[Senate Report 106-146]
[From the U.S. Government Publishing Office]




                                                       Calendar No. 267

106th Congress                                                   Report
  1st Session                    SENATE                         106-146

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



 
                   INDEPENDENT OFFICE OF ADVOCACY ACT

                                _______
                                

                August 27, 1999.--Ordered to be printed

   Filed under authority of the order of the Senate of August 5, 1999

                                _______


Mr. Bond, from the Committee on Small Business, submitted the following

                              R E P O R T

                         [To accompany S. 1346]

    The Committee on Small Business, to which was referred the 
bill (S. 1346) to ensure the independence and nonpartisan 
operation of the Office of Advocacy of the Small Business 
Administration having considered the same, reports favorably 
thereon with amendments and recommends that the bill, as 
amended, do pass.
    On July 15, 1999, the Committee on Small Business 
considered S. 1346. The Committee adopted an amendment offered 
by Chairman Bond and Ranking Democrat Kerry. As amended, the 
bill provides for the independent and nonpartisan operation of 
the Office of Advocacy of the Small Business Administration. 
Having considered S. 1346, as amended, the Committee reports 
favorably thereon without further amendment and recommends that 
the bill do pass.

                        I. Need For Legislation

    The Office of Advocacy is a unique office within the 
Federal government. It is part of the Small Business 
Administration (SBA/Agency), and its director, the Chief 
Counsel for Advocacy, is nominated by the President and 
confirmed by the Senate. At the same time, the Office is also 
intended to be the independent voice for small business within 
the Federal government. It is supposed to develop proposals for 
changing government policies to help small businesses and to 
represent the views and interests of small businesses before 
other Federal agencies.
    The General Accounting Office (GAO) recently published a 
report on personnel practices at the SBA (GAO/GGD-99-68). The 
GAO reported that Assistant and Regional Advocates hired by the 
Office of Advocacy share many of the attributes of Schedule C 
political appointees. Regional Advocates, who are senior staff 
in the Office of Advocacy, are frequently cleared by the White 
House personnel office, which is the same procedure followed 
for approving Schedule C and non-career SES political 
appointees. The report raises questions, concerns and 
suspicions regarding the independence of the Office of 
Advocacy, and the Committee approves legislation to address 
issues raised in the report.
    The Independent Office of Advocacy Act responds to these 
concerns and is designed to build a firewall to prevent the 
political intrusion into the management of day-to-day 
operations of the Office of Advocacy. The bill requires that 
the SBA's budget include a separate account for the Office of 
Advocacy. No longer would its funds come from the general 
operating account of the Agency. The separate account would 
also provide for the number of full-time employees who would 
work within the Office of Advocacy. No longer would the Chief 
Counsel for Advocacy have to seek approval from the SBA 
Administrator to hire staff for the Office of Advocacy.
    The bill also continues the practice of allowing the Chief 
Counsel to hire individuals critical to the mission of the 
Office of Advocacy without going through the normal competitive 
procedures directed by federal law and the Office of Personnel 
Management (OPM). The special hiring authority, which is 
limited only to employees within the Office of Advocacy, is 
beneficial because it allows the Chief Counsel to hire quickly 
those persons who can best assist the Office in responding to 
changing issues and problems confronting small businesses.
    As the director of the Office of Advocacy, the Chief 
Counsel for Advocacy has a dual responsibility. On the one 
hand, this individual is the independent watchdog for small 
business. On the other hand, he or she is also a part of the 
President's Administration. These two roles are sometimes very 
difficult roles to play simultaneously.
    The Independent Office of Advocacy Act is designed to make 
the Office of Advocacy and the Chief Counsel for Advocacy a 
fully independent advocate within the Executive Branch acting 
on behalf of the small business community. The bill would 
establish a clear mandate that the Office of Advocacy will 
continue to fight on behalf of small businesses regardless of 
the position taken on critical issues by the President and the 
Administration.
    The Office of Advocacy as envisioned by the Independent 
Office of Advocacy Act will be unique within the Executive 
Branch. The Chief Counsel for Advocacy will be a wide-ranging 
advocate, who will be free to advocate change in government 
programs and attitudes as they impact small businesses.
    In 1976, Congress established the Office of Advocacy in the 
SBA to be the eyes, ears and voice for small business within 
the Federal government. Over time, it has been assumed that the 
Office of Advocacy is the ``independent'' voice for small 
business. While the Committee believes that the Office of 
Advocacy and the Chief Counsel should be independent and free 
to continue to advocate or support positions that might be 
contrary to the Administration's policies, it has become 
apparent the Office is not as independent as necessary to do 
the job adequately for small business.
    For example, funding for the Office of Advocacy comes from 
the Salaries and Expense Account of the SBA's budget. Staffing 
is allocated by the SBA Administrator to the Office of Advocacy 
from the overall staff allocation for the Agency. In 1990, 
there were 70 full-time employees working on behalf of small 
businesses in the Office of Advocacy. The FY 1999 allocation of 
staff is 49, and fewer are actually on-board as the result of 
the hiring freeze imposed by the SBA Administrator. The 
independence of the Office is diminished when the Office of 
Advocacy staff is reduced to allow for increased staffing for 
new programs and additional initiatives in other areas of SBA, 
at the discretion of the Administrator.

