[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
                           SBREFA COMPLIANCE:
                       IS IT THE SAME OLD STORY?
=======================================================================




                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, MARCH 6, 2002
                               __________

                           Serial No. 107-46
                               __________

         Printed for the use of the Committee on Small Business














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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman 
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
W. TODD AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 6, 2002....................................     1

                               Witnesses

Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small 
  Business Administration........................................     4
Rezendes, Victor, Managing Director, General Accounting Office...     6
Frulla, David, Brand & Frulla....................................     8
Goldhecht, Norman, Regulatory Chairman, National Association 
  Portable X-Ray Providers.......................................    10
Dozier, Damon, Director, Government Affairs, National Small 
  Business United................................................    12
Gibson, Jeffrey, American Pacific Corp...........................    14

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    29
    Grucci, Hon. Felix...........................................    31
Prepared statements:
    Sullivan, Hon. Thomas........................................    33
    Rezendes, Victor.............................................    49
    Frulla, David................................................    58
    Goldhecht, Norman............................................    67
    Dozier, Damon................................................    71
    Gibson, Jeffrey..............................................    80
Additional Information: Statement submitted by Small Business 
  Legislative Council............................................    92



















              SBREFA COMPLIANCE: IS IT THE SAME OLD STORY?

                              ----------                              


                        WEDNESDAY, MARCH 6, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m. in room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
(chairman of the committee) presiding.
    Chairman Manzullo. I would like to call this hearing to 
order.
    Let me give you some good news. It is always good to have 
some good news. We held a hearing at the Los Alamos in Santa Fe 
in Congressman Tom Udall's district because of the extremely 
poor procurement policies, miserable procurement policies, on 
the part of the DOE. We had brought in there--here is this 
national ad that is getting $1 billion in procurement a year or 
in federal tax dollars each year. We had one witness who 
testified that six of the local Pueblos--those are the Indian 
tribes--only got a total of $5,000 in contracts.
    I spoke this morning at the National Hispanic Chamber of 
Commerce, which was founded by Mr. Barreto's father. I ran into 
a lady there who was one of the witnesses in Los Alamos. She 
said you will not believe what happened. The Small Business 
Committee raised so much cain down there that the people at the 
Department of Energy decided to have some energy, and they set 
up a committee to oversee contracts going to small businesses.
    One of the aggrieved parties, a small business lady--did 
you meet her there, Anna, at the breakfast this morning--got 
put in charge of this committee to make sure that the small 
businesses got their fair share of contracts. She said I would 
like the same type of subpoena powers that Mr. Manzullo has. 
They said you have them.
    The first shot out of the gate is $40 million in 
construction contracts set aside for the small business people 
out in Santa Fe. That is why we have lots of oversight with 
this committee. The purpose is to shake up the bureaucrats and 
shake out those contracts so the small business people get 
their fair share. Is that right? You bet.
    Today's hearing is the first in a series that the Committee 
will hold addressing compliance with the Small Business 
Regulatory Enforcement Fairness Act or SBREFA. SBREFA modified 
and strengthened the Regulatory Flexibility Act. The hearings 
will identify problems with the Regulatory Flexibility Act and 
SBREFA. Our goal is to draft legislation that will remove the 
loopholes agencies have discovered for not complying with the 
Regulatory Flexibility Act and SBREFA.
    In 1980, Congress responded to the cries from the small 
business community for help with the constantly growing 
regulatory burdens imposed by the federal government. Congress 
intended the Regulatory Flexibility Act to alleviate the 
disproportionate federal regulatory burden imposed on small 
businesses and other small entities. The authors intended the 
RFA to have the same effect on agency decision making that the 
National Environmental Policy Act had on agency decisions that 
would affect the environment. The concept was to force the 
agencies to think through the problem before using the knee 
jerk response of imposing regulations.
    For 15 years, agencies largely ignored the RFA. This is not 
my supposition, but rather the conclusion of the annual reports 
issued by the Chief Counsel for Advocacy during that time. 
Congress also held hearings highlighting agency failure to 
comply with the RFA.
    SBREFA was enacted in 1996 as a response to federal 
agencies ignoring the mandates of Congress. SBREFA strengthened 
the RFA. The authors expected that the changes would induce 
agency compliance. However, as we will hear today, agencies 
have found new loopholes they can use to avoid compliance with 
the Regulatory Flexibility Act.
    The premise underlying the RFA is simple. If an agency has 
two methods of achieving its statutory objective, the rational 
choice would be to select the one that imposes less burdens on 
small businesses and other small entities. However, the 
agencies have used interpretive gymnastics, even after Congress 
thought it closed them with the enactment of SBREFA, to avoid 
conducting the required analyses and identifying less 
burdensome alternatives that would achieve their statutory 
objectives.
    I look forward to working with the witnesses and others on 
legislation to close those loopholes, and I will now recognize 
the Ranking Member, the gentlelady from New York, for her 
opening statement.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman, and good morning.
    Regulatory and paperwork burdens are one of the greatest 
challenges that confront this nation's small businesses. Firms 
that employ fewer than 20 workers face an annual regulatory 
burden of almost $7,000 per employee, a burden nearly 60 
percent greater than that of corporate America.
    Today, many times small business owners do not have a legal 
department or a regulatory expert to help them understand and 
comply with federal rules. The hurdles created by regulations 
can mean the difference between a business sinking or 
surviving.
    In an effort to level the playing field for small 
businesses, Congress enacted the Regulatory Flexibility Act in 
1980. This groundbreaking legislation mandated that federal 
agencies consider the impact their regulatory proposals would 
have on small businesses. This law was created to insure that 
such proposals did not have unintentional and detrimental 
effects on small firms.
    While the Reg Flex Act was the first step in providing some 
fairness in the regulatory process, much more still needs to be 
done. Reg Flex was able to put small business concerns on the 
radar screen of federal agencies, but compliance has proven 
both uneven and elusive.
    In 1996, President Clinton signed the Small Business 
Regulatory Enforcement Fairness Act, also known as SBREFA. This 
raised the regulatory stakes for agencies by putting legal 
teeth into the regulatory fairness process by allowing small 
businesses adversely affected by a proposed rule to challenge 
it in the courts. SBREFA has gone a long way to improving the 
regulatory process and has helped to protect the interests of 
small business.
    I believe that today it is an appropriate time to go back 
and re-examine where we are in terms of the state of small 
business regulations. What we are now seeing is very much a 
mixed bag. Some agencies actively engage small business in the 
regulatory process, while others like the FCC, which is 
probably responsible for the most regulations affecting small 
businesses, have one of the worst track records for leaving 
small business out.
    Another agency that has an inconsistent track record is the 
Center for Medicare and Medicaid Services. Today, CMS came out 
with its prescription drug card proposal. This rule is a 
perfect example of an agency's failure to comply with the law. 
It also demonstrates a lack of understanding of the Reg Flex 
Act and why it exists--to protect small businesses and 
incorporate their views into the rule making process.
    CMS heard from Democrats on the House Small Business 
Committee who encouraged agency officials to speak to small 
businesses before they proceeded with the proposal process. 
Associations that represent small business such as the National 
Community Pharmacists Association and the National Association 
of Chain Drug Stores also voiced their concerns to CMS. Still, 
the agency ignored this request for small business inclusion 
and pushed forward.
    CMS, like other agencies, must realize that Reg Flex and 
SBREFA were created for a reason. They serve an important 
purpose--to protect the interests of small businesses and to 
insure that they are not negatively affected or overly burdened 
by an agency rule that is in the pipeline.
    The regulatory process is a complex and sometimes 
burdensome undertaking, but regulations can also be fair, 
balanced and provide necessary protections for our health, 
welfare and our environment. Federal agencies must work to 
determine the impact their regulations have on small 
businesses, explore the regulatory options for reducing that 
impact and be held accountable for the final choice of a 
regulatory approach.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    Our first witness is the Honorable Tom Sullivan, Chief 
Counsel for Advocacy. Tom was with NFIB for years and has a 
great background. He has been on the job officially for about 
three weeks now. Is that correct, Tom? We look forward to your 
testimony. I think you know how the lights work. At five 
minutes we would like to have you have your testimony 
concluded.
    All of the statements of the witnesses will be made part of 
the record, along with any statements of Members of Congress. 
Any in the audience that wish to put a statement in the record, 
if you want to do so you have ten days to do so, but try to 
keep it under two pages.
    Mr. Sullivan.

