[Senate Hearing 115-87]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 115-87
 
               IMPROVING SMALL BUSINESS INPUT ON FEDERAL
        REGULATIONS: IDEAS FOR CONGRESS AND A NEW ADMINISTRATION

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
               REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 19, 2017

                               __________

                   Available via http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs
                        
                        
                        
                        
                        
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             HEIDI HEITKAMP, North Dakota
MICHAEL B. ENZI, Wyoming             GARY C. PETERS, Michigan
JOHN HOEVEN, North Dakota            MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                KAMALA D. HARRIS, California

                  Christopher R. Hixon, Staff Director
               Margaret E. Daum, Minority Staff Director
                     Laura W. Kilbride, Chief Clerk


       SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                   JAMES LANKFORD, Oklahoma, Chairman
JOHN MCCAIN, Arizona                 HEIDI HEITKAMP, North Dakota
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                KAMALA D. HARRIS, California
                     John Cuaderes, Staff Director
                 James Mann, Professional Staff Member
                  Eric Bursch, Minority Staff Director
                    Antrell Tyson, Minority Counsel
     Katie Delacenserie, Subcommittee Clerk and Committee Archivist
     
     
                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Lankford.............................................     1
    Senator Heitkamp.............................................     2
    Senator Risch................................................     4
Prepared statement:
    Senator Lankford.............................................    33
    Senator Heitkamp.............................................    35
    Senator Shaheen..............................................    37

                               WITNESSES
                       Thursday, January 19, 2017

Rosario Palmieri, Vice President Labor, Legal, and Regulatory 
  Policy, National Association of Manufacturers..................     9
Jerry Hietpas, President, Action Safety Supply Company...........    11
LaJuanna Russell, President and Founder, Business Management 
  Associates, and Member of the Board, Small Business Council for 
  Small Business Majority........................................    13
Karen R. Harned, Executive Director, Small Business Legal Center, 
  National Federation of Independent Businesses..................    14

                     Alphabetical List of Witnesses

Harned, Karen R.:
    Testimony....................................................    14
    Prepared statement...........................................    68
Hietpas, Jerry:
    Testimony....................................................    11
    Prepared statement...........................................    58
Palmieri Rosario:
    Testimony....................................................     9
    Prepared statement...........................................    39
Russell LaJuanna:
    Testimony....................................................    13
    Prepared statement...........................................    65

                                APPENDIX

Statement for the Record from Kari Warberg Block.................    78
Letter from U.S. Chamber of Commerce.............................    81
Memo from Owner-Operator Independent Drivers Association.........    84
Letter from Credit Union National Association....................    87
National Small Business Regulations Survey.......................    92
Responses to post-hearing questions for the Record from:
    Mr. Palmieri.................................................   109
    Mr. Hietpas..................................................   121
    Ms. Russell..................................................   123
    Ms. Harned...................................................   125


                   IMPROVING SMALL BUSINESS INPUT ON



    FEDERAL REGULATIONS: IDEAS FOR CONGRESS AND A NEW ADMINISTRATION

                              ----------                              


                       THURSDAY, JANUARY 19, 2017

                                 U.S. Senate,      
                        Subcommittee on Regulatory,        
                      Affairs and Federal Management,      
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:06 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. James 
Lankford, Chairman of the Subcommittee, presiding.
    Present: Senators Lankford, Heitkamp, Tester, and Peters.
    Also present: Senator Risch.

            OPENING STATEMENT OF SENATOR LANKFORD\1\

    Senator Lankford. Good morning, everyone. Welcome to 
today's Subcommittee hearing titled, ``Improving Small Business 
Input on Federal Regulations: Ideas for Congress and a New 
Administration.''
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Lankford appears in the 
Appendix on page 33.
---------------------------------------------------------------------------
    In the 115th Congress, the Subcommittee looks to continue 
our examination of the Federal regulatory process, as we look 
for solutions to increase transparency, accountability, and 
efficiency. Today we look at how Federal regulations impact 
small businesses and whether agencies should be required to 
take more seriously the impact on small businesses during the 
rulemaking process.
    According to the Small Business Administration (SBA), there 
are 28 million small businesses in the United States which 
account for 55 percent of all jobs and 66 percent of all new 
jobs since the 1970s.
    Despite the importance of this sector for our economy, 
small business owners continually tell me they do not feel that 
Washington hears their voice. The annual Federal regulatory 
burden is huge--nearly $2 trillion--and the burden falls 
disproportionately on small businesses.
    A recent study by the American Action Forum found that 
every 10 percent increase in cumulative regulatory costs 
results in a loss of more than 400 small businesses. As 
regulatory costs rise, small businesses disappear. Agencies do 
not draft rules with the intent to close small businesses, but, 
unfortunately, that often ends up being the result.
    One way to avoid unnecessary burdens on small businesses is 
to have real, meaningful consultation with stakeholders. 
Currently, agencies are required to consider the regulatory 
impact on and consult with small business entities pursuant to 
the Regulatory Flexibility Act (RFA) and the Small Business 
Regulatory Enforcement Fairness Act (SBREFA). The only place 
you will ever hear that being referred to is probably this 
Committee.
    However, in reality, agencies do not generally take into 
account the views of small businesses. During today's hearing, 
we will discuss ideas to address this problem to ensure that 
agencies truly consider the effects of rules on small business 
sectors of our economy. When entrepreneurs open their own 
businesses, their goal is to provide for their family and serve 
their community by offering a product or service. Each moment a 
small business spends trying to understand and comply with 
overly burdensome Federal regulation is time that is not spent 
growing their business.
    This past December, the National Federation for Independent 
Businesses (NFIB) reported a 38 percent jump in small business 
owners' belief that the economy will improve. According to the 
NFIB's index, small business optimism increased by 7.4 points 
in December, up to 105.8, up from November's 98.4. It is the 
largest month-over-month index change since it began in 1986. 
In fact, members' perceptions that business conditions will 
improve, especially in the area of regulatory burden, accounted 
for 48 percent of the month's increase.
    We have the opportunity to implement changes that would 
make it easier for small business owners to participate in 
rulemaking and truly have their concerns considered. We must 
turn their optimism into a reality. I look forward to 
discussing ways to deliver these results for small businesses 
today with our witnesses.
    With that, I would like to recognize Ranking Member 
Heitkamp for her opening remarks.

            OPENING STATEMENT OF SENATOR HEITKAMP\1\

    Senator Heitkamp. Thank you, Mr. Chairman. I look forward 
to working with you on this Committee in another Congress. Our 
Subcommittee was busier last Congress than, quite honestly, 
many full committees, and I am sure we will have two more 
productive and bipartisan years ahead of us on this Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Heitkamp appears in the 
Appendix on page 35.
---------------------------------------------------------------------------
    Small business plays a crucial role in our Nation's economy 
and the overall prosperity of our country. The vast majority of 
businesses across our country are small businesses. Small 
businesses are especially critical in my State of North Dakota. 
Ninety-six percent of business in North Dakota is small. These 
small businesses are the backbone of our economy, and they are 
a primary source of job creation. I am proud to represent North 
Dakota small business in Congress on this Committee but also 
with Chairman Risch on the Small Business Committee.
    There is a reason why I am on both of these committees: 
because along with agriculture and energy, small business is 
the economic engine that makes North Dakota work. So it has 
been my privilege to travel across my State and visit a wide 
variety of small businesses that call North Dakota home and to 
visit and hear about their needs and their concerns.
    From Main Street bricks-and-mortar retailers in Grand Forks 
and Grafton to cutting-edge innovators in the unmanned aircraft 
systems industry like Packet Digital in Fargo to oil field 
service businesses in Minot, North Dakota needs to listen and 
hear these concerns and react here in Washington to the 
problems that we hear.
    So it is absolutely critical that Congress always be 
willing to work to ensure small business can prosper. Congress 
must seek out the policies that help small business innovate 
and thrive. I am proud that on the Small Business Committee I 
have been a strong advocate for small business and startups in 
our country in more rural States like North Dakota because we 
know that innovation does not just happen in our country's 
biggest cities or biggest States. That innovation must be 
fostered and promoted if we are going to be successful in rural 
America, and I think one thing we learned in this election is 
rural America feels left behind. There is a reason for that, 
and we are here to represent, along with my friend Senator 
Tester from that State to the west of me, Montana--it is a big 
place. It is between me and Senator Risch, that wide open space 
of greatness called ``Big Sky Country.'' Anyway, we digress. 
But I think it is fairly critical that Congress makes sure 
policies do not unfairly or certainly unintentionally hamper 
small business.
    I want to just tell you that we had hoped that we would 
have a fantastic businesswoman from North Dakota who could 
appear in this Committee. Because of timing, she could not. I 
would like to ask the Chairman to allow me to submit her 
comments for the record.\1\
    Senator Lankford. Without objection.
    Senator Heitkamp. Thank you.
---------------------------------------------------------------------------
    \1\ The statement submitted by Ms. Block appears in the Appendix on 
page 78.
---------------------------------------------------------------------------
    Kari Warberg Block owns EarthKind in Bismarck. They are a 
pest control developer and designer and a biomanufacturing 
pioneer. I had hoped to get her out here. She could not make 
it. But when I talk to her about the Federal regulatory 
process, you get a simple answer that is difficult to turn into 
action, but it must be turned into action. She talks about 
needing more common sense from agencies, more small business 
smart from agencies, more understanding, more outreach, and 
more feedback. I hear that from every small business person 
that I talk to, and it usually starts with, ``They just do not 
get it. They just do not get what they are doing and the impact 
it is having on me.''
    People want to innovate. They want to invest the 
profitability back into the business and not into another bean 
counter that is going to satisfy yet another bureaucrat. So to 
me, that is one of the key questions that we have to tackle in 
this space. How do we make sure that agencies engage in a way 
that small businesses need and that include protecting the 
ability of agencies to promulgate fair and well-analyzed rules 
in a timely fashion? So much of the discussion in this area has 
focused on the importance of considering the impact of 
regulations on small business.
    I am going to say something that I say often here: that 
until we actually in the Federal Government sit down and have a 
conversation with our counterparts in State and local 
government, we will not tackle the problem of overregulation.
    We opened up a portal called ``CutRedTape,'' and 
frequently, the comments that we get do not necessarily apply 
to the Federal Government. They apply to a State or a local 
overreach or inconsistency between State and local regulations. 
I would say that I would put that on my top issue of concerns 
for small business today in America, is not only navigating the 
Federal Government and being worried about the ``I gotcha'' 
regulation that you did not know about, but having to harmonize 
and deal with various levels and wondering where is the 
productivity in that. You are expected to be as efficient and 
productive as you can be to survive. The government should be 
as efficient and productive as they can be.
    And so I look forward to hearing from our witnesses on that 
topic. I would ask that you if you do have comments on how we 
can better coordinate, State and local regulation, I would 
appreciate hearing those as well.
    And, finally, for the record, it is great to see the 
Chairman here, Chairman Risch, but I also have a statement from 
the Ranking Member of Small Business, Jeanne Shaheen, and would 
ask that that be submitted for the record.\1\
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Shaheen appears in the 
Appendix on page 37.
---------------------------------------------------------------------------
    Senator Lankford. Without objection. Before we proceed to 
our witnesses, I would like to ask unanimous consent for 
Senator Risch, the Chairman of the Senate Small Business and 
Entrepreneurship Committee, be allowed to join this hearing and 
give a brief opening statement. Without objection. And Senator 
Shaheen, a member of that Committee, submitting everything for 
the record. Glad to be able to have her submission and 
absolutely have unanimous consent to be able to do that as 
well.
    You are recognized, Chairman Risch, and glad that you are 
here joining us.

