proposals” and ensure that “such proposals are given serious consideration.” Several years later, the 1986 White House Conference on Small Business, however, noted that the RFA’s provisions lacked the “effective- ness” Congress had hoped for. The conference report noted that “the courts’ ability to review agency compliance with the law is limited.” The Second DecadeBy the time the third and most recent White House Conference on Small Business was held in 1995, the General Accounting Office had not- ed that agency compliance with the RFA varied from agency to agency, and that Advocacy had no authority to compel agencies’ compliance. The administration’s National Performance Re- view had recommended that agency compliance be subject to judicial review. The Conference Report asked for specific provisions to include small firms in the rulemaking process, and for judicial review of agency compliance. In 1996, President Clinton signed Public Law 104-121, the Small Business Regulatory Enforcement Fairness Act (SBREFA). The new law made agency compliance with the RFA sub- ject to judicial review.1 It also required that the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administra- tion (OSHA) convene small business advocacy review panels to consult with small entities early on regulations expected to have a significant economic impact on small entities. Finally, the law reaffirmed the authority of the chief counsel for advocacy to file friend of the court briefs in cases brought by small entities challenging final agency actions. The Third DecadeIn 2002, President Bush signed Executive Order 13272, which strengthened the Office of Advoca- cy by enhancing its relationship with the Office of Management and Budget’s Office of Informa- tion and Regulatory Affairs (OIRA). The execu- tive order told the agencies to work closely with 1See Table A.2 on p. 39, as well as a brief discussion of RFA judicial review in the October-November 2010 newsletter on p. 67 of this report. “Having an advocate for small businesses within the government is a gift, and is the first instance I have seen of a government entity bringing accountability to another government agency.” —Peter Moore, Northern Pelagic Group, LLC (NORPEL) 2Report on the Regulatory Flexibility Act, FY 2010 Advocacy in properly considering the impact of their regulations on small business. Under the executive order, agencies had to establish written procedures and policies on how they measure the impact of their regulatory proposals on small en- tities; they were also required to notify Advocacy before publishing proposed rules expected to have a significant impact on a substantial number of small entities. Agencies were required by the executive order to publish a response to any writ- ten comments submitted by Advocacy. The executive order also required Advocacy to train the agencies in how to comply with the requirements of the act. Over the past eight years Advocacy has trained more than 2,000 employ- ees at almost 50 agencies on the requirements of the RFA, and has encouraged the agencies to consider the impact of their draft regulations on small entities. The demand for this training con- tinues and the need for consistent understanding of the requirements of RFA compliance has not diminished. At a minimum, agency employees leave the training session with the basic under- standing of the purpose of the RFA and who they can contact for additional assistance within the Office of Advocacy. These important tools, coupled with the understanding that better rule- making occurs with early intervention and small business input, are what make Advocacy’s RFAtraining course successful at many agencies. RFA training during fiscal year 2010 is discussed in Section 2 of this report. In 2010, the U.S. Congress passed the Small Business Jobs Act (SBJA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SBJA included a codification of section 3(c) of Executive Order 13272, which requires agencies to give appropriate consideration to Advocacy’s written comments on regulations. Agencies are now also required to give a detailed statement of changes made in the rule in re- sponse to Advocacy’s comments. This will help Advocacy address the problem of initial regula- tory flexibility analyses or IRFAs (required by section 603 of the RFA) that lack one or more of the required elements. The Dodd-Frank Act, among other objec- tives, created the Consumer Financial Protection Bureau (CFPB) and made its rules subject to the requirements of section 609 of the RFA, which requires covered agencies to convene small busi- ness advocacy review (SBAR) panels whenever they seek to promulgate a rule that will require an IRFA. The CFPB has the additional charge to consider the impact of its regulations on the cost of credit to small business. Chapter 2 provides more detail. High Regulatory Costs Show Ongoing Need for RFAAt the 30th anniversary symposium, Advocacy released the newest update of the Impact of Reg- ulatory Costs on Small Firms by Dr. Mark Crain and Nicole Crain. That study showed that, per employee, the cost of compliance with federal regulations is 36 percent higher for the smallest businesses—those with 20 or fewer employees— compared with larger firms. This disproportion- ate impact of the federal regulatory burden is why the small business regulatory analysis re- quired by the RFA is so important today. In his remarks at the symposium, Cass Sun- stein, administrator of OIRA, noted that “If regu- latory choices are based on careful analysis, andsubject to public scrutiny and review, we will beable to identify new and creative approaches de- signed to maintain and to promote entrepreneur- ship, innovation, competitiveness, and economicgrowth. These points have special importance in aperiod in which it is crucial to consider the effectsof regulation on small business—and to ensure, in accordance with the first declaration of purposein the Regulatory Flexibility Act, that agencies‘seek to achieve statutory goals as effectively andefficiently as possible without imposing unneces- sary burdens on the public.’ ” 3Report on the Regulatory Flexibility Act, FY 2010 2The RFA and E.O.13272: Compliance and the Role of the Office of AdvocacyThe Office of Advocacy has been given the re- sponsibility to oversee compliance with both the Regulatory Flexibility Act and Executive Order 13272, signed in August 2002. The provisions of E.O. 13272 have given Advocacy and federal agencies additional tools for implementing the RFA, and as noted, parts of the executive order have recently been codified. Executive Order 13272 Implementation Under E.O. 13272, federal agencies must inform the public of their plans to take small businesses and the RFA into account when promulgating regulations. Most agencies have done this at the departmental level by making their RFA policies and procedures available on their website. The E.O. also requires agencies to send Advocacy a copy of any draft regulations that may have a significant economic impact on a substantial number of small entities. This must be done at the same time a draft rule is sent to the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) or at a reasonable time prior to publication in the Federal Register. Agencies are asked to utilize Advocacy’s dedicated email address to fulfill this notification requirement instead of sending the draft regulation through the mail. This method is not used as frequently as the Office of Advocacy would like; however, some agencies have be- come regular email system users. A final agency requirement of E.O. 13272 isto give appropriate consideration to Advocacy’spublic comments on a proposed rule and to ad- dress the comments in the final rule published inthe Federal Register. This section of the E.O. wasadopted into law in 2010 as an amendment to theRFA by the Small Business Jobs Act. Most agen- cies complied with this provision in FY 2010. Agency compliance with these three provi- sions of E.O. 13272 is generally good; however, a few agencies ignore the requirements and fail to provide Advocacy with copies of their draft regulations. A summary of agency compliance with E.O. 13272 can be found in this section. The Office of Advocacy was also given three duties under E.O. 13272. First, Advocacy was re- quired to notify agencies of how to comply with the RFA. This was accomplished in 2003 through the publication of A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act.A revised version of this guide was provided to agencies in 2009 and another version will be created in the next fiscal year to incorporate amendments to the RFA. The guide is also available on Advocacy’s website at http:// www.sba.gov/sites/default/files/rfaguide.pdf. Second, Advocacy must report annually to OIRAon agency compliance with the three required agency provisions. This information is included in the third section of this report. Finally, E.O. 13272 requires Advocacy to train federal regula- tory agencies in how to comply with the RFA. In fiscal year 2010, Advocacy trained nearly200 agency employees in RFA compliance, asubstantial increase over the previous fiscalyear. As new staff members are hired, agenciescontinue to request these important training ses- sions. Agencies that have had numerous RFAtrainings are more willing to work with Advo- cacy during the rulemaking process and havea clearer understanding of the nuances of RFAcompliance. Advocacy continues to work withthe regulatory agencies to encourage them to consider the impact of their regulations on small entities from the beginning of rule development. Interagency Communications Advocacy has continued to reach out to agencies on behalf of small businesses through meetings, roundtables, and its training program. Advocacy’s participation in the interagency review of draft rules has increased as the effect of Advocacy’s training program grows and as agencies become more open to the assistance the Office of Advocacy can lend. In FY 2010, Advocacy communicated with agencies through a variety of means including more than 35 formal comment letters (Chart 2.1 and Table 2.1). Interagency cooperation often results in effective regulations that avoid excessive burdens on small businesses. See, for example, the discussion of cooperation between Advocacy and the Department of Justice on the 2010 update of the Americans with Disabilities Act rules.2 On the other hand, interagency discussion failed to reach an agreement between Advocacy and the EPA, which has published regulations on greenhouse gas emissions without benefit of a Section 609 Small Business Advocacy Review panel.3 Roundtables To encourage dialogue between the various agencies and the small business community, the Office of Advocacy continues to expand the number 2 See the Department of Justice discussion on p. 25 of this report. 3 See the Environmental Protection Agency discussion on p. 31 of this report. of small business roundtables it coordinates each year. In FY 2010, Advocacy convened roundtables on tax and pension issues, the environment, workplace safety, aviation, transportation, and telecommunications. Roundtables are a useful way for agencies to engage with small businesses, even on contentious regulations. Agencies benefit by hearing firsthand how their regulations are perceived by the small business community, and small businesses benefit by having an opportunity to directly inform the federal agency about how a rule would affect their operations. At Advocacy roundtables, agencies routinely receive information or perspectives on regulatory alternatives that have the potential to reduce the impact of their rules. A New Agency is Added to the SBAR Panel Process The new Consumer Financial Protection Bureau, created by the Dodd-Frank Act, is the third agency to be required to comply with section 609 of the RFA. CFPB must comply with the small business advocacy review panel requirement and convene a 60-day panel process whenever it decides that a draft rule may have a significant economic impact on a substantial number of small entities. Advocacy is working closely with the CFPB as it develops its staff in an effort to ensure that efficient and effective operating principles will be in place in time for CFPB’s first regulatory action. The SBAR panel process has been developed at the Environmental Protection Agency and the Occupational Safety and Health Administration since the panel requirement for those agencies became law in 1996. Since that time, Advocacy has participated in nearly 50 panels at EPA and OSHA (see Table A.3 in the appendix). “Advocacy provided assistance to NRECA and the American Public Power Association in preparing a request to EPA that it convene an SBAR Panel to examine impacts of the proposed coal ash rule on small entities.” —Jim Stine, The National Rural Electric Cooperative Association (NRECA) Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, FY 2010 is a pie chart showing the most comment concerns raised in Advocacy.s FY 2010 comment letters and the percentage of the total concerns represented by each. The concerns and their shares are as follows: significant alternatives not considered, 26 percent; inadequate economic analysis of small entity impacts, 18 percent; inadequate or missing initial regulatory flexibility analysis, 12 percent; improper certification, 9 percent; agency commended, 6 percent; small entity outreach needed, 3 percent; and other concerns, 26 percent. 5Report on the Regulatory Flexibility Act, FY 2010 This experience will be of great benefit to CFPB as it develops its procedures. For Advocacy the addition of CFPB is a perfect opportunity to rep- resent small business in the SBAR panel process. Advocacy will continue to work with CFPB as the new agency moves closer to regulatory de- velopment in the coming year. Regulatory ReviewSection 610 of the RFA requires federal agen- cies to examine existing rules for their regulatory burden on small entities. To help address this requirement, the Office of Advocacy has encour- aged small businesses and others to highlight rules in particular need of reform so that federal agencies can begin to address their concerns. Until this year, Federal Acquisition Regula- tion 52.232.10 required a retainage of 10 percent on federal contracts for architecture and engi- neering services. This rule was brought to Advo- cacy’s attention by small businesses as potential- ly ripe for regulatory reform. With Advocacy’s encouragement, the FAR Council agreed and published a final rule that made this mandatory retainage discretionary. This rule is discussed in more detail later in Section 3 of this report.4Judicial ReviewIn FY 2010, no significant federal cases involv- ing a claim under the RFA have been reported. Advocacy and the RFAin FY 2010As a result of improvements to the RFA, Advo- cacy’s work on behalf of small businesses has required greater and greater involvement in the federal rulemaking process. As agencies have become more familiar with the role of Advocacy and have adopted the cooperative approach Ad- vocacy encourages, the office has had more suc- cess in urging burden-reducing alternatives. In FY 2010, this more cooperative approach yielded $14.9 billion in foregone regulatory costs (Tables 2.2 and 2.3). 4See the FAR discussion in Table 2.2 on p. 11 and the text on p.33. Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, FY 2010Chart 2.1 illustrates the most common concerns raised in Advocacy’s comment letters and highlightsareas in need of continued improvement based on Advocacy’s analysis of its FY 2010 comment letters. Table 2.1 Regulatory Comment Letters Filed by the Office of Advocacy, FY 2010 7Report on the Regulatory Flexibility Act, FY 2010 DateAgencyComment Subject12/23/09OMBComments regarding improving implementation of the Paperwork Reduction Act, 74 Fed. Reg. 55269.12/23/09EPAComments regarding the prevention of significant deterioration and Title V greenhouse gas tailoring rules, 74 Fed. Reg. 55292.01/28/10SBAComments regarding SBA’s proposed rule seeking to provide regu- latory revisions to its 8(a) and socially and economically disadvan- taged business programs, 74 Fed. Reg. 20666.02/19/10DHS-TSAComments regarding a proposed rule to require domestic and for- eign repair stations to implement a standard security program, 74 Fed. Reg. 59873.03/05/10FCCComments urging that the FCC start the process of redefining size standards with the SBA for the National Broadband Plan, GN Docket. No. 09-51.03/11/10FWSComments regarding the designation of critical habitat for bull trout, 75 Fed. Reg. 2269.03/12/10DOTComments regarding the proposed regulation of the transport of lithium batteries, 75 Fed. Reg. 1302.03/15/10HHSComments regarding Medicare and Medicaid’s electronic health record incentive program, 75 Fed. Reg. 1844.04/20/10EPAComments regarding effluent limitations guidelines and standards for the construction and development point source category, 74 Fed. Reg. 62995.05/03/10SBAComments regarding the Women-owned Small Business Federal Contract Program, 75 Fed. Reg. 10029.05/10/10FWSComments regarding the listing of the boa constrictor, four python species, and four anaconda species as injurious reptiles, 75 Fed. Reg. 11808.05/10/10DOLComments regarding a proposed regulation requiring that federal service contractors offer qualified employees a right of first refusal of employment, 75 Fed. Reg. 13381. 9Report on the Regulatory Flexibility Act, FY 2010 DateAgencyComment Subject08/20/10PTOComments regarding the Enhanced Examination Timing Control Initiative, 75 Fed. Reg. 31763.08/23/10EPAComments regarding national emission standards for hazardous air pollutants for major and area sources, 75 Fed. Reg. 32006, 75 Fed. Reg. 31896.09/01/10EPAReply to the notification letter regarding a Small Business Advoca- cy Review Panel for the forthcoming regulatory proposal for storm- water regulations to address discharges from developed sites. 09/08/10EDComments regarding the definition of gainful employment, 75 Fed. Reg. 43615. 09/09/10HHSComments regarding modifications to the HIPAA privacy, security, and enforcement rules under the Health Information Technology for Economic and Clinical Health Act, 75 Fed. Reg. 40867.09/14/10HHSComments regarding changes in certification requirements for home health agencies and hospices, 75 Fed. Reg. 43235. Table 2.2 Regulatory Cost Savings, FY 2010 11Report on the Regulatory Flexibility Act, FY 2010 AgencySubject DescriptionCost Savings/ Impact MeasuresEPAConstruction and Development Final Rule.On Febru-Based on data from ary 26, 2009, Advocacy filed comments with EPA re-EPA’s economic analy- garding the construction and development storm water sis, Advocacy estimates proposed rule. This rule, promulgated in November 2009, that approximately regulates sediment discharges from construction sites. one-half of the savings Advocacy recommended two regulatory alternatives to accrue to small firms, protect water quality at a considerably lower cost for or $1.957 billion small construction firms. One of those two alternatives annually. was a passive treatment system. In the final rule, EPAadopted the passive treatment system option, saving, ac- cording to EPA, an estimated $3.913 billion per year for the affected construction firms. (EPA November 2009 Economic Analysis, Table 2-1.) FARFederal Acquisition Regulation; FAR case 2008-015, Advocacy has been Payments Under Fixed-price Architect Engineer Con-able to quantify only tracts.The Civilian Agency Acquisition Council and the the up-to clause. An- Defense Acquisition Regulations Council published a ticipated first-year cost final rule on March 19, 2010, to revise a clause applied to savings are $335 mil- federal contracts for architecture and engineering (A&E) lion, with annual cost services that mandated that 10 percent of fees be with-savings of $335 million. held or retained from a firm, regardless of the quality of the firm’s performance. FAR Case 2008-015 amends the clause at FAR 52.232-10, “Payments under Fixed-price Architect-Engineer Contracts.” This final rule revises paragraph (b) of the contract clause at FAR 52.232-10 to state that contracting officers shall withhold up to 10 percent of the payment due only if the contracting of- ficer determines that such a withholding is necessary to protect the government’s interest and ensure satisfactory completion of the contract. The amount of withholding shall be determined based upon the contractor’s perfor- mance record. This final rule also makes several related editorial changes including one that clarifies that the con- tractor will be paid any unpaid balance, including with- held amounts, at the successful completion of the A&E services work. AgencySubject DescriptionCost Savings/ Impact MeasuresEPANational Emission Standards for Hazardous Air Pol-Through a variety of lutants Reciprocating Internal Combustion Engines, 75 concessions by the Fed. Reg. 9648 (March 3, 2010). In June 2009, Advo-agency, first-year cost cacy submitted comments on the EPA proposed rule, Na-savings total $291 mil- tional Emission Standards for Hazardous Air Pollutants lion, with annual cost for Reciprocating Internal Combustion Engines. This rule savings of $291 million. affects hundreds of thousands of small businesses that employ engines for a variety of purposes. These engines are used at facilities such as power plants and chemical and manufacturing plants to generate electricity and to power pumps and compressors. Such small businesses include those in oil and gas production, natural gas pipeline companies, and agriculture (e.g., for irrigation pumps). In March 2010, EPA promulgated the final rule affecting diesel (compression ignition or CI) engines. The agency plans to complete the rulemaking for spark ignition engines. EPAClean Air Act Greenhouse Gas Regulations. On June EPA estimates that the 3, 2010, EPA published a final rule that defers Clean Air permitting deferrals Act greenhouse gas (GHG) requirements for many small contained in the final businesses for up to six years. The “tailoring” rule sets rule will yield one-year thresholds for GHG emissions that define when business-cost savings for small es must obtain a permit to modify or construct under the entities of $9.1 billion. Prevention of Significant Deterioration (PSD) program or a permit to operate under the Title V permit program. The rule defers the requirements of these permitting programs to limit which facilities will immediately be required to obtain PSD and Title V permits. Existing small business- es with potential carbon dioxide emissions (or equivalent emissions of other GHGs) of less than 75,000 tons per year will not be subject to PSD and Title V permitting requirements until at least July 1, 2013. Advocacy rec- ommended in a June 2009 public comment letter that EPA adopt an applicability threshold of at least 25,000 tons/year of CO2. Advocacy subsequently recommended a 100,000 ton/year CO2 threshold in a December 2009 public comment letter. 