[House Report 107-210]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-210

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



 
       NATIONAL SMALL BUSINESS REGULATORY ASSISTANCE ACT OF 2001

                                _______
                                

 September 21, 2001.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 203]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 203) to amend the Small Business Act to direct the 
Administrator of the Small Business Administration to establish 
a pilot program to provide regulatory compliance assistance to 
small business concerns, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``National Small Business Regulatory 
Assistance Act of 2001''.

SEC. 2. PURPOSE.

  The purpose of this Act is to establish a pilot program to--
          (1) provide confidential assistance to small business 
        concerns;
          (2) provide small business concerns with the information 
        necessary to improve their rate of compliance with Federal and 
        State regulations;
          (3) create a partnership among Federal agencies to increase 
        outreach efforts to small business concerns with respect to 
        regulatory compliance;
          (4) provide a mechanism for unbiased feedback to Federal 
        agencies on the regulatory environment for small business 
        concerns; and
          (5) utilize the service delivery network of Small Business 
        Development Centers to improve access of small business 
        concerns to programs to assist them with regulatory compliance.

SEC. 3. DEFINITIONS.

  In this Act, the definitions set forth in section 36(a) of the Small 
Business Act (as added by section 4 of this Act) shall apply.

SEC. 4. SMALL BUSINESS REGULATORY ASSISTANCE PILOT PROGRAM.

  The Small Business Act (15 U.S.C. 637 et seq.) is amended--
          (1) by redesignating section 36 as section 37; and
          (2) by inserting after section 35 the following new section:

``SEC. 36. SMALL BUSINESS REGULATORY ASSISTANCE PILOT PROGRAM.

  ``(a) Definitions.--In this section, the following definitions apply:
          ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Small Business Administration, acting 
        through the Associate Administrator for Small Business 
        Development Centers.
          ``(2) Association.--The term `Association' means the 
        association, established pursuant to section 21(a)(3)(A), 
        representing a majority of Small Business Development Centers.
          ``(3) Participating small business development center.--The 
        term `participating Small Business Development Center' means a 
        Small Business Development Center participating in the pilot 
        program.
          ``(4) Pilot program.--The term `pilot program' means the 
        pilot program established under this section.
          ``(5) Regulatory compliance assistance.--The term `regulatory 
        compliance assistance' means assistance provided by a Small 
        Business Development Center to a small business concern to 
        enable the concern to comply with Federal regulatory 
        requirements.
          ``(6) Small business development center.--The term `Small 
        Business Development Center' means a Small Business Development 
        Center described in section 21.
          ``(7) State.--The term `State' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, and Guam.
  ``(b) Authority.--In accordance with this section, the Administrator 
shall establish a pilot program to provide regulatory compliance 
assistance to small business concerns through participating Small 
Business Development Centers, the Association, and Federal compliance 
partnership programs.
  ``(c) Small Business Development Centers.--
          ``(1) In general.--In carrying out the pilot program, the 
        Administrator shall enter into arrangements with participating 
        Small Business Development Centers under which such centers 
        will provide--
                  ``(A) access to information and resources, including 
                current Federal and State nonpunitive compliance and 
                technical assistance programs similar to those 
                established under section 507 of the Clean Air Act 
                Amendments of 1990;
                  ``(B) training and educational activities;
                  ``(C) confidential, free-of-charge, one-on-one, in-
                depth counseling to the owners and operators of small 
                business concerns regarding compliance with Federal and 
                State regulations, provided that such counseling is not 
                considered to be the practice of law in a State in 
                which a Small Business Development Center is located or 
                in which such counseling is conducted;
                  ``(D) technical assistance; and
                  ``(E) referrals to experts and other providers of 
                compliance assistance who meet such standards for 
                educational, technical, and professional competency as 
                are established by the Administrator.
          ``(2) Reports.--
                  ``(A) In general.--Each participating Small Business 
                Development Center shall transmit to the Administrator 
                a quarterly report that includes--
                          ``(i) a summary of the regulatory compliance 
                        assistance provided by the center under the 
                        pilot program; and
                          ``(ii) any data and information obtained by 
                        the center from a Federal agency regarding 
                        regulatory compliance that the agency intends 
                        to be disseminated to small business concerns.
                  ``(B) Electronic form.--Each report referred to in 
                subparagraph (A) shall be transmitted in electronic 
                form.
                  ``(C) Interim reports.--During any time period 
                falling between the transmittal of quarterly reports, a 
                participating Small Business Development Center may 
                transmit to the Administrator any interim report 
                containing data or information considered by the center 
                to be necessary or useful.
                  ``(D) Limitation on disclosure requirements.--The 
                Administrator may not require a Small Business 
                Development Center to disclose the name or address of 
                any small business concern that received or is 
                receiving assistance under the pilot program, except 
                that the Administrator shall require such a disclosure 
                if ordered to do so by a court in any civil or criminal 
                enforcement action commenced by a Federal or State 
                agency.
  ``(d) Data Repository and Clearinghouse.--
          ``(1) In general.--In carrying out the pilot program, the 
        Administrator shall--
                  ``(A) act as the repository of and clearinghouse for 
                data and information submitted by Small Business 
                Development Centers; and
                  ``(B) transmit to the President and to the Committees 
                on Small Business of the Senate and House of 
                Representatives an annual report that includes--
                          ``(i) a description of the types of 
                        assistance provided by participating Small 
                        Business Development Centers under the pilot 
                        program;
                          ``(ii) data regarding the number of small 
                        business concerns that contacted participating 
                        Small Business Development Centers regarding 
                        assistance under the pilot program;
                          ``(iii) data regarding the number of small 
                        business concerns assisted by participating 
                        Small Business Development Centers under the 
                        pilot program;
                          ``(iv) data and information regarding 
                        outreach activities conducted by participating 
                        Small Business Development Centers under the 
                        pilot program, including any activities 
                        conducted in partnership with Federal agencies;
                          ``(v) data and information regarding each 
                        case known to the Administrator in which one or 
                        more Small Business Development Centers offered 
                        conflicting advice or information regarding 
                        compliance with a Federal or State regulation 
                        to one or more small business concerns;
                          ``(vi) any recommendations for improvements 
                        in the regulation of small business concerns; 
                        and
                          ``(vii) a list of regulations identified by 
                        the Administrator, after consultation with the 
                        Small Business and Agriculture Regulatory 
                        Enforcement Ombudsman, as being most burdensome 
                        to small business concerns, and recommendations 
                        to reduce or eliminate the burdens of such 
                        regulations.
  ``(e) Eligibility.--
          ``(1) In general.--A Small Business Development Center shall 
        be eligible to receive assistance under the pilot program only 
        if the center is certified under section 21(k)(2).
          ``(2) Waiver.--With respect to a Small Business Development 
        Center seeking assistance under the pilot program, the 
        Administrator may waive the certification requirement set forth 
        in paragraph (1) if the Administrator determines that the 
        center is making a good faith effort to obtain such 
        certification.
          ``(3) Effective date.--This subsection shall take effect on 
        October 1, 2001.
  ``(f) Selection of Participating State Programs.--
          ``(1) In general.--In consultation with the Association and 
        giving substantial weight to the Association's recommendations, 
        the Administrator shall select the Small Business Development 
        Center programs of 2 States from each of the following groups 
        of States to participate in the pilot program established by 
        this section:
                  ``(A) Group 1: Maine, Massachusetts, New Hampshire, 
                Connecticut, Vermont, and Rhode Island.
                  ``(B) Group 2: New York, New Jersey, Puerto Rico, and 
                the Virgin Islands.
                  ``(C) Group 3: Pennsylvania, Maryland, West Virginia, 
                Virginia, the District of Columbia, and Delaware.
                  ``(D) Group 4: Georgia, Alabama, North Carolina, 
                South Carolina, Mississippi, Florida, Kentucky, and 
                Tennessee.
                  ``(E) Group 5: Illinois, Ohio, Michigan, Indiana, 
                Wisconsin, and Minnesota.
                  ``(F) Group 6: Texas, New Mexico, Arkansas, Oklahoma, 
                and Louisiana.
                  ``(G) Group 7: Missouri, Iowa, Nebraska, and Kansas.
                  ``(H) Group 8: Colorado, Wyoming, North Dakota, South 
                Dakota, Montana, and Utah.
                  ``(I) Group 9: California, Guam, Hawaii, Nevada, and 
                Arizona.
                  ``(J) Group 10: Washington, Alaska, Idaho, and 
                Oregon.
          ``(2) Deadline for selection.--The Administrator shall make 
        selections under this subsection not later than 60 days after 
        promulgation of regulations under section 5 of the National 
        Small Business Regulatory Assistance Act of 2001.
  ``(g) Matching Not Required.--Subparagraphs (A) and (B) of section 
21(a)(4) shall not apply to assistance made available under the pilot 
program.
  ``(h) Distribution of Grants.--
          ``(1) In general.--Each State program selected to receive a 
        grant under subsection (f) in a fiscal year shall be eligible 
        to receive a grant in an amount not to exceed the product 
        obtained by multiplying--
                  ``(A) the amount made available for grants under this 
                section for the fiscal year; and
                  ``(B) the ratio that--
                          ``(i) the population of the State; bears to
                          ``(ii) the population of all the States with 
                        programs selected to receive grants under 
                        subsection (f) for the fiscal year.
          ``(2) Minimum amount.--Notwithstanding paragraph (1), the 
        minimum amount that a State program selected to receive a grant 
        under subsection (f) shall be eligible to receive under this 
        section in the fiscal year shall be $200,000.
  ``(i) Evaluation and Report.--Not later than 3 years after the 
establishment of the pilot program, the Comptroller General of the 
United States shall conduct an evaluation of the pilot program and 
shall transmit to the Administrator and to the Committees on Small 
Business of the Senate and House of Representatives a report containing 
the results of the evaluation along with any recommendations as to 
whether the pilot program, with or without modification, should be 
extended to include the participation of all Small Business Development 
Centers.
  ``(j) Authorization of Appropriations.--
          ``(1) In general.--There are authorized to be appropriated to 
        carry out this section $5,000,000 for fiscal year 2002 and each 
        fiscal year thereafter.
          ``(2) Limitation on use of other funds.--The Administrator 
        may carry out the pilot program only with amounts appropriated 
        in advance specifically to carry out this section.''.