               OPENING STATEMENT OF SENATOR RISCH

    Senator Risch. Chairman Lankford, thank you so much for 
having me here today. Thank you so much for having this 
hearing. We are going to be pursuing our Committee's goal, by 
working together as we pursue these really important matters.
    As the Chairman of the Small Business and Entrepreneurship 
Committee, I appreciate the opportunity to work with you and 
with everyone on this Committee on what I think is the most 
important thing that we can do in Congress to help small 
businesses.
    I also can put this in very succinct terms from what I hear 
from my small business owners in Idaho and, for that matter, 
around the country, and that is, they put it in these terms: 
``Government, get out of the way.'' That is what they tell me. 
And, of course, they are talking about the regulatory structure 
in America today more than anything.
    I have had opportunity to work with a very robust 
Committee, the Small Business Committee. Senator Shaheen and I 
have been very close on Foreign Relations and a lot of other 
committees, and I have no doubt that we are going to work 
together very well and have worked together very well. Her 
predecessor, Chairman, I have worked with also; it was a very 
bipartisan effort.
    We hear a lot in the news these days about how polarized 
things are here. This is one of those issues that never gets 
any attention that brings Republicans and Democrats together. 
This is not an ``R'' or ``D'' issue. This is an issue that is a 
bipartisan issue.
    The excessive regulatory burdens our Nation's entrepreneurs 
face are crippling their growth and operations. Every time they 
turn around, there is another rule of compliance mandate from 
the Federal Government, and what the bureaucrats do not 
understand or do not care about is the degree to which these 
regulations increase costs and uncertainty in the business 
world. This is the most profound thing I guess I am going to 
say. Washington, D.C., is not the real world.
    As a former small business owner myself, I can tell you 
that many of the people writing these regulations are grossly 
insensitive in regards to how a real business is run and how to 
make a payroll and figure out how to grow the business.
    What makes matters worse many times is these regulators 
seem more interested in collecting fines than actually 
resolving the underlying issues. This varies from agency to 
agency. Some are not bad at all at it, and they are actually 
trying to do what the agency is supposed to do.
    And if I can digress for just a moment, the story I will 
tell is when I was in business, when I was practicing law, I 
would have clients come in and they would say, ``Well, you 
know, the Environmental Protection Agency (EPA) wants to come 
around and look at our place.'' And I would say, ``If the EPA 
wants to come around, you tell them no. You tell them to go get 
a warrant before they set foot on your business. And if they 
do, I can tell you, it is going to cost you thousands of 
dollars for me when the fines are negotiated at the end of the 
day.''
    In my own small business, the fire inspector from Boise, 
Idaho, would walk into my place--the fire chief with the fire 
inspector--and he would say, ``Jim, how are you doing? We are 
here to look your place over and make sure that things are in 
good shape and if we get a fire started we can put it out.'' 
You know what I told him? ``Absolutely. Come on in.'' And he 
would come through, and he would go through it, and then he got 
into the disaster area, which was in the basement. And he would 
come out, and he would say, ``Well, I got a list here of things 
that need to be done.'' And I would look at that, and I would 
say, ``Yes, we can get that done. You say you want me to do 
this. How about if we do it like this?'' ``Yes, yes, no 
problem. Why don't you work on this and we will be back in 
about a month.''
    He would come back in a month, and again, we would be 
pretty close but not there. This guy, I was not worrying about 
him levying a fine. You know what I knew about that guy? I knew 
that his job was to see that if my place caught fire, that he 
was going to be able to put it out, and also it was his job to 
see fires did not start.
    That is what we need out of the Federal Government. The EPA 
should walk onto the place and say, ``Our job is to clean up 
the air and water. How can we work on doing this together?'' 
They do not get that. When this person walks in, they are the 
enemy. They are the enemy. What kind of world do we live in 
when people who are supposed to be doing a certain job become 
the enemy, when the government is the enemy of small business? 
It is wrong.
    What frustrates me is that we all agree the importance of 
small business is to our economy. They make up 54 percent of 
the private sector economy and 99.7 percent of all employers 
and create about 70 percent of all new jobs. But when it comes 
to helping those small businesses survive, grow, and hire, 
Washington, D.C., has been tone deaf.
    Federal regulatory agencies estimate the cost of complying 
with their own regulations to be $108 billion annually. Small 
businesses bear a larger-than-average proportion of that cost 
as their cost to comply with those regulations is 36 percent 
higher than larger firms. Now, this just makes sense. If the 
Federal Government walks into General Electric corporate and 
they say, ``Here is a new regulation,'' they say, ``Go down 
there to the Department of Regulations,'' and they have an army 
of lawyers, they have an army of consultants, they have an army 
of compliance officers. When they walk into one of my 
constituents who fixes lawn mowers in his garage and says, 
``Here is a form. It is 36 pages long, and this has to be done 
by 5 o'clock tomorrow night,'' it sets this guy completely off.
    And so it is just common sense that it is much more 
difficult for a small business person to comply than it is for 
big businesses.
    The National Small Business Association (NSBA) released 
their 2017 regulation survey yesterday, which I asked to be 
included in the record,\1\ Mr. Chairman, and we will submit 
that.
---------------------------------------------------------------------------
    \1\ The statement submitted by the National Small Business 
Association appears in the Appendix on page 92.
---------------------------------------------------------------------------
    Senator Lankford. Without objection.
    Senator Risch. This staunchly bipartisan organization, 
which has been around for 80 years, reports the following, and 
this is just a summary: More than one-third of small business 
owners have held off on business investment due to the 
uncertainty on pending regulation. And if anybody does not 
believe this, find a small businessman and say, ``Hey, how you 
guys doing with the Affordable Care Act (ACA)? Everything OK 
here?'' And be prepared for about an hour lecture on them not 
understanding what it is all about.
    More than half have held off on hiring a new employee due 
to regulatory burdens. The average small business owner is 
spending at least $12,000 a year on regulations; 14 percent of 
small business owners report they spend more than 20 hours per 
month on Federal regulations. And when asked which areas of 
regulations are most burdensome, the Federal Tax Code and the 
Affordable Care Act were the top two. The Internal Revenue 
Service (IRS), the Department of Labor (DOL), and EPA are the 
most difficult agencies to work with when it comes to 
regulatory burdens and compliance, according to NSBA members.
    We have to give our country's small businesses a break. 
They need relief. In my view, the only way to ensure that the 
Federal Government, under either Democrat or Republican 
leadership in the White House stops beating up on small 
businesses through new rules and mandates, is to enact 
meaningful regulatory reform. We have talked and talked and 
talked about it, and we really need to get at it.
    The Committee that I now chair, the Small Business 
Committee, has jurisdiction over one entity in the Federal 
Government that I think is one of the most important, and that 
is the Office of Advocacy, which is an office within the SBA. 
It is an independent arm of the SBA charged with reducing the 
burdens that Federal regulations and other policies imposed on 
small entities, monitoring Federal agency compliance with the 
Regulatory Flexibility Act and assisting regulatory agencies 
during all stages of the rulemaking development process to 
mitigate the potential impact of rules on small businesses.
    Unfortunately, the views of the Office of Advocacy have 
been ignored more often than not, and this is an agency that I 
have done my best to try to make much more robust than what it 
is. It is supposed to be independent. It is supposed to get the 
Federal bureaucrats by the throat when they are rulemaking and 
say, ``Look, let me tell you what this is going to do to small 
business. Stop. Think about this.''
    Let me give you an example of that. The Small Business 
Office of Advocacy disputed the finding by the EPA and U.S Army 
Corps of Engineers (USACE) that the rule would not have a 
significant impact on a substantial number of small entities, 
and that is the rule dealing with the Waters of the United 
States. Those of you from ag States, can you imagine a Federal 
agency--the EPA and the Army Corps of Engineers--finding that 
this would not--that the Waters of the United States proposed 
rule would not have a significant economic impact on small 
businesses? I mean, to me that is a poster child for the 
nonsense that goes on.
    Despite the Office of Advocacy's finding that the rule was 
improperly certified and recommending the agencies withdraw the 
rule and conduct a Small Business Advocacy Review Panel before 
proceeding any further with the rulemaking, obviously EPA 
brushed them aside and ignored that input.
    Under the Regulatory Flexibility Act, when an agency finds 
a proposed rule will have a significant impact on a substantial 
number of small entities, it must evaluate the impact, consider 
the alternatives, and in the case of the EPA, convene a Small 
Business Advocacy Review Panel to consider the input of the 
Office of Advocacy in the small business community. By 
certifying that the rule would not have a significant economic 
impact, the EPA and the Corps effectively shut them out of the 
rulemaking process and turned their backs on small businesses. 
And that is why regulatory reform is so important. Just an 
example.
    The Federal Government should not be allowed to ignore 
small businesses. We need strong controls to limit what 
Washington, D.C., bureaucrats of any Administration, Republican 
or Democrat, can do to stifle small businesses. I hope that we 
are able to come together this year and pass common-sense 
reforms that keep the Federal Government from playing fast and 
loose with our Federal regulatory system.
    As part of our reform efforts here in Congress, we have to 
bolster the Office of Advocacy and give it more authority when 
regulatory agencies ignore small business impacts. I applaud 
the U.S. House of Representatives for passage of the Regulatory 
Accountability Act and the Small Business Regulatory 
Flexibility Improvements Act last week. And I look forward to 
working with this Committee on similar reforms so that we can 
limit the ability of Federal agencies to impose new regulatory 
costs on small business.
    I would like to submit for the record a letter from the 
U.S. Chamber of Commerce,\1\ which I just got, which also 
congratulates the House on the passage of those bills and urges 
the Senate to expeditiously consider regulatory reform 
legislation. I would ask that be put in the record.
---------------------------------------------------------------------------
    \1\ The letter submitted from the U.S. Chamber of Commerce appears 
in the Appendix on page 81.
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    Senator Lankford. Without objection.
    Senator Risch. Despite my frustrations about the anti--
business climate here in Washington, D.C., I am extremely 
confident in America's entrepreneurs who are innovative and 
tenacious. If they were not tenacious, they would not be around 
today. And they provide robust economic growth when we give 
them the chance to do so. After all, America's greatness comes 
from those millions of hardworking small business 
entrepreneurs, not from the government.
    Thank you for the opportunity to join you here today. I 
look forward to working with you in the weeks and months ahead 
to pass these much needed reforms.
    Senator Lankford. Thank you, Chairman Risch.
    Senator Heitkamp. Thank you.
    Senator Lankford. At this time we will proceed with 
testimony from our witnesses. Let me do a brief introduction. 
Then we will have a swearing-in time period as well.
    Rosario Palmieri is vice president for Labor, Legal, and 
Regulatory Policy at the National Association of Manufacturers 
(NAM). Prior to joining NAM, Mr. Palmieri worked for several 
years at the U.S. House of Representatives on the Committee of 
Oversight and Government Reform and the Committee on Small 
Business. He is a native of Pittsburgh, Pennsylvania, a 
graduate of American University, and American University's 
Washington College of Law.
    Jerry Hietpas is president of Action Safety Supply Company, 
headquartered in Oklahoma City, Oklahoma--the center of the 
world. Action Safety Supply is a family owned and--operated 
business that has been a subcontractor and contractor working 
on roads, streets, bridges, airports, and highways in Oklahoma 
since 1975.
    LaJuanna Russell is the founder and president of Business 
Management Associates (BMA), a business process and human 
capital management firm in Alexandria, Virginia. She is also a 
member of the Board of Directors of the Small Business Council 
for Small Business Majority, a national small business advocacy 
organization. Ms. Russell is a graduate of Virginia Tech and 
George Washington University.
    Karen Harned is the executive director of the National 
Federation of Independent Business Small Business Legal Center. 
Prior to joining NFIB, she worked as an attorney here in 
Washington and for Senator Don Nickles of Oklahoma. She 
graduated from the University of Oklahoma and George Washington 
University National Law Center. She is from Tulsa, Oklahoma. So 
we are disproportionately represented by Central Time today. I 
just want everyone to know that, center of the universe. 
[Laughter.]
    I do want to thank our witnesses today for your 
preparation. It is very difficult to get on to Capitol Hill 
right now with all the security perimeters, and so we 
appreciate not only your preparation but your tenacity to 
actually get here.
    It is the custom of this Subcommittee that we swear in all 
witnesses that appear before us. If you do not mind, I would 
ask you all to stand and raise your right hand to be sworn in.
    Do you swear the testimony you will give before this 
Subcommittee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Palmieri. I do.
    Mr. Hietpas. I do.
    Ms. Russell. I do.
    Ms. Harned. I do.
    Senator Lankford. Thank you. Let the record reflect the 
witnesses all answered in the affirmative. You may be seated.
    We will be using a timing system and microphone system. I 
explained that before we began to everyone at the table. I 
appreciate everyone. There will be about a 5-minute time period 
allotted for your opening statement, and, obviously, what you 
have submitted already written will be entered into the 
permanent record as well. So I would ask you to go ahead and 
begin. Mr. Palmieri, you are up first.