 STATEMENT OF THE HONORABLE THOMAS SULLIVAN, CHIEF COUNSEL FOR 
     ADVOCACY, UNITED STATES SMALL BUSINESS ADMINISTRATION

    Mr. Sullivan. Good morning, Mr. Chairman. Chairman 
Manzullo, Ranking Member Velazquez, Members of the Committee, 
thank you for the opportunity to appear before you today to 
discuss the Small Business Regulatory Enforcement Fairness Act, 
SBREFA. I am pleased that my complete written statement is 
already accepted into the record, and I will briefly summarize 
the key points.
    First, let me tell you what an honor and privilege it is 
for me to have been appointed Chief Counsel by President Bush. 
This is my first statement before a congressional Committee 
since my confirmation, and I am grateful for the tremendous 
support I have already had from this Committee, from other 
Members of Congress, from Administrator Barreto, from the staff 
in the Office of Advocacy, from government leaders and from our 
many small business organization and trade association friends.
    SBREFA has made a difference, a big difference, both in 
opening the rule making process to greater scrutiny and in 
reducing unduly burdensome mandates on small businesses. We 
estimate that during fiscal years 1998 through 2001, 
modifications to federal regulatory proposals in response in 
part to Advocacy's recommendations resulted in cost savings 
totaling more than $16.4 billion or more than $4.1 billion per 
year on average.
    I mention in my written statement that SBREFA is helping 
change the regulatory culture in at least some government 
agencies. It is important to note this morning, however, that 
this cultural change is by no means uniform among all 
regulatory agencies. One of the largest hurdles to be overcome 
remains resistance in some agencies to the concept that less 
burdensome regulatory alternatives may be equally effective in 
achieving their public policy objectives. Other agencies simply 
have not internalized their Reg Flex responsibilities and do 
not seem to view its requirements as germane to their mission.
    I would like to offer a few remarks on Section 212 of 
SBREFA, which requires agencies to publish compliance guides to 
assist small entities in understanding their regulations. 
Frankly, I find it embarrassing that government agencies must 
be forced to publish guides to help small businesses comply 
with their rules, but recognizing that Section 212 is not 
working as intended, Advocacy wants to work with this Committee 
and Congress and regulatory agencies to make sure this problem 
is resolved. If additional legislation is needed to clarify 
Congress' intent, an annual report to this Committee from each 
agency with respect to its compliance guide efforts might be 
productive.
    In conclusion, I would like to refocus our discussion on 
why we have SBREFA, the Reg Flex Act or why, for that matter, 
we have an Office of Advocacy. Why do we go to all this 
trouble? Perhaps the best answer is the simplest. The bedrock 
importance of small business to our economy, both at the 
national and community levels.
    Small business is and has historically been our nation's 
primary source of innovation, job creation and productivity. It 
has led us out of recessions and economic downturns. Small 
firms have provided tremendous economic empowerment 
opportunities for women and minority entrepreneurs. Small 
employers, as this Committee well knows, spend more than $1.5 
trillion on their payroll.
    All these are good reasons for us to work to insure a 
healthy and competitive small business sector. Small business 
wants a level playing field. The cost of regulation is a good 
case in point. Our recent study on this subject disclosed that 
the cost of federal regulation to firms with fewer than 20 
employees was almost $7,000 per employee. Congresswoman 
Velazquez mentioned in her opening statement that that is more 
than 60 percent higher than their larger business counterparts. 
This disproportionate burden is a huge impediment to small 
business realizing its full potential.
    Although small business has done a remarkable job in coping 
with this problem, it is tantalizing to think of what 
productive and innovative energies would be unleashed if we 
could reduce this burden even further. That is why we do what 
we do at Advocacy, and that is why Congress wrote the 
Regulatory Flexibility Act and the Small Business Regulatory 
Enforcement Fairness Act--to help small business realize their 
full potential.
    I pledge the full cooperation and assistance of the Office 
of Advocacy in your deliberations of how best to accomplish 
this worthy goal.
    [Mr. Sullivan's statement may be found in the appendix.]
    Chairman Manzullo. I want to give you one more minute, Tom. 
Could you read into the record your statement talking about CMS 
starting on page 10?
    We are going to have CMS accountability round three coming 
up. I want everybody to realize that it is still HCFA as far as 
I am concerned. You do not change an old horse by giving it a 
new name. Read in there the continuous abuses that are carried 
on by CMS.
    Mr. Sullivan. I would be happy to.
    Chairman Manzullo. I hope someone from CMS can hear this 
and take this back and let them know it is HCFA as far as I am 
concerned.
    Mr. Sullivan. I would be happy to, Mr. Chairman. In my 
written statement, as the Chairman mentioned, I did mention 
some agencies that have been less accommodating in 
theircompliance with the Reg Flex Act.
    CMS is one of those agencies. An advisory committee on 
regulatory reform has been formed at the Department of Health 
and Human Services to identify overly burdensome Medicare 
regulations promulgated by that agency. This is a positive 
development, but, frankly, a number of these overly burdensome 
regulations would not be on the books today if CMS had complied 
with the Reg Flex Act.
    For example, in the case of the Medicare reimbursement 
methodology for portable x-ray providers, CMS has ignored 
Advocacy's comments and recommendations since 1998. Advocacy 
commented on the proposed rule, indicating that the overall 
reduction in Medicare reimbursement for portable x-ray services 
amounted to as much as 54 percent in some cases and that the 
agency had not prepared an adequate analysis of the impact on 
small entities.
    GAO also published a report in 1998 acknowledging, with 
some uncertainty, that portable x-ray providers may not be able 
to continue supplying services as a result of the reduced 
payments.
    CMS, formerly known as HCFA, published a final rule in this 
case which essentially ignored the comments of Advocacy and 
industry, so Advocacy submitted additional comments indicating 
that, under the Regulatory Flexibility Act, CMS was required to 
address comments received in response to the initial regulatory 
flexibility analysis.
    Eventually, a transition period for implementation was 
allowed after a post final rule discovery that a transition 
payment provision had been left out. This ``fix'' still did not 
address the overall issue of the need for an impact analysis.
    In December, 2001, Advocacy was again forced to comment on 
a new payment regulation, this time a direct final rule where 
the agency waived the Administrative Procedure Act requirement 
for a notice of proposed rule making. Once again, CMS failed to 
assess adequately the impact of the rule on small portable x-
ray providers.
    Chairman Manzullo. Thank you, Tom. I appreciate that.
    The next witness is Victor is it Rezendes?
    Mr. Rezendes. Yes. That is correct.
    Chairman Manzullo. He is the managing director of the U.S. 
GAO, Strategic Issues Team. I look forward to your testimony.

  STATEMENT OF VICTOR REZENDES, MANAGING DIRECTOR, STRATEGIC 
             ISSUES TEAM, GENERAL ACCOUNTING OFFICE

    Mr. Rezendes. Thank you, Mr. Chairman. It is a pleasure to 
be here today to discuss both the----
    Chairman Manzullo. Could you put the mike a little bit 
closer? You might have to bring it up.
    Mr. Rezendes. Sure. How is that? Is that better?
    Chairman Manzullo. Push it up like this. Let us try that.
    Mr. Rezendes. Okay. Great.
    Although the Regulatory Flexibility Act and SBREFA have 
clearly affected how agencies regulate, their full promise has 
yet to be realized. Over the last decade, we have called for 
greater clarity to help agencies implement these laws.
    The questions that remain unanswered are numerous. For 
example, should the economic impact of a rule be measured in 
terms of compliance costs as a percentage of annual revenues or 
work hours? If so, is three percent of revenues or one percent 
of revenues or work hours the appropriate measure?
    These questions are not simply a matter of administrative 
conjecture. They go to the heart of determining the regulatory 
relief for small businesses. This lack of clarity is clearly 
illustrated in EPA's current guidance that provides the 
substantial discretion, but also provides numerical guidelines 
for making these decisions.
    These numerical guidelines establish what appears to be to 
us a high threshold for what constitutes a significant impact. 
The rule could theoretically impose $10,000 in compliance costs 
on 10,000 small businesses, but still be presumed not to have a 
significant impact as long as those costs do not represent one 
percent of the revenues of those firms.
    We have issued several other reports over the decade that 
reached similar conclusions. In 1991, we examined the 
implementation of the Regulatory Flexibility Act as it related 
to small government jurisdictions and concluded that each of 
the agencies that we reviewed at that time had a different 
interpretation of the Act.
    In 1994, we examined 12 years of annual reports prepared by 
SBA's Office of Counsel for Advocacy and said the reports 
indicated variable compliance. In 1998, we said that the lack 
of clarity regarding whether EPA should have convened panels on 
two proposed rules was traceable to the lack of agreed upon 
government wide criteria as to when a rule had a significant 
impact. In 1999, we noted a similar lack of clarity on the 
requirement that agencies review their existing rules that have 
significant impact imposed over the last ten years of their 
promulgation.
    Last year, we issued two additional reports. One examined 
the requirement that agencies establish a policy for the 
reduction of civil penalties on small entities. All of the 
agencies' penalty relief policies that we reviewed were within 
the discretion that Congress provided, but the policies varied 
considerably. Some covered only a portion of the agency's 
enforcement actions, and some provided small entities with no 
greater relief than they did to larger firms.
    The last report we just issued examined the requirement 
that the agencies' publish a small entity compliance guide for 
any rule that requires a final regulatory flexibility analysis. 
We concluded that the requirement did not have much of an 
impact, and implementation also varied across the agencies. 
Some of the requirement's ineffectiveness and inconsistency is 
traceable to a definitional problem. Other problems were 
traceable to the discretion provided under the Act. Under the 
statute, agencies can designate a previously published document 
as its small entity compliance guide or develop and publish a 
guide with no input from the small entities years after the 
rule takes effect.
    The bottom line, Mr. Chairman, is that these statutes 
provide agencies with a great degree of discretion. While 
flexibility allows agencies to address unique situations, it 
also results in wide variation between agencies and in some 
cases within agencies.
    If Congress is unhappy with how these Acts are being 
implemented, it needs to either amend the underlying statute to 
provide greater clarity or give some other entity the authority 
to issue guidance on these issues.
    Thank you, Mr. Chairman.
    [Mr. Rezendes' statement may be found in the appendix.]
    Chairman Manzullo. We have a general vote, so I think we 
are going to break now. We will be back here in a couple 
minutes, probably about ten or 15 minutes.
    [Recess.]
    Chairman Manzullo. Our next witness is David Frulla from 
Brand & Frulla. We look forward to your testimony.
    You might want to put the mike a little bit closer to you.