SEC. 5. PROMULGATION OF REGULATIONS.

  After providing notice and an opportunity for comment and after 
consulting with the Association (but not later than 180 days after the 
date of the enactment of this Act), the Administrator shall promulgate 
final regulations to carry out this Act, including regulations that 
establish--
          (1) priorities for the types of assistance to be provided 
        under the pilot program;
          (2) standards relating to educational, technical, and support 
        services to be provided by participating Small Business 
        Development Centers;
          (3) standards relating to any national service delivery and 
        support function to be provided by the Association under the 
        pilot program;
          (4) standards relating to any work plan that the 
        Administrator may require a participating Small Business 
        Development Center to develop; and
          (5) standards relating to the educational, technical, and 
        professional competency of any expert or other assistance 
        provider to whom a small business concern may be referred for 
        compliance assistance under the pilot program.

SEC. 6. PRIVACY REQUIREMENTS APPLICABLE TO SMALL BUSINESS DEVELOPMENT 
                    CENTERS.

  Section 21(c) of the Small Business Act (15 U.S.C. 648(c)) is amended 
by adding at the end the following:
          ``(9) Privacy requirements.--
                  ``(A) In general.--No Small Business Development 
                Center, consortium of Small Business Development 
                Centers, or contractor or agent of a Small Business 
                Development Center shall disclose the name or address 
                of any individual or small business concern receiving 
                assistance under this section without the consent of 
                such individual or small business concern, except 
                that--
                          ``(i) the Administrator shall require such 
                        disclosure if ordered to do so by a court in 
                        any civil or criminal enforcement action 
                        commenced by a Federal or State agency; and
                          ``(ii) if the Administrator considers it 
                        necessary while undertaking a financial audit 
                        of a Small Business Development Center, the 
                        Administrator shall require such disclosure for 
                        the sole purpose of undertaking such audit.
                  ``(B) Regulations.--The Administrator shall issue 
                regulations to establish standards for requiring 
                disclosures during a financial audit under subparagraph 
                (A)(ii).''.

                                Purpose

    The purpose of H.R. 203, the ``National Small Business 
Regulatory Assistance Act of 2001,'' is to utilize existing 
Small Business Administration infrastructure to provide 
regulatory compliance assistance to small businesses. The 
United States Small Business Administration oversees the 
operations of Small Business Development Centers. Located in 
every state, these centers are associated with colleges and 
universities and provide operational assistance to small 
business owners. They are authorized to provide regulatory 
compliance assistance but they do not have an organized program 
for providing such assistance. H.R. 203 would establish a pilot 
project for selected small business development center state 
programs to develop regulatory compliance assistance programs.
    The bill mandates that the Administrator of the United 
States Small Business Administration establish a pilot project 
in which twenty small business development center state 
programs will be selected to test whether the centers within 
those state programs would be an appropriate vehicle for 
providing regulatory compliance assistance to small business 
owners. It is the expectation of the Committee that the program 
should be expanded to include all small business development 
centers should the pilot program prove successful.