TESTIMONY OF ROSARIO PALMIERI,\1\ VICE PRESIDENT LABOR, LEGAL, 
  AND REGULATORY POLICY, NATIONAL ASSOCIATION OF MANUFACTURERS

    Mr. Palmieri. Thank you, Chairman Lankford, Chairman Risch, 
Ranking Member Heitkamp, and Senators Tester and Peters. It is 
an honor to testify before you today about this important 
topic.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Palmieri appears in the Appendix 
on page 39.
---------------------------------------------------------------------------
    Manufacturers employ nearly 12 million Americans and 
support 18 million jobs in this economy. Manufacturing has the 
highest multiplier effect of any sector. And to retain 
manufacturing momentum and return to net manufacturing job 
gains in this country, we need both improved economic 
conditions but also improved Government policies.
    Manufacturers believe regulation is critical to the 
protection of worker safety, public health, and our 
environment. We believe some critical objectives of government 
can only be achieved through regulation, but that does not mean 
our regulatory system is not in need of considerable 
improvement and reform.
    Regulations are often unnecessarily complex, duplicative, 
and ineffectively achieve their benefits. Excessive regulatory 
changes and uncertainty impose high costs, especially on small 
businesses, and small businesses, as we have heard, bear a 
disproportionate burden of regulation because the often high 
fixed costs of compliance are not subject to economies of 
scale. That is why today's hearing and the implementation of 
the Regulatory Flexibility Act are so important.
    Unfortunately, agencies are not anxious to analyze the 
impact of their regulations on small business. A recent study 
showed that between 1996 and 2012, fewer than 8 percent of 
rules were subject to RFA analysis by our Federal agencies. And 
although we had hoped that is because agencies made excellent 
decisions about which rules had those impacts, let me share a 
quick list of some of the most expensive EPA rules: EPA's 
greenhouse gas limits on power plants, National Ambient Air 
Quality Standards for ozone, Boiler MACT, and Waters of the 
U.S. rule. EPA certified that in each of these they would not 
have a significant economic impact on a substantial number of 
small entities.
    Each agency defines that phrase for itself and decides 
which rules to conduct analysis on. Last year, the SBA's Office 
of Advocacy saved small businesses more than $1.6 billion in 
first-year regulatory costs and since 1998 has saved more than 
$130 billion. Imagine what could have been accomplished if 
fewer rules could evade these requirements.
    Lawmakers have universally supported the RFA's provisions, 
but Congress needs to strengthen the law and close loopholes 
that agencies use to avoid its requirements. Among the reason 
for the small number of regulations requiring a regulatory 
flexibility analysis is the exclusion of the indirect effects 
of regulation. If an agency can claim that it is not directly 
regulating small entities either because it is regulating 
further up the supply chain or just regulating governments, it 
will not conduct the analysis. But this was not the original 
intent of the RFA, and one of the original authors, a 
Democratic Senator from Iowa, clearly stated that the scope 
included both direct and indirect effects.
    Unfortunately, the courts disagreed and found indirect 
effects to be outside the scope of the RFA, and this one change 
in the RFA would bring many of the rules most costly to small 
businesses under the act's framework and result in significant 
cost savings for small businesses. An example of an entire 
class of regulations exempted from the RFA because of this 
decision are Clean Air Act rules establishing National Ambient 
Air Quality Standards. Despite the fact that even the EPA 
acknowledges these rules often cost hundreds of billions of 
dollars to implement, no small entities are directly affected 
by these rules--simply because the Clean Air Act only directly 
regulates States which, in turn, regulate small businesses. 
This simple clarification to the law would have significant 
benefits to our small business economy, all the while ensuring 
the continued strong protection of air quality. After all, the 
RFA only requires the analysis of small entity impacts; it does 
not dictate how an agency will design its regulation. Since the 
RFA was modeled on the National Environmental Policy Act, its 
consideration of effects is also helpful to understanding the 
intent of the authors of this law. NEPA's implementing 
regulations define the term ``effect'' to mean ``direct 
effects'' and ``indirect effects,'' which are caused by the 
action and are later in time or further removed in distance but 
still reasonably foreseeable.
    The House has already passed legislation, as we heard, 
which would close many of these loopholes. The NAM encourages 
the Senate to take action on similar provisions to ensure vital 
improvements to the RFA are achieved in this Congress. The 
House legislation importantly also addresses regulatory 
lookbacks through improved Section 610 of the RFA.
    While we have appreciated this Administration's efforts on 
retrospective review, they have not resulted in significant 
cost savings or a change in culture in Federal agencies. To 
truly build a culture of continuous improvement and thoughtful 
retrospective review, different incentives are needed. To 
incentivize high-quality reviews, Section 610 must be reformed 
to clean up outdated or unnecessary regulatory accumulation.
    I appreciate the opportunity to testify today on behalf of 
manufacturers around the country, and I applaud you for holding 
today's hearing.
    Senator Lankford. Thank you, Mr. Palmieri. Mr. Hietpas.