13Report on the Regulatory Flexibility Act, FY 2010 AgencySubject DescriptionCost Savings/ Impact MeasuresSECSection 404(b) of the Sarbanes-Oxley Act of 2002 According to the data (SOX). As required by SOX, the U.S. Securities and collected by industry Exchange Commission (SEC) published final rules on on actual compliance June 18, 2003, that would require thousands of small costs, the Dodd-Frank businesses that raise funds from public investors to report Act exemption could on internal controls and audit procedures, and to obtain save small public costly outside auditor evaluations and attestations of their companies nearly $2.9 reports. However, once the rules were in effect for larger billion in first-year companies, it became clear that they would cost much compliance costs, and more. Actual compliance costs for smaller public compa-$2.9 billion in annual nies with less than $75 million in market capitalization compliance costs. turned out to be closer to $1 million per firm. Advocacy urged the SEC to delay the first and subsequent compli- ance deadlines for the rules for small entities, and to form a smaller public company advisory committee to study the problem and make recommendations. The SEC acted decisively to avoid unintended harm to small entities, implementing temporary delays. In 2010, the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) permanently exempted public compa- nies with a market capitalization of less than $75 million from the external audit of internal control requirements of SOX section 404(b). Table 2.3 Summary of Cost Savings, FY 20101(dollars) Rule/ InterventionFirst-year Costs Annual CostsHazardous Air Pollution Rule for Prepared Ani- 7,000,000 9,000,000 mal Feed Manufacturing (EPA)2Certification Procedures and Identification Re- 327,100,000 quirements for Aviation Parts and Articles (FAA)3Construction and Development Final Rule (EPA)4 1,957,000,000 1,957,000,000 FAR Case 2008-015, Payments under Fixed-price 335,000,000 335,000,000 Architect Engineer Contracts (FAR)5 Reciprocating Internal Combustion Engines 291,000,000 291,000,000 (EPA)6Clean Air Act Greenhouse Gas Regulations GHG 9,143,099,941 “tailoring” (EPA)7Women-owned Small Business8 34,875,000 3,487,500 Sarbanes-Oxley9 2,899,500,000 2,899,500,000 TOTAL14,994,574,941 5,494,987,500 1. The Office of Advocacy generally bases its cost savings estimates on agency estimates. Cost savings for a given rule are captured in the fiscal year in which the agency agrees to changes in the rule as a result of Advocacy’s intervention. Where possible, Advocacy limits the savings to those attributable to small business. These are best estimates. First-year cost savings consist of either capital or annual costs that would be incurred in the rule’s first year of implementation. Recurring annual cost savings are listed where applicable. 2. Source: EPA. 3. Source: FAA. 4. Source: EPA November 2009 Economic Analysis, Table 2-1. 5. Source: FPDS-NG Data. 6. Source: EPA RIA Feb 2010, Table 4-4. 7. Source: EPA RIA, Table 4-7. 8. Source: SBA. 9. Source: FERF Survey. 15 Report on the Regulatory Flexibility Act, FY 2010 17Report on the Regulatory Flexibility Act, FY 2010 3Advocacy Review of Agency RFACompliance in Fiscal Year 2010Since the enactment of the Regulatory Flexibility Act in 1980, the Office of Advocacy has worked consistently with federal agencies to examine the effects of their proposed regulations on small entities. Advocacy demonstrates its commit- ment to working with agen- cies to reduce the burden of federal regulations on small entities by providing written interagency communica- tions, public comments, RFAtraining, and congressional testimony, and by hosting RFA panels and roundtables. Over the years, communica- tion and coordination between other federal agencies and the Office of Advocacy has increased in the ef- fort to address small business concerns in policy deliberations. The following section provides an overview of RFA and E.O. 13272 compliance by agency in fiscal year 2010. Department of AgricultureE.O. 13272 ComplianceThe U.S. Department of Agriculture (USDA) has complied with section 3(a) of E.O. 13272 bymaking its policies for considering small busi- ness impacts when promulgating regulationspublicly available on the website. The followingagencies within USDA generally comply withsection 3(b) of E.O. 13272 by notifying Advoca- cy of rules that may have a significant economicimpact on a substantial number of small entities: the Animal and Plant Health Inspection Service(APHIS), the Agricultural Marketing Service, the Grain Inspection, Packers, and StockyardsAdministration, and the Forest Service. The U.S. Forest Service has consistently reached out toAdvocacy to increase its understanding of theRFA and continues to contact Advocacy wellin advance of publishing rules that could havea significant economic impact on a substantialnumber of small entities. Advocacy did not fileany public comments with the Forest Servicein FY 2010; therefore, compliance with section3(c) cannot be assessed. Advocacy providedRFA training to APHIS on January 13, 2010. Department of CommerceE.O. 13272 ComplianceThe Department of Commerce (DOC) contin- ues to comply with the requirements of E.O. 13272. Its RFA policies are publicly available in compliance with section 3(a) of E.O. 13272, and DOC’s agencies notify Advocacy of draft rules as required by section 3(b) of E.O. 13272. For example, the National Marine Fisheries Ser- vice (NMFS) not only notifies Advocacy of its draft rules, but also routinely submits them to the Office of Advocacy for interagency review. Similarly, in the last year, the U.S. Patent and Trademark Office (PTO) complied with section 3(b) of E.O. 13272 by notifying Advocacy of its draft rules and submitting them to Advocacy. In gneral, DOC and its agencies comply with sec- tion 3(c) of E.O. 13272 by giving appropriate consideration to comments made by Advocacy during the rulemaking process. National Oceanic and Atmospheric AdministrationIssue:Modification of the Herring Midwater Trawl GearAuthorization Letter. On Septem- ber 4, 2009, NMFS published a proposed rule on fisheries of the Northeastern United States; “It’s a relief to realize that someone in government is paying attention to the plight of independent fishermen and processors. It puts a little faith back in my perception of our process.” —Jeff Reichle, Lunds Fish Modification of the Gulf of Maine/Georges Bank Herring Midwater Trawl Gear Authorization Letter. For vessels fishing in Closed Area I (CA I), the proposed rule modifies the requirements for midwater trawl vessels that have been issued Atlantic herring limited access permits for all areas and/or Areas 2 and 3. To fish in CA I, mid- water trawl vessels with these permits would be required to carry a NMFS-approved observer and to bring the entire catch aboard the vessel, unless specific conditions are met, so that it is avail- able to the observer for sampling. The proposed changes to the Gulf of Maine/Georges Bank Herring Midwater Trawl Gear Letter of Autho- rization would be effective indefinitely, until changed by a subsequent action. NMFS certified that the rule would not have a significant economic impact on a substantial number of small entities. However, after talking to industry representatives, Advocacy staff con- cluded that the rule’s impacts may be significant. On September 24, 2009, Advocacy filed com- ments on the proposed rule. Advocacy advised NMFS that certification may be inappropriate and that an IRFA may be warranted. Advocacy recommended that NMFS consider alternatives such as lifting the prohibition on fishing without an observer if no observer is available, clarify- ing the phrase “unless the fish has been brought abroad the vessel” to prevent fishers from being penalized unnecessarily, giving full consideration to the industry’s rewritten version of the dogfish exemption, and allowing a vessel to discontinue fishing in Closed Area I but keep the fish if it has to discontinue a trip due to a mechanical failure or safety concern. NMFS published the final rule in November 2009. In the final rule, NMFS modified the pro- posed rule on Closed Area I access and allowed vessels to continue fishing in other areas if they leave Closed Area I for a mechanical failure or safety reason, as Advocacy and the industry re- quested. Also, NMFS incorporated some of the suggestions regarding exemptions. Issue: Herring Stock Assessment. On Novem- ber 10, 2009, the Office of Advocacy submitted a letter to the National Oceanic and Atmospheric Administration regarding the specifications for the Atlantic herring fishery. In June 2009, the Transboundary Resources Assessment Com- mittee (TRAC) performed a stock assessment. As a result of the TRAC report, the Science and Statistical Committee (SSC) set the acceptable biological catch (ABC) at 90,000 metric tons, which reduced the current ABC by more than 50 percent. However, the SSC recognized that there was substantial uncertainty in the June 2009 assessment; the New England Fishery Manage- ment Council (NEFMC) stated that the herring fishery was not overfished and that the data from the TRAC assessment were questionable. Advocacy asserted that reducing the ABC by greater than 50 percent may have a devastating effect on small businesses in the herring fishery, the lobster fishers who rely on herring for bait, and the small communities from New Jersey to Maine that are dependent on the fish stock for economic vitality. Advocacy stated that employ- ing a wider range of scientific information is necessary to ensure that unnecessary economic harm is not visited on small entities. The office encouraged NMFS to perform a new benchmark assessment for the Atlantic herring fishery. Ad- vocacy further encouraged NMFS to extend the 2009 specifications to 2010 in the meantime and to utilize maximum flexibility in considering alternatives. The NEFMC met in mid-November to talk about herring. In the end, they voted to recommend that the allowable catch for herring be 106,000 MT rather than 90,000 MT. The 106,000 MT limit was based on the three-year average catch from 2006-2008. This is an example of how Advocacy is involved early in the process. There was no proposed rule. The letter was in reference to the science that will be used for proposed herring catch rules for the next two years. By addressing the issue of the science early on, the chances of 19Report on the Regulatory Flexibility Act, FY 2010 NMFS considering less burdensome alternativesfor small entities will increase. Issue: Regional Fishery Management Coun- cils. On October 30, 2009, the Office of Advoca- cy submitted a comment on the NMFS proposed rule on the Magnuson-Stevens Fishery Conser- vation and Management Act; Regional Fishery Management Councils; Operations. Although the agency complied with the RFA in the proposal, Advocacy submitted comments because of the impact the proposal would have on future activi- ties that will affect small entities. The proposed rule addressed the admin- istration and operations of the regional fishery management councils and made changes to the regulations requiring councils to provide procedures for proposed regulations, clarify- ing restrictions on lobbying, and clarifying timing in the council nomination process. Advocacy commended NMFS for proposing a rule that will increase the transparency of the process. While many of the initiatives will benefit small entities, Advocacy not- ed, some areas of the proposal could be improved. The proposal required the councils to post their Statement of Organization, Practices and Procedures (SOPPs) on the Internet. Advocacy supported that aspect of the proposal and encouaged NMFS to continue to allow the public to request a copy by mail or in person to ensure access for all. The proposal also required each council to establish clear internal procedures forproposed regulations and to make them avail- able to the public to inform the public of how it operates. Advocacy encouraged NMFS to provide more guidance on the substance of the procedures and to establish a minimum set of standards for information available on a coun- cil’s website. r. The proposed rule also specified a revised means for announcing meetings of a council, scientific and statistical committees, advisory panels, other committees, and the council coor- dination committee. The revised regulations al- low for notice of regular, emergency, and closed meetings by any means that will result in wide publicity in the major fishing ports of the region and other ports with an interest in any of the fish- eries likely to be addressed in the proceedings. Advocacy supported this aspect of the proposal. Finally, the proposal further required members of SSCs to file financial disclosures. Advocacy en- couraged NMFS to include grants, income, and other forms of compensation in the disclosure of financial interests from the groups that are listed. NMFS finalized most of the rule on Sep- tember 27, 2010, noting that the elements on stipends for SSCs and advisory panels needed additional review. Among other things, in the final rule, NMFS concurred that SOPPs should be made available in print form as well as on the Internet. NMFS also stated that councils are to maintain in the council office copies of docu- ments that are too large to place on the website and that meeting notices should be provided in advance and through the use of media including industry publications. NMFS also agreed that transparency and consistency are important. Each NMFS regional office, the council, the council attorney advisor from NOAA, NOAA’s Office of the General Counsel, and the General Counsel for Fisheries will collaborate to ensure that the procedures are efficient, responsive to specific regional needs, consistent with the Magnuson Stevens Act, and transparent from the public’s perspective. NMFS further stated that it is revis- ing the financial disclosure form to clarify what sources and types of income are reportable. U.S. Patent and Trademark OfficeIssue: Enhanced Examination Timing ControlInitiative. On June 4, 2010, the United StatesPatent and Trademark Office (PTO) published a“Time and time again, Advocacy has stood by small business fishermen, proving itself to be an invaluable resource for this highly regulated industry.” —Shaun M. Gehan, Kelley Drye & Warren, LLP notice and request for comments on a proposed initiative that would provide applicants with the ability to choose between three “tracks” for the timing of examination of their applications. These include a prioritized track for rapid examination, examination under the current procedure, and a track allowing for up to a 30-month delay. Advo- cacy submitted public comments on the proposal, which, while expressing general support for the agency’s efforts to create a faster and more ef- ficient patent review process, urged the agency to consider concerns of small businesses and their representatives. These concerns included fees and other requirements associated with the election of the rapid examination track and the delayed track. The agency has not proceeded with rulemakings to implement this proposal in FY 2010. Department of Defense E.O. 13272 ComplianceThe Federal Acquisition Regulation Council (FAR Council) promulgates procurement regula- tions that are governmentwide and affect small businesses. The FAR Council statutorily includes representation from the Department of Defense (DOD), the General Services Administration, and the National Aeronautics and Space Administra- tion (NASA). The DOD regulations, called the Defense Federal Acquisition Regulation Supple- ment, are specific to DOD and can only supple- ment the FAR Council regulations. The FAR Council and DOD regulatory processes are inter- related and DOD’s procedures comply with sec- tion 3(a) of E.O. 13272. DOD notifies Advocacy of its draft rules in compliance with section 3(b) of E.O. 13272, and routinely submits prepublica- tion rulemakings for Advocacy’s consideration. In compliance with Section 3(c), DOD has given appropriate consideration to comments provided by Advocacy. For the most part, these comments have been discussed and considered during inter- agency deliberations. DOD staff participated in two RFA training sessions in FY 2010. Department of Education E.O. 13272 ComplianceThe Department of Education has made its poli- cies and procedures publicly available as re- quired by section 3(a) of E.O. 13272. Education notifies Advocacy of draft rules that may have a significant economic impact on a substantial number of small entities, as required by section 3(b) of E.O. 13272. Advocacy filed one public comment letter with the Department of Educa- tion in FY 2010; however, that rule was not final- ized. Therefore Education’s compliance with 3(c) cannot be assessed. Issue: Program Integrity: Gainful Employ- ment. On July 26, 2010, the Department of Edu- cation’s Office of Postsecondary Education pub- lished a proposed rule that establishes measures for determining whether certain postsecondary educational programs lead to gainful employ- ment in recognized occupations, for the purposes of determining eligibility for the student financial assistance programs authorized under title IV of the Higher Education Act of 1965, as amended. Advocacy was contacted by small institutions and their representatives, who have expressed concern regarding the economic impact of the proposal on small schools. Advocacy drafted a public comment letter relaying the small institu- tions’ concerns and urging the agency to consider alternatives that would be less burdensome on small schools. Due to the large number of com- ments and concerns submitted regarding this rule, the agency opted to delay publication of the final rule until 2011. 21Report on the Regulatory Flexibility Act, FY 2010 Department of Health and Human ServicesE.O. 13272 ComplianceThe Department of Health and Human Services (HHS) has complied with section 3(a) of E.O. 13272 by making its policies and procedures publicly available online. Agencies within HHS do not consistently notify Advocacy of draft proposed rules pursuant to section 3(b) of E.O. 13272. In general, HHS and its agencies comply with section 3(c) of E.O. 13272 by giving ap- propriate consideration to comments made by Advocacy during the rulemaking process. Issue:Modification to Health Insurance Portability and Accountability Act (HIPAA) Privacy, Security and Enforcement Rules under the Health Information Technology for Economic and Clinical Health Act (HI- TECH). On July 14, 2010, HHS published a proposed rule whose purpose was to modify and implement recent statutory amendments under the HITECH Act, to strengthen the privacy and security protection of health information, and to improve the workability and effectiveness of the HIPAA rules. The original HIPAA rules generally applied to three types of “covered entities”—health care providers who conduct covered health care transactions electronically, health plans, and health care clearinghouses. The proposed rule extended the HIPAA privacy and security regulations to the “business as- sociates” of covered entities. The HIPAA rules define ‘‘business associate’’ generally to mean a person who performs, on behalf of a covered entity, functions, activities, or certain services that involve the use or disclosure of protected health information. Business associates include “third party administrators or pharmacy benefit managers for health plans, claims processing or billing companies, transcription companies, and persons who perform legal, actuarial, accounting, management, or administrative services for cov- ered entities and who require access to protected health information.” Despite treating all of the affected healthcare entities as small for the purposes of this rule, HHS chose to certify that this regulation will nothave a significant economic impact on a substan- tial number of small businesses under Section605 of the RFA. Advocacy’s comments voicedconcern about the computation by HHS of thecosts of the rule. Affected small entities had ap- proached Advocacy with their belief that the busi- ness associate provisions of the rule would resultin a significant burden on their businesses. Centers for Medicare and Medicaid ServicesIssue: Medicare Program: Home Health Pro- spective Payment System Rate Update forCalendar Year 2011; Changes in Certification Requirements for Home Health Agencies and Hospices. On July 23, 2010, the Centers for Medicare and Medicaid Services (CMS) pub- lished in the Federal Register a proposed rule that would update the Home Health Prospective Payment System (HHPPS) rates effective Janu- ary 1, 2011, update the wage index and outlier used under the HHPPS, and institute changes to the home health agency capitalization require- ments, among other changes. CMS also certi- fied under the RFA that the rule would not have a significant economic impact on a substantial number of small businesses. Advocacy was ap- proached by small home health care agencies and their representatives because they believed that, contrary to the CMS certification, the regulation would significantly affect their businesses and potentially beneficiary access to quality care. These concerns primarily involved the rule’s proposed changes to their certification and capi- talization requirements. On September 14 and October 4, 2010, Advocacy filed public com- ments with CMS asking that the agency revisit its certification by preparing an initial regulatory flexibility analysis based on the economic impact arguments raised by affected home health care agencies. Department of Homeland Security E.O. 13272 Compliance The Department of Homeland Security (DHS) has made progress in complying with E.O. 13272. DHS has posted its RFA policy on its website, as required by section 3(a) of E.O. 13272. The Transportation Security Administra- tion (TSA) was trained in RFA compliance in FY 