[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


  OVERSIGHT OF THE OFFICE OF ADVOCACY AND THE OFFICE OF THE NATIONAL 
                          OMBUDSMAN AT THE SBA

=======================================================================

                                HEARING

                               BEFORE THE

       SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT AND REGULATIONS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 10, 2016

                               __________

 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 
                             

            Small Business Committee Document Number 114-042
              Available via the GPO Website: www.fdsys.gov
              
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
             Emily Murphy, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Cresent Hardy...............................................     1
Hon. Alma Adams..................................................     2

                               WITNESSES

Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United 
  States Small Business Administration, Washington, DC...........     3
Rear Admiral Earl L. Gay, USN (Ret.), Small Business and 
  Agriculture Regulatory Enforcement Ombudsman, United States 
  Small Business Administration, Washington, DC..................     5

                                APPENDIX

Prepared Statements:
    Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United 
      States Small Business Administration, Washington, DC.......    14
    Rear Admiral Earl L. Gay, USN (Ret.), Small Business and 
      Agriculture Regulatory Enforcement Ombudsman, United States 
      Small Business Administration, Washington, DC..............    20
Questions and Answers for the Record:
    Questions and Answers from Hon. Steve Chabot to Hon. Darryl 
      L. DePriest................................................    27
    Questions and Answers from Hon. Steve Chabot to Rear Admiral 
      Earl L. Gay................................................    37
Additional Material for the Record:
    None.

 
  OVERSIGHT OF THE OFFICE OF ADVOCACY AND THE OFFICE OF THE NATIONAL 
                          OMBUDSMAN AT THE SBA

                              ----------                              


                      WEDNESDAY, FEBRUARY 10, 2016

                  House of Representatives,
               Committee on Small Business,
                    Subcommittee on Investigations,
                                 Oversight and Regulations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 1:00 p.m., in 
Room 2360, Rayburn House Office Building, Hon. Cresent Hardy 
[chairman of the Subcommittee] presiding.
    Present: Representatives Hardy, Velazquez, and Adams.
    Chairman HARDY. Good afternoon. I would like to call this 
hearing to order. Too often small businesses tell us that the 
federal government ignores their concerns about the new 
regulation and threats, treats them unfairly. At a hearing in 
my district this past November, I heard that the red tape is 
making it more difficult and small firms, especially those in 
rural areas, harder to operate. Small businesses are even more 
worried about the flood of new mandates that are gushing out of 
Washington, D.C. And the final year of the Obama administration 
gives them grave concern.
    Last year, the administration finalized rules totaling $99 
billion in costs, and many of those rules, like the EPA's 
waters of the U.S. rule, inflict significant burdens upon small 
businesses. This year, it could even be worse, as the federal 
agencies plan to finalize the rules, like the Department of 
Labor's overtime rule, and impose major costs on small 
businesses and will hurt their employees.
    Two offices, the Office of Advocacy and the Office of the 
National Ombudsman at the Small Business Administration, were 
created by Congress to help small businesses with their very 
regulatory concerns that I have mentioned. The Office of 
Advocacy independently represents the views and the interests 
of small businesses as regulations are developed. It also 
monitors agencies' compliance with the Regulatory Flexibility 
Act. The Office of the National Ombudsman provides a way for 
small businesses to anonymously comment on excessive and unfair 
regulatory enforcement actions.
    Today, the Subcommittee will hear from the leaders of both 
offices on how they are carrying on their statutory duties. 
Given that the regulations continue to be a significant 
challenge for small businesses, it is critical that these 
offices work efficiently to reduce excessive regulatory burdens 
and ensure that small businesses are treated fairly.
    I would like to thank the witnesses here today, and I look 
forward to hearing your testimony. And I will yield now to the 
ranking member, Ms. Adams, for her opening remarks.
    Ms. ADAMS. Thank you, Mr. Chairman.
    And I want to thank the gentlemen for being here. At nearly 
30 million strong, small businesses are central to the U.S. 
economy. Responsible for two-thirds of net new jobs, they are 
the engine that drives the job creation. The State of North 
Carolina alone is home to more than 800,000 small businesses. 
Essential to their success is ensuring that their voice can be 
heard when it comes to Federal policy and regulation. This 
means not only reviewing regulations from a small-business 
perspective but also giving entrepreneurs a point of access to 
address their concerns.
    And this is where the Office of Advocacy and the National 
Ombudsman play a critical role. During today's hearing, we will 
hear from both of these offices on how they are meeting their 
mandates and providing small businesses with a voice in the 
Federal Government. At its core, the Office of Advocacy works 
to reduce the burden of Federal regulation on small businesses 
through its implementation of the Regulatory Flexibility Act. 
In 2014, Advocacy achieved nearly $5 billion in annual savings 
for small businesses. By right-sizing regulations, small 
businesses are better able to focus on their core mission.
    In addition to its regulatory work, Advocacy conducts 
research on small businesses. During 2014, it published 23 
research and data products, exceeding its annual goal of 20 
reports. I am interested in how it sets its research agenda and 
in what ways it is prioritizing research related to minority-
owned businesses, which make up 15 percent of U.S. businesses 
and are growing rapidly.
    The Ombudsman plays a complementary role to Advocacy, 
providing small firms with the ability to directly resolve 
complaints about the Federal Government. Such a mechanism is 
critical as small businesses lack the resources that larger 
corporations have to address such problems. And I am eager to 
understand how the Ombudsman is able to effectively handle its 
caseload, which reached a 6-year high last year. In addition, 
the Ombudsman is responsible for Regional Regulatory Fairness 
Boards, which provide small businesses with an avenue to raise 
concerns about Federal policies. Ensuring that these boards are 
filled can be a challenge, and I am hoping to hear an update on 
such progress, as well as efforts to increase diversity on 
these boards.
    During the hearing, I am hopeful to hear what is working 
and what is not. Ensuring that these offices function 
effectively and efficiently is essential to leveling the 
playing field for small businesses. So I want to thank both of 
the witnesses for being here today, and I look forward to your 
testimony.
    I yield back, Mr. Chairman.
    Chairman HARDY. Thank you. If Committee members have 
opening statements prepared, I would like to ask them that they 
submit them for the record.
    I would like to take a moment and explain how things work 
around here, the timing lights. You will each have 5 minutes to 
deliver your testimony. The light will start out green. When 
you have 1 minute remaining, the light will turn yellow. And 
when it turns red, you are out of time. So I ask you try to 
stay within those limits. But we are here to hear from you 
also.
    I guess we will do an introduction first. Our first witness 
is Mr. Darryl DePriest. Mr. DePriest was appointed by President 
Obama and confirmed by the United States Senate as the seventh 
Chief Counsel of Advocacy this past December. He leads the 
Office of Advocacy, which is housed in the Small Business 
Administration, but it is independent from the agency. The 
office advocates for small businesses as new regulations are 
developed by the federal agencies.
    And, first, I would like to thank Mr. DePriest for coming 
to my office and introducing himself yesterday. Thank you very 
much.
    Our second witness is Admiral Earl Gay, a Small Business 
and Agriculture Regulatory Enforcement Ombudsman--I have a hard 
time saying that word, so I don't want to say it too many times 
too fast--at the Small Business Administration. Admiral Gay 
leads the Office of the National Ombudsman, which assists small 
businesses that believe they have been subject to an excessive 
and unfair regulatory enforcement action. He has had a 
distinguished career as a naval officer and aviator.
    And, Admiral Gay, we appreciate your service.
    Mr. DePriest, we will begin with you.