TESTIMONY OF JERRY HIETPAS,\1\ PRESIDENT, ACTION SAFETY SUPPLY 
                            COMPANY

    Mr. Hietpas. Thank you, Senator. I really enjoyed the 
opening comments by the Senators. One of the things that people 
in the rest of the world think is that folks in Washington just 
do not get it. I can assure you what I heard this morning in 
the opening statements and the opening comments has completely 
disputed that kind of thinking process. You folks get it, and 
you understand. And so I want to encourage you to, first of 
all, never give up, never give in, press on, because we are on 
the same page.
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    \1\ The prepared statement of Mr. Hietpas appears in the Appendix 
on page 58.
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    The comments that I have submitted, my written comments do 
a really good job of identifying the problem. We do not really 
need to spend a whole lot more time identifying the problem 
with your understanding of the problem. What we really need to 
focus on is the solution. And so I am going to take my comments 
in that general direction based upon just one more little story 
that identified the problem but also worked through a solution.
    One of the things that we do in Oklahoma, other than the 
temporary traffic control for road construction and all the 
cool blinker signs and those kinds of things, we put up 
guardrail but we also stripe the roads. And one of the 
contracts that we have with the Department of Transportation 
(DOT) is a requirements contract that, when they come up, we 
have to bid on this thing. It is an annual contract with 
renewals that can take it to 3 years, a year at a time.
    What we do is, when the Department identifies some striping 
that needs to be done in a given area, they will issue a 
purchase order for that work, and we go do it. In order for 
that work to be scheduled, the Department of Transportation in 
the fall of the preceding year goes out and drives their 
sections of roadway--each division traffic engineer does that--
and identifies roadways where the striping is starting to break 
down and come apart and does not clearly identify or delineate 
the traffic lanes or do a good job for nighttime drivers. And 
so they will identify these pieces. They accumulate the number 
of feet of stripe. That comes up with a dollar figure, and they 
submit all of these things to the Federal Government for the 
funding assistance that they use. So this is done in the fall 
of the year.
    In the following spring of the year, they start issuing 
these purchase orders against these projects that have all been 
submitted and approved and the funds approved. Well, the 
comptroller's office is the one that does all of the funding 
solutions for the different using departments. They get these 
funds and tell Oklahoma Department of Transportation (ODOT), 
the transportation side, go ahead, go to work, we are ready. 
And so they issue the purchase orders.
    Well, in western Oklahoma, we had a series of roads that 
needed to be striped. They issued the purchase order, and we 
went out and met with the local people, got ready to start to 
do the work, and they said, yes, all of these are ready except 
for this one section of roadway. What is going to happen with 
this section of roadway, there is an expansion coming on. We 
have some widening, and a section of it is going to be 
overlaid. And so rather than stripe that section now, let us 
just hold off until the fall when that construction work is 
done, and we will put the stripe on the new surface rather than 
striping it now and covering that all up and wasting those 
dollars.
    That makes total sense. That is what we want to do. We want 
to do things that make sense. And so we go out, and we do that 
work. And, gosh, I think it was about September or October that 
we get called into a meeting that was being held by the traffic 
division to complain about the vendor--us--because we just were 
not prosecuting this work quickly enough and these things were 
being held open. We had numerous projects like this that were 
being held open. They are saying, ``What the heck is going 
on?'' ``We have a problem with this vendor. We need to get them 
out of here and get a different vendor because they are not 
completing this safety improvement work.''
    Well, when the division traffic people came in and sat down 
with us, they discovered that the dollars that were being hung 
up and the work that was not being finished is the work that we 
were holding off waiting for this overlay work so that we would 
not just waste these dollars. We had scheduled it to where it 
made sense.
    And so what happened is when we got all the people in the 
room, we found out from the comptrollers that if this work is 
not finished, the Federal Government closes out on these 
dollars. These dollars have to be sent back into the pool, and 
we lose those funds. A little bit of communication, they do the 
kind of paperwork, and it does not happen anymore. So we have 
undertaken the responsibility that if this happens, we just 
contact the comptroller's office.
    Now, why didn't we before? We did not know about it. 
Neither did the division guys out on the roadway know about it. 
And the comptroller did not want to talk to us because we are a 
vendor of the traffic division, and so they did not want to 
step on their toes. And so that one little fix, putting 
everybody in the room, got this thing done. I encourage you to 
figure out a way to get everybody in the room so that we can 
work our way through the regulations and make sense.
    Thanks for the opportunity.
    Senator Lankford. Thank you. Ms. Russell.

   TESTIMONY OF LAJUANNA RUSSELL,\1\ PRESIDENT AND FOUNDER, 
BUSINESS MANAGEMENT ASSOCIATES, AND MEMBER OF THE BOARD, SMALL 
          BUSINESS COUNCIL FOR SMALL BUSINESS MAJORITY

    Ms. Russell. Good morning, Chairman Lankford, and good 
morning, Ranking Member Heitkamp. Thank you so much for 
allowing us all to come in this morning and provide our views.
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    \1\ The prepared statement of Ms. Russell appears in the Appendix 
on page 65.
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    It is wonderful to hear everyone's different perspective, 
and, of course, here I am with just another one for you to 
consider. As you mentioned, I own a firm that is like a 
management consulting firm. We provide services to primarily 
Federal Government customers, and we are located right here in 
the Old Town area. So I hear that often, too, when I go outside 
of this area, that you are in D.C. We hear it every day. We get 
it. And sometimes others are like, ``You guys are a bit too 
much for us.'' But we understand.
    So I started my business in 2005 because I was doing some 
consulting work, and I wanted to do more. And I think that is 
when every entrepreneur really gets started. They want to do 
more, right? They have a fire or desire to take that thing, 
whatever that thing is, that they were doing that they found 
that they love. I can do more with that. I can make it bigger, 
better, stronger, faster. I can innovate. And that is what we 
started our businesses to do.
    And we never consider that there will be law, right? There 
are going to be rules; there are going to be regulations; there 
are going to be laws. There are going to be things that we have 
to follow. We do not quite consider that. We might not make 
plans for that all of the time. But sometimes I realize that 
half of them are necessary. Sometimes they work well to help 
and support small businesses, to level the playing field, to 
give us opportunity that we may not have gotten before. And so 
I want to take my testimony into that direction in terms of, 
yes, there needs to be some reform, definitely. This is a very 
nuanced kind of situation where I would love to see the Federal 
Acquisition Regulation (FAR) changed into a more common-sense 
and common-language document that we can all utilize. That is a 
simple example.
    But there are acquisitions--or, excuse me, there are 
regulations that have been really helpful in supporting small 
businesses. One of them is actually the financial reforms and 
looking at Dodd-Frank and assisting small businesses to have a 
really better playing field when it comes to large businesses. 
I think for us when we look at the regulations that have really 
supported us, it is those that actually have also some level of 
accountability built in, when we are the level playing field 
with the large businesses, that they can have accountability so 
that someone is watching out to make sure that everyone is 
doing what they are supposed to do.
    For my business, it also means increasing opportunities for 
contracting with the Federal Government and making sure we have 
support once we begin to grow. Amazingly, once a small business 
expands out of its SBA designated small business size 
standard--and sometimes that is only $7 million--then we are 
out in the woods, so to speak, without additional support or 
understanding or regulation on how we can grow more and get 
beyond the small business standard.
    We also want to compete further in the health care system, 
and I know that that is an interesting topic for us today, but 
I believe that the new regulations surrounding ACA have been 
helpful to small businesses. It has been crucial to helping 
more small businesses and self-employed entrepreneurs gain 
access to comprehensive and affordable health coverage. Many 
provisions of the health care law have been key to making 
health insurance more accessible and affordable, and for me it 
has helped my business as well. We try really hard to provide 
great health insurance and to pay the majority of the cost. We 
actually pay 80 percent for individual health insurance, and 
because of our premiums--and after ACA, the premiums have been 
lowered or maintained. We have actually been able to maintain 
that and offer an additional 20 percent for--not only the 80 
percent for the individual and then 20 percent for the family 
to ensure that we have full coverage.
    I know that prior to that, some small businesses were 
unable to provide health insurance for their constituents or 
for their employees, and I think that that is a very important 
thing. A healthy workforce is a stable workforce, and a stable 
workforce is going to continue to produce. And a producing 
workforce is going to continue to grow the economy. When you 
look at the number of small businesses that are promoting 
securing the economy and the Nation, enabling some level of 
health insurance for those small businesses is an important 
thing.
    So when you consider the number of Americans that have 
small businesses and employ the workforce and the huge impact, 
we have to change some of the regulations, and we have to 
ensure there are effective mechanisms to receive small business 
input. I think that is essential. But our economy does depend 
on it.
    Thank you.
    Senator Lankford. Thank you. Ms. Harned.

  TESTIMONY OF KAREN R. HARNED,\1\ EXECUTIVE DIRECTOR, SMALL 
   BUSINESS LEGAL CENTER, NATIONAL FEDERATION OF INDEPENDENT 
                           BUSINESSES