2005 and FY 2010, and the United States Coast Guard (USCG) was trained in FY 2005, FY 2008, and FY 2010. In FY 2010, Advocacy did an advanced RFA training course for members of the DHS General Counsel’s Office, as well as DHS staff from Immigration and Customs Enforcement (ICE), the U.S. Citizenship and Immigration Service (USCIS), and the Office of the Chief Procurement Officer (OCPO). DHS did not submit all draft rules that may have a signifi- cant economic impact on a substantial number of small entities to Advocacy in FY 2010, as required by 3(b). However, USCIS did submit all draft rules to Advocacy, whether or not they had a significant economic impact on a substantial number of small entities. DHS did not publish any final rules in FY 2010 that were the subject of Advocacy comments; therefore, compliance with section 3(c) of E.O. 13272 cannot be as- sessed. Advocacy submitted comments to DHS on TSA’s proposed Aircraft Repair Station rule; however, this rule was not finalized in FY 2010. Issue: Limitations on Subcontracting in Emergency Acquisitions. On August 9, 2010, Advocacy submitted comments on DHS’s pro- posed Revision of the Department of Homeland Security Acquisition Regulation: Limitations on Subcontracting in Emergency. DHS’s proposed rule would limit the use of subcontractors by prime contractors on cost-reimbursement-type emergency contracts above the simplified acqui- sition threshold. U.S. Coast GuardIssue: Standards for Living Organisms in Ships’ Ballast Water Discharged in U.S. Wa- ters. On December 4, 2009, Advocacy filed comments with the U.S. Coast Guard (USCG) regarding its proposed rule amending its regula- tions for ballast water management by estab- lishing standards for the allowable concentra- tion of living organisms in ships’ ballast water discharged in U.S. waters. The rule would aid USCG’s efforts to manage the introduction and spread of nonindigenous and invasive species into U.S. waters. USCG has not yet published a final rule. USCG’s current regulations for the manage- ment of ballast water discharge require that all vessels equipped with ballast after tanks and bound for ports or places of the United States conduct mid-ocean ballast water exchange, re- tain their ballast water on board, or use another USCG-approved ballast water management method. In lieu of ballast water exchange, USCG proposed regulations establishing a two-phased ballast water discharge standard for the concen- tration of living organisms that can be discharged in ballast water and establishing an approval process for ballast water management systems intended for use on board vessels that would be used to treat ballast water to ensure it meets the standard. The Coast Guard’s initial regulatory flex- ibility analysis did not examine a significant por- tion of the shipping industry composed mainly of small businesses. Advocacy requested that the Coast Guard expand its IRFA to include an analysis of the rule’s impact for businesses op- erating vessels under 100 feet in length, river vessels, and tugboats. Advocacy also encouraged the Coast Guard to examine the relative benefits of imposing the new standards for small vessels 23Report on the Regulatory Flexibility Act, FY 2010 with relatively low-volume ballast tanks after it completes an expanded analysis. Small businesses in the supply vessel indus- try contacted Advocacy and explained that a largenumber of their vessels use only municipal waterin their ballast tanks. Because municipal waterhas not been shown to contribute to the spreadof invasive species, Advocacy urged the CoastGuard to craft an exemption for vessels that useonly municipal water in their ballast tanks. The proposed rule also includes a five-year grandfathering provision for those vessels that comply with the phase one standard prior to Jan- uary 1, 2016. Because the ballast water manage- ment systems required by the rule will be very costly to small businesses, Advocacy urged the Coast Guard to adopt a grandfathering provision that would apply for the life of a typical ballast water treatment system. Department of Housing and Urban DevelopmentE.O. 13272 ComplianceThe Department of Housing and Urban Develop- ment (HUD) has made its policies and proce- dures available to the public in compliance with section 3(a) of E.O. 13272. HUD consistently notifies Advocacy of rules that may have a sig- nificant economic impact on a substantial num- ber of small entities as required by section 3(b) of E.O. 13272. HUD received RFA training in FY 2005. HUD published a final rule in FY 2010 that was the subject of an Advocacy public com- ment and addressed Advocacy’s comments in the final rule in compliance with section 3(c). Issue: Continuation of FHA Reform: Strengthening Risk Management Through Responsible FHA-approved Lenders. On De- cember 23, 2009, the Office of Advocacy submit- ted a comment letter to the Department of Hous- ing and Urban Development, Federal Housing Administration (FHA) on its proposed rulemak- ing on Continuation of FHA Reform-Strength- ening Risk Management Through Responsible FHA-Approved Lenders. The purpose of the proposed rule was to streamline, modernize, and strengthen the mortgage insurance functions and responsibilities of FHA. These responsibilities are authorized by provisions contained in the National Housing Act, as amended by the FHAModernization Act of 2008 and further supported by the Helping Families Save Their Homes Act of 2009. FHA proposed to no longer approve loan correspondents as participants in FHA pro- grams. Mortgagees would be required to ensure that their loan correspondents meet applicable requirements. The proposal would also increase the net worth requirement for FHA-approved mortgagees for the purpose of ensuring that ap- proved mortgagees are sufficiently capitalized. FHA prepared a certification for the RFAsection of the preamble. After working with in- dustry representatives, Advocacy questioned the basis of this certification. Advocacy asserted that at least 40 percent of the approved mortgagees had a net worth that was less than $1 million. Although HUD did not state that these approved mortgagees were small, it is fair to assume that at least 40 percent probably are small, given their net worth. The new net worth requirements will eliminate a large number of smaller wholesale lenders who are currently servicing mortgage brokers. Those lenders will lose the current in- come they receive by participating in the FHAprogram, and mortgage brokers may have a dif- ficult time finding new lenders to obtain the FHAproduct. Because only FHA-approved mortgag- ees are allowed to request FHA case numbers and other information, the proposal interferes with a correspondent’s ability to obtain informa- tion for FHA loans or access FHA’s website. The lack of access is time-consuming and potentially costly if the customer decides to go elsewhere for the loan. Advocacy encouraged FHA to pre- pare an IRFA to determine the economic impact this proposal may have on small entities and to consider less costly alternatives such as a net worth requirement that is not so excessive. FHA finalized the rule in April 2010. As a result of Advocacy’s involvement, the final rule provided for a more gradual transition to new net worth requirements for lenders that meet SBA’s definition of a small business. Department of theInterior E.O. 13272 Compliance The Department of the Interior (DOI) has com- plied with section 3(a) of E.O. 13272 by main- taining its RFA policies on its website. Not all of DOI’s agencies comply with section 3(b) of E.O. 13272 by notifying Advocacy of draft rules that may have a significant economic impact on a substantial number of small entities. The U.S. Fish and Wildlife Service (FWS) fails to so notify Advocacy. The Office of Advocacy filed three public comment letters with DOI in FY 2010, discussed below. For rules that were ulti- mately published as final rules in FY 2010, DOI complied with section 3(c) of E.O. 13272 by re- sponding to Advocacy’s written comments. Fish and Wildlife ServiceFor most of its rules proposing to designate critical habitat under the Endangered Species Act, FWS has not complied with the RFA by publishing an IRFA or a certification for public comment concurrently with its proposed rules. Instead, FWS often delays the publication of its RFA analysis until very late in the rulemaking process. Advocacy believes that these delays in completing RFA analyses hinder the ability of affected small entities to provide meaningful comment on the agency’s proposals. Advocacy provided FWS with two public comment letters in FY 2010, discussed below. Issue: Revised Critical Habitat for the Bull Trout in the Coterminous United States. On March 11, 2010, Advocacy filed comments with FWS regarding its proposal to revise its critical habitat designation for the bull trout under the Endangered Species Act. Because conservation measures for endangered salmon, steelhead, Klamath suckers, and other protected fish were already in place within the designated areas, FWS concluded that the incremental economic impact of the proposed designation would be small. FWS indicated that the most significant economic impact would occur within the areas of proposed critical habitat that were not already occupied by bull trout, but are necessary for the conservation of the species. Advocacy noted that several small entities, including county governments and other small municipal bodies, had filed comments expressing their concern regarding the impact of the desig- nation on their localities. The office urged FWS to conduct further outreach with commenters to determine whether or not the economic impacts were of such a magnitude that FWS could ex- clude particular areas from its final designation, as allowed under Section 4(b)(2) of the act. Ad- vocacy also commended FWS for publishing its IRFA at the time it published the proposed rule, instead of delaying the analysis as it has done in other instances. FWS finalized the critical habitat for the bull trout in October 2010 after determin- ing that it would not exclude any areas from its proposal based on economic impacts. Issue: Proposal to List the Boa Constrictor, Four Python Species, and Four Anaconda Species as Injurious Reptiles. On May 10, 2010, Advocacy filed public comments with FWS regarding its proposal to list nine species of constrictor snakes as injurious wildlife under the Lacey Act. If the rule is finalized, importa- tion and interstate transport of the species listed will be prohibited, unless authorized by permit for scientific, medical, educational, or zoological purposes. Many of the species proposed for list- ing are widely sold to individuals who keep these animals as pets, and a large industry has grown up to support the hobby. 25Report on the Regulatory Flexibility Act, FY 2010 On April 21, 2010, Advocacy hosted a small business roundtable attended by members of the small business communities potentially affected by the proposed listing. Participants included constrictor snake breeders, reptile supply manu- facturers, specialized reptile shipping companies, zoological organizations, academics, and trade associations. All participants expressed concerns that the proposed rule, if finalized, would have devastating consequences on their businesses as well as on the science of herpetology. Ad- ditionally, participants expressed concern that the Lacey Act is an inappropriate mechanism for managing feral snake populations because it would ban transport and trade of those animals between states that do not have habitat support- ive of feral colonies. In comments, Advocacy forwarded the concerns of roundtable participants and also highlighted deficiencies in the IRFA prepared for the proposed rule. Notably, Advocacy ex- pressed concerns that the IRFA failed to identify the small entities directly affected by the rule, underestimated the economic impact of the rule on small entities, and did not discuss significant alternatives that would reduce the burden while achieving the agency’s wildlife management goals. Advocacy recommended that FWS de- velop a supplemental IRFA that would more ac- curately describe the economic impacts on small entities engaged in the breeding, sale, use, and care of these snake species, and consider alterna- tive approaches. FWS has not made a final determinationregarding whether it will list as injurious wild- life any or all of the species in the proposal atthis time. Office of Surface Mining Reclamation and EnforcementIssue: Advance Notice of Proposed Rulemak- ing, Stream Buffer Zone and Related Rules; Notice of Intent to Prepare a Supplemental Environmental Impact Statement. On Decem- ber 16, 2009, Advocacy filed comments with the Office of Surface Mining Reclamation and Enforcement (OSMRE) requesting that OSMRE extend the comment period for its advance no- tice of proposed rulemaking (ANPRM) to allow small entities adequate opportunity to provide feedback on the alternatives presented. The AN- PRM is the first step toward revising the agen- cy’s existing stream buffer zone rules to reduce the impacts on streams of Appalachian surface coal mining operations. Because the alterna- tives presented in the ANPRM could result in significant regulatory changes, Advocacy urged OSMRE to extend the comment period for 60 days. OSMRE ultimately decided not to extend the comment period for the rule. Department of JusticeE.O. 13272 ComplianceThe Department of Justice (DOJ) has made its policies and procedures publicly available as required by section 3(a) of E.O. 13272. DOJ notifies Advocacy through the office’s email notification system of draft rules that may have a significant economic impact on a substantial number of small entities, as required by section 3(b) of E.O. 13272. DOJ finalized one rule in FY2010 that was the subject of Advocacy’s com- ments (amending Title III of the Americans with Disabilities Act), and the agency complied with Section 3(c) of E.O. 13272 by addressing these comments in the final rule. Issue: Americans with Disabilities Act Regula- tions on Public Accommodations. On September15, 2010, the Department of Justice published afinal rule that amends the agency’s regulationsimplementing Title III of the Americans withDisabilities Act (ADA). Title III sets standardsfor making buildings accessible for people withdisabilities and requires existing facilities to re- move barriers that conflict with these standardswhen such modifications are “readily achievable.” DOJ’s 2010 ADA Standards for Accessible De- sign adopt the Access Board’s 2004 Americans with Disabilities Act Accessibility Guidelines (2004 ADAAG). The agency had not changed its Title III ADA regulations since 1991. Advocacy has been very involved with this rulemaking, submitting multiple comment letters and a report on this issue. When DOJ released its ANPRM on this issue in 2004, Advocacy submitted a public comment letter stating that the new regulations would unfairly punish the small businesses that had complied with the 1991 regulations. Advocacy recommended that DOJ adopt a general safe harbor for existing elements that complied with the 1991 ADA standards. In November 2007, Advocacy submitted a report to the U.S. Department of Justice titled Evaluation of Barrier Removal Costs Associated with the 2004 Americans with Disabilities Act Accessibil- ity Guidelines. The report found that both small and large firms face substantial costs from the adoption of the barrier removal requirements in the 2004 ADAAG. In June 2008, DOJ released a notice of pro- posed rulemaking (NPRM) on the 2010 ADA Standards titled Nondiscrimination on the Basis of Disability by Public Accommodations and in Commercial Facilities. DOJ’s NPRM proposed two safe harbors to address the concerns of small businesses regarding the cost of adopting the 2010 standards. Under the “general” safe harbor, existing facilities’ compliance with the current 1991 ADA standards may be sufficient to meet the new requirements. The small business safe harbor gives credit to small businesses that spend 1 percent of revenue on ADA modifications. Advocacy held a small business roundtable on this rule, attended by small business stake- holders and DOJ, and wrote a comment letter based on this input. While the small business representatives were supportive of the general safe harbor, these entities were concerned that the small business safe harbor could be inter- preted as a minimum spending requirement. In DOJ’s final rule on the 2010 ADA standards, DOJ adopted the general safe harbor and de- clined to adopt the small business safe harbor. Advocacy is in the process of calculating the cost savings for this regulation. Department of Labor E.O. 13272 Compliance The Department of Labor (DOL) has made its policies and procedures publicly available as re- quired by Section 3(a) of E.O. 13272. The Mine Safety and Health Administration (MSHA), the Occupational Safety and Health Administra- tion (OSHA), the Employment and Training Administration, the Employment Standards Administration, the Employee Benefits Security Administration (EBSA), the Office of Labor- Management Standards (OLMS), the Office of Federal Contract Compliance Programs, the Wage and Hour Division, the Office of the As- sistant Secretary for Policy, and the Solicitor’s Office were trained in RFA compliance in FY 2004, FY 2009, and FY 2010. Agencies within DOL notify Advocacy in a timely manner, through Advocacy’s email noti- fication system (OSHA, MSHA, EBSA and the Office of Worker Compensation Programs) of draft rules that may have a significant economic impact on a substantial number of small enti- ties, as required by Section 3(b) of E.O. 13272. OSHA finalized one rule in FY 2010 upon which Advocacy filed comments (Cranes and Derricks in Construction), and the agency complied with Section 3(c) of E.O. 13272. Advocacy submitted comments to OSHA in FY 2010 on its proposed Occupational Injury and Illness (Musculoskeletal Disorder) Recording and Reporting rule and its proposed Walking-Working Surfaces and Per- sonal Protective Equipment (Fall Protection Sys- tems) rule; however, neither of these rules were finalized in FY 2010. Advocacy also submitted comments to the Wage and Hour Division on its proposed rule, Nondisplacement of Qualified Workers under Service Contracts; however this rule was not finalized in FY 2010. EBSA did not publish any proposed or final rules in FY 2010 27Report on the Regulatory Flexibility Act, FY 2010 that were the subject of Advocacy comments, but did institute a policy in FY 2010 that was the subject of Advocacy comments. Advocacy also attended numerous public forums, advisory committee meetings, and stake- holder meetings for expected OSHA regulatory actions, including Combustible Dust, Hazard Communication, and the Injury and Illness Pre- vention Program. Occupational Safety and Health AdministrationIssue: Cranes and Derricks in Construction. On August 9, 2010, the Occupational Safety and Health Administration (OSHA) finalized a rule that revises its safety standards for cranes and derricks in construction. The final rule updates and specifies industry work practices to protect employees using this construction equipment. The final rule also addresses advances in the de- signs of cranes and derricks, related hazards, and the qualifications of employees needed to operate them safely. OSHA had been working on its cranes and derricks in construction rule since 1998, when its Advisory Committee for Construction Safety and Health recom- mended changes to the exist- ing standard. In July 2002, OSHA an- nounced plans to use negoti- ated rulemaking under the Negotiated Rulemaking Act to revise the standard, and formed the Cranes and Der- ricks Negotiated Rulemaking Advisory Committee (CDAC) in late 2002. CDAC drafted a proposed rule that OSHA was committed to publish. However, before proceed- ing with a proposed rule based on the CDAC document, OSHA was required to convene a Small Business Advocacy Review (SBAR) panel in accordance with the Small Business Regulato- ry Enforcement Fairness Act of 1996. Advocacy, along with OSHA and the Office of Management and Budget, was an active participant in the SBAR panel process in identifying small entity representatives (SERs) to work with the panel, assisting the SERs in reviewing the draft rule and other materials, and preparing the final SBAR panel report. When the proposed rule was published in 2008, the Office of Advocacy filed a public com- ment letter that recommended changes to make the rule less burdensome on small business. The final rule included a specific recommendation from Advocacy that the rule exempt companies that use equipment solely to deliver materials to a construction site; this represents cost savings to these firms. However, OSHA rejected Advocacy recommendations to allow small firms to self- certify their competence and other recommenda- tions concerning controlling entities. Employee Benefits Security Administration Issue: New E-signature Option for Forms 5500. On May 20, 2010, Advocacy commended EBSA for taking into account the concerns of the small business community in its announcement (Release Number 10-680-NAT) issued on May 13, 2010, that provided a new e-signature option on electronically filed Forms 5500 and 5500-SF, employee benefit plan annual reports. EBSA de- signed the new e-signature option to simplify the electronic filing process for small businesses that use employee plan service providers to complete and file their annual reports. Before EBSA announced the new e-signatureoption, service providers that managed the filingprocess for plans were not permitted to sign andsubmit the electronic Form 5500 or 5500-SF onbehalf of plan sponsors. In March 2010, Advoca- cy coordinated a meeting between small businessstakeholders and EBSA staff. At the meeting, thesmall business stakeholders expressed concern“SBAAdvocacy has been a reliable voice for small business concerns in the regulatory process. They have consistently worked with the small business community to identify issues of concern in proposed regulations and bring those issues to the agencies’ attention.” —Marc Freedman, U.S. Chamber of Commerce that the EBSA policy on e-filing was burdensome for small business employers that sponsor plans, because the employers could not rely on their plan administrators and providers to file employ- ee benefit plan annual reports. EBSA addressed the concerns of small business