 STATEMENTS OF THE HONORABLE DARRYL L. DEPRIEST, CHIEF COUNSEL 
  FOR ADVOCACY, UNITED STATES SMALL BUSINESS ADMINISTRATION, 
  WASHINGTON, D.C.; AND REAR ADMIRAL EARL L. GAY, USN (RET.), 
     SMALL BUSINESS AND AGRICULTURE REGULATORY ENFORCEMENT 
    OMBUDSMAN, UNITED STATES SMALL BUSINESS ADMINISTRATION, 
                        WASHINGTON, D.C.

         STATEMENT OF THE HONORABLE DARRYL L. DEPRIEST

    Mr. DePRIEST. Chairman Hardy, Ranking Member Adams, and 
members of the Committee, good afternoon. As the Chief Counsel 
for Advocacy, I would like to thank you for this opportunity to 
appear before the Committee today to discuss the office and its 
accomplishments during fiscal year 2015, which I think is 
responsive to some of the issues that you raised in your 
opening statements.
    I have provided my complete testimony, and I ask that it be 
entered into the record. It includes all of Advocacy's recent 
activity, which I will just summarize in these brief remarks.
    When the Office of Advocacy was first created in 1976, it 
was charged with providing small businesses with an independent 
and credible voice in the Federal rulemaking process. Too 
often, small businesses were unduly burdened by one-size-fits-
all regulations from Federal agencies. During the past 40 
years, the Office of Advocacy has facilitated greater 
consideration of small-business impacts through economic 
research, regulatory flexibility trainings, comment letters, 
roundtables, publications, and collaboration with Federal 
officials throughout government. As a result, Federal agencies 
treat Advocacy as a partner in the rulemaking process in an 
effort to reduce the regulatory burden on small business.
    As the seventh Senate-confirmed Chief Counsel, I will 
ensure that the office continues to work with Federal agencies 
to mitigate the potential costs of regulation on small 
entities. To further describe our dedication to this cause, I 
would like to update you on Advocacy's efforts and 
accomplishments on behalf of small business during fiscal year 
2015. During this time, Advocacy hosted 21 roundtables to 
highlight the concerns of small businesses on a wide range of 
topics, from OSHA standards to FAA regulations. In addition, 
Advocacy submitted 28 comment letters to 15 different agencies 
on a variety of issues. Specifically, the majority of these 
comment letters addressed either, one, the need for flexible 
alternatives supporting small business; two, inadequate 
analysis of the impact on small entities; three, improper 
certification of the rule; or, four, requests for greater 
outreach to small entities. The office achieved more than $1.6 
billion of first-year cost savings as a result of its efforts 
on behalf of small business. Generally, these savings come from 
the difference in costs between the proposed rule and the final 
rule.
    Advocacy's efforts have also produced positive outcomes 
that are not quantifiable and are not captured in these cost-
savings projections. Advocacy's work with Federal agencies and 
engagement with small businesses often helped facilitate 
greater consideration of small-business concerns and Federal 
rulemakings in Federal initiatives. For example, Advocacy's 
engagement with officials from the Food and Drug Administration 
produced more flexible regulations on animal food controls. 
Similarly, our work with the Federal Communications Commission 
improved competitive bidding rules.
    Advocacy's approach to Federal agencies has also included 
facilitating greater compliance with the Regulatory Flexibility 
Act throughout the government. Since 2002, Advocacy has 
conducted formal trainings on RFA compliance for Federal 
agencies and other stakeholders. In fiscal year 2015 alone, 
Advocacy conducted trainings for 126 Federal officials from a 
variety of different agencies, exceeding our annual goal by 
more than 25 percent. In addition to these formal trainings, 
Advocacy offers Federal agencies technical assistance regarding 
RFA compliance. Since its creation, Advocacy has provided 
timely and policy-relevant information on important issues 
affecting small businesses. During fiscal year 2015, we 
released 26 research publications on several topics relevant to 
today's economy.
    Finally, the 10 regional advocates who are part of the 
office play a vital role in maintaining an open dialogue with 
the vast majority of small entities that operate outside the 
beltway. They interact directly with small-business owners, 
small-business trade associations, and State officials to 
educate them about the benefits of regulatory flexibility. This 
past fiscal year, Advocacy's regional advocates participated in 
more than 500 outreach efforts, exceeding their annual goal of 
360.
    In closing, I would like to thank the Committee and its 
staff for its continued support of the Office of Advocacy. As 
chief counsel, I look forward to working closely with you on 
the important issues of affecting small entities across this 
country. Now, if there are any questions, I would be pleased to 
answer them.
    Chairman HARDY. Thank you, Mr. DePriest.
    Admiral Gay, you have your 5 minutes.