                          Need for Legislation

    During the past twenty years, the Federal Register--the 
compendium of federal regulatory initiatives and changes--
almost doubled in size from 42,000 pages to a record 83,289 
pages in 2000. This crush of federal dictates is particularly 
troubling to small businesses who find it increasingly 
difficult to meet these burgeoning regulatory requirements 
while at the same time trying to successfully operate their 
businesses in an expanding competitive global environment. 
Often, small business owners do not learn about their failure 
to comply with a regulation or that a new regulatory 
requirement has been imposed until an inspector or auditor 
walks through the door.
    The result is neither beneficial to the small business 
owner nor the federal government. Federal regulations exist to 
achieve some statutory objective; noncompliance hinders the 
reaching of these statutory goals. Small business owners 
certainly would be more interested in complying with federal 
regulations than paying penalties and fines. However, the 
amount of information, including regulations and concomitant 
guidance, simply overwhelms small business owners.
    In 1966, Congress took action in an effort to alleviate 
this problem. The Small Business Regulatory Enforcement 
Fairness Act provided that federal agencies are required to 
produce plain-English compliance guides for any regulation that 
would have a significant economic impact on a substantial 
number of small businesses. Of course, if small business owners 
do not know about the regulatory changes, the existence of such 
compliance guides does little to assist them. Some mechanism 
must exist to make small businesses more aware of their 
regulatory obligations.
    Even more important than making small businesses aware of 
the regulations is providing them with assistance needed to 
understand and comply with the regulations. A regulation may 
only take up ten or eleven pages of text, but the explanation 
for what those ten or eleven pages mean may encompass as much 
as three hundred pages of dense, triple-columned, single-spaced 
pages in the Federal Register. Most small business owners do 
not have the time to go through this dense prolixity. And even 
if they did, they would not understand it unless they were 
knowledgeable in the field. The Committee believes that greater 
assistance must be provided to small business owners in helping 
them comply with complex regulatory issuances. Otherwise, a 
divide could develop between those businesses, usually large, 
with the resources to comply and those, usually small, without 
such resources. The small business will be at risk for 
penalties, fines, and audits while large businesses will not. A 
regulatory compliance assistance program operated through the 
small business development centers could provide substantial 
assistance in ensuring such a divide does not occur.
    The Small Business Administration oversees a number of 
mechanisms for delivering advice to small business owners. One 
of the most effective is the Small Business Development Center 
program. Operated in conjunction with colleges and 
universities, the small business development centers assist 
small businesses in solving problems concerning the operations, 
manufacturing, engineering, technology, exchange and 
development, personnel administration, marketing, sales, 
merchandising, finance, accounting, and business strategy 
development. The small business development centers utilize the 
resources and the expertise of colleges and universities. In 
addition, the small business development centers, like the 
Agricultural Extension Service, also provide a focal point for 
information retrieval, coordination of federal and state 
government services, and referral to experts. Historically, the 
small business development centers have focused on financial, 
management, and marketing activities of small businesses 
despite the requirement that they also provide regulatory 
compliance assistance. See Sec. 21(c)(3)(H) of the Small 
Business Act (codified at 15 U.S.C. Sec. 648(c)(3)(H)).
    The Committee believes that small business development 
centers can provide an effective mechanism for dispensing 
regulatory compliance information and advice. However, 
regulatory compliance, unlike many of the other activities 
undertaken by the small business development centers, has 
significant legal consequences. Therefore, the Committee 
believes that a pilot program to examine how the regulatory 
compliance assistance will operate in selected small business 
development centers is a preferred strategy to simply providing 
an authorization of additional funding so that the small 
business development centers can provide regulatory compliance 
assistance.

                            Committee Action

    The Committee on Small Business held a field hearing to 
consider predecessor versions of H.R. 203. The hearing was held 
on September 2, 1999 at the Columbia Greene Community College 
in Hudson, NY. During that hearing, small businesses testified 
concerning the complexity of federal regulations, their desire 
for better understanding of federal regulatory requirements, 
and the need for easy access to compliance assistance. The 
Committee's Subcommittee on Workforce, Empowerment, and 
Government Programs held a hearing on H.R. 203 on July 19, 
2001. At the hearing, witnesses, the sponsor of the bill, Mr. 
Sweeney (R-NY), noted that he continues to hear from small 
business constituents that they still are being overwhelmed 
with regulation and need compliance assistance. The Association 
of Small Business Development Centers also voiced support for 
the bill. Finally, the American Industrial Hygiene Association 
also endorsed the bill but suggested that amendments should be 
made to ensure that regulatory compliance assistance is 
provided by properly credentialed individuals.

                       Consideration of H.R. 203

    At 10:00 a.m. on August 1, 2001, the Committee on Small 
Business met to consider and report H.R. 203. Following a brief 
opening statement by the Chairman, he declared the bill open 
for amendment.
    Ms. Valazquez (D-NY), the Ranking Democratic Member, 
introduced an amendment which was accepted by unanimous voice 
vote, a quorum being present. Mr. Pence (R-IN) then introduced 
an amendment which was accepted by unanimous voice vote, a 
quorum being present. Chairman Manzullo then moved the bill be 
reported, and at 10:30 a.m. by unanimous voice vote, a quorum 
being present, the Committee passed H.R. 203, as amended and 
ordered it reported.

                      Section-by-Section Analysis


Section 1. Short title

    Designates the bill as the ``National Small Business 
Regulatory Assistance Act of 2001.''

Section 2. Purpose

    This section expresses the purpose of the legislation--to 
establish a pilot project within certain Small Business 
Development Centers to provide and coordinate regulatory 
compliance assistance to small businesses.

Section 3. Definitions

    The definitions of the Small Business Act shall apply to 
this pilot program unless a different definition is utilized in 
the new Sec. 36 created by this Act. In those cases in which 
the definition is different, the definitions in new Sec. 36 
shall apply to the pilot program created by this Act.