       STATEMENT OF DAVID FRULLA, ESQUIRE, BRAND & FRULLA

    Mr. Frulla. Thank you, Chairman Manzullo. The Ranking 
Member is not yet back, but I do appreciate the opportunity to 
address the Members of the Committee today.
    I am with a ten person law firm in Washington, D.C. We have 
handled I think nine pieces of RFA litigation since the law was 
changed against the Commerce Department, EPA, HCFA and the Army 
Corps of Engineers. We have won some, lost some, settled some, 
which I would like to talk about briefly, and had some stayed, 
some pieces of litigation stayed while efforts to work out more 
flexible solutions have been undertaken with some success. We 
also have some litigation still in play, including for the 
National Federation of Independent Business Legal Foundation 
where Mr. Sullivan just left.
    What I would like to do today is three things. First, give 
you a little bit of a history on a success story under SBREFA; 
second, to address briefly some problems that we still discern; 
and, third, to offer some concrete solutions from a litigator's 
perspective. They may not be broad reaching policy suggestions 
necessarily, but they are things that we think are discrete and 
achievable and could help those that have to litigate in the 
Regulatory Flexibility Act forum.
    First on the success story briefly. We represented in one 
of the Reg Flex cases that we undertook a coalition of 
commercial shark fishermen from the Atlantic Ocean and the Gulf 
of Mexico. Smaller businesses you could not imagine. We brought 
a broad ranging challenge to the scientific bases for quota 
reductions they faced. The National Marine Fisheries Service 
had also stubbornly insisted that a 50 percent quota reduction 
would not have a significant impact on a substantial number of 
small businesses. They were all small businesses, and they were 
all subject to a 50 percent cut.
    The Judge did not necessarily understand fully the science. 
He did understand the Reg Flex part. There were a series of 
Orders issued. Finally, three years later, the case was 
settled. Part of the settlement included a stay of the most 
draconian levels of quota cuts, coupled with an independent 
review of the science that was used to justify some of the 
further quota reductions.
    The good news I can report is that the independent review 
of the science showed that the underpinnings for these further 
quota reductions was not sufficient to support them. That is 
good news because it hopefully means that we can start on a 
more constructive regulatory track for these clients. We also 
received in settlement a measure of our attorneys' fees, which 
was also much appreciated.
    I would like to turn now quickly to some of the ways that 
agencies still attempt to get around the Reg Flex Act. Some 
claim that binding actions do not represent regulations. We 
still see from time to time inadequate certifications of no 
significant impact. Agencies do still claim that their statutes 
do not provide them any flexibility to consider constructive 
alternatives. Sometimes agencies will state that the 
regulations do not directly impact small businesses. Sometimes 
they structure their regulations that way so they can avoid Reg 
Flex.
    Interestingly, we are seeing that one of the defenses now 
is that agencies will dump a whole lot of economic information 
into the record and not analyze it, which makes it pretty much 
impenetrable for the judge. The judge says well, if there is 
that much information there must be a kernel of analysis in 
there somewhere, so we do face that. Sometimes, finally, 
agencies do not have sufficient information or resources and 
fail to collect it. For that reason as well, the Reg Flex 
analysis of impact and, more importantly, of alternatives can 
fall short.
    I would like to offer some suggestions in my final time. 
Jere Glover, who was the former Chief Counsel of Advocacy who 
has joined our firm, warned me that I should not tell you how 
to fix it perfectly because neither he nor I are ready to 
retire yet. Here are some suggestions.
    We should extend the successful SBREFA panel process to 
other agencies. One that I am familiar with is the National 
Marine Fisheries Service. It is a small segment of the Commerce 
Department, but the people that it regulates are almost all 
small entities, and the profusion of regulations is pretty 
intense.
    We think it would be important, and again these are quite 
technical, sort of litigator perspectives, to clarify the 
applicable standards of review for SBREFA litigation. On 
questions of whether the Reg Flex Act applies, that should be 
considered by the Court as a matter of law, for instance. 
Agency analyses on economic impacts and alternatives could then 
be considered under the arbitrary and capricious standard.
    The Regulatory Flexibility Act should be clarified either 
through an amendment or direct Committee language to impose an 
affirmative obligation on an agency to base its Reg Flex 
analyses on reasonably adequate economic and social 
information. We can discern that obligation from NEPA under the 
case law. We believe that there is even a stronger reason for 
it under Reg Flex, which is set forth in my testimony. The Reg 
Flex Act should state that courts should defer to Mr. Sullivan 
and his staff in terms of legal questions relating to the Reg 
Flex Act and its application to a rule or an agency. We would 
like to see the attorneys' fees provisions addressed under the 
Equal Access to Justice Act, and, finally, you should continue 
to fund the Office of Advocacy for the great work that it does.
    Thank you, sir.
    [Mr. Frulla's statement may be found in the appendix.]
    Chairman Manzullo. Thank you.
    We are going to be working on some amendments to RFA and 
SBREFA. Mr. Frulla, I would like you to be in contact with 
Barry Pineles here. The SBA Ombudsman is in the room back there 
somewhere, but work with him. There he is. Thank you for 
coming.
    Work with the ombudsman and obviously with Tom Sullivan and 
with staff on both sides of the aisle here. Let us start 
working on some remedial legislation and go get them.
    Mr. Frulla. Thank you, sir.
    Chairman Manzullo. Thank you for your testimony.
    The next witness will be Norman Goldhecht. He is the vice-
president of Diagnostic Health Systems located in Lakewood, New 
Jersey. We look forward to your testimony.

 STATEMENT OF NORMAN GOLDHECHT, REGULATORY CHAIRMAN, NATIONAL 
            ASSOCIATION OF PORTABLE X-RAY PROVIDERS

    Mr. Goldhecht. Thank you, Chairman Manzullo, Congresswoman 
Velazquez and Committee Members, for the opportunity to testify 
before you again today. My name is Norman Goldhecht, and I 
appear before you today as the regulatory chairman of the 
NAPXP. I am also a former owner of a portable x-ray company in 
New Jersey who recently sold his company after 16 years largely 
because I felt that the federal rule making was dooming our 
industry, and I could no longer afford to remain in business.
    Selling my family owned business was particularly difficult 
for me and my partner, who is my brother-in-law, because we had 
both hoped to pass our company along to our children. Sadly, we 
realized that if we remained in this business we would not pass 
along the legacy of a proud company, but the burden of an 
impossible situation in which quality patient care and service 
wasnot feasible under increasingly onerous federal rule making.
    I have been asked to provide the perspective of our small 
business dominated industry regarding CMS compliance with RFA. 
We agree with the SBA Office of Advocacy in finding that CMS 
has failed to comply for over three years relative to the rule 
making process for our industry. When asked by the press to 
comment on the most recent plea by Advocacy to obey this law, 
CMS graciously offered to consider complying next year.
    The question before us is does the RFA work? One federal 
agency, the SBA, informs another, CMS, that they are in 
violation of federal statute. This is not a situation where our 
industry or our attorneys offered this analysis. This is the 
SBA Office of Advocacy. CMS refuses to even respond to the SBA.
    When we ask this Committee or the SBA what we can do to 
force CMS to obey the law, we are told we can sue. Sue the 
federal government because as small businesses we are being 
driven into extinction through illegal rule making and are 
unable to survive financially. Sue the federal government 
because they refuse to respond to a federal agency of 
jurisdiction.
    If we sue under RFA, we cannot receive any damages if we 
win. All we can do is force CMS to obey the law. We might 
consider this because we are small businesses who are facing 
bankruptcy over illegal rule making. Rather than pay our 
employees, our creditors or ourselves, we might pay lawyers to 
sue the federal government to force them to obey the law. We 
are informed that we might receive funds to reimburse our legal 
costs of up to $125 an hour.
    Let me see if I have this straight. One federal agency has 
confirmed that another federal agency is breaking the law. The 
offending agency refuses to comply with the law in spite of 
clear counsel from the agency charged with oversight opinion 
that the offending agency is in violation. SBA cannot bring 
suit. It is the job of small businesses who are, because of law 
breaking, going bankrupt to bring this to the court and hope 
that they can compel the offending agency to obey the law at 
their own expense, minus what one pays a plumber to come fix a 
leak on a Saturday and no compensation for the harm done to 
small businesses.
    The question before us is does RFA work? Mr. Chairman, I do 
not mean to be disrespectful, but my industry has cried foul 
for years and received steadily worse treatment for our 
trouble. We now have what to a normal citizen, a taxpayer, a 
Medicare patient or a constituent, would appear to be an open 
and shut case. The SBA says we are right, and CMS is wrong.
    That and a few hundred thousand dollars over a few years to 
sue the government might force CMS to agree to what they should 
have done in the first place. No more. The reality is we will 
not be around to see the case through because the rule making 
in question is bankrupting us.
    The issue before us today is agency compliance with the 
RFA. I believe that our experience provides a textbook example 
of why this admirable law deserves the teeth required to allow 
it to achieve the intent this Committee and the Congress 
intended.
    If our situation does not frustrate and anger this 
Committee as it frustrates and angers us, then your work on 
this matter is done. If this Committee feels that the small 
businesses served by that law at best allows them to take a 
federal agency to court to force compliance with no hope of 
compensation for damage, let alone the true cost of acting as a 
government watchdog, then your work is done. However, if this 
Committee is outraged by the callous refusal of CMS to obey the 
law and respond appropriately to Congress, the Executive Branch 
and the public in this instance, then I am afraid that your 
work is not complete.
    If this Committee does not believe that small businesses 
should have to sue to force agency compliance, particularly 
when Congress and the SBA are in accord regarding the lack of 
agency compliance, then we are here to work with you to 
strengthen the law and protect American small businesses from 
federal agency abuse.
    Our case against CMS does provide an illustration as to how 
the current RFA might be strengthened. We begin with the 
premise that by definition small businesses are those least 
able to pursue legal remedies against federal agencies and the 
courts. This is all the more true when the law does not allow 
for any damages, which might offer incentive for private small 
businesses to hold agencies accountable through suit.
    As we are discussing a suit that is aimed solely at 
compelling the agency to comply with the law, the time and 
money spent pursuing such a suit should not be a further 
deterrent against wronged parties seeking justice. At the most 
obvious level, if the SBA Office of Advocacy finds a violation 
there should be some level of compliance required or penalty 
assessed short of legal action in the court of law.
    The Office of Inspector General for each agency serves as a 
watchdog for that agency. Could the IG be employed to force 
compliance from an agency? At the very least, we must find a 
way to enforce the existing law, if not improve upon it, by 
expanding the Office of Advocacy's jurisdiction or otherwise 
placing agencies----
    Chairman Manzullo. How are you doing on time, Norm? Your 
red light is on.
    Mr. Goldhecht. Summing up.
    Chairman Manzullo. Okay.
    Mr. Goldhecht [continuing]. On notice that compliance will 
not be tolerated.
    In summation, I must stress that you represent our last and 
best hope for fairness. Without your assistance, our services 
will continue to vanish, and the elderly nursing home patients 
will be denied our care. The most damaging effect, however, may 
not be to small businesses and patients alone, but to all of 
our nation's small businesses that count on regulatory fairness 
and believe that laws like the RFA protect them.
    The NAPXP stands ready to assist the Committee in any way 
in devising a workable solution to this serious problem.
    Chairman Manzullo. I am going to have to cut you off.
    Mr. Goldhecht. That is fine.
    [Mr. Goldhecht's statement may be found in the appendix.]
    Chairman Manzullo. Thank you.
    Our next witness is Damon Dozier, who is the director of 
Government and Public Affairs of the National Small Business 
United.
    You know what the red light means?
    Mr. Dozier. Yes, I do, Mr. Chairman.
    Chairman Manzullo. You bet. Thank you, Damon.