       STATEMENT OF REAR ADMIRAL EARL L. GAY, US N (RET.)

    Admiral GAY. Thank you, Chairman Hardy and Ranking Member 
Adams for providing me this opportunity to comment on how the 
Office of the National Ombudsman can and does help improve the 
regulatory environment for America's small businesses. I look 
forward to working with this Committee to improve the 
regulatory enforcement environment for our Nation's 28 million 
small businesses.
    I am also excited that Darryl L. DePriest is now on board 
as the Chief Counsel for Advocacy. I meet with Mr. DePriest 
weekly to discuss synergies our offices execute to ensure a 
fair regulatory environment. We both agree that a strong 
working relationship with frequent communication and 
collaboration is critical to the SBA's mission of counseling 
and protecting America's small businesses against unnecessary 
regulatory burdens. Now, while the Office of Advocacy is 
responsible for ensuring fairness in implementation stages of 
Federal regulations, the Office of the National Ombudsman, or 
ONO, works to ensure regulations are being fairly enforced once 
they are enacted. Pursuant to the Small Business Regulatory 
Enforcement and Fairness Act, or SBREFA Act of 1996, this 
office was created to serve as a powerful voice for America's 
small businesses. In fulfilling this role, we conduct public 
hearings, outreach events, and roundtables in each of SBA's 10 
regions, where we provide small businesses with forums where 
they can voice their concerns and comments about regulatory 
enforcement actions without fear of retaliation. We work with 
and encourage regulators to address entrepreneurs' comments and 
concerns promptly and, wherever possible, to opt for compliance 
assistance and education rather than moving directly to levying 
fines and penalties.
    Additionally, we rate Federal agencies on the timeliness 
and the quality of their responses in our annual report to 
Congress. Our office also facilitates Regulatory Fairness 
Boards, as you talked about earlier, ma'am, or RegFair Boards 
in each of the SBA regions. Each board consists of five small-
business owners who serve as the eyes and ears for small 
businesses in their communities, States, and regions. They work 
with local business and regional business offices, addressing 
any concerns with regulatory enforcement issues. Now, those reg 
boards are very vital assets, and they continue to be advocates 
for our efforts. In addition to receiving comments regarding 
regulatory fairness, our ONO office also receives comments in 
other issues, such as contracting, access to capital, loan 
policy and business training, counseling, and other support. 
During fiscal year 2015, our staff conducted more than 80 
outreach events and four regional regulatory fairness hearings. 
Through the aggressive efforts of our district and regional 
offices, these roundtables and hearings continue to be very 
well attended. In my brief 3 months onboard, this office has 
held one regulatory enforcement fairness hearing, three small-
business roundtables, one in Nevada recently and Florida, and 
several outreach events with small-business owners and 
entrepreneurs. I have met and established personal 
relationships with senior leaders at 12 Federal agencies, 
discussing ways we can better work together to reduce 
regulatory burdens against small businesses.
    During the next 6 months, we plan on conducting several 
roundtables and hearings, and also hosting our annual meeting 
with members of the 10 Regional Fairness Boards. It is 
important to note that all of our hearings, meetings, and 
partnership programs with small-business stakeholders have been 
in close collaboration with other Federal agencies. We truly 
value their critical presence and participation. I provided you 
a schedule of our activities for fiscal year 2015, as well as 
the planned events for the first two quarters of fiscal year 
2016.
    In closing, I would like to state that on behalf of 
Administrator Contreras-Sweet and the great staff in the Office 
of the National Ombudsman, we look forward to working with all 
of our teammates and the Members of Congress to eliminate 
unnecessary regulatory burdens on small businesses as they 
continue to fuel America's economic prosperity. I thank you 
again for the opportunity to appear here today and will be 
happy to answer any questions. Thank you.
    Chairman HARDY. Thank you, Admiral Gay.
    I appreciate both your testimonies. Thank you for being 
here again.
    I would like to start with Mr. DePriest. Small-business 
owners are feeling like they are drowning in a sea of red tape. 
You know, 82,000 pages last year of new regulations written. 
Can you tell us a little bit about what your office is doing to 
prepare for this upcoming flood of new red tape that is coming 
to be able to make sure that we protect those small businesses?
    Mr. DePRIEST. Certainly. I am blessed with having a 
terrific staff that has been through this process repeatedly, 
especially as we move toward the end of this administration, to 
make sure that every regulation that is proposed goes through 
the Regulatory Flexibility Act analysis and is analyzed for its 
effect on small businesses.
    We will continue to do the things we do, such as the 
roundtables, coordinating the panels, doing the analysis, 
having our economists look at it, everything that we can do to 
make sure that while an agency is able to achieve its 
regulatory goal, at the same time, we are looking for ways to 
minimize the effect that any proposed regulation would have on 
small businesses.
    Chairman HARDY. Thank you.
    Over the last couple years, the Office of Advocacy has 
filed public comment letters with federal agencies raising 
significant concerns about the RFA compliance. For example, the 
Office of Advocacy wrote the EPA and the Corps a comment letter 
on the waters of the United States rule and asked the agencies 
to withdraw the rule and comply with the RFA. The agencies 
ignored the Advocacy letter and finalized the rule without 
conducting a SBAR panel and assessing the impacts of the rule 
on small businesses. While the small business community was 
pleased that the Office of Advocacy stood up for them, some 
view it as a failure of the office also. What legal authority 
do you have for the chief counsel of Advocacy? And is there 
anything that you need us to do to help you ensure that you 
have the ability to make sure that agencies comply?
    Mr. DePRIEST. Thank you. The office has, under the 
amendments to the Regulatory Flexibility Act, particularly the 
Small Business Regulatory Enforcement Fairness Act, has the 