stakeholders by announcing its new e- signature option. Under the new option, service providers can now obtain their own signing cre- dentials and submit the electronic Form 5500 or 5500-SF for the plan on behalf of the sponsoring employers. Department of State E.O. 13272 Compliance The Department of State (State) has made some progress in complying with E.O. 13272. While State has not posted its RFA policy on its website as required by Section 3(a) of E.O. 13272, it was trained in RFA compliance in FY 2006. The State Department did not notify Advocacy of any draft rules in FY 2010 as required by Section 3(b) of E.O. 13272. The State Department did not pub- lish any final rules in FY 2010 that were subject to Advocacy comments; therefore, the agency’s compliance with section 3(c) of E.O. 13272 can- not be assessed. Advocacy submitted comments to the State Department on its proposed rule, Exchange Visitor Program-General Provisions; however, this rule was not finalized in FY 2010. Department of TransportationE.O. 13272 ComplianceThe Department of Transportation (DOT) has made its policies and procedures publicly avail- able as required by section 3(a) of E.O. 13272. The Federal Aviation Administration was trained in RFA compliance in FY 2003 and FY 2008. The Federal Motor Carrier Administration and the Federal Railroad Administration were trained in RFA compliance in FY 2004, FY 2008, and FY 2010. The National Highway Traffic Safety Administration and the Federal Highway Admin- istration were trained in RFA compliance in FY 2005. Agencies within DOT have typically noti- fied Advocacy in a timely manner, through Ad- vocacy’s email notification system, of draft rules that may have a significant economic impact on a substantial number of small entities, as required by section 3(b) of E.O. 13272; however, compli- ance has recently waned. DOT agencies finalized one rule in FY 2010 on which Advocacy filed comments: FAA’s Pro- duction and Airworthiness Approvals, Part Mark- ing, and Miscellaneous Amendments rule. That rule responded to comments raised by Advocacy as required by section 3(c). Advocacy submitted comments to DOT agencies on two rules in FY 2010: FAA’s Advance Notice of Proposed Rule- making on Safety Management Systems, and the Pipeline and Hazardous Materials Safety Admin- istration proposed rule on Hazardous Materials: Transportation of Lithium Batteries; however, neither rule was finalized in FY 2010. Federal Aviation AdministrationIssue: Production and Airworthiness Ap- provals, Part Marking, and Miscellaneous Amendments. On October 16, 2009, the Fed- eral Aviation Administration (FAA) finalized a rule that amends its certification procedures and identification requirements for aviation parts and articles. The rule updates and standardizes re- quirements for production approval holders, re- vises export airworthiness approval requirements to facilitate global manufacturing, consolidates parts marking rules, and amends the identifica- tion requirements for parts and articles. The Of- fice of Advocacy discussed FAA’s proposed rule at its regular aviation safety roundtable and then hosted a conference call on January 29, 2007, for interested small business representatives and aviation parts manufacturers to obtain their input and discuss small business concerns with the proposed rule. Advocacy filed a public comment letter addressing these concerns, particularly 29Report on the Regulatory Flexibility Act, FY 2010 with respect to provisions addressing marking components within a subassembly and quality systems. Advocacy also worked with FAA to revise and re-publish a supplemental regulatory flexibility analysis to correct certain deficienciewith the original analysis. In response to Advocacy’s comments, the FAA revised the final rule to eliminate several provisions, including a requirement for airwor- thiness approvals (Form 8130-3) for all foreign s and domestic shipments of aviation parts and for mark- ing all components and sub- components within an assem- bly. According to FAA, these revisions eliminated $327.1 million or 99.1 percent of the (undiscounted) cost of the rule, most accruing to small firms. In addition, FAAfollowed Advocacy’s recom- mendation by clarifying that the requirements for quality systems may be scaled to the size and complex- ity of the business, resulting in additional but unquantified savings to small business. Department of the TreasuryE.O. 13272 ComplianceThe Department of the Treasury (Treasury) hasmade its policies and procedures available tothe public in compliance with section 3(a) ofE.O. 13272. The Internal Revenue Service (IRS) within Treasury creates regulations of most con- cern to small businesses. IRS notified Advocacyof draft proposed rules under section 3(b) of E.O. 13272. IRS did not publish any final rules in FY2010 that were the subject of Advocacy com- ments; therefore, the compliance of the IRS withsection 3(c) of E.O. 13272 cannot be assessed. Issue: Registration of Mortgage Loan Origi- nators to Implement the Secure and FairEnforcement for Mortgage Licensing Act. On June 9, 2009, the Board of Governors of the Federal Reserve System, the Office of the Comp- troller of the Currency, the Federal Deposit In- surance Corporation (FDIC), the Office of Thrift Supervision, the Farm Credit Administration (FCA), and the National Credit Union Adminis- tration (NCUA) issued a joint proposed rule on the Registration of Mortgage Loan Originators to implement the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act). The SAFE Act requires an employee of a bank, sav- ings association, credit union or other depository institution and their subsidiaries who act as resi- dential mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry. It also requires financial institutions to require their employees who act as residential mortgage loan originators to comply with the SAFE Act’s requirements to register and obtain a unique identifier. Agency-regulated institutions must also adopt and follow written policies and procedures designed to assure compliance with the requirements in the proposal. On July 9, 2009, Advocacy submitted com- ments on the proposed rule. Advocacy expressed concern that the agencies may have underesti- mated the economic burden of the proposal. The proposal provided for a de minimis exception, which the agencies applied to financial institu- tions processing less than 25 mortgages per year in the aggregate. Advocacy said that the agen- cies were defining de minimis in an extremely restrictive manner. As a result, the rule may be unduly burdensome on small community banks that had little to do with the recent problems in the mortgage industry. Advocacy encouraged the agencies to work with representatives of the small financial institution industry to develop a better definition. In the proposed rule, they established a deminimis exception that would have exemptedfrom the registration requirements an employeeof an agency-regulated institution if, during theprevious 12 months: (1) The employee acted as amortgage loan originator for five or fewer residen- tial mortgage loans and (2) the agency-regulatedinstitution employed mortgage loan originatorswho, while exempted from registration pursuant“My thanks go out to the Office of Advocacy for your efforts… It is through your efforts that we actually make progress.” —Ric Peri, Aircraft Electronics Association to this section, in the aggregate, acted as mortgage loan originators in connection with 25 or fewer residential mortgage loans. Advocacy specifically commented that the proposed de minimis excep- tion would make the rule unduly burdensome for small community institutions. The proposal also provided for a grace pe- riod for initial registrations of 180 days from the date the agencies provide public notice that the registry accepts initial registrations. Advocacy recommended that the agencies extend the time period for compliance to at least one year to pro- vide small financial institutions the additional time needed to register employees, develop compliance policies, and make any other neces- sary changes. The agencies finalized the rule on July 28, 2010. In the final rule, the agencies took steps to minimize the impact on small entities. First, they revised the rule’s de minimis exception to reduce the compliance burden. In response to Advocacy and other comments, the agencies removed the institution threshold from this de minimis ex- ception. As a result, the final rule’s exception contains only the individual threshold, as well as a prohibition on any agency-regulated institu- tion engaging in any act or practice to evade the limits of the de minimis exception. This revised exception should simplify compliance and there- fore impose the least burden overall for institu- tions, including small entities. The agencies also made changes to the final rule that reduced the impact its requirements would have on all agency-regulated financial institutions, including small entities. The fi- nal rule decreased the amount of information required for submission by a mortgage loan originator. Specifically, the final rule does not require submission of financial history informa- tion such as bankruptcies and liens, employ- ment and terminations, pending actions, and felonies unrelated to crimes of dishonesty. Fur- ther, the agencies declined to include loan mod- ification activities in the final rule’s definition of mortgage loan originator. Under the Office of Thrift Supervision (OTS) rule, agency-regulated institution employees engaged solely in bona fide, cost-free loss mitigation efforts, which re- sult in reduced and sustainable payments for the borrower generally, would not meet the defini- tion of “mortgage loan originator.’’ This reduc- es the number of savings association employees subject to the final rule’s requirements. Department of Veterans Affairs E.O. 13272 ComplianceThe Department of Veterans Affairs (VA) has made its RFA policies publicly available on its website, as required by section 3(a) of E.O. 13272, while maintaining that most of its regula- tions do not affect small entities. The VA notifies Advocacy of any proposed rules that may have a significant economic impact on a substantial number of small entities in accordance with sec- tion 3(b) of E.O. 13272. The VA did not publish any final rules in FY 2010 that were the subject of Advocacy’s comments; therefore, the depart- ment’s compliance with section 3(c) of E.O. 13272 cannot be assessed. Consumer Product Safety Commission E.O. 13272 ComplianceThe Consumer Product Safety Commission (CPSC) has complied with section 3(a) of E.O. 13272 by making its policies and procedures publicly available online. CPSC also periodically complies with section 3(b) of E.O. 13272 by notifying Advocacy of draft proposed rules. In general, CPSC complies with section 3(c) of E.O. 13272 by giving appropriate consid- eration to comments made by Advocacy during the rulemaking process. Issue: Safety Standards for Cradles and Bas- sinets. On April 28, 2010, the CPSC published a 31Report on the Regulatory Flexibility Act, FY 2010 proposed rule in the Federal Register seeking toadopt the industry’s voluntary testing standardsas mandatory. The rule also proposed additionalproduct testing and the elimi- nation of certain product fea- tures such as strap restraints. On July 8, 2010, the Office ofAdvocacy filed a public com- ment letter with the CPSCasking the agency to improvethe analysis contained in itsIRFA, which suggested thatthe new regulation wouldhave only a small impact onthe industry and that any costscould be passed on to theconsumer. Advocacy notedthat the IRFA contained littledata that would allow an as- sessment of the true costs ofthe rule. Advocacy’s requestwas buttressed by industrycomplaints that the rule wouldraise their costs and lowertheir revenues significantly. CPSC decided toreopen the comment period for the rule in anattempt to obtain additional information fromthe industry regarding the rule’s provisions andimpacts. Environmental Protection AgencyE.O. 13272 ComplianceThe Environmental Protection Agency (EPA) has made its RFA policies and procedures publicly available through its website in accordance with section 3(a) of E.O. 13272. EPA has also consis- tently notified Advocacy of draft proposed rules expected to have a significant economic impact on a substantial number of small entities before publishing them in the Federal Register, as re- quired by section 3(b) of E.O. 13272. EPA also consistently provides prepublication draft rules for Advocacy review. EPA continues to respond to Advocacy’s comments in accordance with sec- tion 3(c) of E.O. 13272. Issue: Construction and Development (C&D) Water Pollution Guidelines. On December 1, 2009, EPA promulgated the Construction and Development (C&D) Water Pollution Guidelines, which impose requirements for stormwater dis- charges from construction and development sites. Advocacy filed comments in spring 2009 oppos- ing the EPA proposed standard, because it was based on costly advanced treatment systems. In April 2010, Advocacy petitioned EPA to recon- sider the C&D rule, indicating that the numeric standard for turbidity in the rule was “costly, dif- ficult to implement, and based on numerous fac- tual errors.” Specifically, the office argued that EPA had misinterpreted its own data, set the 280 nephelometric turbidity unit (NTU) limit based on data from active rather than passive treatment systems, and underestimated the cost of the rule by a factor of ten. Several industry groups filed a lawsuit to overturn the rule. In a significant victory for small businesses, in August 2010, EPA agreed to take a remand from the federal court to reconsider the rule, and in November EPA published a stay of the 280 NTU standard portion of the rule while it was under review. The stay of this requirement could save affected small businesses up to $10 billion per year. Issue: Clean AirAct Greenhouse Gas Regula- tions. On June 3, 2010, EPA published a final rule that defers Clean Air Act greenhouse gas (GHG) requirements for many small businesses for up to six years. The “tailoring” rule sets thresholds for GHG emissions that define when businesses must obtain a permit to modify or construct under the Prevention of Significant De- terioration (PSD) program or a permit to operate under the Title V permit program. The rule defers the requirements of these permitting programs to limit which facilities will immediately have to get PSD and Title V permits. Existing small busi- nesses with potential carbon dioxide emissions “By convincing EPA to overturn the numeric effluent limitation guideline for the construction and development industry, the SBA Office of Advocacy has helped to ensure that builders and developers will not be required to spend thousands of dollars on stormwater technology that may not help the agency meet its goal.” —Bobby Bowling, TropicanaBuilding Corporation, ElPaso, TX (or equivalent emissions of other GHGs) of less than 75,000 tons per year will not be subject to PSD and Title V permitting requirements until at least July 1, 2013. Advocacy recommended in a June 2009 public comment letter that EPA adopt an applicability threshold of at least 25,000 tons per year of CO2. Advocacy subsequently recom- mended a 100,000 ton per year CO2 threshold in a December 2009 public comment letter. EPA estimates that the permitting deferrals contained in the final rule will yield one-year cost savings for small entities of $9.1 billion. Issue: National Emission Standards for Haz- ardous Air Pollutants Reciprocating Internal Combustion Engines. In June 2009, Advocacy submitted comments on the EPA’s proposed rule, Na- tional Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines. This rule affects hundreds of thou- sands of small businesses that employ engines for a variety of purposes. These engines are used at facilities such as power plants and chemical and manufacturing plants to generate electricity and to power pumps and compres- sors. Affected small busi- nesses include those in oil and gas production, natural gas pipeline companies, and agriculture (e.g., for irri- gation pumps). On March 3, 2010, EPA promul- gated the final rule affecting diesel (compression ignition or CI) engines. Through a variety of re- visions made in the final rule, EPA has estimated annual cost savings of $291 million. Issue: Spill Prevention Controls and Counter- measures (SPCC). EPA completed the last major amendments to the SPCC rule (phase III, Novem- ber 2009; phase II, December 2008; phase I, De- cember 2006). Advocacy worked in collaboration with EPA and a large coalition of affected trade associations. As a result, EPA provided relief for the following targeted facilities: small facilities, oil-filled equipment, and motive power equip- ment (for example, tractors). This Advocacy ini- tiative is estimated to have saved more than $100 million per year, affecting hundreds of thousands of facilities. Equal Employment Opportunity Commission E.O. 13272 ComplianceThe Equal Employment Opportunity Commis- sion (EEOC) has posted its RFA policy on its website, as required by section 3(a) of E.O. 13272. The EEOC did not have any draft rules that had a significant economic impact on a substantial number of small entities in FY 2010; therefore, the agency’s compliance with sec- tion 3(b) of E.O. 13272 cannot be assessed. The EEOC did send Advocacy early drafts of other rulemakings and notices to seek input on the potential small business impacts. The EEOC alsodid not publish any final rules in FY 2010 that were the subject of Advocacy comments; there- fore, the agency’s compliance with section 3(c) of E.O. 13272 cannot be assessed. Federal Acquisition Regulation Council E.O. 13272 ComplianceThe policies and procedures required by section 3(a) that were provided by the Department of Defense apply also to the Federal Acquisition Regulation Council (FAR Council). The FAR Council has complied with section 3(b) by mak- ing its deliberations and predecisional delibera- tive rulemaking processes open to the Office of “The Office of Advocacy played a critical role throughout the multi-year effort to refine final Phase II SPCC regulations, and in the long run helped EPA develop a rule that fairly balances risk reduction with the regulatory costs imposed on small business.” —Jim Stine, The National Rural Electric Cooperation Association (NRECA) 33Report on the Regulatory Flexibility Act, FY 2010 Advocacy. The FAR Council published one rule in FY 2010 that was the subject of Advocacy comments and was in compliance with section 3(c) of E.O. 13272. The FAR Council participat- ed in two RFA training sessions in FY 2010. Issue: Payments under Fixed-price Archi- tecture and Engineering Contracts. On July 6, 2009, the Office of Advocacy submitted a comment letter to the FAR Council on the pro- posed regulation, Payments under Fixed-price Architecture and Engineering Contracts, FAR Case 2008-015. The proposed regulation was published in the Federal Register on May 5, 2009. The FAR Council proposed to amend the FAR to give contracting officers greater flex- ibility with respect to retainage on fixed-price architecture and engineering (A&E) contracts. Under the proposed rule, the contracting officer may retain less than the maximum of 10 percent of the contract price for each voucher of the A&E firm. The government retains the amount until the contracting officer determines that the work has been completed satisfactorily. Advo- cacy commended the FAR Council for propos- ing this regulation in response to the Office of Advocacy’s Regulatory Review and Reform (r3) initiative. The r3 initiative, launched in 2008, is a process developed to help implement section 610 of the RFA, which requires agencies to consider whether their current rules should continue with- out change or should be amended or rescinded. It solicits small business comment in the effort to identify and address existing federal regulations that should be revised because they are ineffec- tive, duplicative, or out of date. The A&E small business community recommended this proposed regulatory change under r3. The regulation was published as a final rule on March 19, 2010. Federal Communications CommissionE.O. 13272 ComplianceThe Federal Communications Commission (FCC) has not made its policies and procedures to promote RFA compliance publicly available and therefore has not complied with section 3(a) of E.O. 13272. The FCC complies in part with section 3(b) by notifying Advocacy of proposed rules that may have a significant economic im- pact on a substantial number of small entities; however, the FCC notifies Advocacy of such rules only after the adoption and release of the rule for public comment. The FCC does not provide its draft rules to Advocacy for review as required by section 3(b). The FCC complies with section 3(c) by responding to Advocacy’s written comments when it issues final rules. Advocacy continues to offer the FCC assistance in com- plying with the RFA, and often reaches out to engage FCC staff early in the rulemaking process and to discuss the impact the proposed rules may have on a variety of small businesses. Issue: Petition for Rulemaking to Amend theCommission’s Rules Governing Retransmis- sion Consent. On May 11, 2010, Advocacyfiled a letter with the FCC in response to its re- quest for comment on a petition filed on March9, 2010, for rulemaking to amend the FCC’srules governing retransmission consent. Advo- cacy urged the commission to consider the im- pact of the current retransmission consent ruleson small businesses. Advocacy noted specificissues of concern to small video providers, suchas a lack of bargaining power in retransmissionconsent negotiations, which can lead to a sub- stantial increase in fees. Small businesses havealso expressed concern over the possible threatof losing the broadcasters’ programming during the negotiation process. Advocacy noted the large number of small businesses that constitute the multichannel video programming distribu- tor “MVPD” market and the important role they play in creating a healthy, competitive market- place. Advocacy recommended that the FCC be mindful of these issues and the impact on this important segment of the market as it considers this petition. Issue: National Broadband Plan. On March 5, 2010, the Office of Advocacy sent a letter to the Federal Communications Commission request- ing that the agency