  STATEMENT OF DAMON DOZIER, DIRECTOR, GOVERNMENT AND PUBLIC 
            AFFAIRS, NATIONAL SMALL BUSINESS UNITED

    Mr. Dozier. My name is Damon Dozier, and I serve as the 
director of Government and Public Affairs for National Small 
Business United, which is the nation's oldest bipartisan 
advocate for small business. NSBU represents 65,000 small 
businesses in all 50 states.
    The goal of our organization is to protect and promote our 
members and all of our nation's small businesses before 
Congress and the Administration. We at NSBU work towards this 
goal by working with Congress, the media, our direct members, 
affiliates and a national audience as a small business advocacy 
organization.
    I am pleased to appear before the Committee to share my 
views concerning the Reg Flex Act of 1980, as amended by 
SBREFA. I would like to add that my views expressed today are 
based on my direct experience in working with the RFA as a 
former Assistant Advocate for Environmental Policy in the 
Office of Advocacy in the Small Business Administration and as 
staff with regulatory affairs responsibilities for the Senate 
Committee on Small Business and Entrepreneurship. These views 
do not necessarily reflect those of NSBU.
    The bulk of my experience with the RFA has centered on 
monitoring Environmental Protection Agency compliance with the 
law, which, during my tenure at the Office of Advocacy, 
included insuring that proposed rules were properly certified 
as not having a significant economic impact on a substantial 
number of small entities. My duties also included, among other 
things, reviewing federal agency initial and final Regulatory 
Flexibility Act analyses, filing comment letters on proposed 
and final rules and, of course, providing assistance to the 
Chief Counsel in his role as one of the three members of the 
SBREFA panel.
    It has been my experience that, comparatively speaking, the 
EPA has been particularly active in its small entity outreach 
efforts in relation to the SBREFA panel process and has made 
some tremendous steps over the past six years in insuring that 
the small entity representatives participating in such process 
have enough quality data and information to make educated 
comments regarding rules and development.
    As of March 20, 2002, the agency will have completed 25 
SBREFA panels. While completion of SBREFA panels is not and 
should not be the only standard by which RFA compliance is 
measured, the record bears mentioning nonetheless.
    For most of its major rule makings that affect small 
business concerns, the agency has done adequate outreach. 
Through the exceptional efforts of the Small Business 
ombudsman, Karen Brown, and the Small Business advocacy chair, 
Thomas Kelly, the agency has put in place the right mechanisms 
to hear from small business. A level of involvement, as we have 
heard here today, is desperately needed at other federal 
agencies.
    However, when I started at Advocacy in 1996, the SBREFA law 
was very new, and it seemed that no federal agency was exactly 
sure how to comply with the non-panel related provisions of 
SBREFA and were not, quite frankly, very motivated to learn. 
Six years later, this still seems to be the case. In my 
opinion, the RFA, and later SBREFA, were desperately needed 
because federal agencies were refusing to do adequate outreach, 
in most cases any outreach at all, to small firms.
    While one of the issues to be addressed at this hearing 
includes perhaps adding additional agencies to the SBREFA panel 
process, an option that I enthusiastically support, the problem 
of the lack of outreach will still remain no matter how many 
are added unless agencies are forced to change the belief that 
they can get away with simply refusing to comply with the law.
    There is more to SBREFA than the panel process. Just a few 
short months ago, the General Accounting Office, in a report 
entitled Regulatory Reform: Compliance Guide Requirement has 
had Little Effect on Agency Practices, found that six federal 
agencies, including Commerce, EPA, FCC and SEC failed to 
produce small business guidance documents as required by 
SBREFA, as required by law.
    GAO found that Section 212 of SBREFA has had little impact, 
and its implementation has varied across and sometimes within 
the agencies. Most alarmingly, not only did the six agencies 
fail to provide compliance guides; some of the documents 
provided by the agencies appeared to have been identified as 
small entity compliance guides only in response to our inquiry. 
As Mr. Sullivan said, that is truly an embarrassment.
    The findings of the GAO seem to be a microcosm for a larger 
problem. Most federal agencies are simply not committed to 
agency outreach and thus fail to comply with most of the RFA's 
provisions. If the agencies cited in the GAO report had been 
committed to doing outreach to small firms and small business 
associations, even if the agency found that a particular rule 
failed the significant and substantial test, the small business 
community could have provided pressure on these agencies to 
comply with 212 or at least make them aware that the provision 
existed.
    I see that my time is going. I do note that in my testimony 
I suggest specific fixes to the RFA law, and I would be happy 
to answer any questions that you may have.
    [Mr. Dozier's statement may be found in the appendix.]
    Chairman Manzullo. We obviously want you to be part of the 
input on the amendments, et cetera, Damon, when we start 
working on that.
    Our next witness is Jeff Gibson, director of Support 
Operations for the Halotron Division of American Pacific 
Corporation. We look forward to your testimony.

 STATEMENT OF JEFFREY GIBSON, DIRECTOR OF SUPPORT OPERATIONS, 
   HALOTRON DIVISION, AMERICAN PACIFIC CORPORATION, NATIONAL 
                  ASSOCIATION OF MANUFACTURERS