                      II. Description Of The Bill

    The Independent Office of Advocacy Act (S. 1346) provides 
for an effective, independent advocate for small business 
within the Federal government that is not restricted by the 
views or policies of the Small Business Administration (SBA/
Agency) or any other agency. The Act is designed to make the 
Office of Advocacy and the Chief Counsel for Advocacy a full 
independent advocate within the Executive Branch acting on 
behalf of the small business community.
    Under this bill, the Office of Advocacy will be unique 
within the Executive Branch. The Chief Counsel for Advocacy 
will be a wide-ranging advocate, who will be free to take 
positions contrary to the Administration's policies and to 
advocate change in government programs and attitudes as they 
impact small business.
    The Act establishes for the first time in the Small 
Business Act that the Office of Advocacy has the statutory 
independence and adequate financial resources to be an advocate 
for the small business community. In addition to the statement 
of the Office's independence, the bill provides for a separate 
authorization to fund the Office of Advocacy. As designed in 
this bill, its annual budget would be a separate account in the 
SBA budget, similar to the separate accounts for the Office of 
Inspector General and the Business Loans Program. SBA is 
directed to provide appropriate and adequate office space at 
the SBA headquarters and its field office locations, together 
with equipment, office supplies, and communications facilities 
and services as are necessary to support the requirements of 
the Office of Advocacy.
    Each appropriation request submitted by the Administration 
to the Congress would also provide for the number of full-time 
employees who would work within the Office of Advocacy. The 
Chief Counsel for Advocacy would not need the approval of the 
SBA Administrator to hire staff. The bill continues the 
practice of allowing the Chief Counsel to hire individuals 
critical to the mission of the Office of Advocacy without going 
through the normal competitive procedures directed by federal 
law and the Office of Personnel Management (OPM).
    Section 4 of the Independent Office of Advocacy Act sets 
forth in detail the functions of the Office of Advocacy as 
intended by the Congress. The Chief Counsel will head up the 
Office of Advocacy. The Chief Counsel will be appointed by the 
President from civilian life with the advice and consent of the 
Senate without regard to the person's political affiliation. To 
be eligible for the position, the nominee cannot have served in 
any position at SBA during the preceding five years of the 
appointment.
    Because of the independent nature of the office, the 
Committee established the office in such a manner so that the 
incumbent Chief Counsel would not feel that his or her job were 
in jeopardy by taking a position critical of or in opposition 
to an Administration initiative. To strengthen this position, 
the bill provides that the President must notify the Congress 
30 days in advance before removing the Chief Counsel from 
office.
    Section 4 sets forth the primary functions of the Office of 
Advocacy, which the Committee views as wide-ranging and 
comprehensive insofar as are the needs and problems confronting 
small businesses nationwide. In setting forth the 
responsibilities of the Office ofAdvocacy, the Committee 
intends for the Office to serve as focal point to receive complaints, 
criticisms and suggestions concerning the policies and programs of the 
federal government that affect small businesses.
    The Committee believes that the authority enunciated in 
Section 4 is significant, and it included a specific subsection 
(g) ``Information From Federal Agencies'' to enable the Office 
and the Chief Counsel to carry out its responsibilities. 
Basically, the Committee directs each Federal agency to provide 
to the Chief Counsel all information that the Chief Counsel 
believes is necessary in carrying out the responsibilities of 
the Office of Advocacy.
    In addition, the section spells out special powers that are 
conferred on the Chief Counsel. Without regard for the civil 
service laws and regulations, the Chief Counsel may hire and 
terminate those individuals who are considered necessary to 
carry out the duties of the Office. This subsection is intended 
to include the regular staff of the office of Advocacy and such 
consultants and experts on a temporary or intermittent basis 
that the Chief Counsel may choose to hire. The hiring authority 
rests with the Chief Counsel. Nothing in the Act should be 
interpreted to require that the Chief Counsel obtain the 
approval, concurrence or review by the SBA Administrator or any 
other person within the Administration. The authority of the 
Chief Counsel to hire staff, consultants and experts will be 
limited by the amounts appropriated annually by the Congress.
    Section 4 also includes a requirement that the 
Administrator of SBA provide the Office of Advocacy with 
adequate office space, equipment, office supplies, and 
communications facilities and services both in SBA's central 
offices and field offices that are deemed necessary for the 
efficient and effective operation of the Office of Advocacy. 
This provision is similar to the requirement for SBA to support 
the Office of Inspector General.
    The bill requires and authorizes the Chief Counsel to 
submit certain reports to the President and the Congress, 
including an annual report on the Regulatory Flexibility Act. 
The Committee believes strongly that these reports should not 
be subject to the mandatory review and editing that has 
historically been required by past and current Administrations. 
In order for the Committee to carry out its responsibilities on 
behalf of the small business community, it is important that it 
receive regular reports from the Chief Counsel that have not 
been submitted to the Office of Management and Budget or any 
other Federal department or agency for editing and/or approval.
    The bill authorizes such sums as are necessary for carrying 
out the responsibilities of the Office of Advocacy. The amounts 
appropriated should remain available until spent and should not 
be limited to fiscal year limitations. This subsection is 
intended to give the Chief Counsel the flexibility to respond 
to matters that come before the Office of Advocacy without the 
pressures of obligating funds, perhaps prematurely, prior to 
the end of a fiscal year.
    Since there is a sitting Chief Counsel for Advocacy who was 
reviewed and approved by the Committee and the full Senate, it 
is the intention of the Committee that the incumbent will 
continue to serve subject to the requirements of this bill once 
enacted.