ability to file amicus briefs in court if there is a legal 
challenge to a regulation. The comment letters that we write, 
such as the one that you referenced, can also be used as 
evidence in court to see whether the agency has complied with 
the Regulatory Flexibility Act. Now, insofar as whether there 
is more that we need, in talking with the staff, we found that 
the vast majority of agencies comply with the Regulatory 
Flexibility Act. Our mantra is better information, better 
rules. So we try to put small businesses together with the 
agencies so that they get the input from small businesses. For 
example, in the waters of the United States, we did conduct 
roundtables with representatives of small business, with the 
EPA, and with the Corps. So they heard the concerns of small 
business. And we will just have to see, as we go forward, as we 
monitor the situation, you know, what effect it has. Now, I 
understand that that particular rule has been enjoined by the 
courts. But we will continue to monitor it.
    Chairman HARDY. Thank you. Admiral Gay, your office's 
annual report indicates the office is spending a lot of time 
helping small businesses resolve federal procurement disputes. 
This appears to be duplicative work of other offices within the 
SBA and the Federal Government. Can you explain what your 
office does when it receives the comments from the small 
business regarding the Federal procurement?
    Admiral GAY. Yes, sir. Thank you for that question. As in 
all cases, we receive the comments. And in the comment forms, 
we ask that the small business state what their issues are, 
what they want to come out of it, and the impact that that 
regulation has on their ability to operate. But most 
importantly, we require them to provide supporting 
documentation, so we have ample evidence to support their 
issues.
    Once that happens, it comes to my office, and I have two 
outstanding case management specialists. Our office is four 
now. We were seven. We are down to four now. And we are working 
hard to replace those two. But at any rate, once the case 
management specialist looks over the case, I prepare a letter, 
signed by myself, to the corresponding entity, stating the 
issues that were in the comment.
    The agency has 30 days or less to provide me a timely and 
quality response. So when that happens, I in turn review the 
letter that they have returned back to me, and I usually phone 
call to the commenter to state what is happening. And then we 
send that letter back to the commenter.
    Chairman HARDY. Thank you.
    My time has expired. I will turn the time over to Ms. 
Adams.
    Ms. ADAMS. Thank you, Mr. Chair.
    And thank you, gentlemen. In 2014, Advocacy published 23 
research reports. One of my priorities is to increase research 
into minority-owned small businesses as a means of 
understanding the challenges that they face. Mr. DePriest, how 
do you determine these research priorities? And what type of 
research are you planning on for minority businesses for this 
year?
    Mr. DePRIEST. Thank you. We solicit, insofar as our 
economic research is concerned, we solicit ideas from the 
small-business community, from Members of Congress, from 
members of this Committee, from the mother SBA of what they 
might want us to research. And in that process, we try to pull 
together what our research agenda is going to be for the year. 
Now, insofar as minorities, that is a special focus of the 
office. When the office was created, the statute creating it 
specified that we are supposed to do research on issues 
involving minorities. As a matter of fact, we are doing some 
research right now on minorities in the technology area, 
minorities and immigrants and what their effect is in the 
technology area. As a matter of fact, in a couple weeks, I am 
going out to San Francisco and Silicon Valley to talk with 
individuals who are involved in the effort of increasing 
minority entrepreneurship. And at that time, we are also going 
to present our research on what is going on and things that can 
be helpful. So we are mindful of our requirements to do so, and 
we actively do it and do it as best we can.
    Ms. ADAMS. Thank you.
    Advocacy received over $9 million in the recently enacted 
omnibus, with staffing making up nearly 90 percent of the 
office's budget. Mr. DePriest, do you believe that this funding 
is sufficient for the office to carry out its responsibilities?
    Mr. DePRIEST. Yes. I believe that it is. In talking with 
the members of the staff since I have been there, I believe 
that it is a sufficient amount of money for us to carry on our 
activities.
    Ms. ADAMS. Good. Most people want more. Advocacy and 
Ombudsman play different yet similar roles in supporting small 
businesses. They both provide a conduit for small businesses to 
raise problems with the Federal Government.
    Admiral Gay, how do you coordinate with each other to 
ensure that your work is not duplicative? It sort of gets back 
on what maybe the chairman----
    Admiral GAY. Yes, ma'am. As I stated before, I meet with 
Darryl weekly, sometimes biweekly, to discuss the systemic 
issues that I have seen or my case management specialists have 
seen in dealing with the small businesses' concerns and the 
comment forms as well. We also participate in roundtables 
together. As a matter of fact, the recent one that we had out 
in Las Vegas with Sara Wagner, sir--we had Yvonne Lee, who 
works under Darryl's Advocacy department, attend those, as well 
as fairness hearings. I attended a U.S. Air Force contracting 
summit. And we go toe and toe. We usually attend the same 
forums and business get-togethers, so we are not duplicative at 
all. We try to reduce the duplication.
    Ms. ADAMS. Okay. I was going to ask if you thought Congress 
should consider merging the offices, considering the overlaps. 
I guess your answer is no?
    Admiral GAY. Well, give me 2 more months, ma'am, and I can 
come back and give you my opinion on that.
    Ms. ADAMS. Okay. Then I would also, you know, as a 
connected question, would that result in better service to 
small businesses with better potentially lower costs?
    Admiral GAY. I think right now I think we work together 
pretty closely. Before Darryl and I got here, the people who 
were in our individual offices, they know each other. They 
worked close together. They have a very nurturing relationship. 
And our job as leaders is to maintain that and make sure we 
grow that congeniality.
    Ms. ADAMS. Thank you very much.
    Mr. Chair, I yield back.
    Chairman HARDY. Thank you. I turn the time over to Ms. 
Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. DePriest, President Obama issued two executive orders, 
13563 and 13610, as well as related memoranda to help reduce 
regulatory burdens on small business. Advocacy has provided 
counsel to the administration on these measures. In your view, 
have these executive orders made any difference in reducing 
regulatory burdens to small businesses?
    Mr. DePRIEST. Yes, I believe they have. As I said during my 
opening remarks, we calculate that we saved businesses in the 
first year $1.6 billion. And that is the difference between 
what the agencies proposed as their initial rule and what they 
ended up with after consultation with us. We think that is a 
significant savings. As I said, there are other savings that 
are perhaps not as quantifiable, but we think $1.6 billion is 
significant savings. We are constantly looking for ways to 
represent the interests of small business. As I said, we do 
roundtables where we try to put the small businesses together 
with the agencies. We help with the panels. We do everything 
that we can to be the voice of small business and reduce the 
burden. Now, I think that the executive orders that the 
President has issued, some of which lead to actually looking 
back at regulations and see whether they are still remaining in 
force, you know, we do that. We help the agencies put together 
an agenda for doing that lookback. So I think that we are on 
the right track there.
    Ms. VELAZQUEZ. Okay. Mr. DePriest, under Dodd-Frank, the 
newly created Consumer Financial Protection Bureau became 
subject to the Small Business Advocacy Review Panel process. 
Given that the CFPB is a newer agency, can you comment on 
Advocacy's experience in establishing the panel process there?
    Mr. DePRIEST. Yes, I can. The CFPB has really embraced the 
process. I did have the number here. I would have to get it to 
you, but they have done a number of the panels that they are 
required to do. And, in some instances, you know, we think that 
there has been a benefit insofar as the rules that they were 
thinking about versus what they proposed. So even though it is 
a newer agency, they come at it and we come at them with the 
history of what we have been doing with OSHA and the EPA. And I 
would say that the agency has embraced that process.
    Ms. VELAZQUEZ. Well, one of our concerns is we don't want 
for regulations to hinder the ability of small banks to provide 
access to capital for small businesses. So this is why it is so 
important that you work with the CFPB to make sure that 
consideration is taken when they issue regulations regarding 
the cost of credit for small businesses.
    Mr. DePRIEST. I see. Yes, we do that. And we will continue 
to monitor that.
    Ms. VELAZQUEZ. Thank you.
    I yield back. Thank you, Mr. Chairman.
    Chairman HARDY. Thank you. If you don't mind, we are going 
to go a second round if everybody is fine with that.
    Admiral Gay, I would like to ask, on procurement 
complaints, small businesses not getting paid, are you dealing 
with that within your office, or are you getting it out to the 
appropriate people to look at it?
    Admiral GAY. Yes, sir. As we deal with the Federal contract 
disputes, that is one of the issues that we see. And that is 
businesses not receiving prompt payments on contracts. So, yes, 
sir, we do see that, along with time delays in processing of 
the contract, and so on and so forth. So we do see some of 
those that involve late payments.
    Chairman HARDY. The question, I guess, though, is these are 
regulatory issues. Are you referring them over to the proper--
--
    Admiral GAY. Yes, sir. Yes, sir.
    Chairman HARDY. Okay.
    Admiral GAY. Absolutely.
    Chairman HARDY. Another question for you, Admiral Gay. 
According to the office's website, there are board member 
vacancies on six of the 10 regional Regulatory Fairness Boards. 
For example, region 9, which includes Nevada, there are only 
three board members, and none of them are from my home State of 
Nevada. Can you explain why there are so many vacancies, and 
what are you doing to fill those vacancies?
    Admiral GAY. First of all, thank you for funding that would 
allow me to leave the beltway area to get out there. This is an 
all-hands-on-deck effort. You can't do that while here inside 
the beltway. And so what that does is allow me to go out and 
get recommendations from the RegFair Board members, and also 
Members of Congress as well, on people that are viable 
candidates to serve on these boards. Another issue is the 
vetting process. The vetting process, as you may or may not 
know, is meticulous, and it is prudent. And I think it should 
be because these candidates are representing the federal 
government. They are speaking on behalf of the government as 
well.
    Chairman HARDY. If I may on that.
    Admiral GAY. Yes, sir.
    Chairman HARDY. Your selection process, are you involving 
small-business owners, operators, and officers that serve 
within that regional regulatory fairness area?
    Admiral GAY. Yes, sir.
    Chairman HARDY. Okay. Could you also please provide the 
Committee with a list of current Regulatory Fairness Board 
members for each region and the date that they were appointed 
by the SBA?
    Admiral GAY. Yes, sir, I will do that.
    Chairman HARDY. You know, each Regional Regulatory Fairness 
Board is supposed to have five members that are appointed by 
the Administrator, receiving recommendations from the chair and 
the ranking member of the House and the Senate Small Business 
Committees. The current and previous chairmen of the House 
Committee on Small Business have never been asked by the SBA 
for a recommendation. I believe this is a little bit concerning 
that we have never been asked. And it appears the SBA is not 
complying with their statutory requirements.
    Admiral GAY. Well, I understand the statutory requirements, 
and I will ensure that any new members on my watch will be 
reviewed by the chairs.
    Chairman HARDY. With that, I will turn the time over to Ms. 
Adams.
    Ms. ADAMS. Thank you, Mr. Chair.
    Mr. DePriest, Advocacy is required to carry out the panel 
process at EPA, OSHA, and CFPB. Can you comment on what is 
working in this panel process and what can be improved?
    Mr. DePRIEST. I think that what is working is that the 
agencies are listening to the concerns from the small-entity 
representatives and implementing less burdensome regulations. 
To follow on with Congresswoman Velazquez' comment, 
particularly with the CFPB, they have held six of the panels 
since 2012. Some of the issues involved mortgage loan 
origination and arbitration and payday lending. And we think 