    Mr. Gibson. Thank you, Mr. Chairman and the Committee, for 
the opportunity to testify.
    My name is Jeff Gibson. I am the director of Support 
Operations for the Halotron Division of American Pacific 
Corporation. I am here today representing the National 
Association of Manufacturers and its 10,000 small and medium 
sized companies. I welcome the opportunity to testify before 
you today on the necessity for SBREFA compliance by federal 
agencies.
    As a small business, we are reminded daily of the onerous 
and unintended effects regulations can have on our and other 
small businesses. While my testimony will focus on one 
particular regulation that has a direct impact on our company, 
I am submitting for the record a list of regulations, both 
proposed and final, that affect small manufacturers.
    American Pacific Corporation employs 220 people in Utah and 
Nevada. We manufacture specialty chemicals, and our sole 
manufacturing facility is located in Cedar City, Utah. Since 
1958, we have manufactured chemicals that are used in the space 
shuttle and DOD solid rocket motor programs, and in the past 
decade we have diversified into the air bag and fire protection 
market.
    During the past three years, we have spent an inordinate 
amount of time and an extraordinary amount of money to oppose a 
proposed rule to establish an allocation system for controlling 
hydro chlorofluorocarbons or HCFC production import and export 
in the U.S. This proposed EPA rule would negatively impact our 
company and many other NAM small businesses.
    This rule proposes an allocation system for a key 
ingredient in our fire protection chemical, which is also 
widely used in other products from foam insulation to 
commercial chillers. We believe that the EPA has not done due 
diligence in weighing the negative impact to small businesses 
against the potential minimal environmental gain.
    In 1992, realizing the need for alternatives to ozone 
depleting fire suppression chemicals, we entered the fire 
extinguisher business. Our company developed Halotron I, an EPA 
approved replacement for halon 1211. Halon 1211 is a potent 
ozone depleter that is no longer produced in the United States. 
Alternatives to this substance are in great demand.
    Our product is the most widely approved and used clean 
agent for portable fire extinguishers in the U.S. However, our 
survivability is in jeopardy. The promulgation of this rule 
would benefitthe 27 producers and importers of HCFCs by 
establishing an EPA created commodity market and would hurt many small 
businesses through increased costs due to contrived shortages. These 
small businesses should not be punished for following EPA rules and 
bringing these innovative and more environmentally friendly products to 
market.
    It took millions of dollars to research, develop and test 
our product and many years to meet all the criteria mandated by 
government agencies. We were finally able to bring this product 
to market in 1996, and we are starting to see a return on our 
investment.
    At the time the EPA prepared to initiate this rule four 
years ago, the consumption of HCFCs was 92 percent of the 
Montreal Protocol regulated cap. The EPA was concerned that the 
U.S. would exceed its agreed upon maximum level. Subsequently, 
the EPA conducted stakeholder meetings on a potential new rule 
to allocate HCFC rights. Initially it was represented by EPA to 
be a placeholder that would not go into effect unless U.S. 
consumption did near the cap. Should that happen, a trigger 
mechanism would be invoked, and the rule would go into effect. 
If the threshold was not reached, there would be no rule.
    In 1999, the EPA released an advance noticed of proposed 
rule making to establish the allocation system to control the 
production, import and export HCFCs in the United States. This 
rule was reproposed and released for public comment on July 20, 
2001. As this rule has evolved over the years, the HCFC 
consumption trend has actually gone down instead of up as EPA 
has anticipated. The threat of exceeding the cap is gone. 
Nonetheless, the trigger mechanism has been removed, and the 
EPA continues to push for this rule to be enacted immediately.
    HCFC consumption is down to 83.75 percent and will decrease 
once HCFC 141b is no longer produced and imported at the end of 
2003 as mandated by the Protocol. While we support compliance 
with the Montreal Protocol, this rule as written is patently 
anti-competitive, ill conceived, unnecessary and disastrous to 
our and many other small businesses.
    The regulation, which will have little environmental gain, 
will raise the price of HCFCs, creating a new bureaucracy of 
EPA reporting requirements and establishing a new commodity 
market limited to only 27 companies that are slated to receive 
allocations. Small businesses are bound to suffer price 
increases due to contrived shortages and lack of competition at 
the hands of a government created oligopoly.
    In the preamble of the rule, EPA stated that there are no 
economic effects to a significant number of small businesses, 
yet they do not know this because they have not conducted a 
regulatory flexibility analysis to determine if small 
businesses are affected.
    Chairman Manzullo. How are you doing on time there, Jeff?
    Mr. Gibson. I will wrap up.
    The Small Business Administration has worked with us on the 
issue for several months. They have acted as a liaison between 
us and EPA to find a solution. They have done an admirable job 
for our and other businesses' concerns. Unfortunately, the EPA 
persists in its quest to see the rule come to fruition no 
matter what the cost, no matter what the ancillary effects, no 
matter that the rule is no longer necessary.
    Small businesses are important to this country's economy, 
job creation and innovation. These regulations have a 
disproportionate impact on small businesses. The intent of 
SBREFA was to mandate the federal agencies and thoroughly 
analyze----
    Chairman Manzullo. That is a good point to end on that 
sentence.
    Mr. Gibson. Okay.
    [Mr. Gibson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much. I appreciate your 
testimony. I do not want the bell to go off here.
    You know, there is another outreach that we should add to 
the tools, and that is the outreach of this Committee. We 
reached out to the Veterans Administration when they went into 
the commercial laundry business and threatened to destroy 100 
jobs in my district. We like to do pairs here. We like to sit 
the aggrieved party next to the government bureaucrat that is 
responsible for that nonsense. VA went out of business that day 
in commercial laundry.
    Right next to them we had an aggrieved owner of a 
campground at Denali National Park when the National Park 
Service decided to go into the hotel business. We matched the 
person in charge from the National Park Service, and all of a 
sudden they decided not to go into the hotel business.
    What we are going to do is this, especially with CMS and 
the portable x-ray people. We have Mr. Scully here, and we will 
have accountability time, round three, with HCFA. The other 
agencies that are beating up on the small businesses, it is 
accountability time, folks.
    I have the gavel. I have the power to subpoena. We may have 
a hearing that will start at 8:00 on a Monday morning and run 
all night until we get every single small business that is 
being screwed in this nation up to this table with the 
bureaucrats in Washington sitting on it.
    Tom, if you could start working on that list of potential 
people, we will load this place up. I will get the biggest room 
here, and we will go all night and all weekend until these 
agencies come into compliance. We had to bring the SBA here 
along with OIRA. They sat around for six months on the standard 
for travel agents. It took 24 hours to get the new regulation 
in. OIRA is coming out with its ruling tomorrow that will open 
that up.
    I am prepared to do that, and I want that message to go 
deep. If there are any bureaucrats in here representing any 
agencies, watch out. My patience is at a total end, and I am 
not going to tolerate businesses such as what happened to you, 
Norm.
    My mother was a victim of what HCFA did. She had a leg 
amputated. From time to time, when she was at the assisted 
living center the portable x-ray guy would stop by, take her x-
ray and one time found out that she had pneumonia and had to be 
treated for that. Well, he went out of business. Do you know 
what happened next time? They had to call an ambulance. They 
put her in an ambulance and took her to the hospital to perform 
an x-ray. That is shameful that HCFA would waste money like 
that. Somebody needs to be at this table, perhaps sworn under 
oath, as to why HCFA is wasting money like that. It is 
accountability time.
    Barry, would you work with Tom Sullivan?
    Mr. Pineles. I always do.
    Chairman Manzullo. And also with the ombudsman and anybody 
else out there. You want to have a pair. The pair will be the 
aggrieved small business person and the key person in 
government. We will set it up, and we will go at it big time. 
Big time. No one will get away from the room until that issue 
is resolved.
    Well, Nydia, why do you not lead off the questions?
    Ms. Velazquez. You do not want to ask questions?
    Chairman Manzullo. No. I made a statement here.
    Ms. Velazquez. Okay. Mr. Rezendes, does SBA have the 
authority to issue regulations to federal agencies for the 
implementation of the procedural provisions of the RFA?
    Mr. Rezendes. We think that they have the authority to 
issue clarifying guidance to them. I do not think there is a 
prohibition from them doing that, although we have advocated 
since they have not been too enthusiastic to do that that 
Congress may want to direct them or some other agency to do 
that.
    Ms. Velazquez. Okay. Let me ask you. Could the 
Administration somehow direct SBA to institute these 
regulations?
    Mr. Rezendes. Yes. There is really no question about that. 
I think, you know, having the Office of Advocacy having to file 
a friend of the court brief on federal agency compliance with 
the federal rule in a federal court does not seem the easiest 
way to solve this problem since this is all at the federal 
level. We are talking about federal agencies implementing the 
federal law on themselves.
    Basically, you know, greater clarity from SBA and having 
OMB back that up and having some kind of oversight of the 
agencies in terms of reporting and insuring compliance would 
seem a much easier way to go about doing this.
    Ms. Velazquez. Mr. Sullivan, do you agree or disagree?
    Mr. Sullivan. I agree that we have an opportunity to work 
with government agencies to actually make sure that they are 
doing what they are supposed to do under the Regulatory 
Flexibility Act.
    Elaborating on Mr. Rezendes' comment on guidance to 
agencies, we would welcome this Committee's help to impress 
upon government agencies that that guidance already exists. Not 
only does that guidance exist, but the Office of Advocacy has a 
training module to actually help government agency rule writers 
comply with their requirements under the Reg Flex Act. We want 
to help agencies learn their requirements and do it correctly.