                          iii. committee vote

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following votes on S. 1346 were recorded on 
July 15, 1999. A motion by Senator Bond to adopt an amendment 
offered by Senator Bond and Senator Kerry passed by a unanimous 
voice vote. A motion by Senator Bond to adopt the Independent 
Office of Advocacy Act, with an amendment, was approved by a 
unanimous recorded vote, with the following Senators voting in 
the affirmative: Bond, Kerry, Burns, Coverdell, Bennett, Snowe, 
Enzi, Fitzgerald, Crapo, Abraham, Levin, Harkin, Lieberman, 
Wellstone, Cleland, Landrieu and Edwards.

                           iv. cost estimate

    In compliance with rule XXVI(11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts indicated by the 
Congressional Budget Office in the following letter.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 23, 1999.
Hon. Christopher S. Bond,
Chairman, Committee on Small Business,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1346, the 
Independent Office of Advocacy Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark Hadley.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 1346--Independent Office of Advocacy Act

    S. 1346 would authorize the appropriation of such sums as 
may be necessary for the Office of Advocacy within the Small 
Business Administration (SBA). The bill would clarify the 
office's role and would codify requirements for reports to the 
Congress on issues and regulations affecting small businesses.
    Based on information from the SBA, CBO estimates that the 
office will spend about $4 million in 1999. Assuming 
appropriations of the necessary amounts, we estimate that SBA 
would spend about $5 million a year over the 2000-2004 period 
to implement S. 1346. The increase in estimated costs would 
primarily cover anticipated inflation.
    S. 1346 would not affect direct spending or receipts; 
therefore, pay-as-you-go procedures would not apply. S. 1346 
contains no intergovernment or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would not 
affect the budgets of state, local, or tribal governments.
    The CBO staff contact is Mark Hadley. This estimate was 
approved by Paul N. Van de Water, Assistant Director for Budget 
Analysis.

                   V. Evaluation of Regulatory Impact

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact of the personal privacy of companies or 
individuals who utilize the assistance authorized by this 
legislation.

                      VI. Changes In Existing Law

    In the opinion of the Committee, it is necessary to 
dispense with the requirement of rule XXVI(12) of the Standing 
Rules of the Senate in order to expedite the business of the 
Senate.

                    VI. Section-By-Section Analysis

Section 1. Short title

    The Act is titled the ``Independent Office of Advocacy 
Act.''

Section 2. Findings

    This section describes the need for an effective, 
independent advocate for small business within the Federal 
government that is not restricted by the views or policies of 
the Small Business Administration (SBA/Agency) or any other 
agency. This section also sets forth the important role the 
Office of Advocacy plays in providing research, information and 
its expertise on small business matters to the Congress and the 
Executive Branch.