that we have seen some benefits here. For example, with the 
mortgage servicing rule, small entities which service less than 
5,000 loans are exempt from some parts of the rule. And so that 
was a result of the agency listening to the concerns of small 
business.
    As I said earlier, the mantra is, you know, better 
information, better rules. And these panel processes allow 
small businesses to be directly involved in the process of 
writing the regulations. And I think there is definitely a 
benefit to that.
    Ms. ADAMS. One of the ongoing concerns with the Regulatory 
Flexibility Act has been the ability of agencies to continually 
forego the requirement in section 610 that require periodic 
review of the rules. Do you believe that this requirement 
should be strengthened?
    Mr. DePRIEST. I would have to really look at that and talk 
with my staff about their experiences with that. My 
understanding is that we have helped agencies map out a plan 
for how they do their 610 compliance. And I would like to have 
the opportunity to talk with the staff to see whether that is a 
possibility. Now, I know that later on this year, I will have 
the opportunity to present some legislative priorities. And I 
will take a special look at that to see whether that should be 
one of the ones I recommend.
    Ms. ADAMS. All right. Great.
    Admiral Gay, your office is responsible for operating 10 
Regional Regulatory Fairness Boards, which are comprised of 
small-business owners. What challenges do you face in getting 
small-business owners to devote their time to serve on the 
boards?
    Admiral GAY. Again, ma'am, as a segue or a reverse segue 
back to the previous question, I think that in my short time 
onboard, from what I have seen is we have the RegFair Board 
members are very engaged. They are very, very engaged. And they 
represent small businesses well there. The challenges that we 
have right now, again, are getting the vetting process, getting 
folks through the vetting process and me getting out conducting 
increased outreach events to identify those viable candidates. 
You had an earlier comment about diversity of the board. And it 
is my job, our job to ensure that that board remains diverse. 
And we are working hard to increase the diversity. But I need 
to get out and be on the road to make sure that I recruit 
viable candidates for your approval.
    Ms. ADAMS. Okay. So you have a process for ensuring that 
the boards are diverse in terms of minority businesses and 
their participation?
    Admiral GAY. Yes, ma'am. I think if you look at our report, 
you will see that our membership is diverse.
    Ms. ADAMS. Okay.
    Admiral GAY. Yes, ma'am.
    Ms. ADAMS. Your office had in 2014 its highest caseload in 
6 years, with 420 cases. Do you have sufficient resources, 
staff and otherwise, to handle this volume of cases 
effectively?
    Admiral GAY. Yes, ma'am. As I stated earlier, we were at 
seven. We are at four now, and that came because someone 
retired; someone was promoted; someone was transferred. But our 
boss has given me the right H.R. resources to fill those two 
positions that need to be filled. And we should have those two 
positions filled in the next couple of weeks, because I need to 
get out on the road.
    Ms. ADAMS. Great. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman HARDY. Thank you.
    I turn the time over to Ms. Velazquez.
    Ms. VELAZQUEZ. I have no more questions, Mr. Chairman. 
Thank you.
    Chairman HARDY. Thank you. I have one more. Mr. DePriest, 
you know, your office actually submitted a letter to the 
Department of Labor on the overtime rule and said the 
Department's analysis had said, I quote: ``Does not properly 
inform the public about the impact of this rule on small 
business entities. And due to those problems with the analysis, 
DOL cannot fully consider alternatives that would reduce the 
burdens on small businesses.'' Can you elaborate on the Office 
of Advocacy concerns on the overtime rule?
    Mr. DePRIEST. Well, I actually think that the quotation 
that you made really does sum it up. I mean, when we were first 
presented with this rule, we held several roundtables across 
the country--three in Washington, one in New Orleans, and one 
in Louisville--on this issue. And the letter that we wrote was 
really based upon the comments, the small business concerns 
that these changes will add significant compliance costs and 
paperwork burdens. We are going to actively work with DOL to 
seek regulatory alternatives that have been recommended by 
small businesses. I mean, one of the ones that they are really 
concerned about is the difference between--or how this 
regulation would affect those in low-wage states versus others. 
One of the reasons we went to New Orleans and Louisville was 
because dollars are spent differently in those regions. And we 
have been advocating for the Department of Labor to take that 
into account. Now, we understand that the DOL plans to release 
their rule later this year. So we are looking at it anxiously 
to see what they determine.
    Chairman HARDY. So, at this point, have they indicated 
whether they are going to revisit and redo their initial 
regulatory or give you any indication?
    Mr. DePRIEST. I don't have any further information on that.
    Chairman HARDY. With that, I would like to thank you both 
for coming. I appreciate your being here and your testimonies. 
I appreciate what you do. And if there is anything this Small 
Business Committee can do to help strengthen those issues that 
will help strengthen our small businesses, that is what we are 
here for. As we know, our small businesses operate nimbly and 
swiftly to build and create and offer some of the most 
innovative and reliable goods and services in the marketplace. 
They pour their hearts and minds into their companies. However, 
navigating the rulemaking process and complying with 
regulations is a huge challenge. This Administration is making 
it a lot more difficult for small businesses to keep their 
doors open. That is why your offices and duties are so 
important. Small businesses need you to continue to 
aggressively advocate for them and assist them.
    This Subcommittee will continue to closely monitor your 
offices and your activities and work to ensure that the federal 
agencies comply with their statutory obligations under RFA.
    I ask unanimous consent that the members have 5 legislative 
days to submit their statements and support materials for the 
record.
    Without objection, this meeting is adjourned.
    [Whereupon, at 1:48 p.m., the subcommittee was adjourned.]
                            A P P E N D I X