    Any help which this Committee can provide to impress upon 
government agencies the need to take Reg Flex training 
seriously would be greatly appreciated.
    Ms. Velazquez. I guess that we will spend the whole year 
here meeting with federal agencies.
    Mr. Rezendes, you have testified that defining a 
significant small business impact lies at the heart of the RFA. 
What I assert here is this. The heart of the Regulatory 
Flexibility Act lies in its flexibility.
    Agencies also have to tailor their regulatory alternatives 
and regulatory relief to their own regulations. Can you comment 
on what we might be losing in regards to flexibility during the 
process of attempting to further define the terms of the Reg 
Flex Act?
    Mr. Rezendes. Yes. What I want to clarify is we are not 
looking for a dogmatic, simple, clear definition that everybody 
has to comply with. We like flexibility. It provides the 
agencies with the authority to deal with the situation at hand, 
which is good. I think, you know, for example, at SBA they 
define what is a small business based on almost the industry. 
It is not necessarily one definition fits all, so that is 
really good.
    What we have seen is wide variation and wide discretion on 
the part of the agencies in how they have interpreted this Act. 
Obviously the fact that the Advocacy Office had to file friend 
of court briefs on this is clear evidence that there is 
probably an exaggerated use of this discretion. What is needed 
is some kind of enforcement mechanism, although I want to 
emphasize that this is all within the Executive Branch. I mean, 
OMB working with the SBA could easily insure that this happens.
    Ms. Velazquez. Mr. Sullivan, do you believe that SBA should 
be given the authority to regulate agency activity regarding 
certain aspects of the RFA and SBREFA?
    Mr. Sullivan. I believe that the Office of Advocacy should 
be used as a resource to provide consistency in agency 
compliance with the Regulatory Flexibility Act. If that means 
it has to be done through regulation, then I am willing to work 
with the Committee, and, as Mr. Rezendes mentioned, Dr. John 
Graham's office and others, to go that route.
    I should point out to the Committee, because some of our 
federal partners are represented in the room today, that there 
is some movement on consistency and compliance with the Reg 
Flex Act. For instance, the Department of Labor now has written 
guidance on how to comply with the Reg Flex Act, and how to 
comply with the SBREFA panel process. This has been done with 
the full engagement of our office, as it should be for all the 
federal agencies.
    Ms. Velazquez. Mr. Sullivan, if the SBA or Congress begins 
to fill in the spaces around the RFA terms, we will presumably 
gain some clarity, but we will also lose some flexibility. 
Specifically, the SBA Office of Advocacy could lose the power 
of negotiation. From what I understand, this is why previous 
Chief Counsels have been reluctant to provide strict guidance.
    What will agencies have to engage SBA on if all the 
provisions of the RFA are specifically defined?
    Mr. Sullivan. Congresswoman, we have been very concerned in 
the past, and I continue to be concerned, about imposing a 
specific set of mandates on how to comply with the Reg Flex 
Act.
    I am encouraged this morning by Mr. Rezendes' comments that 
we can provide consistency without eliminating the flexibility 
to comply with the Regulatory Flexibility Act. We are getting 
there. To the extent that guidance can be consistent to all 
federal agencies, that will help. For instance, there should be 
a checklist on what an agency should look at to comply with the 
Reg Flex Act.
    With such tools in place and with the commitment that we 
see here this morning by this Committee, I think this will be 
persuasive among the regulatory agencies. If further persuasion 
is still needed, then we would like to work with the Committee 
to address this problem.
    Ms. Velazquez. Mr. Sullivan, if you could change one thing 
about RFA or SBREFA, what would it be?
    Mr. Sullivan. If the Congresswoman is asking whether the 
Office of Advocacy needs additional legislative changes, there 
are discussions about this all the time. Legislation or 
legislative fixes should be a last option because we prefer to 
try first to convince the agencies to comply with the Reg Flex 
Act, using fully the gavel, the subpoena and other resources.
    If we do need to change the law, I think that we should 
explore whether agencies be required to respond to Advocacy's 
concerns, specifically addressing questions on small business 
economic analysis early in the regulatory process.
    Ms. Velazquez. Thank you, Mr. Sullivan.
    Mr. Damon Dozier, Section 610 of the Reg Flex Act requires 
each agency to review all existing rules within ten years of 
promulgation. Does the lack of 610 entries in recent regulatory 
agendas seem suspicious to you?
    Mr. Dozier. Absolutely. I cannot think of any 610 review or 
actually any regulation being changed as a result of 610 
review; that is, a ten year old rule now being changed to 
accurately reflect a substantial economic impact on a 
substantial number of small entities.
    I think that 610 is one of the particular sections of 
SBREFA that--well, it seems today that all of it has been 
ignored to some degree, but especially 610. I think agencies 
have a tough time going back to the coffers, if you will, 
pulling up the old regulations and actually doing new analyses 
to find out if they are complying with that provision of the 
law.
    Ms. Velazquez. Would you like to see SBREFA amended to make 
the 610 review process more transparent?
    Mr. Dozier. I would. I think that one of the great things 
about the law that I think could have helped a lot of these 
small business people is looking back at things that had been 
on thebooks and had been hindering them for some time and then 
looking again to see if there is any possibility, as Mr. Sullivan said, 
for flexibility or for review.
    A lot of the rules that come out now that are harming small 
firms are rules that have been on the books for a number of 
years. It is not just a new rule or a proposed rule. It is 
rules that have been there for some time.
    Ms. Velazquez. Thank you.
    Mr. Frulla, when you draw a parallel between NEPA and the 
RFA, your testimony seems to indicate that it would be 
unreasonable for an agency to promulgate a rule that could be 
made more flexible for small businesses, yet the foundation of 
the Regulatory Flexibility Act is that it does not require an 
agency to adopt the least burdensome regulatory alternative, 
but simply to examine them.
    Could you please explain that further?
    Mr. Frulla. Yes. The distinction that I was attempting to 
draw is that under NEPA an agency is required to consider a 
sufficient array of alternatives. The agency can pick whatever 
alternative, provided the analysis is complete under NEPA.
    We think that the standard is different and probably--not 
probably, but is stronger under the Regulatory Flexibility Act. 
We look to some congressional materials and some court 
decisions where if you go through a regulatory flexibility 
analysis and you see that there is a better way to build the 
mousetrap, then it ought to be really hard to say well, we do 
not want to do that.
    By contrast with NEPA, there may be a reason why you would 
not pick the most environmentally beneficent alternative, but I 
think you would be awfully hard pressed to explain how or why 
you would do that under Reg Flex. Does that help?
    Ms. Velazquez. Thank you.
    Chairman Manzullo. Dr. Christian-Christensen.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mrs. Christensen. I just have a couple of questions. Mr. 
Chairman, I think before I ask my questions I think on the CMS 
issues we could use another year.
    Chairman Manzullo. You are a physician. You know well.
    Mrs. Christensen. Yes. Thanks.
    Chairman Manzullo. We will have another hearing. We shall 
have another hearing.
    Mrs. Christensen. Thanks. Attorney Frulla, in the ten cases 
that you mentioned I think that you filed, I think you said----
    Mr. Frulla. Nine.
    Mrs. Christensen. Nine or ten. In how many of those cases 
was an amicus brief filed by the Office of Advocacy?
    Mr. Frulla. They filed in one of our cases on the standard 
of review. There were two litigations regarding the commercial 
shark fisheries. They filed an amicus brief on the standard of 
review because originally the agency was trying to get away 
even from the arbitrary and capricious standard. The agency or 
the Justice Department, their lawyers, came back and said we 
will live with the arbitrary and capricious standard. At that 
point, the SBA I guess backed off is the right word. That is 
one case.
    We are cognizant of the resource constraints that the 
agency faces and in many instances has not sort of broken its 
arm to get in. We could always use help, though.
    Mrs. Christensen. I was going to ask Attorney Sullivan the 
next question on the number and types of briefs that the office 
has filed.
    Mr. Sullivan. Actually, we used the amicus authority, the 
full-blown amicus authority, only once, but that does not tell 
the whole story. The whole story on how Reg Flex litigation is 
successful includes the exchange of letters and information 
between government agencies and the Office of Advocacy.
    The comment letters that the Office of Advocacy sends to 
regulatory agencies--let us take CMS, for instance--do set out 
a record, a public record, that says if an agency is or is not 
complying with the Reg Flex Act. The open and deliberate 
exchange of letters and information does help a court decide 
ultimately on a case's merits, so even though we may not be 
filing amicus briefs in each and every case, the record that is 
created and reviewed benefits from the letters and the comment 
letters coming from the Office of Advocacy.
    In fiscal year 2001, there were 47 of those letters that 
built a critical record of agency decision making coming out of 
the Office of Advocacy.
    Mrs. Christensen. Thanks for that. I am still a bit 
concerned because even when the letters are filed they do not 
seem to respond. I mean, it does not force any response. I am 
going to ask another question, but if you want to respond?
    Mr. Sullivan. I would like to respond because I share 
your----
    Chairman Manzullo. Could you yield for a second? When you 
send in your letters, if you do not get a response in 15 days 
would you contact my staff? We will send a letter to the agency 
telling them to respond to your letter.
    Mr. Sullivan. Actually, I would like to respond.
    Mrs. Christensen. Do you copy us? Do you copy us on the 
letters?
    Mr. Sullivan. We are absolutely in contact with this 
Committee and with the Senate Committee when we do not get 
responses to our letters.
    You know, we talk about the resources that are available to 
get a point across and whether an agency is complying with the 
law. This Committee, in its commitment to making sure agencies 
comply with the law, is a valuable resource. There are also 
resources represented on this panel with both the attorneys and 
trade and membership small business organizations.