Section 3. Purposes

    This section states that the purpose of the Act is to 
ensure that the Office of Advocacy has the statutory 
independence and adequate financial resources to be an advocate 
for small business. The Office of Advocacy is directed to keep 
the Senate and House Small Business Committees and the SBA 
Administrator informed on matters of importance to small 
businesses.
    Subsection 3 provides that there will be a separate 
authorization for the Office of Advocacy.
    Subsections 4 states that the Office of Advocacy will 
continue to monitor Agency compliance with the Regulatory 
Flexibility Act and will report annually to the Congress. 
Subsection 5 states that the purpose of the Act is to enhance 
the role of the Office of Advocacy inthe panel review process.

Section 4. Office of Advocacy

    Subsection (a) sets forth a new Section 32 of the Small 
Business Act (15 U.S.C. 631 et seq.) describing the Office of 
Advocacy.
    Subsection (a) of Section 32 of the Small Business Act 
defines the terms ``Chief Counsel'' and ``Office'' as used in 
Section 32.
    Subsection (b) of Section 32 establishes within SBA the 
Office of Advocacy and designates the Chief Counsel for 
Advocacy to manage the Office. This subsection sets forth the 
restrictions on who may be nominated by the President to serve 
as Chief Counsel. Subsection (b) also requires SBA to submit a 
separate budget request each year for the Office of Advocacy.
    Subsection (c) of Section 32 describes the primary 
functions of the Office of Advocacy:
    (1) The Office shall examine the role played by small 
business within the U.S. economy;
    (2) Directs the Office to examine the effectiveness of 
Federal subsidy and assistance programs;
    (3) The Office is directed to measure the direct costs of 
regulation on small business;
    (4) Determine the impact of the U.S. tax system on small 
businesses;
    (5) Study the ability to the private sector to meet the 
credit needs of small business and determine the impact of 
government demands for credit on small businesses;
    (6) Determine the availability of credit and management 
assistance to small businesses;
    (7) Evaluate the efforts of Federal agencies and the 
private sector to help minority-owned and women-owned small 
businesses;
    (8) Make recommendations to help in the development and 
strengthening of minority-and women-owned small businesses;
    (9) Directs the Office of Advocacy to make recommendations 
to help small business expand to their full potential and to 
assess any common reasons for businesses success and failures;
    (10) Develop a set of criteria to be used to define small 
businesses; and
    (11) Make recommendations on issues and regulations 
affecting small business.
    Subsection (d) of Section 32 describes additional functions 
of the Office of Advocacy. It will serve as a focal point for 
receipt of complaints, criticisms and suggestions concerning 
the policies and programs of the Federal government that affect 
small businesses. The Office will counsel small businesses on 
how to resolve their difficulties with the Federal government. 
The Office will represent the interests and views of small 
businesses before other Federal agencies, and it will encourage 
both private and public entities to disseminate information 
about services and programs for small businesses. Lastly, 
Subsection (d) directs the Office of Advocacy to carry out its 
responsibilities under the Regulatory Flexibility Act.
    Subsection (e) of Section 32 outlines the staff and powers 
of the Office of Advocacy. The Chief Counsel has the authority 
to hire staff for the Office of Advocacy and is exempt from the 
standard civil service laws governing competitive hiring.
    Subsection (f) of Section 32 directs SBA to provide the 
Office of Advocacy with adequate office space in the 
headquarters and field offices. SBA shall also provide 
equipment, office supplies, and communications facilities and 
services as are necessary.
    Subsection (g) of Section 32 allows for the Chief Counsel 
to obtain from each Federal agency such information as needed 
to carry out the responsibilities of the Office of Advocacy.
    Subsection (h) of Section 32 directs the Chief Counsel to 
submit an annual report on Agency compliance with the 
requirements of the Regulatory Flexibility Act. Further, the 
Chief Counsel can prepare and submit to the President and 
Congress such reports as he or she deems necessary. In no case 
shall a report from the Office of Advocacy be submitted in 
advance to OMB for approval or Administration clearance.
    Subsection (i) of Section authorizes to be appropriated 
such sums as are necessary for the Office of Advocacy.
    A new Subsection (c) permits the incumbent Chief Counsel 
for Advocacy to continue to serve in that position after date 
of enactment of this Act in accordance with the requirements of 
Section 32 of the Small Business Act.

                                
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