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Created by Congress in 1976, the Office of Advocacy of the U.S. 
Small Business Administration (SBA) is an independent voice for 
small business within the federal government. The Chief Counsel 
 for Advocacy, who is appointed by the President and confirmed 
  by the U.S. Senate, directs this office. The Chief Counsel 
 advances the views, concerns, and interests of small business 
  before Congress, the White House, federal agencies, federal 
courts, and state policy makers. Issues are identified through 
    economic research, policy analyses, and small business 
    outreach. The Chief Counsel's efforts are supported by 
Advocacy's staff in Washington, D.C., and by Regional Advocates 
 throughout the country. For more information about the Office 
 of Advocacy, visit http://www.sba.gov/advocacy, or call (202) 
                           205-6533.
    Chairman Hardy, Ranking Member Adams, and Members of the 
Committee, good afternoon. As the Chief Counsel for Advocacy, I 
would like to thank you for the opportunity to appear before 
the Committee today to discuss the Office of Advocacy and its 
many accomplishments during Fiscal Year 2015 (FY2015).

    When the Office of Advocacy was first created in 1976, it 
was charged with providing small businesses with an independent 
and credible voice in the federal rulemaking process. Too 
often, small businesses have been unduly burdened by one-size-
fits-all regulations from federal agencies.

    During the past 40 years, the Office of Advocacy has 
facilitated greater consideration of small business impacts 
through economic research, regulatory flexibility trainings, 
comment letters, roundtables, publications, and collaboration 
with federal officials throughout government. Federal agencies 
treat Advocacy as a partner in the rulemaking process in the 
effort to reduce the regulatory burden on small business.

    As the seventh Senate-confirmed Chief Counsel, I will 
ensure that the office continues to work with federal agencies 
to mitigate the potential costs of regulation on small 
entities. To further describe our dedication to this cause, I 
would like to update you on Advocacy's efforts and 
accomplishments on behalf of small business during FY2015.

    Regulatory Outreach

    From draft until final proposal, Advocacy engages federal 
officials throughout the entire rulemaking process. Advocacy's 
roundtables, comment letters, and interagency discussions are 
vital to alerting federal officials to the potential impacts on 
small entities and producing alternatives to help reduce any 
burdens.

    Roundtables

    Advocacy's regulatory roundtables gather federal officials, 
trade associations, and small business stakeholders from across 
the country for substantive presentations and open discussions 
about regulatory issues. During topics that included: (1) 
occupational exposure limits and other safety requirements; (2) 
overtime pay; (3) regulation of small drones; (4) federal 
procurement; (5) national emission standards; and (6) tax 
reform. Notably, our staff conducted roundtables in Louisville, 
New Orleans, and Washington, D.C. to discuss new federal 
procurement regulations.

    Comment Letters

    Once a proposed rule has been published and is open for 
public comment. Advocacy will often submit written comments 
voicing the concerns of small entities. These comment letters 
are a major tool used by Advocacy to ensure federal officials 
consider the impacts on small business, as federal agencies are 
compelled by statute to respond. During FY2015, Advocacy 
submitted 28 comment letters to 15 different agencies on a 
variety of issues. The majority of these comment letters 
addressed either: (1) the need for flexible alternatives 
supporting small business; (2) inadequate analysis of the 
impact on small entities; (3) improper certification of the 
rule; or (4) requests for greater outreach to small entities.

    Regulatory Impact

    The Office of Advocacy has worked for nearly forty years to 
create a more flexible regulatory environment for small 
business in the United States. Advocacy's positive impact on 
the federal rulemaking process can be seen in many ways: (1) as 
first-year cost-savings; (2) as greater consideration of small 
business concerns in particular areas; and (3) as greater 
compliance with the RFA by federal agencies. Taking each of 
these parts into account provides an accurate portrayal of 
Advocacy's success.

    Cost Savings

    During FY2015, Advocacy achieved over $1.6 billion in 
first-year cost savings as a result of its efforts on behalf of 
small business. Generally, savings come from the difference in 
cost between the proposed rule and the final rule. These 
savings resulted from eleven separate rules proposed by five 
different agencies: (1) the Department of Energy; (2) the Food 
and Drug Administration; (3) the Occupational Safety and Health 
Administration; (4) the Bureau of Land Management; and (5) the 
Environmental Protection Agency.

    For the majority of rules, the first-year cost savings 
arises from a one-time implementation cost. However, for rules 
such as OSHA's final Cranes and Derricks in Construction final 
rule, the initial implementation of the rule was delayed for 
three years. Advocacy's efforts resulted in over $13 million in 
savings for each year, saving small businesses $40 million 
cumulatively over those three years.

    Greater Consideration of Small Business Concerns

    Advocacy's efforts have also produced positive outcomes 
that are not quantifiable and are not captured in cost-savings 
projections. Advocacy's partnering approach to federal agencies 
and small business trade associations often help facilitate 
greater consideration of small business concerns in federal 
rulemakings and federal initiatives. For example, during 
FY2015, Advocacy obtained greater consideration of small 
business concerns in three federal rulemakings and three 
federal initiatives. Advocacy's engagement of federal officials 
from the Food and Drug Administration and the Federal 
Communications Commission produced more flexible regulations on 
animal food controls and on competitive bidding rules, 
respectively. Advocacy's leadership and hard work on a federal 
cybersecurity framework resulted in the National Institute of 
Standards and Technology conducted a panel on the impacts of 
federal cybersecurity regulations on small federal contractors. 
Similarly, Advocacy provided valuable regulatory advice to the 
agencies involved in the Transatlantic Trade and Investment 
Partnership negotiations. Advocacy's participation in several 
rounds of negotiations helped garner greater consideration of 
small business issues on the international stage.

    Greater Compliance with the RFA

    Advocacy has established cooperative relationships with 
most federal agencies, and has successfully facilitated greater 
compliance with the RFA throughout the government. As federal 
agencies have become more familiar with the RFA and have 
actively partnered with Advocacy, agencies throughout the 
government have produced more flexible and less burdensome 
regulations. Such success has been achieved through Advocacy's 
respected publications, technical assistance, and formal 
trainings on the RFA.

    Since 2002, Advocacy has conducted formal trainings on RFA 
compliance for federal agencies and other stakeholders. These 
trainings have been a valuable resource in achieving greater 
regulatory flexibility and greater consideration of small 
business concerns. Over the past thirteen years, Advocacy has 
conducted trainings for 18 cabinet-level departments and 
agencies, 67 separate component agencies and offices, 22 
independent agencies, and various special groups including 
congressional staff, small business organizations, and trade 
associations. In FY2015 alone, Advocacy conducted trainings for 
126 federal officials from a variety of different agencies, 
exceeding our annual goal by over 25 percent.

    In addition to these formal trainings, Advocacy offers 
federal agencies technical assistance regarding RFA compliance. 
Throughout the rulemaking process, Advocacy is in daily contact 
with agencies to provide technical assistance in complying with 
the RFA. Such assistance can include: (1) estimates of the 
numbers of businesses likely to be affected by a proposal; (2) 
legal opinions on RFA issues; (3) the review of draft 
materials; (4) arranging roundtables with affected industry 
representatives; and (5) other assistance specific to each 
case.