    Ms. Harned. Thank you, and thank you, Chairman Lankford and 
Senator Heitkamp, for having me here today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Harned appears in the Appendix on 
page 68.
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    On behalf of the National Federation of Independent 
Business, I appreciate the opportunity to testify on reforms 
that would improve small business input in the Federal 
rulemaking process.
    Since January 2009, ``government regulations and red tape'' 
have been listed among the top three problems small business 
owners face, according to NFIB Research Foundation's monthly 
Small Business Economic Trends survey. And in our latest 
report, analyzing December 2016 data, small business owners 
cited regulations as the second biggest impediment to expanding 
their business, second only to taxes.
    Small businesses bear a disproportionate amount of the 
regulatory burden as compared to the large corporations. And it 
is the small business owner, not a team of compliance officers, 
who is charged with understanding new regulations, filling out 
required paperwork, and ensuring the business is in compliance 
with new Federal mandates.
    Every hour a small business owner is spending complying and 
understanding the Federal regulation is one less hour that she 
is spending servicing her customers or planning for future 
growth of her company.
    During my nearly 15 years at NFIB, I have heard countless 
stories from small business owners struggling with a new 
regulatory requirement. To them, the requirement came out of 
nowhere, and they are frustrated that they had no say in its 
development. That is why early engagement in the regulatory 
process is key for the small business community.
    It has been two decades since the enactment of the Small 
Business Regulatory Enforcement Fairness Act. These amendments 
to the Regulatory Flexibility Act may not be well known to the 
average American, but they have positively impacted small 
business owners and their customers in every State across this 
country.
    SBREFA has been instrumental in tamping down the one-size-
fits-all mentality that can be found throughout the regulatory 
state. When followed correctly, it can be a valuable tool for 
agencies to identify flexible and less burdensome regulatory 
alternatives. However, these last 20 years have also exposed 
loopholes and weaknesses in the law, and it allows Federal 
agencies to act outside of the spirit of SBREFA when it comes 
to small business regulation.
    NFIB supports reforms that would expand SBREFA's reach into 
other agencies. Each agency should be required to comply with 
SBREFA, and Small Business Advocacy Review (SBAR) panels should 
be convened before every economically significant rule is 
promulgated. SBAR panels allow an agency to walk through a 
potential proposal with small business owners, either in person 
or on the phone, receive feedback and other input for those 
that will be directly impacted by regulation, much like what 
Jerry was mentioning earlier.
    NFIB also supports legislation that would account for the 
indirect cost of regulation on small business. Federal agencies 
are quick to proclaim the benefits of their proposals, but they 
decline to analyze and make publicly available the indirect 
costs to consumers. Whether a regulation mandates a new 
manufacturing process, sets a lower emission limit, or requires 
implementation of new technology, the rule is going to increase 
the cost of producing goods and services. These costs will be 
borne on small business consumers that purchase them and should 
be included in the calculation when agencies analyze the costs 
and benefits of new regulatory proposals.
    NFIB supports legislation that would allow for judicial 
review of RFA compliance during the proposed rule stage. Under 
current law, an agency determination that a rule does not 
significantly impact a substantial number of small entities may 
occur years before the rule is finalized. Small businesses must 
wait until the rule is promulgated before legally challenging 
it. Unless a court stays enforcement of the rule, small 
businesses must comply with it while the battle over its 
certification is fought in court. This system imposes 
unnecessary costs and regulatory burdens on small businesses 
and it is inefficient.
    NFIB also supports reforms that would waive first-time 
paperwork violations, require agencies to conduct more vigorous 
cost-benefit analysis, end Chevron deference, provide for 
third-party review of RFA analyses, codify Executive Order (EO) 
13563, and increase agency focus on compliance assistance. 
Finally, work still needs to be done to ensure agencies comply 
with the letter and the spirit of SBREFA.
    Small businesses are the engine of our economy. Yet over 
the last several years, the crushing weight of regulation has 
been a top reason preventing them from growing and creating 
jobs. NFIB looks forward to working with this Congress to pass 
regulatory reforms that would improve current law and level the 
regulatory playing field for small businesses.
    Thank you for inviting me to testify here today, and I look 
forward to answering any questions you may have.
    Senator Lankford. Thank you all for being here, and thanks 
for your testimony on where you are.
    The Chairman and I, and Ranking Member will defer on this 
for our questions on the end. Senator Peters, would you like to 
be able to ask some questions initially?
    Senator Peters. That would be great. Thank you, Mr. 
Chairman and Ranking Member Heitkamp for that.
    Senator Lankford. Thank you.
    Senator Peters. And to our witnesses, thank you for your 
testimony here today. It is important for us to have a thorough 
review of regulations to make sure that small businesses have 
the opportunity to be successful. But I think all of you would 
agree that it is also a very careful balancing act, and the 
fact, as Mr. Palmieri mentioned, from your association you 
realized that regulations are important in areas of workplace 
safety, workplace health, and the list goes on. And my 
experience in working with a lot of small businesses and being 
in private business for 20-plus years is most employers want to 
do that. And, in fact, they like the fact that the regulation 
is in place so that as they are good actors, they want to make 
sure everybody else is a good actor as well; otherwise, you 
have to compete with companies that are taking shortcuts and 
are actually hurting perhaps their employees in dealing with 
safety and health. And then that puts them at a competitive 
disadvantage, and then you get a race to the bottom. So we have 
to have those types of regulations in place.
    But having said that, there are a lot of crazy regulations 
as well out there that we need to fix. I was involved with one 
as a Member of the House. I come from Michigan where the auto 
industry is big. Auto dealers are an important part of that, 
and they had forms that they had to have customers fill out to 
confirm that their automobile met the Clean Air Standards and 
had the catalytic converters. It was something that was put in 
in the 1970s. And the automobile coming off the assembly line 
has all that now. It is not necessary to have that paperwork, 
and so we worked to get rid of that. And, unfortunately, it 
actually took an act of Congress to get rid of paperwork that 
auto dealers forced their customers to sign, which was just 
added work and problems.
    So we have to strike that balance, and I know that is what 
this Committee is all about, trying to do that. And I have 
heard some testimony, and I would like some more specifics, 
similar to the specific that I had with the piece of paper for 
the auto dealers. I have heard broad issues of concerns with 
taxation. Taxation is obviously beyond the scope of this 
Committee. I understand people have issues with the IRS. Issues 
with the Affordable Care Act have come up. And I am going to 
ask you a question, Ms. Russell, later about that. But as far 
as specifically now, and particularly, Mr. Palmieri, with 
manufacturers, that is incredibly important to me, especially 
small manufacturers, which is the lifeblood of Michigan. We 
have got our big manufacturers, but it is the supply networks, 
smaller manufacturers.
    If you were to prioritize them, what are a couple things 
that we should be thinking about in this Committee where we 
might have to intervene and have an act of Congress, like I did 
to help auto dealers smooth their process and save money for 
their customers? Are there a couple specifics? And I am going 
to ask Ms. Harned as well--you have heard countless stories--if 
there is something that is just specific to small business that 
really is an example of what is outrageous.
    Mr. Palmieri. Well, I mean, I think the challenge in 
identifying that one specific crazy item that affects small 
business is that for many of our small businesses, what they 
tell us is it is not that one item, it is not that last rule; 
it is the accumulation of all of those rules, the 650 major 
regulations from this Administration, the 500-plus from the 
last Administration, and the thousands and thousands of 
restrictions that they face on each stage of their production 
process.
    And so for us certainly the Congressional Review Act, there 
will be rules that will come up before the Senate and House 
that are negatively impacting manufacturers at all stages or 
increase the cost of energy for small businesses or others that 
will be immediate priorities. There is a list of challenges 
that we identified with the last Administration's rules, 
everything from overtime to the black listing rule to others 
that are at the tops of the lists of manufacturers.
    But what we hope to do as well is to identify ways where we 
cannot repeat the mistakes that we have so far, and that on a 
rule like the Waters of the United States rule we do that 
analysis up front: we look at those small business impacts; we 
consider less costly alternatives. We can only do that if 
Congress passes reforms of the Regulatory Flexibility Act 
legislation.
    Ms. Harned. Right. I would agree with Rosario. It really is 
for the small business owner the death by a thousand cuts or 
ten thousand cuts when it comes to regulation. It is that 
cumulative burden.
    One of the biggest rules, though, that is most problematic 
for NFIB members right now still out there is the overtime 
rule. That is by far and away one that we have heard the most 
from them on since it was finalized, and we would want to see 
that eliminated if at all possible.
    But when it comes to regulatory reform more generally, 
Rosario is right. You have so many regulations that are already 
on the books, and small business owners may not even know about 
that they are out of compliance. In fact, most of the time they 
do not. They do not until the inspector shows up. And if an 
inspector, to Senator Risch's point, comes to their business, 
they are going to look for and try to find a violation, and 
chances are they are going to be able to find one. And that is 
really the cultural change that I also think we would like to 
see at the agencies, one, again, that is more on how do we help 
you comply with the law as opposed to let us do a ``gotcha'' 
game once we get there, because small business owners do want 
to do right by their customers and their community. It does not 
help their business, which is typically advertised by word of 
mouth, if they are known as that bad person that is out there 
trying to pollute the waters or do all of these things that are 
harmful for our society. And they want to comply, but they 
cannot possibly be expected to understand and know all of the 
thousands of rules that may apply to their different 
businesses.
    Senator Peters. Right. Well, I understand that I am running 
out of time, lots of questions, but--and I understand there is 
a layer of many different regulations in place. But it is also 
helpful to identify some of those that we can try to fix. If 
you are dying by a thousand cuts and we can eliminate some of 
those cuts, that is better than keeping the whole thousand in 
place. And so having that kind of information is something I am 
willing and I know my colleagues here are willing to look at 
specifics as well that impact many small businesses, whether it 
is a flower shop or a hardware store on Main Street or a small 
manufacturer that is a third-tier manufacturer making parts for 
the auto industry or aerospace. You know, I want to work with 
you on that and look for specifics so we can make those kinds 
of fixes, because making those kinds of individual fixes then 
highlights the broader problem that will allow us to work in a 
more comprehensive way as well.
    So my staff will be following up with all of you to try to 
identify some of those things that we can be actively engaged 
in and try to help. Thank you.
    Senator Lankford. Thank you, Senator Peters.
    Senator Heitkamp?
    Senator Heitkamp. Thank you, Mr. Chairman. You know, we are 
the Committee that looks at the thousand cuts. That is our job 
here, and to look at how we can, in fact, create a system where 
you have a feeling like--or that you actually have had input on 
the front end, which is one of the issues that we heard this 
morning, which is it is like input and then this rulemaking 
takes forever, and it leaves this great deal of uncertainty, 
which causes a retraction in people's willingness to expand as 
they are waiting to find out what is that going to look like at 
the end, and so the chilling factor of pending rules on 
business development.
    But I want to get at two points because, again, we are the 