    The collective strength of all those voices pointed in the 
same direction should accomplish our goals without necessarily 
going to an extremely expensive and time consuming legal 
process.
    Mrs. Christensen. Did you want to say something?
    Mr. Goldhecht. Yes.
    Mrs. Christensen. Let me ask this question first, and then 
you might want to incorporate it in your response.
    One of the suggestions is that every agency has an 
ombudsman and that that would help. In responding to the 
previous comment, would you also include, and maybe Mr. Gibson 
would also like to include. Do you think that that is going to 
be as effective as it needs to be to help move these cases 
along?
    Mr. Goldhecht. I cannot particularly comment to that point, 
but I just wanted to further Mr. Sullivan's point. The letters 
did go out. In the case of portable x-ray, a letter went out.
    Mrs. Christensen. I understand.
    Mr. Goldhecht. I am sitting here four years later waiting 
for some kind of response. Although we appreciate the efforts 
that they did, CMS, HCFA, whatever you want to call them, 
basically ignored it and has no desire, from what I can tell, 
to listen to what Advocacy has said.
    Mrs. Christensen. Personally, I know how difficult it is to 
even think about suing the federal government, so what do you 
do? It just sits there unless someone has the resources, which 
most small businesses do not. They are trying to still provide 
services.
    I want to ask probably just one more question, unless 
someone wants to comment. Mr. Gibson,did you want to comment?
    Mr. Gibson. With regard to the ombudsman, I think it would 
be helpful in our case because I think in our particular issue 
it is a matter of communicating with EPA the real issue. I 
think the result was an unintended result. There was no intent 
to have the effect that the proposed rule would have. It is a 
matter of explaining to them in more detail the market as it 
is, the situation as it is and the various sectors that would 
be affected by the proposed rule.
    Chairman Manzullo. Could I go on to Mr. Grucci and then 
come back to you for a short question?
    Mrs. Christensen. It is a short one.
    Chairman Manzullo. Go ahead. Go ahead. I do not know when 
the bell is going to go off.
    Mrs. Christensen. It follows up on what Mr. Gibson said.
    Mr. Dozier, on page 8 you were talking about one of the 
panels that you worked on. There was a whole lot of data and 
economic information. It was very cumbersome, but there were 
some representative groups that provided input.
    I think what you were trying to say is that that was more 
effective in trying to reach a determination of impact than 
economic data, and I think that is what Mr. Gibson was saying. 
Do you want to comment on that?
    Mr. Dozier. One of the concerns that I personally have with 
Advocacy coming up with a significant and substantial 
definition is that agencies typically, if they are responsive, 
have more resources to serve a particular industry. In that 
particular case, EPA could go out and do site visits, get data 
from the industry and cull it together in a manner in which we 
wanted to see it, quite frankly, and then we could come up with 
the result.
    I have a fear, and it is just a fear, that if Advocacy has 
to come up with the significant and substantial test that they 
would have some responsibility to try to either get that data 
or cut it in ways that they do not necessarily have the 
resources to do.
    Chairman Manzullo. Thank you.
    Mr. Grucci.
    Mr. Grucci. Thank you, Mr. Chairman. Mr. Chairman, I will 
ask for unanimous consent to have my opening remarks made part 
of the record.
    Chairman Manzullo. All the remarks will be made a part of 
the record without objection.
    Mr. Grucci. Thank you, sir.
    Mr. Sullivan, the GAO report entitled Compliance Guide 
Requirement, has had little effect on agency practices. I am 
concerned about the way that our government applies its 
regulations and conducts its enforcement on small businesses.
    I was asked to address the SBREFA workshop. I believe you 
were there as well. One of the things that I tried to impart 
upon those who were at the meeting was that when you go into a 
small business, you are going into a business where the owners 
are the chief executive officer, they are the accountants, they 
are the stock clerks, they are the manufacturers, they are the 
sales people, they are the bookkeepers. In short, they are 
everything to a small business.
    When an agency comes to visit them, it is a frightening 
experience. If they have EPA oversight. I can assure you from 
being in a business where EPA has a role to play it is a 
frightening experience when they come in because they are not 
coming in to give you any kind of an award. They are there to 
find something and to give you as much grief as they possibly 
can. I am not just picking on EPA. It seems to be the attitude 
of most who come in to regulate.
    We all know, and the statistics will certainly verify this, 
that small businesses, the mom and pop operations, are the 
backbone of our economic system. They are the engine that 
drives the job growth, et cetera.
    If SBREFA is not working to the fullest extent, how do we 
fix it to make it better, and how do we continue to enforce the 
laws, because I am not suggesting that we weaken the laws for 
small businesses or for any business, for that matter. How do 
we continue to assure the American public that the businesses 
that they either work in or shop at or are in their communities 
are abiding by the law, and yet we are not impacting small 
businesses to such an extent that they must close their doors 
because the regulatory requirements are so onerous and so 
strenuous that they simply just cannot afford to keep up with 
them?
    I know in my own business, when I was there, we had to hire 
several people in administrative positions just to keep up with 
what regulations may or may not be coming down the pipe line 
that would have an effect on us. There is no way to incorporate 
that in the cost of your goods, so it costs you to your bottom 
line. Eventually the more and more that impacts your business, 
the quicker you close your doors.
    I do not think our goal here collectively is to make that 
happen. Should counsel, and I guess it is you as Chief Counsel 
of the Office of Advocacy, promulgate rule making to further 
define the terms substantial number of small businesses and 
significant economic impact? I think those have been stumbling 
blocks for your agency, and I would like to hear your comments.
    Mr. Sullivan. Congressman Grucci, first of all, let me 
thank you for coming over to the Small Business Administration 
and helping Michael Bererra host the regulatory fairness kind 
of instructional session amongst other federal agencies a few 
weeks ago. Your sharing your experience as the owner of an 
impressive small fireworks company was certainly well timed and 
I think impressed upon the federal agencies how difficult it is 
for a small business owner to keep up with a morass of federal 
regulations.
    You asked, I think in a broad question, how do we improve 
SBREFA? Well, we are doing it right now. We get regulatory 
agencies to pay attention. That does not mean getting them to 
send more enforcement folks out to small businesses, but it 
does get them to understand what you articulated, and that is 
that when a federal regulatory officer, whether they are 
writing a regulation or enforcing a regulation, knows that 
money saved from a small business owner goes to hiring new 
employees. Money saved goes to providing health care or buying 
new equipment. It does not go into breaking a law or polluting 
the environment or creating an unsafe workplace. If federal 
agencies get it, then they get the basis of SBREFA.
    How do we improve it? We get federal regulatory agencies to 
pay attention. We do it through accountability time through 
this Committee. We get it through the Office of Advocacy 
providing guidance and instruction to regulatory agencies on 
how to comply, and we do it working in partnership with Michael 
Bererra's shop, the small business ombudsman at the Small 
Business Administration. He is out there.
    Once a regulation is written and the enforcement officers 
are visiting small businesses across the country. Mr. Bererra 
makes sure that those regulatory officers treat small business 
fairly. The collective group, this Committee or other small 
business stakeholders, the Office of Advocacy, simply have to 
go in again and again and again and tell them how important 
SBREFA is and that lack of compliance with the Regulatory 
Flexibility Act will not be tolerated.
    If we have to do that through additional legislation, then 
we will work with this Committee to make sure that that happens 
and that it is written in a way to accomplish our goals. If it 
has to do with our office writing guidelines or rules, then we 
will do that with the help of this Committee to make sure there 
is a consistent application and a fair application government 
wide.
    Mr. Grucci. Thank you, Mr. Chairman.
    Chairman Manzullo. I have a question for Mr. Rezendes. It 
is at the request of Mrs. Kelly. She had written the Truth in 
Regulating Act. Has GAO made a request for appropriations to 
establish the office to examine the regulations established by 
the Truth in Regulating Act?
    Mr. Rezendes. Yes, we have, Mr. Chairman.
    Chairman Manzullo. You have?
    Mr. Rezendes. Yes.
    Chairman Manzullo. Do you recall the amount?
    Mr. Rezendes. We have never received funding for it.
    Chairman Manzullo. Okay. Is that in your request this year?
    Mr. Rezendes. I am not sure if it is in this year.
    Chairman Manzullo. It is? It is? Do you have an idea what 
the amount is?
    Mr. Rezendes. $5.2 million.
    Chairman Manzullo. Okay. We will work on that with the 
Cardinals.
    Did you have a question? We have a little bit of time. Go 
ahead.
    Ms. Velazquez. Yes. Can any of you talk about what kind of 
incentives you believe could be built into the Reg Flexibility 
Act?
    Mr. Sullivan. Congresswoman Velazquez, we talk about 
incentives that can be built in. I think one incentive, and I 
am entirely serious, is for regulatory agencies not to be 
called before this Committee for accountability time.
    The idea that agencies are lax in complying with the Reg 
Flex Act and one letter or two letters in 1998 just does not 
convince them. An incentive to convince them to respond to our 
letters from the Office of Advocacy and to the greater concerns 
expressed I think here this morning is for them not to be 
subpoenaed, not to be called before this Committee and not to 
be embarrassed by not complying with the law.
    Ms. Velazquez. Mr. Rezendes.
    Mr. Rezendes. One issue on which we have had recommended 
legislative change is civil penalty relief. We took a look at 
how the agencies were applying civil penalty relief to small 
businesses, and our basic bottom line was that they were not 
collecting the information to even know how much relief was 
provided. So we were advocating that they maintain data so they 
would know.
    Some could not even differentiate in their enforcement 
actions, whether it was a small business, or if they did get a 
penalty how much relief was provided, so that is one area we 