    Economic Research and Outreach

    Since its creation, Advocacy has provided current and 
policy-relevant information on important issues affecting small 
businesses. During FY2015, the Office of Advocacy provided 
small business owners, researchers, policymakers, and other 
stakeholders with 26 contracted and internal research 
publications on several topics relevant to today's economy, 
including: (1) access to capital; (2) employment; (3) 
innovation; (4) veterans; and (5) minority- and women-owned 
businesses.

    During FY2015, Advocacy also established a new program 
series entitled ``Small Business Economic Research Forums.'' 
These forums provide interested parties with an opportunity to 
discuss relevant small business issues with our research team 
and other stakeholders. These forums also inform Advocacy's 
staff of the cutting-edge topics that are affecting small 
businesses across the country. During the series' inaugural 
year, eight research forums were held on topics such as 
consumer credit, student loan debt, tax exemptions, and new 
sources of capital.

    Communications Outreach

    Advocacy's information team keeps in touch with concerned 
stakeholders through Advocacy's website, various publications, 
email alerts, and social media presence. Our monthly 
newsletter, The Small Business Advocate, reaches nearly 37,000 
electronic subscribers. In addition, our specialized email 
alerts provide valuable information to thousands more, 
including over 28,000 research subscribers and over 25,000 
regulatory subscribers. Advocacy also frequently updates 
stakeholders on Facebook, Twitter, and Advocacy's blog.

    Regional Advocates

    The ten Regional advocates play a vital role in maintaining 
an open dialogue with the vast majority of small entities that 
operate outside of the Washington, D.C. area. They interact 
directly with small business owners, small business trade 
associations, and state officials to educate them about the 
benefits of regulatory flexibility. Regional advocates conduct 
outreach to identify areas of concern for small business and 
assist headquarters staff with specific actions, such as 
recommending participants for Small Business Regulatory 
Enforcement Fairness Act panels that require small entity 
representatives. They also alert businesses in their respective 
regions about regulatory proposals that could affect them. 
During FY2015, Advocacy's regional advocates participated in 
more than 500 outreach events, exceeding their annual goal of 
360.

    Conclusion

    In closing, I would like to thank the Committee and its 
staff for its continued support of the Office of Advocacy. As 
Chief Counsel, I look forward to working closely with you on 
the important issues affecting small entities across this 
country. If there are any questions, I would be pleased to 
answer them.

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    Thank you Chairman Hardy and Ranking Member Adams for 
providing me this opportunity to comment on how the Office of 
the National Ombudsman can and does help improve the regulatory 
environment for America's small businesses.

    I look forward to working with this committee to improve 
the regulatory enforcement environment for our nation's 28 
million small businesses. I am also excited that Darryl L. 
DePriest is now on bard as the Chief Counsel for the Office of 
Advocacy. I meet with Mr. DePriest weekly to discuss synergies 
our offices execute to ensure a fair regulatory environment. We 
both agree that a strong working relationship with frequent 
communication and collaboration is critical to the SBA's 
mission of counseling and protecting America's small businesses 
against unnecessary regulatory burdens.

    While the Office of Advocacy is responsible for ensuring 
fairness in the implementation stages of federal regulations, 
the Office of the National Ombudsman (ONO) works to ensure 
regulations are being fairly enforced once they are enacted. 
Pursuant to the Small Business Regulatory Enforcement Fairness 
Act (``SBREFA''), this office was created to serve as a 
powerful voice for America's small businesses.

    In fulfilling this role, we conduct public hearings and 
outreach events (including roundtables and meetings) in each of 
SBA's ten regions, providing small businesses with forums where 
they voice their comments about federal regulatory enforcement 
actions without fear of retaliation.

    We work with and encourage regulators to address 
entrepreneurs' comments and concerns promptly, and wherever 
possible, to opt for compliance assistance and education rather 
than moving directly to levy penalties and fines. Additionally, 
in our annual report to Congress, we rate federal agencies on 
the timeliness and quality of their responses to comments 
received from small businesses.

    Our office also facilitates regional regulatory fairness 
boards (RegFair boards) in each of the SBA regions. Each 
RegFair board consists of 5 small business owners who serve as 
the eyes and ears for small businesses in their communities, 
states, and regions. They work with local small businesses to 
address regional concerns regarding federal regulatory 
enforcement or compliance issues. These RegFair boards have 
been and continue to be vital assets and advocates. In addition 
to receiving comments regarding regulatory fairness, our office 
also receives comments regarding other issues; such as, 
contracting, access to capital, loan policy and business 
training, counseling and other support.

    During FY-15, our staff conducted more than 80 outreach 
events, 4 regional regulatory fairness hearings and 1 national 
hearing here in Washington, DC. Through the aggressive efforts 
of our district and regional offices and SBA resource partners 
and federal agency representatives, these roundtables and 
hearings continue to be very well attended and productive.

    In my brief three months onboard, this office has held one 
regulatory enforcement fairness hearing, 2 small business 
roundtables in Nevada and several outreach events with small 
business owners and entrepreneurs. I have met and established 
personal relationships with senior leaders at 12 federal 
agencies, discussing ways we can better work together to reduce 
regulatory burdens for small businesses. During the next six 
months we plan on conducting several roundtables and hearings 
and hosting our annual meeting with members of the ten regional 
regulatory fairness boards.

    It is important to note that all of our hearings, meetings, 
and partnership programs with small business stakeholders, have 
been in close collaboration with other federal agencies, we 
truly value their critical presence and participation.

    Attached you will find a schedule of the ONO activities for 
FY-15, as well as the planned events for the first two quarters 
of FY-16.

    In closing, I'd like to state that, on behalf of 
Administrator Contreras-Sweet, and the great staff in the 
Office of the National Ombudsman, we look forward to working 
with all of our teammates and the members of Congress, to 
eliminate unnecessary regulatory burdens on small businesses as 
they continue to fuel America's economic prosperity.

    I thank you again for the opportunity to appear here today 
and will be happy to answer any questions.

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