Section 4. Small Business Regulatory Assistance Pilot Program

    This section establishes the pilot program by creating a 
new Section 36 of the Small Business Act.
    Section 36(a)(1) defines the term ``Administrator'' as the 
Administrator of the Small Business Administration.
    Section 36(a)(2) defines the term ``Association'' to be the 
association established pursuant to Section 21 of the Small 
Business Act which represents the majority of small business 
development centers. That organization is the Association of 
Small Business Development Centers.
    Section 36(a)(3) defines the term ``Participating Small 
Business Development Center'' as a small business development 
center selected to participate in the pilot program established 
under this section.
    Section 36(a)(4) defines the term ``Pilot Program'' as the 
three-year program established under this section.
    Section 36(a)(5) defines the term ``Regulatory Compliance 
Assistance'' as assistance provided by a participating small 
business development center to a small business concerning 
compliance with federal regulations.
    Section 36(a)(6) defines the term ``Small Business 
Development Center'' means a small business development center 
described in section 21 of the Small Business Act.
    Section 36(a)(7) defines the term ``State'' to include all 
fifty states and the District of Columbia, the Virgin Islands, 
and Guam.
    Section 36(b) authorizes the Administrator of the Small 
Business Administration to establish a pilot program for 
selected small business development centers to provide small 
businesses with regulatory compliance assistance.
    Section 36(c)(1) authorizes the Administrator to enter into 
arrangements with the small business development centers 
selected under this section for the provision of regulatory 
compliance assistance.
    The participating small business development centers are 
required to provide access to information and resources on 
regulatory compliance, including contact information for 
federal and state compliance and technical assistance similar 
to those established under section 507 of the Clean Air Act 
Amendments of 1990. Numerous other federal and state agencies 
have non-punitive compliance assistance programs (such as the 
federal Occupational Safety and Health Administration) and the 
Committee expects that the participating small business 
development centers will maintain all necessary contact 
information with those federal and state agencies. Furthermore, 
the Committee expects that the quality of coordination of these 
assistance resources will be a significant factor in selecting 
the small business development centers for the pilot project.
    Section 36(c)(1) also requires that the selected small 
business development centers establish various training and 
educational activities. The Committee expects that selected 
centers will utilize their contacts with federal and state 
agencies to obtain compliance pamphlets, videos, books, and any 
compliance guides issued pursuant to the Small Business 
Regulatory Enforcement Fairness Act. In addition, the Committee 
expects that participating centers will hold lectures and 
seminars on regulatory compliance including updates on 
compliance based on regulatory changes. The Committee expects 
that the Administrator will consider the quality of proposed 
educational programs in determining which centers are selected 
to participate in the pilot program.
    Section 36(c)(1)(C) also mandates that the selected small 
business development centers provide confidential counseling on 
a one-on-one basis at no charge to small businesses seeking 
regulatory compliance assistance. The Committee recognizes that 
compliance with regulations inculcates legal rights and 
responsibilities of small business owners. Therefore, section 
36(c) prohibits any regulatory compliance counseling that would 
be considered the practice of law in the jurisdiction in which 
the small business development center is located or in which 
such counseling is conducted. Furthermore, the Committee 
supports efforts in which the participating development centers 
establish contacts with lawyers in the community willing to 
provide seminars and other consultative service on regulatory 
compliance matters.
    Section 36(c)(1) also requires the provision of technical 
assistance. Such counseling may include the arrangement of 
meetings with technical experts known to the participating 
small business development centers as long as such counseling 
again is done on a one-on-one basis at no charge to the small 
business.
    Section 36(c)(1)(E) makes explicit the Committee's concern 
that small businesses are directed to those individuals who 
have appropriate credentials and certifications to provide 
regulatory compliance assistance. While the Committee fully 
understands that many very successful businesses, including 
Microsoft, Apple, and Dell Computer, started in garages and 
those businessmen are quite capable of providing advice on 
starting, financing, and marketing a business, they are not 
necessarily qualified to provide guidance on compliance with 
OSHA, EPA, or IRS regulations. In fact, due to the potential 
legal consequences resulting from a small business owner 
following incorrect guidance, the Committee determined that it 
is necessary to make explicit the requirement that the 
participating centers only refer businesses to individuals with 
appropriate expertise in the regulatory compliance matter for 
which advice is sought.
    Section 36(c)(2) requires each participating center to file 
a quarterly report with the Administrator. The report shall 
provide a summary of the compliance assistance provided under 
the pilot program. The report also must contain any data and 
information obtained by the participating small business 
development center from a federal agency concerning compliance 
which the federal agency intends to be disseminated to small 
business concerns. The Committee believes that this latter 
requirement will enable the Administrator or the Chief Counsel 
for Advocacy to raise issues of agency inconsistencies, to the 
extent that they exist, to the appropriate decisionmakers.
    Section 36(c)(2) requires that reports be filed with the 
Administrator in an electronic format. The Committee expects 
the Administrator to promulgate regulations which will provide 
for a consistent format of the report. The Committee believes 
that such consistency is necessary for the accurate compilation 
of data and proper assessment of the effectiveness of the pilot 
program.
    Section 36(c)(2) also permits, but does not require, 
participating small business development centers to make 
interim reports if such reports are necessary or useful. For 
example, a participating small business development center may 
receive inconsistent compliance information from a federal 
agency. By alerting the Administrator prior to the issuance of 
the quarterly report, the federal agency may be able to issue a 
clarification that may eliminate confusion, save compliance 
costs, and improve small business compliance.
    One of the critical concerns to small businesses is that 
discussions of compliance assistance could be revealed to 
federal agencies which would lead to fines and penalties. 
Furthermore, the Committee is concerned that small business 
development centers havebeen revealing the names of businesses 
which seek their advice to the Administrator for functions unrelated to 
the financial auditing of small business development centers. The 
Committee believes that such behavior is simply intolerable. Without 
any assurances of privacy, small businesses will be less likely to use 
small business development centers. And this would be especially true 
for regulatory compliance assistance efforts. The Committee recognizes 
the concern about revealing the names of businesses that utilize the 
resources of small business development centers. Therefore, 
Sec. 36(c)(1)(D) prohibits the disclosure of the names or addresses of 
any concern receiving compliance assistance under this pilot program 
unless the Administrator is ordered to make such disclosure pursuant to 
a court order or civil or criminal enforcement action commenced by a 
federal or state agency. The committee expects that participating small 
business development centers will only respond to formal agency 
requests such as civil investigative demands, subpoenas, requests from 
Administrator's Associate Administrator for Small Business Development 
Centers when performing a financial audit of the small business 
development center, or requests from the Inspector General of the Small 
Business Administration. The committee expects the small business 
development centers will not provide information concerning the 
identity of businesses simply upon the verbal request of a federal or 
state agency.
    Section 36(d) requires the Administrator to act as 
repository of data and information submitted by the 
participating small business development centers. Given the 
oversight role and importance of the Associate Administrator 
for Small Business Development Centers, section 36(d) requires 
that the functions of maintaining the database be housed with 
the Associate Administrator. The Committee believes that a 
central repository is necessary in order to determine whether 
federal agencies are providing consistent compliance 
information on a national basis. However, the Committee expects 
that the information received under this subsection be made 
available to other offices within the Small Business 
Administration, particularly the Chief Counsel for Advocacy and 
the Small Business and Agriculture Regulatory Ombudsman so 
those offices can more effectively carry out their mission of 
representing the interests of small businesses before federal 
agencies.
    Section 36(d) also requires that the Administrator submit 
an annual report to the President and the Committees on Small 
Business of the Senate and the House Representatives. The 
report will contain: (a) data on the types of information 
provided by the participating small business development 
centers; (b) the number of small businesses that contacted the 
participating small business development centers; (c) the 
number of small businesses assisted by participating small 
business development centers; (d) information on the outreach 
activities of the participating small business development 
centers; (e) information regarding each case known to the 
Administrator in which participating small business development 
centers provided conflicting advice regarding compliance with 
federal regulation to one or more small businesses; (f) and any 
recommendations for improving the regulatory environment of 
small businesses. The Committee believes that this information 
is necessary to properly evaluate the utility of the pilot 
program. More importantly, the report will reveal whether 
similarly situated small businesses are receiving consistent 
regulatory compliance assistance. In preparing the report, the 
Committee recognizes that the Administrator may wish to consult 
with the Chief Counsel for Advocacy and the Small Business and 
Agriculture Regulatory Ombudsman. The Committee supports such 
consultative efforts but notes that the Administrator may not 
delegate the responsibility of preparing the report required by 
this subsection to any office within the Small Business 
Administration except the Associate Administrator for Small 
Business Development Centers.
    Section 36(e) limits participation in the pilot program 
only to those small business development centers certified 
under Sec. 21(k)(2) of the Small Business Act. The Committee is 
limiting participation in the pilot program so those small 
business centers selected are of the highest quality. Some 
small business development centers have not completed their 
certification programs. Nevertheless, some of these centers may 
be developing or already have exceptional regulatory compliance 
assistance programs. The Committee does not believe that such 
centers should be prohibited from participating in the pilot 
program. Therefore, Sec. 36(e)(2) authorizes the Administrator 
to waive the requirement for certification if the center is 
making a good faith effort to obtain such certification.
    Section 36(f) requires the Administrator to select two 
participating state programs from each of the Small Business 
Administration's ten federal regions as those regions exist on 
the date of enactment of this Act. The Administrator shall 
consult with the Association and give the Association's 
recommendations substantial weight. The Administrator is 
required to complete the selection of the participating centers 
within 60 days after the regulations to implement the pilot 
program have been promulgated.
    Section 36(g) ensures that no matching funds currently 
allocated to the operation of the Small Business Development 
Centers will be utilized to fund the pilot program. In order to 
ensure proper funding, the Committee is authorizing a separate 
funding authorization for the program.
    Section 36(h) establishes the procedures for distributing 
grants among the selected state programs. The formula is based 
on the principle that a state which has a smaller population 
also will have, in absolute terms, fewer small businesses than 
a larger state. The formula therefore allocates funds according 
to the relative size of each state. The Committee believes that 
the minimum funds needed to initiate a state program will be 
$200,000. Because the Committee has authorized $5,000,000, it 
is making extra resources available to the larger states who 
will require more resources to initiate the pilot project.
    Section 36(i) requires the Comptroller General of the 
United States to provide a report three years after the 
establishment of the pilot program evaluating the effectiveness 
of the program. The report also should contain any suggested 
modifications to the pilot program. Finally, the Comptroller 
General should provide its opinion concerning whether the 
program should be continued and expanded to include more small 
businessdevelopment centers. The report shall be transmitted to 
the Committees on Small Business of the Senate and House of 
Representatives. The Committee expects that the pilot program will be 
sufficiently successful to expand the program to other small business 
development centers.
    Section 36(j) limits the operation of the pilot program 
only to the funds appropriated in advance for the program. 
Section 36(j) provides an authorization of appropriations of 
$5,000,000 for fiscal year 2002 and each year thereafter. 
Section 36(j) also prohibits the Administrator from using other 
funds, including other funds made available for the operation 
of Small Business Development Centers, to operate this pilot 
project. The Committee authorized the additional appropriations 
because it determined that funding of the regulatory compliance 
program should not detract from the available funding for the 
delivery of other Small Business Development Center programs.