seek revision of the Small Business Administration size standards for tele- communications services to better reflect current market conditions. Advocacy expressed its belief that revising the size standards to more accurate- ly reflect the existing telecommunications market will assist Advocacy and others in documenting the trends followed by small business providers of telecommunication services, and developing policies to ensure adequate competition in the telecommunications market. Federal Reserve Board E.O. 13272 ComplianceThe Board of Governors of the Federal Reserve System (FRB) has not published policies and procedures as required by section 3(a) of E.O. 13272. The FRB did notify Advocacy of some rules that may have a significant economic impact on small entities, as required by section 3(b) of the executive order, through notify.advocacy@ sba.gov in FY 2010. The FRB addressed Advo- cacy’s comments in the final rules as required by section 3(c) of the executive order. Issue: Regulation Z Closed-end Credit. On De- cember 23, 2009, the Office of Advocacy submit- ted a comment letter to the FRB on the Board’s proposed rulemaking on Regulation Z, Docket No. R-1366, Truth in Lending. The proposed rule amended Regulation Z, which implements the Truth in Lending Act. The proposal revised the rules for disclosure of closed-end credit secured by real property or a consumer’s dwelling, except for rules regarding rescission and reverse mort- gages. It required transaction-specific disclosures to be provided to the consumer at least three busi- ness days before consummation. The proposed rule also made changes to the format, timing, and content of the disclosures for the four main types of closed-end credit information governed by Regulation Z: 1) disclosures at application, 2) disclosures within three days after application, 3) disclosures three days before consummation, and 4) disclosures after consummation. It also pro- posed additional protections related to limits on loan originator compensation. Although the FRB prepared an IRFA, Ad- vocacy expressed concerns that the IRFA may not have complied with the requirements of the Regulatory Flexibility Act because it lacked ad- equate information about the economic impact of the proposal and full consideration of less burdensome alternatives. Small business repre- sentatives in the industry were concerned that the proposal may require small community banks to dramatically alter their business practices, raising costs for community banks. Advocacy argued that if community banks were to leave the market because of increased costs, it would be more difficult for consumers, including small entities, to obtain a mortgage. Advocacy further commented that small businesses offering loan origination services would be negatively and dis- proportionately affected by the proposal because the definition of loan originator in the proposal placed restrictions on small businesses that were not placed on larger competitors. Advocacy encouraged the Board to consider less costly al- ternatives, such as reconsidering the definitions of “finance charge” and “loan originator,” with- drawing the proposed prohibition on payments to loan originators that are based on the terms or conditions of the loan and instead requiring creditors to disclose the lowest interest rate, al- lowing loan originators to retain their ability to receive compensation as a percentage of the loan 35Report on the Regulatory Flexibility Act, FY 2010 amount and not just a flat fee, allowing consum- ers to waive the three-day waiting period, and delaying the implementation date. Advocacy also encouraged the Board to determine more accu- rately the full economic impact on small entities and to prepare and publish for public comment a revised IRFA. The Board finalized the rule on September 24, 2010. In the final rule, the Board adopted an alternative that permits loan originator compen- sation to be based on the loan amount. In addi- tion, the final rule does not apply to open-end credit or timeshare plans, and the final rule does not extend the record retention requirement to persons other than the creditor who pays loan originator compensation. This was the alternative requested by the small business community. Office of Management and BudgetE.O. 13272 ComplianceThe Office of Management and Budget (OMB), Office of Federal Procurement Policy (OFPP) does not issue regulations and is therefore not required to comply with E.O. 13272. Office of Federal Procurement Policy Issue: Work Reserved for Performance byFederal Employees. The Office of Advocacysubmitted a formal comment letter on June 6,2010. On March 31, 2010, the OFPP publisheda policy letter providing guidance to executivedepartments and agencies on circumstanceswhen work must be reserved for performance by . ports the administration’s goal of trying to bal. ance work that is inherently governmental, andshould be performed by government employees, with work that can be outsourced to the privatesector. This policy will help provide a morelevel playing field for small businesses. Whilethe draft policy document is not by definition a . come of the policy directive may have effectssimilar to those of a regulation. Therefore theOffice of Advocacy encouraged OFPP to con. sider the cost of compliance to small entities. Securities and Exchange CommissionE.O. 13272 ComplianceThe Securities and Exchange Commission (SEC) . cedures for the consideration of small entities in its rulemaking as required by section 3(a) of E.O. 13272. However, the SEC consistently notifies Advocacy through Advocacy’s email notification system of draft rules that may have a significant economic impact on a substantial number of small entities, as required by section 3(b). The SEC did not publish any proposed or final rules in FY 2010 that were the subject of Advocacy comments. Therefore, compliance with 3(c) can. not be assessed. Small Business AdministrationE.O. 13272 ComplianceThe U.S. Small Business Administration (SBA) has made significant efforts to stay in compli. ance with E.O. 13272. SBA has published its RFA procedures in compliance with section 3(a) of E.O. 13272. SBA notifies Advocacy of draft rules in compliance with section 3(b) of E.O. 13272 and consistently provides Advocacy with rules for review. As a result of RFA training and continued RFA discussions on draft rules, SBApersonnel have utilized Advocacy input earlier rather than later in the regulatory development 36Report on the Regulatory Flexibility Act, FY 2010 process. SBA published the WOSB final rule in FY 2010 that was the subject of an Advocacy comment letter. The agency is in compliance with section 3(c) of E.O. 13272. Issue: Small Business Size Regulations. On January 28, 2010, the Office of Advocacy filed a comment letter with the Small Business Admin- istration, discussing small entity concerns about SBA’s proposed rulemaking to regulate the 8(a) procurement program. The proposed regulation attempts for the first time to establish a residency requirement for 8(a) companies. The proposal, if implemented, would require the participant to spend part of every month physically present at his/her primary offices. Public Law 95-507 is the legal authority for the 8(a) program and it requires the participant to be a citizen of the United States. There is no legislative or regula- tory history of the 8(a) program to support this residency provision. Issue: Women-owned Small Business Federal Contract Program. On May 3, 2010, the Office of Advocacy filed a comment letter with the SBAdiscussing small entity concerns with Section 811 of the Small Business Reauthorization Act of 2000, Public Law 105-554. Section 811 addressed the difficulties women-owned small busi- nesses have encountered in competing for federal con- tracts. Public Law 105-554 created an acquisition tool that would allow agencies to restrict competition to qualified women-owned small businesses. Since 2000, SBAhas had a legislative requirement of trying to provide maximum practicable opportunity for women-owned small businesses to participate in the performance of contracts issued by any fed- eral agency. ConclusionIn FY 2010, Advocacy observed continued im- provement in federal agencies with respect to their RFA and E.O 13272 compliance. While Advocacy still faces the challenge of working with stakeholders and federal agencies to ensure that federal regulations do not place small busi- nesses at a competitive disadvantage because of disproportionate regulatory burdens, many agen- cies now see that the analytical process mandated by the RFA produces better and more informed regulatory decisions. Advocacy will continue to work coopera- tively with federal agencies so that they can both meet their regulatory goals and fulfill their obligations under the RFA. To accomplish this, Advocacy will focus its efforts on training new agency staff to establish continuity with respect to agency compliance with the RFA and E.O. 13272. Advocacy hopes to continue providing input to federal agencies regarding the impacts of proposed regulations on small entities early in the rulemaking process. “The Office of Advocacy lived up to its reputation as an independent voice for small business in this case and I am sure will continue to do so.” —Ann Sullivan, Women Impacting Public Policy 37Report on the Regulatory Flexibility Act, FY 2010 Appendix A Supplementary TablesTable A.1 Federal Agencies Trained in RFA Compliance, 2003-2010As required by E.O. 13272, the Office of Advocacy has offered training to the following federal de- partments and agencies in how to comply with the Regulatory Flexibility Act. Department of AgricultureAnimal and Plant Health Inspection ServiceAgricultural Marketing ServiceGrain Inspection, Packers, and Stockyards AdministrationForest ServiceRural Utilities ServiceDepartment of CommerceNational Oceanic and Atmospheric Administration National Telecommunications and Information AdministrationOffice of Manufacturing ServicesPatent and Trademark OfficeDepartment of EducationDepartment of EnergyDepartment of Health and Human ServicesCenters for Disease Control and PreventionCenters for Medicare and Medicaid Services Food and Drug AdministrationDepartment of Homeland SecurityBureau of Citizenship and Immigration ServicesBureau of Customs and Border ProtectionFederal Emergency Management AgencyTransportation Security AdministrationUnited States Coast GuardDepartment of Housing and Urban Development Office of Community Planning and DevelopmentOffice of Fair Housing and Equal OpportunityOffice of Manufactured HousingOffice of Public and Indian HousingDepartment of the InteriorBureau of Indian AffairsBureau of Land ManagementFish and Wildlife ServiceMinerals Management ServiceNational Park ServiceOffice of Surface Mining Reclamation and EnforcementDepartment of JusticeBureau of Alcohol, Tobacco and FirearmsDrug Enforcement AdministrationFederal Bureau of Prisons Department of Labor Employee Benefits Security Administration Employment and Training Administration Employment Standards Administration Mine Safety and Health Administration Occupational Safety and Health AdministrationDepartment of Transportation Federal Aviation Administration Federal Highway Administration Federal Motor Carrier Safety Administration Federal Railroad Administration Federal Transit Administration Maritime Administration National Highway Traffic Safety Administration Research and Special Programs Administration Surface Transportation BoardDepartment of the Treasury Alcohol and Tobacco Tax and Trade Bureau Financial Crimes Enforcement Network Financial Management Service Internal Revenue Service Office of the Comptroller of the CurrencyDepartment of Veterans AffairsOffice of Management and Budget Office of Federal Procurement PolicyIndependent Federal Agencies Access Board Consumer Product Safety Commission Commodity Futures Trading Commission Environmental Protection Agency Farm Credit Administration Federal Communications Commission Federal Deposit Insurance Corporation Federal Election Commission Federal Housing Finance Board Federal Reserve System Federal Trade Commission General Services Administration / FAR Council National Credit Union Administration Nuclear Regulatory Commission Pension Benefit Guaranty Corporation Securities and Exchange Commission Small Business Administration Trade and Development Agency 39Report on the Regulatory Flexibility Act, FY 2010 Table A.2 RFA Related Case LawU.S. v. Neely595 F.Supp.2d 662 (D.S.C. 2009) The United States brought action to enforce monetary forfeiture assessed by the Federal Communica- tions Commission (FCC) against Neely, the licensee of a radio station, for repeated violations of an FCC regulation limiting the radio station’s nighttime transmitter power. Neely admitted all factual al- legations establishing the violations, but he claimed that he did not have to pay the forfeiture because the FCC has not established policy under the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) with respect to the application of civil penalties to small entities. Both the United States and Neely filed motions for summary judgment. The court granted summary judgment to the United States, holding that SBREFA did not require the reduction of the forfeiture in this case. The court reasoned that the FCC’s forfeiture policy state- ment established procedures and guidelines through which the agency may consider whether small entities have the ability to pay a particular forfeiture amount or the ability to submit the same kind of documentation as larger entities to corroborate their inability to pay. Those procedures were sufficient to keep the forfeiture policy within the limits of SBREFA. Date Report NPRM1 Final Rule Rule TitleConvenedCompletedPublishedPublishedEnvironmental Protection AgencyNonroad Diesel Engines03/25/9705/23/9709/24/9710/23/98Industrial Laundries Effluent Guideline206/06/9708/08/9712/17/97 Stormwater Phase II06/19/9708/07/9701/09/9812/08/99Transportation Equipment Cleaning Effluent Guidelines07/16/9709/23/9706/25/9808/14/00Centralized Waste Treatment 01/13/99 Effluent Guideline11/06/9701/23/9809/10/0312/22/00Underground Injection Control (UIC) Class V Wells02/17/9804/17/9807/29/9812/07/99Ground Water04/10/9806/09/9805/10/0011/08/06Federal Implementatin Plan (FIP) for Regional Nitrogen Oxides Reductions06/23/9808/21/9810/21/9804/28/06Section 126 Petitions06/23/9808/21/9809/30/9805/25/99Radon in Drinking Water07/09/9809/18/9811/02/99 Long Term 1 Enhanced Surface Water Treatment 08/21/9810/19/9804/10/0001/14/02Filter Backwash Recycling08/21/9810/19/9804/10/0006/08/01Light Duty Vehicles/Light Duty Trucks Emissions and Sulfur in Gas08/27/9810/26/9805/13/9902/10/00Arsenic in Drinking Water03/30/9906/04/9906/22/0001/22/01Recreational Marine Engines10/05/01 06/07/9908/25/9908/14/0211/08/02Diesel Fuel Sulfur Control Requirements11/12/9903/24/0006/02/0001/18/01 Table A.3 SBAR Panels through Fiscal Year 2010 Rule TitleDateConvenedReport CompletedNPRM1PublishedFinal Rule PublishedLead Renovation and Remodeling Rule11/23/9903/03/0001/10/06Metals Products and Machinery12/09/9903/03/0001/03/0105/13/03Concentrated Animal Feedlots Effluent12/16/9904/07/0001/12/0102/12/03Reinforced Plastics Composites04/06/0006/02/0008/02/0104/21/03Stage 2 Disinfectant Byprod- ucts Long Term 2 EnhancedSurface Water Treatment04/25/0006/23/0008/11/0308/18/0301/04/0601/05/06 Nonroad Large Spark Ignition Engines, Recreation Land En- gines, Recreation Marine Gas Tanks and Highway Motor- cycles05/03/0107/17/0110/05/0108/14/0211/08/02Construction and Development Effluent Limitations Guidelines307/16/0110/12/0106/24/02Aquatic Animal Production Industry01/22/0206/19/0209/12/0208/23/04Lime Industry - Air Pollution01/22/0203/25/0212/20/0201/05/04Nonroad Diesel Engines - Tier IV10/24/0212/23/0205/23/0306/29/04Cooling Water Intake StructuresPhase III Facilities02/27/0404/27/0411/24/0406/15/06Section 126 Petition (2005 Clean Air Implementation Rule – CAIR) 04/27/0506/27/0508/24/0504/28/06FIP for Regional Nox/So2 (2005 CAIR)04/27/0506/27/0508/24/0504/28/06Mobile Source Air Toxics09/07/0511/08/0503/29/0602/26/07 Report on the Regulatory Flexibility Act, FY 2010 DateReport NPRM1Final Rule Rule TitleConvenedCompletedPublishedPublished Occupational Exposure to Crystalline Silica10/20/0312/19/03Occupational Exposure to Hexavalent Chromium01/30/0404/20/0410/04/0402/28/06Cranes and Derricks in Construction 08/18/0610/17/0610/09/0808/09/10Occupational Exposure to Beryllium09/17/0701/15/08Occupational Exposure to Diacetyl and Food Flavorings Containing Diacetyl05/05/0907/02/09 1 Notice of Proposed Rulemaking (NPRM) published in the Federal Register. 2Proposed rule was withdrawn August 18, 1999. EPA does not plan to issue a final rule. 3 Proposed rule was withdrawn on April 26, 2004. EPA issued a new proposal November 28, 2008.4 Proposed rule was withdrawn on December 31, 2003. OSHA does not plan to issue a final rule. Report on the Regulatory Flexibility Act, FY 2010 45Report on the Regulatory Flexibility Act, FY 2010 Appendix BThe Regulatory Flexibility ActThe following text of the Regulatory Flexibility innovation and restricted improvements inAct of 1980, as amended, is taken from Title 5 of productivity; the United States Code, sections 601–612. The (5) unnecessary regulations create entry Regulatory Flexibility Act was originally passed barriers in many industries and discourage in 1980 (P.L. 96-354). The act was amended by potential entrepreneurs from introducing ben- the Small Business Regulatory Enforcement eficial products and processes; Fairness Act of 1996 (P.L. 104-121), the Dodd-(6) the practice of treating all regulated Frank Wall Street Reform and Consumer Protec-businesses, organizations, and governmental tion Act (P.L. 111-203), and the Small Business jurisdictions as equivalent may lead to inef- Jobs Act of 2010 (P.L. 111-240).ficient use of regulatory agency resources, enforcement problems and, in some cases, to Congressional Findings and actions inconsistent with the legislative intent Declaration of Purposeof health, safety, environmental and economic welfare legislation; (a) The Congress finds and declares that —(7) alternative regulatory approaches (1) when adopting regulations to protect the which do not conflict with the stated objec- health, safety and economic welfare of the Na-tives of applicable statutes may be available tion, Federal agencies should seek to achieve which minimize the significant economic statutory goals as effectively and efficiently as impact of rules on small businesses, small possible without imposing unnecessary burdens organizations, and small governmental juris- on the public;dictions; (2) laws and regulations designed for appli-(8) the process by which Federal regula- cation to large scale entities have been applied tions are developed and adopted should be re- uniformly to small businesses, small organiza-formed to require agencies to solicit the ideas tions, and small governmental jurisdictions even and comments of small businesses, small or- though the problems that gave rise to govern-ganizations, and small governmental jurisdic- ment action may not have been caused by those tions to examine the impact of proposed and smaller entities;existing rules on such entities, and to review (3) uniform Federal regulatory and report-the continued need for existing rules. ing requirements have in numerous instances imposed unnecessary and disproportionately (b) It is the purpose of this Act [enacting this burdensome demands including legal, account-chapter and provisions set out as notes under ing and consulting costs upon small businesses, this section] to establish as a principle of reg- small organizations, and small governmental ulatory issuance that agencies shall endeavor, jurisdictions with limited resources;consistent with the objectives of the rule and (4) the failure to recognize differences inof applicable statutes, to fit regulatory and the scale and resources of regulated entitiesinformational requirements to the scale of the has in numerous instances adversely affectedbusinesses, organizations, and governmental competition in the marketplace, discouragedjurisdictions subject to regulation. To achieve this principle, agencies are required to solicit and (3) the term “small business” has the consider flexible regulatory proposals and to ex-same meaning as the term “small business plain the rationale for their actions to assure that concern” under section 3 of the Small Busi- such proposals are given serious consideration.ness Act, unless an agency, after consultation with the Office of Advocacy of the Small Regulatory Flexibility Business Administration and after opportunity Actfor public comment, establishes one or more definitions of such term which are appropriate § 601 Definitionsto the activities of the agency and publishes § 602 Regulatory agendasuch definition(s) in the Federal Register; § 603 Initial regulatory flexibility analysis (4) the term “small organization” means § 604 Final regulatory flexibility analysisany not-for-profit enterprise which is indepen- § 605 Avoidance of duplicative or unnecessary dently owned and operated and is not domi- analysesnant in its field, unless an agency establishes, § 606 Effect on other lawafter opportunity for public comment, one or § 607 Preparation of analysesmore definitions of such term which are ap- § 608 Procedure for waiver or delay of com- propriate to the activities of the agency and pletionpublishes such definition(s) in the Federal § 609 Procedures for gathering commentsRegister; § 610 Periodic review of rules (5) the term “small governmental jurisdic- § 611 Judicial reviewtion” means governments of cities, counties, § 612 Reports and intervention rightstowns, townships, villages, school districts, or special districts, with a population of less than § 601. Definitionsfifty thousand, unless an agency establishes, after opportunity for public comment, one or For purposes of this chapter — more definitions of such term which are ap- propriate to the activities of the agency and (1) the term “agency” means an agency as which are based on such factors as location defined in section 551(1) of this title; in rural or sparsely populated areas or limited (2) the term “rule” means any rule for which revenues due to the population of such juris-the agency publishes a general notice of pro- diction, and publishes such definition(s) in the posed rulemaking pursuant to section 553(b) of Federal Register;this title, or any other law, including any rule of (6) the term “small entity” shall have the general applicability governing Federal grants same meaning as the terms “small business,” to State and local governments for which the “small organization” and “small governmental agency provides an opportunity for notice and jurisdiction” defined in paragraphs (3), (4) public comment, except that the term “rule” does and (5) of this section; andnot include a rule of particular applicability relat- (7) the term “collection of information” —ing to rates, wages, corporate or financial struc- (A) means the obtaining, causing to tures or reorganizations thereof, prices, facilities, be obtained, soliciting, or requiring the dis-appliances, services, or allowances therefor or closure to third parties or the public, of facts to valuations, costs or accounting, or practices or opinions by or for an agency, regardless of relating to such rates, wages, structures, prices, form or format, calling for either —appliances, services, or allowances; (i) answers to identical questions posed to, or identical reporting or recordkeep- ing requirements imposed on, 10 or more 47Report on the Regulatory Flexibility Act, FY 2010 persons, other than agencies, instrumentalities, or and shall invite comments upon each subject employees of the United States; orarea on the agenda. (ii) answers to questions posed to (d) Nothing in this section precludes an agen- agencies, instrumentalities, or employees of the cy from considering or acting on any matter United States which are to be used for general not included in a regulatory flexibility agenda, statistical purposes; andor requires an agency to consider or act on (B) shall not include a collection of in-any matter listed in such agenda. formation described under section 3518(c)(1) of title 44, United States Code.