big-picture folks here. I know I say that word funny because I 
am from darn near Canada. Anyway, so let us talk about 
retrospective or retroactive review.
    Senator Lankford and I have been working on this issue. We 
have been talking about doing it on major rules, making sure 
that we have embedded within major rules a process for lookback 
so that we actually--not only do you have that process 
available, but you as small business owners commenting can help 
fashion what that retrospective review is going to look like.
    Mr. Palmieri, you mentioned the need for improved 
retrospective review in the small business space. Do you have 
specific ideas about how we can improve the 610 review process 
and how we can get at--every Administration comes in and says, 
``We are going to reinvent government. We are going to get rid 
of all these rules.'' And you saw it in the Clinton 
Administration, with some success, and then it just kind of--it 
is like yeast. It just starts blowing up again. People punch it 
down, but we never quite get at stopping that cycle of the 
growth.
    And so I am curious about retrospective review and how we 
should be doing it differently and if you are aware of the work 
that we have been doing on retrospective review.
    Mr. Palmieri. Absolutely aware of the work you both have 
been doing. You are leaders on regulatory reform, and we look 
to you. And certainly your legislation on planning for 
retrospective review we think is very important, and we are 
supportive of that legislation.
    As far as improving the process overall, I think the 
challenge that most Administrations, Republican and Democratic 
Administrations alike, have faced is that they try to do it 
alone; they try to do it without Congress. And when they try to 
do it without Congress, when they direct their agencies, ``Go 
and look for all the regulations you can fix,'' it is fix on 
your own. Right? So as soon as they run into a statutory 
requirement, they say, ``Well, we cannot touch this rule 
because it is required by statute.'' Or, ``If we tried to 
reform or undo or change, we would need to go to Congress 
first.'' And so that ends their discussion.
    So unless there is a combined Congressional-Administration 
discussion that results in a final product, either the 
Administration being required to send you a package of 
legislative reforms to implement those changes from 
retrospective review or, like Senator King and Senator Blunt, 
with the Regulatory Improvement Act, a commission-based 
approach where the two entities are working together and there 
is clearly a legislative package that will come to you, we will 
never realize the full benefits of retrospective review.
    And then certainly in my testimony and other places, much 
more thoughtful people than me have suggested--please.
    Senator Heitkamp. I do not mean to interrupt, but I am 
really intrigued by this idea that we then--anyone who has kind 
of watched these hearings that the Chairman and I have had know 
that I hit on this all the time, that we have a real fun time 
as Members of Congress beating up on the bureaucrats. But the 
bureaucrats, feel many times like, wait a minute, you guys are 
the ones who wrote these rules, or you know that this has been 
a problem. Let us take Waters of the United States. We have 
been in and out of the Supreme Court on Waters of the United 
States, back and forth, for 30 years. Isn't it time for 
Congress to legislate and say this is the lane? As long as we 
are just letting EPA and the Court decide, they are going to 
spill out, then the Supreme Court comes, and then they spill 
out, and we do not get any certainty to American business.
    So I want to ask you about this idea of submitting a 
legislative package, the regulators saying, ``Look, we think 
this is crazy. We do not want to do this, but we have to do it 
because it is a mandate, and we do not want an Inspector 
General (IG) report. We do not want a Government Accountability 
Office (GAO) report on this. Here is your list of legislative 
fixes that we can all agree.''
    Has that ever been done? Or, has that ever been embedded in 
any regulatory reform package that you are aware of?
    Mr. Palmieri. Not that I am aware of.
    Senator Heitkamp. It is a really good idea. It is a really 
good idea. And I wonder, as we kind of move forward, to think 
about that, because I totally agree with you. It is like 
talking over each other and pointing fingers, and we get 
nothing done. It is just an excellent suggestion. Thank you so 
much.
    Ms. Harned, could you offer any insights for us in this 
lane as well?
    Ms. Harned. Well, yes. I would agree with Mr. Palmieri 
that, regulatory--and you and Senator Lankford, retrospective 
review is critical because we have so many laws on the books 
that are not--or regs on the books that are not needed anymore, 
but you do have the statutory backup. And one of the things I 
would say also, over the last decade or so, we are seeing so 
many of the laws that are coming out of Congress that are 
giving the agencies even more authority and have much more 
ambiguity throughout that, which lets the bureaucrats make all 
of the decisions in the end. And we really think that we need 
to go back and especially tailor the legislation that is coming 
out of Congress at the beginning that really is getting your 
intent into the agencies' hands so that they really have a very 
clear road map of what they are looking at going in. That has 
not been happening. The Affordable Care Act actually is a great 
example of that, as are a number of acts.
    And so that would be one other thing I would add, is that 
there just needs to be more clarity in the drafting in the 
beginning when new mandates are going to go into effect.
    Senator Heitkamp. That presupposes that this is not done on 
purpose. We all know this is purposeful. It is like we cannot 
deal with that, it is too contentious, we are going to send it 
over there and then make judgments about the decisions they 
make on either side, depending upon who is in charge. That is 
no way to legislate. That is absolutely ignoring our 
constitutional responsibility. I totally agree.
    I want to get at the other issue that I think is critical, 
which is State and local regulation and the intersection 
between State and local regulation, because we have not quite 
had a discussion here about that, and whether any of you on the 
panel can offer some suggestions on how we can institutionalize 
better coordination, better dialogue, more opportunities for 
you to better understand how all of this works together, and we 
will start with you, Ms. Russell.
    Ms. Russell. Thank you. That is actually a very interesting 
topic for my company. We are about 100 employees, and we cover 
about 15 States. And every single State is completely 
different. Everything we do when it comes to taxes or human 
resources (H.R.) or whatever within that State and for those 
individuals, it varies. And so it is a tough question for us 
because, of course, we have the Federal rules and regulations, 
the Department of Labor, and then we have those things that 
each State is mandating.
    We have actually had to run separate payrolls sometimes 
because of one State needing it this way or one State needing 
that way, in different formats or timing. And that would be 
something awesome if we could get every State on the same page. 
How do we do that? Right? Every State is run differently; every 
State is governed differently, and their individuals from that 
perspective. And that would be extremely helpful, I know, for 
small businesses looking at the State level, when you are 
looking over multi-states for employment.
    Senator Heitkamp. Not to interrupt because I want to hear 
from everyone, and we run kind of a loose ship here. If I can 
just offer a couple more?
    You look at the Uniform Commercial Code, which was designed 
to create--for all of these various jurisdictions to come 
together and say here are commercial rules so that it is easier 
to do business across borders. So it is a great model, but now 
we have kind of--with all of the business interaction and with 
more multi-state businesses, we do not have something that is 
similar to that on payroll. We do not have something that is 
similar to that on other kinds of, the Occupational Safety and 
Health Administration (OSHA) regulations where you can feel 
comfortable if you are in compliance in Oklahoma that you are 
going to be in compliance in North Dakota. And, I am a big 
believer in the Tenth Amendment. I came out of State 
government. And so I am not someone who says that there should 
be mandates here, but I think there is a great interest that I 
have in trying to incentivize States to coordinate better, to 
try and create opportunities for regional businesses, so that 
those small businesses can grow.
    So I guess, in Oklahoma, what do you see from your 
perspective? Does your business, Jerry, go regionally, or are 
you just in the State of Oklahoma?
    Mr. Hietpas. We have done business in other States. We 
actually have an office in Topeka, Kansas, which is the 
northern annex of Oklahoma. [Laughter.]
    But my perception of your question, and reshape me if I am 
headed in the wrong direction, but my understanding of the 
question is how do States perceive what is required of them of 
the Federal law and the regulations that they put in place in 
order for us to meet and for them as well to meet the Federal 
law.
    What we see on our side of the deal, we have, of course, in 
our mainstay the Manual on Uniform Traffic Control Devices, 
which is a Federal document, part of Title 47, so that signs 
and barricades and the methodology is uniform across the United 
States. But each State, first of all, adopts that as their 
basic, but every regulation they put in place beyond that is 
their perception of what it takes in order to meet the Federal 
law.
    We find the same thing with our compliance in the Davis-
Bacon, and part of my submitted testimony has to do with how do 
we determine wage rates. Well, in Oklahoma, it is done a 
certain way so that we have like 9, 10, or 11 different wage 
rates based upon regions just so that Oklahoma's version of 
compliance with the Davis-Bacon wage law for fair wages for the 
construction employees makes sense. It is different for us when 
we go to Kansas. We have their perception of that same law 
where we are doing our certified payroll reports.
    And so each State I believe is doing their best to come up 
with their own regulations and their own operations in order 
to, from their perception, meet the requirements of the Federal 
law. I do not know if there is a way that we can get the folks 
together and say, OK, what we really need from you at the 
Federal level is this kind of information in this kind of a 
format, and that would, in my opinion, cause uniformity at 
least in regions, but very possibly all the way across the 
entire country.
    Senator Heitkamp. That is a great specific example of what 
I am getting at, but, again, we are up here, we are not the 
Commerce Committee that deals with the transportation issues. 
So we are trying to figure out how we put opportunities in 
place to have that discussion and maybe have a greater 
collaboration with State and local entities about what we are 
hearing here about regulation, either implementing Federal 
programs or just--payroll is a great example. I mean, every 
State is going to have a different kind of requirement. They 
may have different safety requirements beyond what OSHA has, 
and you have to know all of that. And there has to be--in North 
Dakota, we implemented one-stop shopping so that we could get 
all of--whether it workers' comp and unemployment and, when I 
was tax commissioner, registration for sales tax, retail 
licensing.
    So we tried to consolidate where people would go, but, you 
look at the different definitions of employer, there is just a 
classic example. Maybe we have one here for the IRS, one here 
for OSHA, one here for all of the other provisions, and all of 
that creates compliance costs.
    And so, Mr. Palmieri, can you offer anything on State and 
local regulation?
    Mr. Palmieri. Sure. I mean, I think one place to look for 
feedback on this issue is offices of kind of State economic 
development entities, because the best ones are focused not 
just on providing extra resources or whatever, but helping a 
business, a manufacturer or other that wants to build a new 
facility to go through the permitting process in their State. 
And they can identify for you, here are the things that we have 
improved in our State and made easier than maybe another State, 
but here is the Federal overlay of things that still make it 
more difficult for us to help a business build a new facility, 
increase jobs, or retain jobs in a State. And I think that 
would be one place to go.
    I would say at a minimum the Office of Advocacy in SBA had 
a program for a number of years where they were encouraging 
States to adopt their own regulatory flexibility laws, so 
actually being advocates at the State level because of exactly 
what you have identified for reforms to make State regulation 
more small business friendly as well.
    Senator Heitkamp. Before we populate the States with that 
model, we need to make sure that the Office of Advocacy gets 
listened to here in Washington, DC.
    Just one last comment, and then I will yield back to the 
Chairman.
    Ms. Harned. Yes, thank you, Senator Heitkamp, for the 
question. We have actually a very active member in Texas who 
really points up the issue quite well. He has been very much--