Section 5. Promulgation of regulations

    Section 5 authorizes the Administrator to promulgate 
regulations to implement this pilot program no later than 180 
days after the enactment of the Act. Such regulations only 
shall be promulgated after the public has been given an 
opportunity for notice and comment. The Committee believes that 
the Administrator can and should accomplish the issuance of 
regulations within the deadline set by statute. The Committee 
considers this Act to be some other law for purposes of section 
603 of Title 5 of the United States Code.
    The regulations shall include the priorities for the type 
of assistance to be provided, standards relating to the 
educational, technical, and support services to be provided by 
the Association to the participating centers, and standards for 
work plans that the participating centers will provide to the 
Administrator. The Committee believes that given the potential 
interest in the program by Small Business Development Centers, 
it is appropriate for the Administrator to have a set of 
standards by which it can determine which state programs shall 
be chosen. More importantly, the standards will provide an 
appropriate baseline for the Comptroller General's evaluation 
of the pilot project.
    Section 5 also requires the Administrator to develop 
appropriate standards for ensuring the technical qualifications 
of experts to whom small businesses will be referred. The 
Committee does not intend that someone must have a college or 
advance degree to qualify. For example, a contractor licensed 
in a state with 20 years experience (who is a high-school 
graduate) may be as well-equipped to provide advice on 
compliance with OSHA construction standards as a professor of 
civil engineering. On the other hand, that same contractor 
might not be an appropriate individual to provide tax 
compliance advice. The Committee does not expect that this 
aspect of the Administrator's regulations shall be all 
encompassing, i.e., delineate every profession and the 
appropriate qualifications. However, the Committee does expect 
that the Administrator will recognize, as qualified, those 
individuals certified by nationally-recognized accrediting 
bodies (whose members must demonstrate substantial educational 
and practical experience), meet educational and work standards 
established by a federal agency, or are licensed to practice a 
particular profession or job pursuant to state law. The 
Committee expects that the regulations will provide 
participating centers with enough information that the centers 
can determine whether the person providing the advice is 
competent in the field of regulation.
    Section 6 amends section 21 of the Small Business Act. The 
Committee has been contacted on a number of occasions by small 
business development centers that employees of the Small 
Business Administration have attempted to obtain the names and 
addresses of businesses that sought the services of the small 
business development centers. The Committee believes that any 
attempts by the Administrator or the employees of the Small 
Business Administration to obtain the names and addresses of 
persons seeking small business development center assistance is 
inappropriate because it would act as a distincentive for small 
businesses to utilize the centers.
    Section 6 prohibits the Administrator, any other employee 
of the Small Business Administration, or any agent of the 
Administrator (including contractors) from obtaining the names 
and addresses of businesses that sought assistance. The 
Committee's bill provides for two exceptions: (1) if the 
Administrator is ordered by a court in any civil or criminal 
action initiated by federal or state agency; or (2) the 
Administrator requires the information while undertaking a 
financial audit of the Small Business Development Center.
    To ensure that the Administrator does not unduly abuse the 
second exception for disclosure, section 6 requires the 
Administrator to promulgate regulations specifying when such 
disclosures in an audit shall be made. The Committee expects 
that the regulations will strictly limit disclosure during the 
audit process and severely circumscribe those individuals who 
will have access to the audit information during the audit. The 
Committee recognizes that the information collected during the 
audit may have to be retained for a variety of purposes, such 
as management reviews by the Inspector General or Congressional 
oversight. The Committee expects the Administrator's 
regulations to cover who, if anyone, shall have access to the 
raw data, including the names and addresses of the small 
business development center's users, after the audit is 
complete. The Committee does not intend that information 
obtained during the audit concerning identifiable individuals 
or businesses that is retained by the Administrator shall be 
releasable pursuant to the Freedom of Information Act.