§ 603. Initial regulatory (8) Recordkeeping requirement — The term flexibility analysis“recordkeeping requirement” means a require- (a) Whenever an agency is required by section ment imposed by an agency on persons to main- 553 of this title, or any other law, to publish tain specified records. general notice of proposed rulemaking for § 602. Regulatory agendaany proposed rule, or publishes a notice of proposed rulemaking for an interpretative rule (a) During the months of October and April involving the internal revenue laws of the of each year, each agency shall publish in the United States, the agency shall prepare and Federal Register a regulatory flexibility agenda make available for public comment an initial which shall contain —regulatory flexibility analysis. Such analysis (1) a brief description of the subject area of shall describe the impact of the proposed rule any rule which the agency expects to propose or on small entities. The initial regulatory flex- promulgate which is likely to have a significant ibility analysis or a summary shall be pub- economic impact on a substantial number of lished in the Federal Register at the time of small entities;the publication of general notice of proposed (2) a summary of the nature of any such rule rulemaking for the rule. The agency shall under consideration for each subject area listed transmit a copy of the initial regulatory flex- in the agenda pursuant to paragraph (1), the ob-ibility analysis to the Chief Counsel for Ad- jectives and legal basis for the issuance of the vocacy of the Small Business Administration. rule, and an approximate schedule for complet-In the case of an interpretative rule involving ing action on any rule for which the agency has the internal revenue laws of the United States, issued a general notice of proposed rulemaking, this chapter applies to interpretative rules pub- andlished in the Federal Register for codification (3) the name and telephone number of an in the Code of Federal Regulations, but only agency official knowledgeable concerning the to the extent that such interpretative rules im- items listed in paragraph (1).pose on small entities a collection of informa- (b) Each regulatory flexibility agenda shall be tion requirement. transmitted to the Chief Counsel for Advocacy of (b) Each initial regulatory flexibility analysis the Small Business Administration for comment, required under this section shall contain — if any.(1) a description of the reasons why ac- (c) Each agency shall endeavor to provide notice tion by the agency is being considered; of each regulatory flexibility agenda to small en-(2) a succinct statement of the objectives tities or their representatives through direct noti-of, and legal basis for, the proposed rule; fication or publication of the agenda in publica- tions likely to be obtained by such small entities 49Report on the Regulatory Flexibility Act, FY 2010 (4) a description of and an estimate of the the head of the agency makes a certification number of small entities to which the rule will under the preceding sentence, the agency apply or an explanation of why no such estimate shall publish such certification in the Federal is available;Register at the time of publication of general (5) a description of the projected reporting, notice of proposed rulemaking for the rule recordkeeping and other compliance require-or at the time of publication of the final rule, ments of the rule, including an estimate of the along with a statement providing the factual classes of small entities which will be subject basis for such certification. The agency shall to the requirement and the type of professional provide such certification and statement to skills necessary for preparation of the report or the Chief Counsel for Advocacy of the Small record; Business Administration. (6) a description of the steps the agency has (c) In order to avoid duplicative action, an taken to minimize the significant economic im-agency may consider a series of closely re- pact on small entities consistent with the stated lated rules as one rule for the purposes of sec- objectives of applicable statutes, including a tions 602, 603, 604 and 610 of this title. statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final § 606. Effect on other lawrule and why each one of the other significant The requirements of sections 603 and 604 of alternatives to the rule considered by the agency this title do not alter in any manner standards which affect the impact on small entities was otherwise applicable by law to agency action. rejected; (7) for a covered agency, as defined in sec-§ 607. Preparation of tion 609(d)(2), a description of the steps the agency has taken to minimize any additional cost analysesof credit for small entities.In complying with the provisions of sections (b) The agency shall make copies of the final 603 and 604 of this title, an agency may regulatory flexibility analysis available to mem-provide either a quantifiable or numerical de- bers of the public and shall publish in the Feder-scription of the effects of a proposed rule or al Register such analysis or a summary thereof..alternatives to the proposed rule, or more gen- eral descriptive statements if quantification is § 605. Avoidance of not practicable or reliable. duplicative or unnecessary § 608. Procedure for waiver analysesor delay of completion(a) Any Federal agency may perform the analy- (a) An agency head may waive or delay the ses required by sections 602, 603, and 604 of this completion of some or all of the requirements title in conjunction with or as a part of any other of section 603 of this title by publishing in agenda or analysis required by any other law if the Federal Register, not later than the date of such other analysis satisfies the provisions of publication of the final rule, a written finding, such sections. with reasons therefor, that the final rule is be-(b) Sections 603 and 604 of this title shall not ing promulgated in response to an emergency apply to any proposed or final rule if the head that makes compliance or timely compliance of the agency certifies that the rule will not, if with the provisions of section 603 of this title promulgated, have a significant economic im- impracticable.pact on a substantial number of small entities. If (b) Except as provided in section 605(b), an including soliciting and receiving comments agency head may not waive the requirements over computer networks; andof section 604 of this title. An agency head may (5) the adoption or modification of agency delay the completion of the requirements of sec-procedural rules to reduce the cost or com- tion 604 of this title for a period of not more than plexity of participation in the rulemaking by one hundred and eighty days after the date of small entities. publication in the Federal Register of a final rule (b) Prior to publication of an initial regulatory by publishing in the Federal Register, not later flexibility analysis which a covered agency is than such date of publication, a written finding, required to conduct by this chapter— with reasons therefor, that the final rule is being (1) a covered agency shall notify the promulgated in response to an emergency that Chief Counsel for Advocacy of the Small makes timely compliance with the provisions Business Administration and provide the of section 604 of this title impracticable. If the Chief Counsel with information on the poten- agency has not prepared a final regulatory analy-tial impacts of the proposed rule on small en- sis pursuant to section 604 of this title within one tities and the type of small entities that might hundred and eighty days from the date of publi-be affected; cation of the final rule, such rule shall lapse and (2) not later than 15 days after the date of have no effect. Such rule shall not be repromul-receipt of the materials described in paragraph gated until a final regulatory flexibility analysis (1), the Chief Counsel shall identify individu- has been completed by the agency.als representative of affected small entities for the purpose of obtaining advice and recom- § 609. Procedures for mendations from those individuals about the gathering commentspotential impacts of the proposed rule; (3) the agency shall convene a review (a) When any rule is promulgated which will panel for such rule consisting wholly of full have a significant economic impact on a sub-time Federal employees of the office within stantial number of small entities, the head of the the agency responsible for carrying out the agency promulgating the rule or the official of proposed rule, the Office of Information and the agency with statutory responsibility for the Regulatory Affairs within the Office of Man- promulgation of the rule shall assure that small agement and Budget, and the Chief Counsel; entities have been given an opportunity to par- (4) the panel shall review any material the ticipate in the rulemaking for the rule through the agency has prepared in connection with this reasonable use of techniques such as—chapter, including any draft proposed rule, (1) the inclusion in an advance notice of collect advice and recommendations of each proposed rulemaking, if issued, of a statement individual small entity representative identi- that the proposed rule may have a significant fied by the agency after consultation with the economic effect on a substantial number of small Chief Counsel, on issues related to subsec- entities;tions 603(b), paragraphs (3), (4) and (5) and (2) the publication of general notice of pro-603(c); posed rulemaking in publications likely to be (5) not later than 60 days after the date a obtained by small entities;covered agency convenes a review panel pur- (3) the direct notification of interested small suant to paragraph (3), the review panel shall entities;report on the comments of the small entity (4) the conduct of open conferences or public representatives and its findings as to issues hearings concerning the rule for small entities related to subsections 603(b), paragraphs (3), 51Report on the Regulatory Flexibility Act, FY 2010 (4) and (5) and 603(c), provided that such report § 610. Periodic review of shall be made public as part of the rulemaking record; andrules(6) where appropriate, the agency shall (a) Within one hundred and eighty days after modify the proposed rule, the initial regulatory the effective date of this chapter, each agency flexibility analysis or the decision on whether an shall publish in the Federal Register a plan initial regulatory flexibility analysis is required.for the periodic review of the rules issued (c) An agency may in its discretion apply subsec-by the agency which have or will have a sig- tion (b) to rules that the agency intends to certify nificant economic impact upon a substantial under subsection 605(b), but the agency believes number of small entities. Such plan may be may have a greater than de minimis impact on a amended by the agency at any time by pub- substantial number of small entities.lishing the revision in the Federal Register. (d) For purposes of this section, the term “cov-The purpose of the review shall be to deter- ered agency” means mine whether such rules should be continued (1) Environmental Protection Agency, without change, or should be amended or re- (2) Consumer Financial Protection Bureau, scinded, consistent with the stated objectives and of applicable statutes, to minimize any sig- (3) Occupational Safety and Health Adminis-nificant economic impact of the rules upon a tration of the Department of Labor. substantial number of such small entities. The (e) The Chief Counsel for Advocacy, in consulta-plan shall provide for the review of all such tion with the individuals identified in subsection agency rules existing on the effective date of (b)(2), and with the Administrator of the Office this chapter within ten years of that date and of Information and Regulatory Affairs within the for the review of such rules adopted after the Office of Management and Budget, may waive effective date of this chapter within ten years the requirements of subsections (b)(3), (b)(4), of the publication of such rules as the final and (b)(5) by including in the rulemaking record rule. If the head of the agency determines that a written finding, with reasons therefor, that completion of the review of existing rules is those requirements would not advance the effec-not feasible by the established date, he shall tive participation of small entities in the rulemak-so certify in a statement published in the Fed- ing process. For purposes of this subsection, the eral Register and may extend the completion factors to be considered in making such a finding date by one year at a time for a total of not are as follows:more than five years. (1) In developing a proposed rule, the extent (b) In reviewing rules to minimize any sig- to which the covered agency consulted with in-nificant economic impact of the rule on a dividuals representative of affected small entities substantial number of small entities in a man- with respect to the potential impacts of the rule ner consistent with the stated objectives of and took such concerns into consideration.applicable statutes, the agency shall consider (2) Special circumstances requiring prompt the following factors— issuance of the rule.(1) the continued need for the rule; (3) Whether the requirements of subsection (2) the nature of complaints or comments (b) would provide the individuals identified in received concerning the rule from the public; subsection (b)(2) with a competitive advantage (3) the complexity of the rule; relative to other small entities.(4) the extent to which the rule overlaps, duplicates or conflicts with other Federal rules, and, to the extent feasible, with State and lo-for judicial review under this section shall be filed cal governmental rules; andnot later than— (5) the length of time since the rule has been (i) one year after the date the analysis is evaluated or the degree to which technology, eco-made available to the public, ornomic conditions, or other factors have changed in (ii) where a provision of law requires the area affected by the rule.that an action challenging a final agency regulation (c) Each year, each agency shall publish in the Fed-be commenced before the expiration of the 1-year eral Register a list of the rules which have a signifi-period, the number of days specified in such provi- cant economic impact on a substantial number of sion of law that is after the date the analysis is made small entities, which are to be reviewed pursuant to available to the public. this section during the succeeding twelve months. (4) In granting any relief in an action under The list shall include a brief description of each rule this section, the court shall order the agency to take and the need for and legal basis of such rule and corrective action consistent with this chapter and shall invite public comment upon the rule.chapter 7, including, but not limited to — (A) remanding the rule to the agency, and § 611. Judicial review (B) deferring the enforcement of the rule against small entities unless the court finds that (a) continued enforcement of the rule is in the public (1) For any rule subject to this chapter, a small interest.entity that is adversely affected or aggrieved by (5) Nothing in this subsection shall be construed final agency action is entitled to judicial review of to limit the authority of any court to stay the effec-agency compliance with the requirements of sec- tive date of any rule or provision thereof under any tions 601, 604, 605(b), 608(b), and 610 in accor- other provision of law or to grant any other relief in dance with chapter 7. Agency compliance with sec- addition to the requirements of this section.tions 607 and 609(a) shall be judicially reviewable (b) In an action for the judicial review of a rule, the in connection with judicial review of section 604. regulatory flexibility analysis for such rule, includ- (2) Each court having jurisdiction to review ing an analysis prepared or corrected pursuant to such rule for compliance with section 553, or under paragraph (a)(4), shall constitute part of the entire any other provision of law, shall have jurisdiction to record of agency action in connection with such review any claims of noncompliance with sections review.601, 604, 605(b), 608(b), and 610 in accordance (c) Compliance or noncompliance by an agency with chapter 7. Agency compliance with sections with the provisions of this chapter shall be subject 607 and 609(a) shall be judicially reviewable in to judicial review only in accordance with this sec-connection with judicial review of section 604. tion. (3) (A) A small entity may seek such review (d) Nothing in this section bars judicial review of during the period beginning on the date of final any other impact statement or similar analysis re-agency action and ending one year later, except that quired by any other law if judicial review of such where a provision of law requires that an action statement or analysis is otherwise permitted by law.challenging a final agency action be commenced before the expiration of one year, such lesser period shall apply to an action for judicial review under § 612. Reports and intervention this section.rights (B) In the case where an agency delays the (a) The Chief Counsel for Advocacy of the Small issuance of a final regulatory flexibility analysis Business Administration shall monitor agency pursuant to section 608(b) of this chapter, an action compliance with this chapter and shall report at 53Report on the Regulatory Flexibility Act, FY 2010 least annually thereon to the President and to the Committees on the Judiciary and Small Business of the Senate and House of Representatives. (b) The Chief Counsel for Advocacy of the Small Business Administration is authorized to appear as amicus curiae in any action brought in a court of the United States to review a rule. In any such action, the Chief Counsel is authorized to present his or her views with respect to compliance with this chapter, the adequacy of the rulemaking re- cord with respect to small entities and the effect of the rule on small entities. (c) A court of the United States shall grant the application of the Chief Counsel for Advocacy of the Small Business Administration to appear in any such action for the purposes described in subsection (b). 