would like to see changed.
    Ms. Velazquez. Thank you.
    Mr. Frulla.
    Mr. Frulla. Thank you. This may be a little more stick than 
carrot, but let me try. It also goes to another question of Ms. 
Christian-Christensen and Mr. Sullivan's testimony.
    We would suggest, and we have, that the Equal Access to 
Justice Act attorneys' fees go to a small business that 
prevails or settles favorable SBREFA litigation. There is 
another threshold in the law that you must not only prevail; 
the agency's position must be shown to be not substantially 
justified.
    If the small businesses knew and agencies knew that if they 
lost one of these they would have to cover at least some of the 
small businesses' or the small business association's 
attorneys' fees, that is a stick and not a carrot, but it is a 
carrot if you do not have to pay it.
    There is another point that I think is important there, and 
I will be brief because I know you all do not have that much 
time, and that is that you should write into the law something 
so that when Mr. Sullivan and his shop comment on a matter 
particularly within their expertise that courts are required to 
treat that agency as the expert and that the agencies and the 
courts are to defer to their expertise. As it is now, that is 
an open question under the law.
    I think that would help substantially, and it would make 
the comment letters stronger because there would be force 
because somebody could go and sue on them.
    Mr. Dozier. Madam Congresswoman, if I may?
    Ms. Velazquez. Yes.
    Mr. Dozier. I think that one thing that can be changed in 
the law, and I write this in my testimony, deals with Section 
609 of the Act. Specifically, Section 609 requires outreach to 
be done if the significant and substantial trigger is actually 
hit.
    What I propose is that you change that requirement so that 
it is just not the significant and substantial trigger, but 
that if you are doing any regulation that could affect small 
entities, understanding that there are some procedural 
regulations that we do not want to fall into, you know, that 
gap. We do not want every time someone changes a flood plain 
designation or the Coast Guard rules on bridge openings. They 
do a lot of procedural things.
    We do not want that to happen, but if you get it into the 
agencies' minds that small entity outreach is just common 
sense, if you are going to regulate a small business or you are 
going to regulate an industry rather that includes small 
businesses, you should be talking to them. I mean, that is 
simple common sense. You should not be regulating a community 
if you do not know anything about that community; not just 
certain sectors of the community, but the community as a whole.
    Ms. Velazquez. Thank you.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Mr. Grucci, you had another follow up 
question?
    Mr. Grucci. Yes, Mr. Chairman. Thank you. I have a question 
for Mr. Gibson and then a follow up for Mr. Sullivan if my time 
permits.
    Mr. Gibson, the intent of SBREFA was to provide relief to 
small businesses that face unfair financial burden as a result 
of the federal regulations. You suggest benefit analysis. What 
do you see as the benefit of this cost analysis that you are 
suggesting, and how much weight do you think it should have in 
the final issuing of the rule?
    Mr. Gibson. Well, we think that the cost benefit analysis 
is very important because obviously the number of businesses 
that are affected in our case and in the rule is very large. 
The overall objective of the rule that has to be taken into 
account clearly is to protect the environment and to make sure 
that the usage of those chemicals is in compliance with the 
Clean Air Act.
    I think that our position is that they can do both. They 
can achieve the goal of being in compliance with the Clean Air 
Act and also be fair to the smaller businesses that are 
affected by the rule.
    Mr. Grucci. Thank you.
    Mr. Sullivan, in following my line of questioning just a 
moment ago one of the things that I found, and I sat on several 
of our association boards as either a board member or vice-
president. We always tried to have a voice in the rule making 
process. That often fell on deaf ears.
    I will point to a specific agency because they were very 
unkind to the suggestions being made to improve the safety of 
the industry that I used to be in, and that is Consumer 
Products Safety Commission, CPSC. In their eyes, we, and I am 
sure other industries felt the same way, were guilty before we 
even had an opportunity to have a voice in the process. That 
made it very difficult.
    The consumer industry was being singled out, members of 
that industry, some of them deservedly, but most of the time 
others not deservedly, receiving the wrath of CPSC in the sense 
that small businesses were being fined as much as several 
hundred thousand dollars, and taking their right to do business 
away. It was not in the end of the business that I was in. I 
was in the display side of the business, in the consumer sales 
side of the business.
    The question that I have is why we can not in the rule 
making process that is going to unfold, make SBREFA a better 
place, why can't the voice of industry have a louder voice than 
it currently does, and how would you suggest that we craft 
legislation to do that?
    Again, I am not suggesting that business should dictate 
unto itself how it should be regulated. That is what government 
is there for, but government is also there to understand, as 
was pointed out a moment ago, the industry that it is 
regulating and overseeing. What are your thoughts on that?
    Mr. Sullivan. Congressman Grucci, your explanation of 
having a voice, a small business voice, in the regulatory 
process is the foundation of the Office of Advocacy, so I could 
not agree with you more in that statement and the need for the 
voice.
    One thing that we have been trying to impress upon 
regulatory agencies is not necessarily how loud the voice, 
although once in a while a big, loud voice helps, but it is how 
early that voice is inserted in the process and how effective 
that voice is.
    When I talk about early and effective, I mean because the 
Regulatory Flexibility Act currently suggests that agencies 
seek out input from small entities in the regulatory process. 
That is an open communication, and that communication is used 
by other businesses, whether they be across the country or 
through trade associations and others so that at the end of the 
day the regulation that comes out of a department if they do 
choose to go the regulatory route does reflect the common sense 
brought to the table by the voice of small business.
    In answer to the question of how do we make it better, we 
actually look at the law that is written, the Regulatory 
Flexibility Act, and we look at those provisions that say small 
entities should have a voice early in the regulatory process, 
and we make sure that the agencies understand that that is in 
fact one of the considerations in the Regulatory Flexibility 
Act.
    If the agencies repeatedly ignore those responsibilities, 
then we consider legislative strengthening opportunities or 
regulatory opportunities, but those suggestions, the 
legislative suggestions of having a voice, a small business 
voice in the regulatory process, are on the books. We are there 
to try and convince agencies to follow it, and we want to work 
with this Committee and all of our partners to make sure that 
they get----
    Mr. Grucci. I agree that they are on the books, but I think 
you would agree with me that they are not often enforced 
stringently enough for the small business community to have a 
true voice in the industry that they choose to be in.
    What I am suggesting that you all do is to turn up the 
volume a little bit so you can hear the voices of those people 
who dot the main streets from one side of this country to the 
other who do not come to Washington, who do not have the 
lobbyists, who do not have the resources to spend to come in 
and talk to your offices.
    When your field inspectors go out, they should be going out 
armed not only with bringing the bad guys to justice, but 
helping to make the good guys even better by listening to what 
they have to say because the best way to understand that 
industry, whatever that industry may be, how to make it a 
better industry, how to make it a safer industry, how to make 
it a cleaner industry, is to listen to the good guys because 
they know what they are doing.
    I would just encourage you to put that into the thought 
process as you send out your folks across the country to take a 
look and see what is going on out there.
    Mr. Sullivan. Congressman, I actually would like the record 
to reflect a frequent nodding to everything that Congressman 
Grucci was talking about.
    Chairman Manzullo. The record will reflect your frequent 
nods.
    Mr. Sullivan. Sometimes the written record does not do 
justice to my agreement with what the Congressman said.
    Chairman Manzullo. Those are nods of affirmation. Okay.
    Listen, I want to thank you all for coming. You know, the 
standard has to begin at home. The reason I got so upset last 
week with the SBA is that the SBA has to set the standard on 
how to treat small businesses. The hearing last week showed 
that the small businesses had been shut out of the process of 
revising the size standards, even though Mr. Barreto had been 
out on the streets himself gathering that information. I know 
that as a fact.
    Somehow, even the material that he was feeding into the 
agency itself never found its way to the people that wrote the 
rules. That is why Hector is doing a great job because I know 
where his heart is.
    The SBA has to set the standard. Tom, I know that Reg Flex 
applies to the SBA. If the SBA does not follow Reg Flex, I do 
not know who is going to do it because it is for the small 
businesses to do that. We have here one business that has 
already gone under.
    Ms. Velazquez. Mr. Chairman, if I may?
    Chairman Manzullo. Yes, Nydia.
    Ms. Velazquez. Mr. Sullivan, I guess you have some work to 
do because SBA is in violation of the Reg Flex Act when it 
issued its new regulations on 8(a). I hope to see a letter sent 
to the SBA and Mr. Barreto.
    Chairman Manzullo. Have you sent the letter on that, Ms. 
Velazquez?
    Ms. Velazquez. We are submitting comments on the 
regulations.
    Chairman Manzullo. I know the folks from SBA are here. We 
surely do not want to have another hearing as we did yesterday 
or last week, but I would expect that letter to be answered.
    Thank you all for coming. Stay in contact with Mr. Pineles 
and our staff for two things. Number one is drafting these 
amendments to whatever statutory remedy is necessary. Number 
two, for agency accountability days starting off with an 
appearance not by CMS, but by HCFA.
    As I said six months ago, I will not recognize your new 
name unless I see a change in what is going on, and I see no 
change whatsoever at this point. We will start off with round 
three of HCFA accountability days.
    Thank you for coming. This meeting is adjourned.
    [Whereupon, at 11:55 a.m. the Committee was adjourned.]
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