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 13, 2001.
Hon. Donald Manzullo,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 203, the National 
Small Business Regulatory Assistance Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Ken Johnson.
            Sincerely,
                                            Dan L. Crippen,
                                                          Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 203--National Small Business Regulatory Assistance Act of 2001

    Summary: H.R. 203 would require the Small Business 
Administration (SBA) to establish a pilot program for small 
business development centers (SBDCs) to counsel small business 
owners on compliance with federal and state regulations. SBDCs 
are cooperative efforts of the private sector, schools, and 
federal, state, and local governments to provide management 
assistance to current and prospective small business owners.
    H.R. 203 would authorize the appropriation of $5 million a 
year to fund the new program. Based on the SBA's historical 
spending patterns, CBO estimates that implementing the bill 
would cost $23 million over the 2002-2006 period, assuming the 
appropriation of the necessary amounts. The bill would not 
affect direct spending or receipts; therefore, pay-as-you-go 
procedures would not apply.
    H.R. 203 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no significant costs on state, local, or 
tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 203 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2002     2003     2004     2005     2006
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Authorization Level................................................        5        5        5        5        5
Estimated Outlays..................................................        3        5        5        5        5
----------------------------------------------------------------------------------------------------------------

    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: H.R. 203 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no significant costs on state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Ken Johnson. Impact on 
State, Local, and Tribal Governments: Susan Sieg Tompkins. 
Impact on the Private Sector: Cecil McPherson.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Committee Estimate of Costs

    Pursuant to the Congressional Budget Act of 1974, the 
Committee estimates that the amendments to the Small Business 
Act contained in H.R. 4946 will not significantly increase 
discretionary spending over the next fiscal years. The 
Committee also estimates that H.R. 203 will not affect direct 
spending. These estimates concur with Congressional Budget 
Office (CBO) estimates.
    Furthermore, pursuant to clause 3(d)(2)(A) of rule XIII of 
the Rules of the House of Representatives, the Committee 
estimates that implementation of H.R. 203 will not 
significantly increase other administrative costs.

                           Oversight Findings

    In accordance with clause 4(c)(2) of rule X of the Rules of 
the House of Representatives, the Committee states that no 
oversight findings or recommendations have been made by the 
Committee on Government Reform with respect to the subject 
matter contained in H.R. 203.
    In accordance with clause (2)(b)(1) of rule X of the Rules 
of the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 203 are incorporated 
into the descriptive portions of this report.

                 Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, clause 18, of the 
Constitution of the United States.

                       Compliance With P.L. 104-4

    H.R. 203 contains no unfunded mandates.

                    Congressional Accountability Act

    H.R. 203 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

                  Federal Advisory Committee Statement

    This legislation does not establish or authorize the 
establishment of any new advisory committees.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                          SMALL BUSINESS ACT

           *       *       *       *       *       *       *


  Sec. 21. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

          (9) Privacy requirements.--
                  (A) In general.--No Small Business 
                Development Center, consortium of Small 
                Business Development Centers, or contractor or 
                agent of a Small Business Development Center 
                shall disclose the name or address of any 
                individual or small business concern receiving 
                assistance under this section without the 
                consent of such individual or small business 
                concern, except that--
                          (i) the Administrator shall require 
                        such disclosure if ordered to do so by 
                        a court in any civil or criminal 
                        enforcement action commenced by a 
                        Federal or State agency; and
                          (ii) if the Administrator considers 
                        it necessary while undertaking a 
                        financial audit of a Small Business 
                        Development Center, the Administrator 
                        shall require such disclosure for the 
                        sole purpose of undertaking such audit.
                  (B) Regulations.--The Administrator shall 
                issue regulations to establish standards for 
                requiring disclosures during a financial audit 
                under subparagraph (A)(ii).

           *       *       *       *       *       *       *


SEC. 36. SMALL BUSINESS REGULATORY ASSISTANCE PILOT PROGRAM.