55Report on the Regulatory Flexibility Act, FY 2010 Appendix CExecutive Order 13272Presidential Documents Executive Order 13272 of August 13, 2002The President Proper Consideration of Small Entities in Agency Rulemaking By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows: Section 1. General Requirements. Each agency shall establish procedures and policies to promote compliance with the Regulatory Flexibility Act, as amended (5 U.S.C. 601 et seq.) (the ‘‘Act’’). Agencies shall thoroughly review draft rules to assess and take appropriate account of the potential impact on small businesses, small governmental jurisdictions, and small organizations, as provided by the Act. The Chief Counsel for Advocacy of the Small Business Administration (Advocacy) shall remain available to advise agencies in performing that review consistent with the provisions of the Act. Sec. 2. Responsibilities of Advocacy. Consistent with the requirements of the Act, other applicable law, and Executive Order 12866 of September 30, 1993, as amended, Advocacy: (a) shall notify agency heads from time to time of the requirements of the Act, including by issuing notifications with respect to the basic require- ments of the Act within 90 days of the date of this order; (b) shall provide training to agencies on compliance with the Act; and (c) may provide comment on draft rules to the agency that has proposed or intends to propose the rules and to the Office of Information and Regu- latory Affairs of the Office of Management and Budget (OIRA). Sec. 3. Responsibilities of Federal Agencies. Consistent with the requirements of the Act and applicable law, agencies shall: (a) Within 180 days of the date of this order, issue written procedures and policies, consistent with the Act, to ensure that the potential impacts of agencies’ draft rules on small businesses, small governmental jurisdictions, and small organizations are properly considered during the rulemaking proc- ess. Agency heads shall submit, no later than 90 days from the date of this order, their written procedures and policies to Advocacy for comment. Prior to issuing final procedures and policies, agencies shall consider any such comments received within 60 days from the date of the submission of the agencies’ procedures and policies to Advocacy. Except to the extent otherwise specifically provided by statute or Executive Order, agencies shall make the final procedures and policies available to the public through the Internet or other easily accessible means; (b) Notify Advocacy of any draft rules that may have a significant economic impact on a substantial number of small entities under the Act. Such notifica- tions shall be made (i) when the agency submits a draft rule to OIRA under Executive Order 12866 if that order requires such submission, or (ii) if no submission to OIRA is so required, at a reasonable time prior to publication of the rule by the agency; and (c) Give every appropriate consideration to any comments provided by Advocacy regarding a draft rule. Consistent with applicable law and appro- priate protection of executive deliberations and legal privileges, an agency shall include, in any explanation or discussion accompanying publication in the Federal Register of a final rule, the agency’s response to any written comments submitted by Advocacy on the proposed rule that preceded the 56Report on the Regulatory Flexibility Act, FY 2010 final rule; provided, however, that such inclusion is not required if the head of the agency certifies that the public interest is not served thereby. Agencies and Advocacy may, to the extent permitted by law, engage in an exchange of data and research, as appropriate, to foster the purposes of the Act. Sec. 4. Definitions. Terms defined in section 601 of title 5, United States Code, including the term ‘‘agency,’’ shall have the same meaning in this order. Sec. 5. Preservation of Authority. Nothing in this order shall be construed to impair or affect the authority of the Administrator of the Small Business Administration to supervise the Small Business Administration as provided in the first sentence of section 2(b)(1) of Public Law 85–09536 (15 U.S.C. 633(b)(1)). Sec. 6. Reporting. For the purpose of promoting compliance with this order, Advocacy shall submit a report not less than annually to the Director of the Office of Management and Budget on the extent of compliance with this order by agencies. Sec. 7. Confidentiality. Consistent with existing law, Advocacy may publicly disclose information that it receives from the agencies in the course of carrying out this order only to the extent that such information already has been lawfully and publicly disclosed by OIRA or the relevant rulemaking agency. Sec. 8. Judicial Review. This order is intended only to improve the internal management of the Federal Government. This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforce- able at law or equity, against the United States, its departments, agencies, or other entities, its officers or employees, or any other person. WTHE WHITE HOUSE, August 13, 2002. 57Report on the Regulatory Flexibility Act, FY 2010 Appendix DAbbreviations ABC acceptable biological catchADAAmericans with Disabilities ActADAAG Americans with Disabilities Act Accessibility GuidelinesA&E architecture and engineeringANPRM advance notice of proposed rulemakingAPAAdministrative Procedure ActAPHIS Animal and Plant Health Inspection ServiceC&D construction and developmentCDAC Crane and Derrick Negotiated Rulemaking Advisory CommitteeCFPB Consumer Financial Protection BureauCMS Centers for Medicare and Medicaid ServicesCPSC Consumer Product Safety CommissionDHS Department of Homeland SecurityDOC Department of CommerceDOD Department of DefenseDOE Department of EnergyDOI Department of the InteriorDOJ Department of JusticeDOLDepartment of LaborDOTDepartment of TransportationEBSAEmployee Benefits Security AdministrationEducation Department of EducationE.O. Executive OrderEPAEnvironmental Protection AgencyFAAFederal Aviation AdministrationFAR Federal Acquisition RegulationFCAFarm Credit AdministrationFCC Federal Communications CommissionFDAFood and Drug AdministrationFDIC Federal Deposit Insurance CorporationFHAFederal Housing AdministrationFPAAfinal partnership administrative adjustmentFRB Federal Reserve BoardFRFAfinal regulatory flexibility analysisFRS Federal Reserve SystemFSIS Food Safety and Inspection ServiceFWS Fish and Wildlife ServiceFYfiscal yearGHG greenhouse gases GSA General Services AdministrationHCFA Health Care Financing Agency, now renamed, see CMSHHPPS Home Health Prospective Payment SystemHHS Department of Health and Human ServicesHIPAA Health Insurance Portability and Accountability ActHITECH Health Information Technology for Economic and Clinical Health ActHUD Department of Housing and Urban DevelopmentICE Immigration and Customs EnforcementIRFA initial regulatory flexibility analysisIRS Internal Revenue ServiceMSHA Mine Safety and Health AdministrationNASA National Aeronautics and Space AdministrationNCUA National Credit Union AdministrationNEFMC New England Fishery Management CouncilNESHAP National Environmental Standards for Hazardous Air PollutantsNMFS National Marine Fisheries ServiceNOAA National Oceanic and Atmospheric AdministrationNPRM notice of proposed rulemakingNPS National Park ServiceOCC Office of the Comptroller of the CurrencyOCPO Office of the Chief Procurement OfficerOFPP Office of Federal Procurement PolicyOIRA Office of Information and Regulatory AffairsOMB Office of Management and BudgetOSHA Occupational Safety and Health AdministrationOSMRE Office of Surface Mining Reclamation and EnforcementOTS Office of Thrift SupervisionPAHS production approval holdersP.L. Public LawPSD Prevention of Significant Deterioration ProgramPTO Patent and Trademark OfficeRFA Regulatory Flexibility ActSAFE Act Secure and Fair Enforcement for Mortgages Licensing ActSBA Small Business AdministrationSBAR Small Business Advocacy Review PanelSBREFA Small Business Regulatory Enforcement Fairness Act SEC Securities and Exchange CommissionSER small entity representativeSFRA special flight rules areaSOPPS statement of operation, practices, and proceduresSOX Sarbanes-Oxley ActSPCC Spill Prevention Control and CountermeasuresSSC Science and Statistical CommitteeState Department of StateTRAC Transboundary Resources Assessment Committee 59Report on the Regulatory Flexibility Act, FY 2010 Treasury Department of the TreasuryTSATransportation Security AdministrationUSDAUnited States Department of AgricultureU.S.C. United States CodeUSCG United States Coast GuardUSCIS United States Citizenship and Immigration ServiceVADepartment of Veterans AffairsWOSB women-owned small businesses 61 Report on the Regulatory Flexibility Act, FY 2010 Appendix E The RFA at 30 The Small Business AdvocateAdvocacy: the voice of small business in government The RFA@30 Symposium, the Office of Advocacy’s 30th anniver- sary observance of the Regulatory Flexibility Act (RFA) delved into the role of the RFA in the fed- eral rulemaking process—past, present, and future. SBA Deputy Administrator Marie Johns greeted the audience of agency, trade association, and small business representatives by saying, “It takes a special breed to get up and get excited about celebrating the 30th anniversary of a law requiring regu- latory fairness!” Former Acting Chief Counsel Susan Walthall kicked off the day’s events with her recollection of standing in the White House on September 19, 1980, for President Jimmy Carter’s signing of the bill. Since that time the law has been a key tool in Advocacy’s efforts to represent the concerns of small busi- nesses in the federal government. The RFA charges Advocacy with monitoring agency compliance with Special Edition: The RFA Turns 30In honor of the anniversary of the signing of the Regulatory Flexibility Act in September 1980, Advocacy held a daylong symposium on September 21. The event featured speakers and panels on key aspects of the law and its implementation. These pages contain wrap-ups of these panels, plus a history and timeline of the RFA’s first 30 years. it, and the office has used it to speak up on behalf of small business in the halls of government. Chief Counsel for Advocacy Winslow Sargeant discussed the importance of the law from the perspective of an entrepreneur and business owner. The RFA directs agencies to consider the impact of a Continued on page 2 In This IssueThe RFA@30 Commemorates Landmark Law............1An RFA Timeline...........2The History of the RFA.....11Top 10 RFA Questions Answered...............14Message from the Chief CounselFull Speed Ahead for Small Business.................3Panel 1The Cost of Regulation ......4Report Updates Federal Regulatory Cost Impact.....5Methods of Calculating Costs .4Panel 2RFA Training in a Nutshell ...6The Impact of RFA Training..7Panel 3The RFA in the Courts and Congress.................8RFA Case Law since 1996....9Panel 4RFA Success Stories and Challenges ..............10SBREFA Panels Benefit Agencies and Small Firms...9An RFA Success Story from the EPA ...................11 Former cheif counsel Jere Glover joined Senator Mary Landrieu and Chief Counsel Winslow Sargeant at the RFA Symposium Former chief counsel Jere Glover joined Senator Mary Landrieu and Chief Counsel Winslow Sargeant at the RFA@30 Symposium. SBA Advocacy logo Former chief counsel Jere Glover joined Senator Mary Landrieu and Chief Counsel Winslow Sargeant at the RFA @ 30 Symposium The RFA at 30, from page 1proposed rule on small businesses, because of the reality that small businesses lack economies of scale that may make tasks such as regula- tory compliance less burdensome and less costly. The law’s regulatory “flexibilities” and “alternatives” encourage agencies to give small businesses a fair shake in the rule writing process, while the agency still meets its regulatory objective. Senator Mary Landrieu, chair of the Senate Small Business and Entrepreneurship Committee, praised her colleagues who worked together on the Small Business Jobs Act. The bill passed the Senate on September 16, the House on September 23, and the President signed it into law on September 27. The bill targets $12 billion in tax cuts to America’s 27.5 million small businesses, strengthens core programs of SBA, and engages small, healthy community banks in an effort to make loans to small businesses. Noting that government, with the best intentions, can be clumsy at times in its rulemaking, she promised to work more closely with Advocacy. “The next thing I want to focus on is regulation,” Senator Landrieu said. Cass Sunstein, the head of the White House Office of Information and Regulatory Affairs, noted that regulations can have unforeseen andunintended consequences. Sunstein characterized the RFA as part of the set of analytical requirements imposed on agencies to ensure that they “look before they leap” when writing regulations. “If regulatory choices are based on careful analysis, and subject to public scrutiny and review, we will be able to identity new and creative approaches designed to maintain anpromote entrepreneurship, innova- tion, competitiveness, and economicgrowth.” He continued, “These points have special importance in a period in which it is crucial to consider the effects of regulation on small business—and to ensure, in accordance with the first declara- granting judicial review of agency compliance; and including small businesses in the rulemaking pro- cess. March 1996 President Clinton signs the Small Business Regulatory Enforcement Fairness Act (SBREFA). August 2002 President George W. Bush signs Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking.” July 2010 President Barack Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act, which subjects the new Consumer Financial Protection Bureau to SBREFA provisions. The Small Business AdvocateEditor Rebecca KrafftManaging Editor Rob KleinsteuberGuest Editor Kathryn TobiasProduction Assistant Angela HamiltonThe Small Business Advocate (ISSN 1045-7658) is published monthly by the U.S. Small Business Administration’s Office of Advocacy and is distributed to SBA field staff and members of the U.S. Congress. The Small Business Advocate is available without charge from the Office of Advo cacy, U.S. Small Business Admini- stration, MC 3114, Washington, DC 20416; advocacy@sba.gov; (202) 205- 6533. For delivery changes, send your current address label with your request to the above address. For electronic delivery of this newsletter, visit, www. sba.gov/advo/newsletter.html. Federal Recycling Program Printed on recycled paper. tion of purpose in the Regulatory Flexibility Act, that agencies ‘seek to achieve statutory goals as effec- tively and efficiently as possible without imposing unnecessary bur- dens on the public.’ ” The Regulatory Flexibility Act Timeline June 1976 Congress enacts Public Law 94-305, creating the SBA Office of Advocacy. January 1980 The first White House Conference on Small Business calls for “sunset review” and economic impact analysis of regulations, and a regulatory review board that includes small business representation. September 19, 1980 President Jimmy Carter signs the Regulatory Flexibility Act (RFA). October 1981 Advocacy reports on the first year of RFA experience in testimony before the Subcommittee on Export Opportunities and Special Small Business Problems of the U.S. House Committee on Small Business. February 1983 Advocacy pub- lishes the first annual report on agency RFA implementation. The report shows spotty agency com- pliance. August 1986 Delegates to the second White House Conference on Small Business recommend strengthening enforcement of the RFA by, among other things, sub- jecting agency compliance to judi- cial review. September 1993 President Bill Clinton issues Executive Order 12866, “Regulatory Planning and Review.” June 1995 The third White HouseConference on Small Business rec- ommends strengthening the RFA by subjecting additional agencies, including the IRS, to the law; d RFA 30th Anniversary page 2 October–November 2010 63 Report on the Regulatory Flexibility Act, FY 2010 Message from the Chief Counsel Full Speed Ahead for Small Businessby Dr. Winslow Sargeant, Chief Counsel for Advocacy “Through my experiencewith high tech startups, I’ve learned what it’s like to deal with federal regulations that apply a ‘one size fits all’ approach—which fail to take into account the different realities of a small business. ” RFA 30th Anniversary page 3 October–November 2010 When I was sworn in on August 23rd, I felt honored to be appointed by President Obama to lead an organization that speaks out every day for the 27.5 million small busi- nesses that make this country great. I believe in the work of this office and in the power of small busi- nesses to improve lives and put our economy back to work. In my first months as chief coun- sel for advocacy, I have met with the heads of small business associa- tions and listened to their concerns and their issues. I immediately contacted agency heads and chief counsels to discuss these. My con- tacts have included a conversation with staff at the Internal Revenue Service on the expanded Form 1099 reporting requirements and a meeting at the White House Office of Federal Procurement Policy on women-owned businesses’ insourc- ing and high-road contracting con- cerns. Additionally, I have sat down twice with Cass Sunstein, adminis- trator of the White House Office of Information and Regulatory Affairs, to ensure that our offices work well together. All of this is to let you know that the Office of Advocacy—the voice for small business in the federal government—is listening and relaying your concerns to the appropriate agencies. As your man in Washington, I will press forward on this important job. Last month, I hosted the Office of Advocacy’s symposium mark- ing the 30th anniversary of the Regulatory Flexibility Act (RFA) where we released a study updating our research on the cost of regula- tion. We all know that small firms create new jobs in tough economic times. We also know that for this to happen, entrepreneurs need an environment for success. It’s Advocacy’s job, through the RFA, to help ensure that they are being adequately considered when new regulations are developed. My background is in technol- ogy and business, so I come to this job with a firsthand understanding of the challenges small businesses face. I started my career as an elec- trical and computer engineer, work- ing for IBM, AT&T, and Lucent Technologies. The passage of the 1996 Telecommunications Act pre- sented an opportunity to start a busi- ness. Along with a couple of friendsin Allentown, Pennsylvania—a community going through some tough economic times—we quit ourjobs and started a company design- ing computer chips. In a relatively short time, we grew from a hand- ful of employees to more than 50. While we were ultimately success- ful, the challenges of starting and growing our business were plentiful. There were regulations, paperwork, legal bills, and sometimes rules that made no sense for a company of oursmall size. Small businesses face differ- ent challenges and risks than large ones. The impact on small businesses of what we do in Washington must always be front and center, because getting it right is too important for our economy. That is why the RFA was enacted in September 1980, and for 30 years it has been a key tool in improving the regulatory environ- ment for small firms. With change have come new opportunities, including new busi- nesses developing innovations, products, and services. At the same time, environmental consciousness and demands for better health care and worker safety have intensified. As new business sectors pop up and others expand, new rules and regu- lations are not far behind. Through my experience with high tech startups, I’ve learned what it’s like to deal with federal regulations that apply a “one size fits all” approach—which fail to take into account the different reali- ties of a small business. The study we’ve just released, The Impact of Regulatory Costs on Small Firms, demonstrates once again the dis- proportionately high cost of one- size-fits-all regulation for small business. This burden is something the Office of Advocacy understands. For the last 30 years Advocacy has worked to ensure that the voice of small business is heard during the government’s rulemaking process, and that agencies consider alterna- tives and solutions that meet their regulatory goals without placing undue burden on small firms. Small businesses will always have an ally in the fight against burdensome regulations—the Office of Advocacy. I look forward to leading that fight for small busi- ness here in Washington. Cost of Federal Regulation Study UpdatedRegulations provide the rules and structure that allow societies to function. While aware of this need, the Office of Advocacy has periodically examined the costs of complying with federal regulations and document- ed the disproportionate effects on small businesses compared with large ones. In the 2010 edition of The Impact of Regulatory Costs on Small Firms, Nicole Crain and W. Mark Crain find that the cost for firms with fewer than 20 employees to comply with regulations is now $10,585 per employee, up from $7,647 in the 2005 report. Compared with firms with 500 or more employees, firms with fewer than 20 workers pay about $2,830 more per employee—a 36 percent difference. The authors employ new and improved methodologies, so direct comparisons with the previous reports’ data should be made with caution. The authors estimate the cumulative cost of federal regulations at $1.75 trillion. That figure is the sum of the compliance costs for four components: economic regulations; environmental regulations; tax compli- ance; and occupational safety, health, and homeland security regulations. The study uses the World Bank’s Regulatory Quality Index for the economic regulations component. This index has more observations than the index used previously, as well as continuous data from 1998 to 2008. Small firms continue to be disproportionately affected by the cost of regulations. Compliance with environ- mental regulations costs the smallest firms 364 percent more than large ones. Another significant disparity is in the cost of tax compliance—206 percent higher in the smallest firms. Analyzed by industry sector, regula- tions on manufacturing are particularly burdensome for small businesses. In the service sector, regulatory costs differ little between small and larger firms. The full report is online at www.sba.gov/advo/research/rs371tot.pdf. —Kathryn Tobias, Senior Editor Annual Cost of Federal Regulations by Firm SizeCost per Cost per Employee for Firms with: Type of Regulation Employee for Fewer than 20–499 500 or More All Firms20 EmployeesEmployeesEmployeesAll Regulation$8,086$10,585$7,454$7,755Economic5,1534,1204,7505,835Environmental1,5234,1011,294883Tax Compliance 8001,584760517Occupational Safety and Home- 610781650520 land Security Authors Thomas Hopkins and Mark Crain discuss recent research with Advocacy economist Radwan Saade Authors Thomas Hopkins and Mark Crain discuss recent research with Advocacy economist Radwan Saade. John Morrall presented alternate scenarios for calculating cumulative regulatory costs John Morrall presented alternate scenarios for calculating cumulative regulatory costs. OIRA Administraator Cass Sunstein Chief Counsel Sargeant Making a Difference with RFA TrainingRFA training at federal regulatory agencies continues to be an important part of getting agencies to recognize that they can issue regulations that accomplish their objective while reducing the potential economic burden of those regulations on small businesses. Since Executive Order 13272 was signed in 2002, the Office of Advocacy has been actively developing and maintaining a training program designed to teach agencies this important point. With over 80 agencies and 1,600 employees trained to date, Advocacy’s RFA training sessions are making a difference. We see this dif- ference in the consideration some agencies are giving to their economic analysis when drafting regulations and more importantly, in the advanced notice some agencies are giving to Advocacy staff regarding those draft regulations. If there is one thing Advocacy’s RFA training sessions stress, it is that coming to Advocacy as early on in the regulatory development process as possible makes a significant difference for small business and makes it easier in the long run for the agency to comply with the RFA. It still surprises my training team when we arrive at a federal agency