he is in partnership with the Texas safety and health 
organization down there. They have inspected his business. He 
has strong workers' comp insurance. That person has inspected 
his business. And I have spoken to him and even the commission 
down there, and I said, well, if somebody--you go in and you 
say this business is good, they have taken care of everything 
we had, if we had any concerns. What does that mean at the 
Federal level? Basically nothing. And that really is something 
that I think we should fix. We need to eliminate the number of 
boxes that business owners need to check. They need to be able 
to know, hey, OK, I checked this box, I am good, and not worry 
that there is somebody who is going to come around the corner 
the next day and say, oh, but you are not because you have not 
gotten my box checked.
    There has to be more collaboration in that area, I think, 
to minimize the burden on them and the people that are coming 
to them with different requests and concerns.
    Senator Lankford. All right. So how do you do that? Because 
that is something I hear commonly from different companies. I 
will talk to some manufacturing location or some business, and 
they will say, ``Hey, the inspector for XYZ entity just left.'' 
And I will go, ``Great. How did it go?'' ``It went terrific. 
Next week I have a different inspector that is coming in from a 
different group, and I understand 3 weeks from now, we just 
contacted that a different inspector is coming in.''
    All of them have their own silo. All of them have their own 
requirement to be able to check things off. Each of them 
carries with them the opportunity to be able to do a fine for 
someone or to be able to step in and help. How do you 
coordinate all those?
    Ms. Harned. Well, I think maybe, this is just some thoughts 
I have had, that the Federal agencies can try to create these 
strategic partnerships, work with the State and--at a minimum, 
start with the State organizations and see are we good here, is 
there even an issue in the State? Is this State doing--and at 
least giving them----
    Senator Lankford. In environmental law areas, EPA often 
delegates to in our State the Department of Environmental 
Quality, and it says here are all the standards and things that 
we are looking for. The State can do this. If you add 
additional requirements, you are welcome to, but this is the 
minimum standard. And so then that State entity would sign off 
on that. They would do the inspections. And if the State has 
signed off on it, then the Federal Government would accept 
that. Is that the model you are proposing?
    Ms. Harned. Well, I do not want to speak formally for NFIB 
on that because we would want to discuss that more internally, 
but I do think that you need to find a solution where you are 
getting--you are having less boxes that need to be checked. And 
to me, that idea is starting to get you there.
    Senator Lankford. OK. Mr. Hietpas, how many pages of 
regulations do you think your business has to comply with? Have 
you ever dared to guess at how many pages of requirements you 
have?
    Mr. Hietpas. Absolutely not. Just this little packet right 
here represents just the payroll section. And it is not all of 
it. It is just the highlights. No, I do not think I could pay 
someone full-time that could sit down and read it and complete 
the process within a year.
    I think more typically than anything, we find out about the 
regulations after we violate one, and go----
    Senator Lankford. You mean you do not have a full-time 
employee that is reading the Federal Register every day? 
[Laughter.]
    Mr. Hietpas. Thank goodness not. That would be a difficult 
position to keep filled.
    Senator Lankford. Yes, it would, actually. I do fear that 
at times agencies do believe, ``I posted that in the Federal 
Register. Every small business in America should have seen 
it.''
    Mr. Hietpas. I am absolutely convinced that you are correct 
and that that is the common belief. Your solution that you 
offered, as you started this question, makes a lot of sense to 
me. And I can appreciate that Karen cannot speak because she 
has a thousand voices behind her. I get to speak for one, with 
an understanding of knowing about the road construction 
community and the subcontractors that back that up, that if we 
had the State authority, knowing what it takes to check all the 
Federal boxes, we can talk to them, we can figure out what 
pieces are missing. And if we run into an issue like I did with 
my example that I did in my testimony, we can sit down and get 
that worked out pretty quickly and quickly come into 
compliance. We do not want to sit and battle Federal 
regulations. We have other things to do.
    So knowing what to do, do it right the first time, and 
moving on just makes a ton of sense, and it is easy for us to 
employ folks to go to work at that point.
    Senator Lankford. OK. Ms. Russell, you have a comment on 
that?
    Ms. Russell. I did. Thank you. It would be interesting--
and, of course, the innovation part starts to come out. It 
would be interesting if we really were able to sit down and 
understand State to State to State what is it so different that 
you are requesting that is not already requested at the Federal 
level. I do not know if that kind of analysis has ever been 
done, get all of the State--he was mentioning--the economic 
development individuals in one room or four rooms if you want 
to do something like that and work through, well, what is so 
different from Oklahoma to Kansas in that area? We have to look 
at one area at a time. What is so different? Is there a way 
that we can consolidate that at least into one form? You have 
those neighboring States that have the same industry that could 
potentially have one form. That is a start. Now let us take 
that one form and see how far we are from Federal. That is one 
start.
    Senator Lankford. OK. Mr. Palmieri, there has been some 
conversation about two different terms that Congress put into 
statute back in 1980: ``significant economic impact'' and 
``substantial number of small entities.'' Those have never been 
defined, and they just kind of sit out there. Is there a need 
to get some sort of definition and to get some sort of clarity 
on those?
    Mr. Palmieri. I think there is. Certainly, each agency 
defines for itself what those words are today. It gets some 
assistance on compliance from the Office of Advocacy. But the 
Office of Advocacy is not in control. It does not have the 
authority it needs to be able to identify across the government 
what those words mean. And so whether it is through rule-
writing authority for them, kind of, again, the National 
Environmental Policy Act (NEPA) model, The Council on 
Environmental Quality (CEQ) wrote the rules that everybody 
lives by and all agencies live by, as opposed to each agency 
deciding for itself what a ``significant economic impact'' 
would mean. I think that would go a long way.
    If you look at the legislative history, back in 1980, they 
felt we did not really have a grasp of the regulatory system at 
that point, so it was hard for them to put into statute 
stronger language. Clearly, I think we are in a better place. 
We have resources, people who know how agencies evade these 
rules when they should not and what it means. I think we are in 
a much better place to give someone the authority to define 
these terms, whether it is Congress or advocacy.
    Senator Lankford. Let us just take the Office of Advocacy. 
Is it in the right spot? And does it have the authority that it 
needs?
    Mr. Palmieri. It does not have the authority to write 
governmentwide rules to define those terms. It can provide 
guidance, but unless you amend the law, they do not have the 
authority to do that. And even if they did, agencies would not 
listen to them.
    Senator Lankford. So take the model of the Office of 
Management and Budget (OMB) and the Office of Information and 
Regulatory Affairs (OIRA), and if there is a significant rule 
that is being promulgated, OIRA has a responsibility to be able 
to check it, come back. They have an internal back-and-forth to 
be able to do that, but that is a requirement that is set into 
place by the Administrative Procedure Act (APA). That model 
does not seem to exist. Every agency just determines on its own 
this is not significant or this does not really reach a 
significant number of groups, and so I do not have to talk to 
anyone. I just put it out there, and the Office of Advocacy can 
raise their hand or can write a letter but really cannot force 
someone to say let us sit down and talk about that.
    Mr. Palmieri. So right now it depends on the relationship 
between OIRA and the Office of Advocacy. If there is a strong 
cooperative relationship there, OIRA can be an enforcer of 
those rules. In different times and in different 
administrations, there have been, you know, clear relationship 
Statements, a memorandum of understanding, but to us I think as 
we are talking about rewriting the law, it is a perfect 
opportunity to give that authority to advocacy, to be able to 
put themselves in a position to answer definitively for the 
government when someone is doing that or not. Certainly, they 
have the ability to define that on the judicial review side. 
Why not have them do it up front?
    Senator Lankford. Go ahead.
    Senator Heitkamp. I was thinking maybe Advocacy belongs at 
OMB and not at SBA.
    Mr. Palmieri. Well, so it is an independent entity.
    Senator Heitkamp. Right.
    Mr. Palmieri. It just shares, space and resources. And 
where it sits would not matter to us as much, but I think if 
you talk to folks who work at Advocacy, there is probably 
something about being kind of a part of that.
    I have also seen proposals years ago of spinning off the 
Office of Advocacy and making it its own independent commission 
so that it was free of all agencies and had more independence. 
But to us, what is most important is that it has resources and 
authority because it does excellent work across Democratic and 
Republican Administrations and is the only voice sometimes that 
will raise its hand against the Administration's priority, 
whether it is EPA or OSHA or others, and say, ``We disagree.'' 
And that is such an important voice to have in this process.
    Senator Heitkamp. Right, I could not agree more. And when 
we are talking about taking that model and populating it in the 
States, we need to refine it here. Because I sit on the Small 
Business Committee, we hear from the Advocacy folks, and I 
think there is enormous frustration that they do great work, 
they point out all the problems, and it just falls on deaf ears 
because someone says, ``We do not agree with you.''
    There needs to be a very strong message from Congress that 
these are our folks, these are our folks who are doing the 
watchdog work of Congress, making sure that we are not overly 
and unnecessarily burdening small business, or at least we have 
that perspective.
    So we are very interested in what we should be doing to 
reform or enhance or make that an entity that feels like, man--
that the agencies feel like, man, we better find out what they 
are going to say, because there are going to be a whole lot of 
people up on Capitol Hill not happy if these folks say they 
were ignored.
    Senator Lankford. And years ago, Congress stepped in on 
what is now affectionately called the ``SBREFA panels'' and 
said there needs to be a gathering of individuals, much like 
what Mr. Hietpas was talking about earlier, make sure everybody 
gets in the same room to be able to have a conversation about 
its effect. The concern is those have not been effective, so I 
am interested in any kind of input. The design was to get more 
people to be able to talk about a rule before it is finalized 
to specifically talk about small business entities. It only 
affects EPA, OSHA, and the Consumer Financial Protection Bureau 
(CFPB). They are the only ones that are required to do it. Then 
the question is: Should this be expanded and should there be a 
great conversation happen on it? And I am open to anyone for 
input here.
    Ms. Harned. Well, NFIB has long recommended that it be 
expanded to all the agencies. We think it is critical----
    Senator Lankford. Independent and executive.
    Ms. Harned. Absolutely. Again, as Mr. Palmieri was saying, 
so often Advocacy is the only small business representative at 
the table. If we can get other small business owners--again, it 
is easy to talk on the phone. These people do not necessarily 
have to come to town. But to actually get them to say what this 
will actually mean for their business is critical, and also 
ensuring that it is a true small business owner, and by that I 
mean small business is defined broadly, right? A business that 
has its own quality assurance officer, that is wonderful that 
it has the resources to employ that person. But we need to 
worry about the businesses that do not have that person and 
what their perspective is when these rules are being created.
    Senator Heitkamp. So your perspective is some of the 
solutions that come out of Advocacy are geared toward 
businesses that may not really need that kind of assistance 
compared--or they do not reflect what is actually happening for 
truly smaller businesses?
    Ms. Harned. Oh, I am sorry. I did not mean that for 
Advocacy. I meant on the Small Business Advocacy Review panels, 
where you do have a panel process.
    Senator Heitkamp. OK.
    Ms. Harned. Sometimes they are supplied primarily----
    Senator Heitkamp. They are populated by people who you 
think do not really understand what that is for the five-guy 
body shop----