  (a) Definitions.--In this section, the following definitions 
apply:
          (1) Administrator.--The term ``Administrator'' means 
        the Administrator of the Small Business Administration, 
        acting through the Associate Administrator for Small 
        Business Development Centers.
          (2) Association.--The term ``Association'' means the 
        association, established pursuant to section 
        21(a)(3)(A), representing a majority of Small Business 
        Development Centers.
          (3) Participating small business development 
        center.--The term ``participating Small Business 
        Development Center'' means a Small Business Development 
        Center participating in the pilot program.
          (4) Pilot program.--The term ``pilot program'' means 
        the pilot program established under this section.
          (5) Regulatory compliance assistance.--The term 
        ``regulatory compliance assistance'' means assistance 
        provided by a Small Business Development Center to a 
        small business concern to enable the concern to comply 
        with Federal regulatory requirements.
          (6) Small business development center.--The term 
        ``Small Business Development Center'' means a Small 
        Business Development Center described in section 21.
          (7) State.--The term ``State'' means each of the 
        several States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Virgin Islands, and 
        Guam.
  (b) Authority.--In accordance with this section, the 
Administrator shall establish a pilot program to provide 
regulatory compliance assistance to small business concerns 
through participating Small Business Development Centers, the 
Association, and Federal compliance partnership programs.
  (c) Small Business Development Centers.--
          (1) In general.--In carrying out the pilot program, 
        the Administrator shall enter into arrangements with 
        participating Small Business Development Centers under 
        which such centers will provide--
                  (A) access to information and resources, 
                including current Federal and State nonpunitive 
                compliance and technical assistance programs 
                similar to those established under section 507 
                of the Clean Air Act Amendments of 1990;
                  (B) training and educational activities;
                  (C) confidential, free-of-charge, one-on-one, 
                in-depth counseling to the owners and operators 
                of small business concerns regarding compliance 
                with Federal and State regulations, provided 
                that such counseling is not considered to be 
                the practice of law in a State in which a Small 
                Business Development Center is located or in 
                which such counseling is conducted;
                  (D) technical assistance; and
                  (E) referrals to experts and other providers 
                of compliance assistance who meet such 
                standards for educational, technical, and 
                professional competency as are established by 
                the Administrator.
          (2) Reports.--
                  (A) In general.--Each participating Small 
                Business Development Center shall transmit to 
                the Administrator a quarterly report that 
                includes--
                          (i) a summary of the regulatory 
                        compliance assistance provided by the 
                        center under the pilot program; and
                          (ii) any data and information 
                        obtained by the center from a Federal 
                        agency regarding regulatory compliance 
                        that the agency intends to be 
                        disseminated to small business 
                        concerns.
                  (B) Electronic form.--Each report referred to 
                in subparagraph (A) shall be transmitted in 
                electronic form.
                  (C) Interim reports.--During any time period 
                falling between the transmittal of quarterly 
                reports, a participating Small Business 
                Development Center may transmit to the 
                Administrator any interim report containing 
                data or information considered by the center to 
                be necessary or useful.
                  (D) Limitation on disclosure requirements.--
                The Administrator may not require a Small 
                Business Development Center to disclose the 
                name or address of any small business concern 
                that received or is receiving assistance under 
                the pilot program, except that the 
                Administrator shall require such a disclosure 
                if ordered to do so by a court in any civil or 
                criminal enforcement action commenced by a 
                Federal or State agency.
  (d) Data Repository and Clearinghouse.--
          (1) In general.--In carrying out the pilot program, 
        the Administrator shall--
                  (A) act as the repository of and 
                clearinghouse for data and information 
                submitted by Small Business Development 
                Centers; and
                  (B) transmit to the President and to the 
                Committees on Small Business of the Senate and 
                House of Representatives an annual report that 
                includes--
                          (i) a description of the types of 
                        assistance provided by participating 
                        Small Business Development Centers 
                        under the pilot program;
                          (ii) data regarding the number of 
                        small business concerns that contacted 
                        participating Small Business 
                        Development Centers regarding 
                        assistance under the pilot program;
                          (iii) data regarding the number of 
                        small business concerns assisted by 
                        participating Small Business 
                        Development Centers under the pilot 
                        program;
                          (iv) data and information regarding 
                        outreach activities conducted by 
                        participating Small Business 
                        Development Centers under the pilot 
                        program, including any activities 
                        conducted in partnership with Federal 
                        agencies;
                          (v) data and information regarding 
                        each case known to the Administrator in 
                        which one or more Small Business 
                        Development Centers offered conflicting 
                        advice or information regarding 
                        compliance with a Federal or State 
                        regulation to one or more small 
                        business concerns;
                          (vi) any recommendations for 
                        improvements in the regulation of small 
                        business concerns; and
                          (vii) a list of regulations 
                        identified by the Administrator, after 
                        consultation with the Small Business 
                        and Agriculture Regulatory Enforcement 
                        Ombudsman, as being most burdensome to 
                        small business concerns, and 
                        recommendations to reduce or eliminate 
                        the burdens of such regulations.
  (e) Eligibility.--
          (1) In general.--A Small Business Development Center 
        shall be eligible to receive assistance under the pilot 
        program only if the center is certified under section 
        21(k)(2).
          (2) Waiver.--With respect to a Small Business 
        Development Center seeking assistance under the pilot 
        program, the Administrator may waive the certification 
        requirement set forth in paragraph (1) if the 
        Administrator determines that the center is making a 
        good faith effort to obtain such certification.
          (3) Effective date.--This subsection shall take 
        effect on October 1, 2001.
  (f) Selection of Participating State Programs.--
          (1) In general.--In consultation with the Association 
        and giving substantial weight to the Association's 
        recommendations, the Administrator shall select the 
        Small Business Development Center programs of 2 States 
        from each of the following groups of States to 
        participate in the pilot program established by this 
        section:
                  (A) Group 1: Maine, Massachusetts, New 
                Hampshire, Connecticut, Vermont, and Rhode 
                Island.
                  (B) Group 2: New York, New Jersey, Puerto 
                Rico, and the Virgin Islands.
                  (C) Group 3: Pennsylvania, Maryland, West 
                Virginia, Virginia, the District of Columbia, 
                and Delaware.
                  (D) Group 4: Georgia, Alabama, North 
                Carolina, South Carolina, Mississippi, Florida, 
                Kentucky, and Tennessee.
                  (E) Group 5: Illinois, Ohio, Michigan, 
                Indiana, Wisconsin, and Minnesota.
                  (F) Group 6: Texas, New Mexico, Arkansas, 
                Oklahoma, and Louisiana.
                  (G) Group 7: Missouri, Iowa, Nebraska, and 
                Kansas.
                  (H) Group 8: Colorado, Wyoming, North Dakota, 
                South Dakota, Montana, and Utah.
                  (I) Group 9: California, Guam, Hawaii, 
                Nevada, and Arizona.
                  (J) Group 10: Washington, Alaska, Idaho, and 
                Oregon.
          (2) Deadline for selection.--The Administrator shall 
        make selections under this subsection not later than 60 
        days after promulgation of regulations under section 5 
        of the National Small Business Regulatory Assistance 
        Act of 2001.
  (g) Matching Not Required.--Subparagraphs (A) and (B) of 
section 21(a)(4) shall not apply to assistance made available 
under the pilot program.
  (h) Distribution of Grants.--
          (1) In general.--Each State program selected to 
        receive a grant under subsection (f) in a fiscal year 
        shall be eligible to receive a grant in an amount not 
        to exceed the product obtained by multiplying--
                  (A) the amount made available for grants 
                under this section for the fiscal year; and
                  (B) the ratio that--
                          (i) the population of the State; 
                        bears to
                          (ii) the population of all the States 
                        with programs selected to receive 
                        grants under subsection (f) for the 
                        fiscal year.
          (2) Minimum amount.--Notwithstanding paragraph (1), 
        the minimum amount that a State program selected to 
        receive a grant under subsection (f) shall be eligible 
        to receive under this section in the fiscal year shall 
        be $200,000.
  (i) Evaluation and Report.--Not later than 3 years after the 
establishment of the pilot program, the Comptroller General of 
the United States shall conduct an evaluation of the pilot 
program and shall transmit to the Administrator and to the 
Committees on Small Business of the Senate and House of 
Representatives a report containing the results of the 
evaluation along with any recommendations as to whether the 
pilot program, with or without modification, should be extended 
to include the participation of all Small Business Development 
Centers.
  (j) Authorization of Appropriations.--
          (1) In general.--There are authorized to be 
        appropriated to carry out this section $5,000,000 for 
        fiscal year 2002 and each fiscal year thereafter.
          (2) Limitation on use of other funds.--The 
        Administrator may carry out the pilot program only with 
        amounts appropriated in advance specifically to carry 
        out this section.
  Sec. [36.] 37. All laws and parts of laws inconsistent with 
this Act are hereby repealed to the extent of such 
inconsistency.