for an RFA training session and I ask regulatory economists, attorneys, and policy staff at the agency, “How many of you are familiar with the RFA?” Consistently, no matter the agency, the number of agency staff that raise their hand are not even half of those in attendance. Even though Advocacy recently celebrated 30 years of the passage of the RFA, the need for training on compliance with the important mandates of the act remains. In these challenging economic times small businesses, now more than ever, need agencies to consider the potential economic impact of their regulatory decisions prior to issuing a final rule. The challenge continues! —Claudia Rodgers, Acting Deputy Chief Counsel SBA Deputy Administrator Marie Johns Top left, SBA Deputy Administrator Marie Johns welcomed the audience. Below, OIRA Administrator Cass Sunstein talked about the RFA and transparency in governance. Senate Small Business Committee Chair Mary Landrieu Top right, Senate Small Business Committee Chair Mary Landrieu thanked Advocacy for supporting small business. Below, Chief Counsel Sargeant discussed regulations and the research, innovation, and development process. Trade Associatin and government experts Keith Holman, David Frulla and Elizabeth Kohl OIRA Administrator Cass Sunstein Panel 3: The RFA in the Courts and Congress Recent History of RFA Activityby Assistant Chief Counsel Kate Reichert “The RFA in the Courts and Congress” panel featured a dis- cussion about developments in RFA case law since the passage of SBREFA and recent legislation regarding the RFA. The panel was moderated by Jeffrey Lubbers of American University’s Washington College of Law, and included pan- elists David Frulla of Kelley, Drye & Warren LLP; Keith Holman of the National Lime Association and former assistant chief counsel for advocacy; and Elizabeth Kohl, attorney advisor with the U.S. Department of Energy. Lubbers raised several issues for discussion including the mean- ing of “significant,” “substantial,” and “small,” for purposes of RFA analyses, the ongoing discussion regarding whether indirect impacts, in addition to direct impacts, should be considered during regulatory analyses; as well as the use of small business regulatory review panels. Holman described his experi- ence at the Office of Advocacy with small business review panels at the Occupational Safety and Health Administration and the Environmental Protection Agency, noting positive effects of the panel process and areas where panels could be utilized more effectively. Holman recognized that these pan- els can be labor-intensive for the agencies, but stressed their utility, explaining that the “purpose of the panel process is to get a better rule at the end of the process so that Advocacy can work with the agencyat its best and highest level.” Frulla discussed the impact that litigation can have on the RFA, not- ing that “rarely is regulatory flexi- bility legislation alone a silver bulle[in terms of ensuring an appropriateregulatory outcome for small busi- nesses].” Rather, small businesses need to have the “staying power” to ensure that an agency adequately corrects RFA violations that a court finds. For instance, Frulla noted that, in Southern Offshore Fishing Association v. Daley, in which he served as counsel for a group of Atlantic shark fisherman, the RFA violations were addressed via an independent scientific review and reconsideration of the agency’s proposed rules. In addition, Frulla singled out the standard of review used by the courts in RFA cases, and suggested that it is becoming more deferential to the agencies than Congress intended when it pro- vided for judicial review of agency RFA compliance. Elizabeth Kohl discussed RFA analysis from the agencies’ per- spective noting some of the chal- lenges her team faces when analyz- ing the impact on small entities; these include statutory limitations on creating flexibility for small entities and the difficulty in tiering small businesses based on revenue. Despite these challenges, Kohl acknowledged that “certification is the exception to the norm … and conclusory or unsupported certifi- cations are made at the agencies’ own peril.” Panel 3 featured trade association and government experts. From left are Keith Holman, David Frulla, and Elizabeth Kohl. Conference attendees trade ideas with OIRA Administrator Cass Sunstein (right). Judicial Review: RFA Case Law since 1996One of the most important amendments to the Regulatory Flexibility Act (RFA) is judicial review. When the RFA was passed 30 years ago, it did not specifically state that the law could be reviewed in the courts. As such, the courts initially found that the RFA was only reviewable in terms of the Administrative Procedures Act (APA). Agencies, therefore, did not give full consideration to their obligations under the RFA. In 1996, Congress amended the RFA to include judicial review as part of the Small Business Regulatory Enforcement Fairness Act (SBREFA). Since the passage of SBREFA, scores of RFA cases have been filed. In those cases, the courts have ruled on several important issues such as standing to sue, the procedural require- ments of the RFA, appropriate size standards, consideration of adequate alternatives, etc. An article on the RFA cases through 2006 can be found on Advocacy’s website: www.sba.gov/advo/laws/law_lib.html. The most recent reported case that raised an RFA claim is Council Tree Communications, Inc. v. Federal Communications Commission. The case involved some of the rules that governed the participation of small wireless telephone service providers in auctions of electromagnetic spectrum conducted by the FCC. The small service providers claimed that the rules were enacted without notice and comment as required by the APA and the RFA and that the rules were arbitrary and capricious. The court did not address the RFA, because it viewed it as duplicative of the APA notice-and-comment claim and stated, “To the extent that the FCC failed to give notice of the new rules for RFA purposes, it also gave inadequate notice for APA purposes, necessitat- ing a remand on the latter basis alone.” The court further stated that on remand, the FCC must comply with all RFA requirements. —Jennifer Smith, Assistant Chief Counsel RFA 30th Anniversary page 9 October–November 2010 SBREFA Panels Benefit Agencies, Small BusinessSince the Small Business Regulatory Enforcement Fairness Act (SBREFA) was passed in 1996, two fed- eral agencies, the U.S. Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA), have been required to convene small business advocacy review panels (also known as SBREFA panels) prior to proposing any rule that is expected to have a significant economic impact on a substantial number of small entities. In the future, the newly created Consumer Financial Protection Bureau (CFPB) at the Federal Reserve Board will join that short list of covered agencies. Do SBREFA panels help agencies and small business? Well, judging by the final panel discussion at the recent RFA@30 Symposium, the answer is definitely, “Yes”! SBREFA panels consist of officials from the rulemaking agency, the Office of Advocacy, and the Office of Information and Regulatory Affairs. Small entity representatives inform the panels about how the contem- plated regulation would affect them. The small entity representatives review preliminary materials, assess the proposal, consider costs, and recommend alternatives. The panel in turn issues a report to the agency detailing these concerns and recommending a course of action. SBREFA panels are definitely helpful. First and foremost, the panels force the agencies to consider the real world costs and implications of their rules on small business. As each of the panelists at the symposium agreed, requiring the agency to explain the rule to actual small business representatives forces the agency to think through its proposal, clearly explain the issue, and justify what it is trying to do. Each of the panelists agreed the process was beneficial, although not without costs. For small business, the panels give them direct access to the agency decision-makers and the opportunity to explain how regulations will affect them. Most small entity representatives report having a favorable experience working with the panel, and nearly all think the process is beneficial. SBREFA panels do require time and effort by both the panel and the small entity representatives. However, because the SBREFA statute establishes a strict 60-day timeframe to conclude the panel, the panels have not been time-consuming and have operated efficiently. Further, because regulations may impose disproportionate impacts on small entities, the process helps to reduce costs and consider approaches that are more flexible and small business-friendly. —Bruce Lundegren, Assistant Chief Counsel RFA success stories Neil Eisner, Jeff Hannapel, Nicole Owens and Jonathan Snare Chief Counsel Sargeant recognizing Susan Walthall Panel 4: RFA Success Stories and Challenges Implementing the RFAby Assistant Chief Counsel Janis Reyes The panel, “RFA Success Stories and Challenges,” featured agency officials and small business stake- holders who shared their experi- ences with implementing the Regulatory Flexibility Act (RFA) and offered suggestions for improv- ing the process. Moderator Neil Eisner, assis- tant general counsel for regula- tion and enforcement at the U.S. Department of Transportation, opened the discussion with the question, “Is the RFA a success?” Eisner noted that the RFA was a success at the agency because for all important rules that go before the secretary, the question that is always posed at briefings is, “Has the agency considered the impact on small entities?” “The greatest impact of the RFA that is out of the sight of the public is that it has changed the agency culture to think about small businesses when they are thinking about doing rulemaking,” stated Jim Laity, an audience participant and desk officer at the Office of Information and Regulatory Affairs. “The Small Business Administration’s Office of Advocacy is the best use of tax dollars out there,” stated panel- ist Jeff Hannapel, vice president of regulatory affairs at the Policy Group and former official at the U.S. Environmental Protection Agency (EPA), “the RFA is so important because it allows small businesses to be part of the regula- tory process.” Panelist Nicole Owens, direc- tor of regulatory management at EPA, stated that the small business input in the SBREFA panel process before the rule is published has resulted in significant rulemak- ing improvements at EPA, such as small business exemptions or phased-in compliance dates. Hannapel added, “SBREFA pan- els are important because they are composed of small businesses with real world experience. They discuss how they will be impacted by the rule—they are not just some talking heads.” While SBREFA panels can be helpful, Owens stated that the EPA can take four to ten months for agency staff to prepare its analyses to give to the SBREFA panel and it ultimately lengthens the time to do a rulemaking. Owens noted that it is hard for the agency to conclude that they couldn’t get the same data in another way, such as through the comment period or through agency outreach. Panelist Jonathan Snare, part- ner at Morgan, Lewis & Bockius LLP and a former official of the Occupational Safety and Health Administration (OSHA), stated that getting relevant data is always a challenge for the agency. Sarah Shortall, an attorney for OSHA, recommended that Advocacy train small entity representatives on the SBREFA process and the type of quantitative data that the agency needs to make this process more helpful. Panelists noted that while OSHA and EPA have different ways of implementing the SBREFA process, the most important thing is for the agency to be flexible and hold panels before the policy deci- sions are made. Panel 4 featured RFA success stories. From left are Neil Eisner, Jeff Hannapel, Nicole Owens, and Jonathan Snare. Chief Counsel Sargeant recognized Susan Walthall for her service as acting chief counsel. President Jimmy Carter signing Regulatory Flexibility Act RFA History, from page 11regulatory agencies—to “require all federal agencies to analyze the cost and relevance of regulations to small businesses.” 1980: The Regulatory Flexibility ActThe White House Conference rec- ommendations, supporting earlier calls for action and the findings on Capitol Hill, helped form the impe- tus for the passage, in 1980, of the Regulatory Flexibility Act (RFA). The intent of the act was clearly stated: “It is the purpose of this act to establish as a principle of regulatory issuance that agencies shall endeav- or, consistent with the objectives… of applicable statutes, to fit regu- latory and informational require- ments to the scale of businesses… To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The law directed agencies to analyze the impact of their regula- tory actions and to review existing rules, planned regulatory actions, and actual proposed rules for their impacts on small entities. Depending on the proposed rule’s expected impact, agencies were required by the RFA to prepare one or more of three documents: an ini- tial regulatory flexibility analysis, a certification, and a final regula- tory flexibility analysis. Rules to be included in the agencies’ “regula- tory agendas” were those likely to have a “significant economic impact on a substantial number of small entities.” Implementing the RFAThe Office of Advocacy was charged to monitor agency compli- ance with the new law. Over the next decade and a half, the office carried out its mandate, reporting annually on agency compliance to the president and the Congress. Bit became clear early to the Office of Advocacy and many small busi- ness people that the law wasn’t strong enough. A briefing paper prepared for the 1986 White HousConference on Small Business noted: “The effectiveness of the Regulatory Flexibility Act largely depends on small business’ aware- ness of proposed regulations and [their] ability to effectively voice [their] concerns to regulatory agencies. In addition, the courts’ abilitto review agency compliance withthe law is limited.” The delegates recommended strengthening the RFA by requir- ing recalcitrant agencies to compland by providing that the action or inaction of all federal agencies with respect to the RFA be subjectto judicial review. President RonalReagan’s 1987 report on small business noted: “Regulations and excessive paperwork place small businesses at a disadvantage in an increasingly competitive world marketplace…” But it would take an act of Congress to make judiciareview law—and reaching that cosensus needed more time. Regulations’ effects on the economic environment for competition also concerned President George H.W. Bush, whose 1992 message in the annual small business report noted: “My Administration this year instituted a moratorium on new Federal regulations to give Federal agencies a chance to review and revise their rules. And we are looking at ways to improve our regulatory process over the long term so that regulations will accomplish their original purpose without hindering economic growth.” The scene was set for the regulatory logjam to move. On September 30, 1993, President Clinton issued Executive Order 12866, “Regulatory Planning and Review,” designed, among other things, to ease the regulatory burden on small firms. The order required federal agencies to analyze carefully their major regulatory undertakings and to take action to ensure that these regulations achieved the desired results with minimal societal burden. An April 1994 report by the General Accounting Office reviewed the Office of Advocacy’s annual reports on agency compli- ance with the RFA and concluded: “The SBA annual reports indicated Continued on page 13 RFA History, from page 12agencies’ compliance with the RFA has varied widely from one agency to another. …the RFA does not authorize SBA or any other agency to compel rulemaking agencies to comply with the act’s provisions.” The 1995 White House Conference and SBREFAIn 1995, a third White House Conference on Small Business looked at why the RFA had not made enough progress in mitigating regulations’ increasing and dispro- portionate effect on small firms. The Administration’s National Performance Review had recom- mended that agency compliance with the RFA be subject to judicial review. Still it had not happened. Once again, the White House Conference delegates forcefully addressed the prob- lem. Recommendation #183 of the National Conference Recommendation Agenda fine- tuned the regulatory policy guid- ance of earlier conferences, asking for specific provisions that would include small firms in the rulemak- ing process. In October, the Office of Advocacy issued a report, based on research by Thomas Hopkins, that estimated the total costs of “process,” environmental, and other social and economic regulations at $668 billion in 1995. Conservative estimates put the average cost of regulation at $3,400 per employee for large firms with more than 500 employees and $5,000 per employ- ee for small firms with fewer than 500 employees. As it turned out, recom- mendation #183 was among the first of the 1995 White House Conference results to be imple- mented. President Clinton signed Public Law 104-121, the Small Business Regulatory Enforcement Fairness Act (SBREFA), on March 29, 1996. The new law gave the courts jurisdiction to review agency compliance with the RFA, thus providing for the first time an enforcement mechanism. Second, it mandated that the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) convene small business advocacy review panels to consult with small enti- ties early on regulations expected to have a significant impact on them, before the regulations were published for public comment. This formalized for these two agencies a process for involving small enti- ties in the agencies’ deliberations on the effectiveness of regulations that would affect them. Third, it reaffirmed the authority of the chief counsel for advocacy to file amicus curiae (friend of the court) briefs in appeals brought by small entities from agency final actions. The 2000s: A Small Business Agenda and Executive Order 13272 On March 19, 2002, President George W. Bush announced his Small Business Agenda, which succinctly noted that “The role of government is not to create wealth but to create an environment where entrepreneurs can flourish.” The president gave a high priority to regulatory concerns, including as a key feature of his agenda the goal to “tear down the regulatory barriers to job creation for small businesses and give small business owners a voice in the complex and confusing federal regulatory process.” The first point under this section was the goal of strengthening the Office of Advocacy by enhancing its relationship with the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) and creating an executive order that would direct agencies to work closely with Advocacy in properly considering the impact of their regulations on small business. RFA 30th Anniversary page 13 October–November 2010 On August 13, 2002, he issued Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking.” The E.O. required federal agencies to • Establish written procedures and policies on how they would measure the impact of their regu- latory proposals on small enti- ties and to vet those policies with Advocacy; • Notify Advocacy before pub- lishing draft rules expected to have a significant economic impact on a substantial number of small enti- ties; and• Consider Advocacy’s written comments on proposed rules and publish a response with the final rule. The E.O. requires Advocacy, in turn, to provide periodic noti- fication as well as training to all agencies on how to comply with the RFA. These steps set the stage for agencies to work closely with Advocacy in considering their rules’ impacts on small entities. Since then, Advocacy has trained nearly all agencies in implementing the RFA, and Cabinet departments as well as many independent agen- cies have submitted written RFA compliance plans and made their RFA procedures publicly available. Another significant development in the first decade of the 21st century was the creation of a model “state RFA” that has since been adopted by many states in whole or in part. A New Administration Implements the RFA When the Obama Administration took office in 2009, one immediate pressing challenge was to respond to the financial crisis faced by the American public and the business community in particular. Some of the participants in the debate on a new financial protection law were familiar with the success of the SBREFA panels that apply to EPA and OSHA rulemakings. The Continued on page 16 RFA History, from page 13Dodd-Frank Wall Street Reform and Consumer Protection Act, signed by President Obama in July 2010, names the new Consumer Financial Protection Bureau as the third agency required to use the SBREFA panel process in develop- ing regulations. Meanwhile, Advocacy continues its active work with federal agencies and the small business community to implement the intent of the RFA. New regulatory cost studies continue to find a dispropor- tionate burden on small firms; but the amount of additional regulatory bur- den that was not loaded onto the backs of small busi- nesses because of Advocacy’s work and the RFA totaled more than $7 billion in fiscal year 2009 alone. As agencies adjust their regulatory development pro- cesses to accommodate the require- ments of the RFA and the E.O., the benefits will continue to accrue to small firms. At the 30th anniversary sym- posium on the RFA in September 2010, OIRA Administrator Cass Sunstein summed up the RFA mis- sion: “In the current economic envi- ronment, it is especially important to see that [regulatory] analysis and openness are mutually reinforc- ing. If the two are taken together, they can help to promote important social goals, to reduce unjustified burdens, and to identify approaches that will promote entrepreneurship, innovation, job growth, and com- petitiveness, not least for the mil- lions of small businesses that are indispensable to economic recovery and growth.” RFA@30 logo U.S. Small Business Administration Office of Advocacy Mail Code 3114 409 Third Street, S.W. Washington, DC 20416Official Use Penalty for Private Use, $300 Return Service Requested