    Ms. Harned. Correct.
    Senator Heitkamp. There is no way he even has the ability 
to do payroll. He contracts all the business stuff out. He does 
not want to think about this, but all of a sudden he is stuck 
with some new rule on, what a spray tent will look like, and he 
is not represented or she is not represented.
    Ms. Harned. Correct. And part of that also is, the time 
that it will take for the small business owner to participate 
and finding that person, right? But that is also where 
technology can be so beneficial so that it does not seem like 
such a cumbersome ask for them when the government is asking 
for their opinions, because I think that also would help get 
more engagement from that community in this process.
    Senator Lankford. OK. Fair enough.
    So there has been some conversation, I have heard several 
of you mention this as well, this issue about direct cost and 
indirect cost and trying to estimate what is the real effect on 
a small business as well. What are the recommendations that you 
have to be able to help correct this issue? And how can we 
really know the actual effect on a business? Mr. Palmieri.
    Mr. Palmieri. So this is just an error in interpretation of 
this law, and so it is a simple fix, just to make clear that 
when we say ``significant economic impact,'' that is direct 
effects and indirect effects. And we have to say it in the law; 
otherwise, agencies will never follow it. And so that small 
number of rules that ever get this small business impacts 
analysis, one of those reasons is because they get to say a 
whole suite of their rules will never meet that definition 
because they only have indirect effects. And we know for so 
many of our small businesses, they are not often the directly 
regulated entity. Right? So we are regulating their power 
supplier, we are regulating one of the larger businesses, and 
they are a subcontractor to that business. And so there are all 
sorts of reasons why small businesses are often not the direct 
intended target of the rule, but are the ones that are most 
affected or most disproportionately affected. And so just 
fixing that in law, making it very clear, ``No, Congress means 
indirect effects also,'' will solve this problem.
    Senator Lankford. Other comments on that?
    Ms. Russell. I would agree. Indirect, you are still 
expending resources, you are still expending money, you are 
still expending the time. Just because they would state it 
differently, it does not lessen the impact of the small 
business.
    Senator Lankford. All right. It is fascinating to me, the 
number of times that I will talk to an agency, and they will 
tell me, ``This does not affect a small business because this 
is only a regulation that was designed for larger businesses.'' 
And that does not seem to be in touch with the basic supply 
chain conversation, much less the actual effect that it is 
going to have in so many other ways.
    Let me ask you a question about implementation timelines. 
It was one of the many things that came up during many rules 
that are rolled out. Is there a need for a different 
implementation timeline on a new reg for small businesses 
versus large businesses? The best example here, Mr. Hietpas has 
already admitted he does not read the Federal Register every 
day. There is a compliance person that is researching that out 
for most large businesses, and down the hall there is a group 
of attorneys that are chasing that down. But for a small 
business, they typically will have an annual update from 
someone that they have hired or from someone from some 
organization that sends out information to them.
    Is there a different timeline needed to say large 
businesses, medium to large businesses, your implementation 
timeline is 6 months, small businesses get a year to be able to 
implement that? And if so, can you think of examples?
    Ms. Harned. Yes, thank you, Senator, and this is a critical 
issue. You see this not just in regulation. Quite frankly, you 
see it in just how the world works for a small business owners. 
You look at data on how long it took small businesses to really 
embrace even things like the Internet and, new technologies. 
They are always going to take longer than a large corporation 
to be able to understand and embrace and incorporate that into 
their business. So it is critical when it comes to regulation 
that implementation dates are extended for them because, again, 
they may not even know that the rule exists by the time it 
becomes effective. Meanwhile, the large corporation has already 
cleared the path and is in compliance, and you have to build in 
time for them to know the rule exists, understand what the rule 
means, and comply with it. And because of their limited 
resources, their limited manpower, it is going to take more 
time for small business owners.
    Senator Lankford. All right. Mr. Hietpas.
    Mr. Hietpas. One more element that tags onto Karen's 
statement is being able to build the costs in, figuring out 
what the cost is of compliance and building that in. We just 
started a project on I-235 in Oklahoma City to just take care 
of the railroad bridge widening of that particular roadway. The 
contract length is 430 calendar days. And so if a new 
regulation is put in play and we have 6 months to comply, and 
because of certain elements of that regulation, it is going to 
add about $2,000, $3,000, $4,000 to that I-235 project, I am 
stuck. That is just another investment in a compliance 
opportunity.
    The striping contract that I was talking about earlier was 
a one-year contract with two opportunities for extensions, and 
those opportunities are based upon what happens to our costs. 
And so if our costs escalate sharply, we do not extend the 
contract. We put the thing back out for rebid. So we sign up on 
the new one, have 6 months to comply, and, again, we are stuck 
with the deal.
    So in many cases, a new rule will come down, the larger 
companies figure out what it is, and then those larger 
companies that hire me to do the work, I will go ahead and do 
the work. And like an example I put in my written testimony, 
here are all the new rules from the Housing and Urban 
Development (HUD). All we were doing was striping a section of 
roadway on a project that was funded with HUD dollars using 
State of Oklahoma specifications, working in the city of Moore. 
Did I anticipate that I was going to have my office staff work 
on the paperwork for 2 weeks in order to get paid? That was not 
included in that bid.
    But, it took us 4 hours to stripe the job and 2 weeks to do 
the paperwork in order to be paid. It was striping a roadway 
using the State standards on a road inside the State of 
Oklahoma. Everything was what we knew and understood. We just 
did not understand HUD's set of rules.
    Now, I am not even completely convinced that HUD had all of 
those kinds of things. What I am convinced of is that the city 
of Moore, in anticipating what it would take in order to get 
all the qualifications met for the HUD funding for that 
particular roadway, that this was their interpretation of the 
paperwork. Again, legislating--getting people in the same room, 
figuring out here is what is produced, here is what we do, will 
this meet your standards, yes or no? And if not, what minor 
modification do we need to make in order to do that? I think 
that cuts through a whole lot of this stuff, but, 
unfortunately, we are talking with people at a local level--or 
at a lower level, and we have one of these buildings someplace 
where HUD's main office is. Someone there said this is what it 
is going to take to comply with Congress' intent of the law, 
and so the regulations are passed down so that they get their 
paperwork, and by the time it finally gets through, we have 
complied with the law, but we may have been able to do it with 
a lot less hoops to jump through.
    Senator Lankford. All right. With that same comment, Ms. 
Harned, you mentioned in your list, which was a very good list 
of practical ideas, the waiver for first-time paperwork 
violations. Walk through that.
    Ms. Harned. Yes, this has been something, again, that NFIB 
has long advocated for because, again, small business owners do 
not necessarily know when they are out of compliance. Giving 
them the chance, letting them know that it is not going to be a 
``gotcha'' game, that just because they get dinged on 
something, they are going to be given an opportunity to correct 
it. Then if they do not correct it, they are the bad actor that 
needs to be punished. But if they do not know that they are out 
of compliance with one of a thousand regulations, at least 
giving them a break on the first time, especially when it is 
not a big safety--not an imminent safety issue or something 
like that and a paperwork violation, we really think is the 
right thing to do.
    Senator Lankford. Mr. Palmieri.
    Mr. Palmieri. We also support that legislation, and I would 
just say that your new Democratic colleague in the Senate, 
Senator Tammy Duckworth, from Illinois, also introduced a 
version of that legislation when she was a member of the House. 
So we think there is a real bipartisan opportunity to address 
that and just to say again it is a focus on compliance 
assistance. What we are trying to get our small business to do 
is to be in compliance, to be aware of the rules before they 
get a $10,000 fine. And, unfortunately, I have had small 
businesses who have testified before this Committee who have 
told you that, they missed a signature on a form, and they got 
a $10,000 fine that took them months to negotiate, a reduction. 
But that is often the impression that is left about the 
relationship between small businesses and the Federal 
Government, is there is no outreach, there is no assistance, 
there is no education. It is do it right, or my only response 
is a big financial penalty. And it does not serve anybody's 
ends.
    Senator Lankford. No, it does not. And Senator Heitkamp and 
I have talked about this before. There is a manufacturer in 
Oklahoma that did not submit the form about conflict minerals 
saying, ``We do not use conflict minerals,'' which they do not. 
So because they did not submit the form saying they had nothing 
to submit, they were fined $100,000. A form that said, ``We 
have nothing to submit, that is a $100,000 fine. And at some 
point, this looked rational to someone in D.C.? But it does not 
look rational to anyone else.
    Senator Heitkamp. And here is another example: A contractor 
of mine had a project in San Francisco. It got stalled out for 
funding, and I think there was a disagreement about how they 
were going to do it. They had to file Davis-Bacon reports every 
week saying, ``I did not employ anyone,'' for 2 years. You 
know, 104 reports saying, ``I have nothing to report,'' or they 
would have been fined.
    And so those are the things that I would hope, regardless 
of where you are on the political spectrum, we all could agree 
that is just crazy, that is just wrong.
    And so I think that in this area there is going to be some 
low-hanging fruit that will be really easy to work on, and then 
there is some systemic kinds of discussions, whether it is 
judicial review, which we go back on--I mean, we kind of know--
--
    Senator Lankford. Which I am right on, by the way.
    Senator Heitkamp. Yes, sometimes. [Laughter.]
    Guidance which we go back and forth on. I kind of try and 
explain to the Chairman that sometimes people need guidance, 
and that is very valuable.
    Anyway, but if you went and looked at low-hanging fruit, I 
think you had a great list. I think we are going to need to 
kind of examine that, Karen, and try and figure out how much of 
that would be easy to do. But we are really committed to 
listening, really committed to a system where people do not 
feel like there is an adversarial relationship in accomplishing 
the work of the people of this country.
    And so I just want you to know--I am going to have to scoot 
off here in a little bit because I have another appointment, 
but I want you to know that this is just a great beginning for 
our Committee, having you all here. I want to thank you for 
your input, thank you for your statements. And I look forward 
to continuing the dialogue about so many good ideas that have 
been advanced here.
    Senator Lankford. Thank you.
    Any other final comments from any of our witnesses?
    [No response.]
    Senator Lankford. I do appreciate very much your testimony, 
both your written testimony and your oral testimony. We look 
forward to following up in the days ahead to be able to 
continue to gather practical ideas as we are trying to pull 
together, as Senator Heitkamp said, a practical list of 
legislative solutions to be able to move through this process. 
There is bipartisan agreement on those areas. Where there is 
bipartisan agreement, we should seize on it and be able to move 
and be able to see how much can be done to be able to help in 
this area related around a small business regulatory scheme.
    Before we adjourn, I would like to announce that on 
February 9, the Subcommittee will hold a hearing on the State 
of the Federal workforce entitled, ``Empowering Managers: Ideas 
for a More Effective Federal Workforce.''
    That concludes today's hearing. I would like to thank the 
witnesses again for their testimony. The hearing record will 
remain open for 15 days until the close of business on February 
3, for the submission of statements and questions for the 
record.
    Thank you all again. This hearing is adjourned.
    [Whereupon, at 11:39 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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