                            ADDITIONAL VIEWS

    Democrats agree strongly that some targeted, uniform 
delivery system must exist to make small businesses more aware 
of their regulatory obligations. If greater assistance is not 
targeted to small businesses, a divide could develop between 
large businesses that have the resources to comply with 
regulatory requirements and small businesses that do not. As a 
result, we strongly support a regulatory compliance assistance 
program operated through SBA's Small Business Development 
Center Program and believe that its overall success will ensure 
the success of the pilot program established under H.R. 203.
    Small businesses have often been overwhelmed by the growing 
and constantly changing Federal, State and local regulatory 
requirements. They fear, with the onslaught of federal 
regulations, that they will inadvertently fail to comply with 
some obscure rule, their business will be shut down by the 
government, and they will be driven into bankruptcy because 
they cannot afford the cost of compliance. On the other hand, 
small businesses also fear that going to the very agencies that 
create and enforce the regulations is tantamount to turning 
themselves in, and will ultimately result in penalties being 
levied on their businesses. In fact, many believe that the 
government is more interested in recovering penalties than in 
promoting compliance with the law.
    Although Federal and State regulations and regulatory 
programs usually provide substantial benefits, they can be 
confusing, burdensome and incur significant costs that 
disproportionately fall on small businesses. Small businesses 
are not only in need of quality regulatory compliance 
assistance programs, but also programs that are uniformly 
developed nationwide and targeted to small businesses.
    An important aspect raised during the Committee's most 
recent hearing is the technical expertise one must have to 
understand each individual regulatory requirement. Providing 
that knowledge to small businesses is as important, if not more 
important, as providing advanced notice of any regulatory 
requirement they must comply with. Therefore, we believe that 
the purpose of this new pilot program is to establish an 
initial contact that results in a referral to the appropriate 
program or experts. It is our belief that the new pilot program 
is required to utilize existing Federal or State compliance 
assistance programs and avoid competing with them. Some of 
these existing compliance assistance programs, such as those 
created under Section 507 of the Clean Air Act Amendments (e.g. 
EPA's State Small Business Assistance Program), have 
established a level of expertise in compliance assistance and 
provide invaluable technical assistance targeted to small 
businesses. In addition, SBDCs must be careful in the type of 
counseling they provide and the liability that can result from 
such counseling.
    During the Committee mark-up session, there was some 
confusion on who would be receiving the grant awards. We concur 
with the report language that directs the Administrator to 
select two State SBDC programs from each of the ten SBA regions 
across the nation. The State SBDC program, not an individual 
center or subcenter, will receive the grant money to implement 
the assistance statewide.
    As introduced, H.R. 203, required assistance with only 
Federal regulations. However, Congress often defers the 
authority to promulgate and enforce Federal regulatory 
requirements to the States. Therefore, small businesses must 
also comply with regulations on the State level and many times, 
these regulations either conflict or are even more stringent 
and complicated than Federal regulations. A prime example is 
EPA's TMDL regulations, where EPA promulgates the regulations 
but States are given the authority to enforce those 
regulations. Thus, States can also, and often do, promulgate 
their own regulations to enforce the requirements under the 
TMDL regulation. The Committee Democrats proposed and supported 
an en bloc amendment to H.R. 203 in committee, containing 
language that included assistance with State regulations within 
the pilot program.
    Democrats are also concerned with privacy protections. 
During this day and age of new information technologies, 
privacy protection is one of the most critical issues facing 
all individuals, including small businesses. Although 
confidentiality provisions were included in H.R. 203 as 
introduced, these provisions applied only to participants of 
the pilot program. Therefore, Democrats sought strong privacy 
protections throughout the existing SBDC program.
    Since its inception, privacy protections have been an 
inviolate principle of the SBDC program. However, in recent 
years, SBA began seeking the names and addresses of SBDC 
clients. At first, the agency assured the SBDCs that the 
information would be kept confidential, but later informed them 
that the agency could not ensure the confidentiality of their 
client information. This puts the SBDCs in a precarious 
position for two important reasons.
    First, each SBDC client signs a liability waiver when it 
seeks SBDC assistance. As part of that waiver agreement, the 
SBDC agrees to never disclose the identity of the client. 
Therefore, this can create liability problems for the program 
that could result in expensive litigation, not to mention the 
possibility of large court imposed penalties and fines. Second, 
and possibly the most important, is the loss of trust from 
clients. SBDC assistance includes assisting small business who 
struggle against Federal and State regulations that could lead 
to possible investigations or penalties against the small 
business owner. If the SBDC clients believe that their 
identities will not be held in confidence, they will no longer 
seek the assistance. This could potentially threaten the 
success of the program and quite possibly terminate its 
existence.
    As a result, the en bloc amendment to H.R. 203, proposed 
and supported by the Democrats, included language prohibiting 
the SBDCs, or an agent of an SBDC, from disclosing the name or 
address of any SBDC client. However, to ensure the integrity of 
the program, these privacy protection provisions will not 
pertain to financial auditors who must review each State SBDC 
program.
    In addition, we believe that fees must not be charged in 
conjunction with this pilot project. Although the SBDCs are 
permitted to charge fees under limited circumstances, one-on-
one counseling is provided free of charge. Current and past 
Administrations have attempted to implement a fee-for-service 
structure for SBDC services that are, and have been, 
historically free. However, implementing such a structure would 
not only be detrimental to the pilot program, but to the 
overall SBDC program. Democrats have consistently opposed such 
a move and will continue to oppose future attempts.
    The proposal also establishes a repository and 
clearinghouse for the information obtained by the SBDCs, 
primarily to provide unbiased feedback to agencies and to 
detect inconsistencies in information regarding compliance with 
a regulation. This will also work to identify government-wide 
trends in regulatory rulemaking and enforcement. This will 
facilitate the ability of the agencies and Congress to improve, 
not only compliance, but compliance assistance, on a 
government-wide level.
    This pilot program will be able to offer small businesses a 
voluntary, confidential, and nonpunitive means in which to 
obtain assistance in complying with the numerous regulations 
that could determine the success or failure of their 
businesses. By utilizing SBDCs as a delivery network, small 
businesses will be able to obtain counseling, training, and 
education, in an environment that is not perceived as 
intimidating or threatening.

                                                Nydia M. Velazquez.

                                  
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