[Senate Report 107-5]
[From the U.S. Government Publishing Office]



                                                        Calendar No. 22
107th Congress                                                   Report
                                 SENATE
 1st Session                                                      107-5

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               INDEPENDENT OFFICE OF ADVOCACY ACT OF 2001

                                _______
                                

                 March 21, 2001.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 395]

    The Committee on Small Business, to which was referred the 
bill (S. 395) to ensure independent and nonpartisan operation 
of the Office of Advocacy of the Small Business Administration, 
having considered the same, the Committee reports favorably 
thereon, with amendments, and recommends that the bill, as 
amended, do pass.

                        I. NEED FOR LEGISLATION

    The Office of Advocacy (Office) 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) published a report in 
1999 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. During the period covered by the report, 
Regional Advocates, who are senior staff in the Office of 
Advocacy, were 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. Consequently, Chairman 
Bond introduced the bill to establish a sufficiently 
independent Chief Counsel who would not be obligated to comply 
with the political demands of the Administration. Further, the 
legislation, as approved by the Committee, is written, in part, 
to address issues raised by the GAO.
    The Independent Office of Advocacy Act of 2001 responds to 
these concerns and is designed to build a firewall to prevent 
the political intrusion into the day-to-day management 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 the Office's 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 does not alter the 25-year-old statute that 
permits 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) (15 U.S.C. 634d). 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. An early draft of S. 395 included 
a restatement of the special hiring authority provided under 
existing law to the Chief Counsel. Although the restatement of 
existing law was dropped from the bill at the insistence of the 
Senator Thompson, Chairman of the Committee on Governmental 
Affairs, the statutory authority for the Chief Counsel to hire 
staff under 15 U.S.C. 634d has not been modified or rescinded 
in any way in S. 395 as approved by the Committee on Small 
Business.
    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 work 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 of 2001, 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 effect 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 that greater independence for the Office would improve 
its ability to advocate on behalf of small businesses.
    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-timeemployees working on behalf of small 
businesses in the Office of Advocacy. The FY 2001 allocation of staff 
is 51, but in recent years the Office has not been fully staffed as the 
result of the hiring freeze imposed by the SBA Administrator three 
years ago. 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 the SBA, at the 
discretion of the Administrator.

                      II. DESCRIPTION OF THE BILL

    The Independent Office of Advocacy Act of 2001 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. The Act 
further directs the SBA 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. As stated earlier in this 
report, the bill does not alter the practice set forth in 
existing law that allows 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 OPM. 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 existing law 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 deems necessary. The special hiring 
authority rests solely with the Chief Counsel. It is the 
Committee's intention that the authority of the Chief Counsel 
to hire staff, consultants and experts would be limited only by 
the amounts appropriated annually by the Congress, without 
further review or approval needed from the Administration..
    Section 4 of the Independent Office of Advocacy Act of 2001 
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 the SBA during the five years preceding 
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, except in cases of misconduct, neglect of duty, 
malfeasance, or if there is reasonable cause to believe that 
the Chief Counsel has committed a crime for which a sentence of 
imprisonment can be imposed. This provision does not restrict 
the President's removal authority; simply, it is intended to 
give Congress advance notice that the Chief Counsel is being 
removed.
    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 of Advocacy, 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. Additionally, the Committee believes that women-
owned businesses and minority-owned businesses play an equally 
important role in our economy. Therefore, the bill adds women-
owned business concerns to the primary function of the Office 
of Advocacy.
    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 August 1999, when this legislation was first approved 
unanimously by the full Senate, the bill was amended at the 
request of Senator Thompson to insure that the other 
Congressional Committees with a specific interest in the 
Regulatory Flexibility Act receive the annual reports, 
including the Senate Committee on Governmental Affairs, the 
House Government Reform Committee and the Senate and House 
Judiciary Committees. This change has been included in S. 395. 
In order for the Committees on Small Business of the Senate and 
House of Representatives to carry out their responsibilities on 
behalf of the small business community, it is important that 
they receive regular reports from the Chief Counsel that have 
not been submitted to the OMB or any other Federal department 
or agency for editing and/or approval.
    An early version of S. 395 restated the existing law, which 
directs each Federal agency toprovide the Chief Counsel with 
all information that the Chief Counsel believes is necessary to 
carrying out the responsibilities of the Office of Advocacy (15 U.S.C. 
634e). At the insistence of the Senate Committee on Armed Service, the 
reference to this provision was dropped from the bill. The Committee 
believes that this authority is very important, and the fact that this 
provision is not restated in S. 395 as approved by the Committee should 
in no way be interpreted as a modification or recission of existing 
law.
    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.
    If, at the time of enactment, 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 vote on S. 395 was recorded on 
February 28, 2001. A motion by Senator Kerry to adopt the 
Independent Office of Advocacy Act was approved by a unanimous 
recorded vote, with the following Senators voting in the 
affirmative: Bond, Kerry, Burns, Bennett, Snowe, Enzi, 
Fitzgerald, Crapo, Allen, Ensign, Levin, Harkin, Lieberman, 
Wellstone, Cleland, Landrieu, Edwards, and Cantwell.

                           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, March 7, 2001.
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. 395, the Independent 
Office of Advocacy 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,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 395--Independent Office of Advocacy Act of 2001

    S. 395 would authorize the appropriation of such sums as 
necessary for the Office of Advocacy within the Small Business 
Administration (SBA). In addition, the bill would clarify the 
office's role and would codify requirements for reports to the 
Congress on issues affecting small businesses.
    Based on information from the SBA, CBO estimates that the 
office will spend about $4 million in 2001. Assuming 
appropriations of the necessary amounts, we estimate that SBA 
would spend about $5 million a year over the 2002-2006 period 
to implement S. 395. The increase in estimated costs would 
primarily cover anticipated inflation.
    S. 395 would not affect direct spending or receipts; 
therefore, pay-as-you-go procedures would not apply. S. 395 
contains no intergovernmental 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 Ken Johnson. This estimate was 
approved by Peter H. Fontaine, Deputy 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.

                    VII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    The Act is titled the ``Independent Office of Advocacy Act 
of 2001.''

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.
    Subsection (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 in the panel review process.

Section 4. Office of Advocacy

    Section 4 amends Title II of Public Law 94-305 (15 U.S.C. 
634a et seq.) describing the Office of Advocacy.
    Section 202 of Title II defines specific terms including 
``Chief Counsel'' and ``Office.''
    Section 203 of Title II establishes within SBA the Office 
of Advocacy and designates the Chief Counsel for Advocacy to 
manage the Office. This section sets forth that the Chief 
Counsel shall be nominated by the President, who shall give the 
Congress 30 days notice should he decide to remove the Chief 
Counsel, except in cases of misconduct, neglect of duty, 
malfeasance, or if there is reasonable cause to believe that 
the Chief counsel has committed a crime for which a sentence of 
imprisonment can be imposed. Section 203 also requires the SBA 
to submit a separate budget request each year for the Office of 
Advocacy.
    Subsection (c) of Section 203 sets forth the following 
primary functions for the Office of Advocacy:
          (1) Examine the role played by small business within 
        the U.S. economy;
          (2) Examine the effectiveness of Federal subsidy and 
        assistance programs;
          (3) Measure the direct costs of regulation on small 
        business concerns;
          (4) Determine the impact of the U.S. tax system on 
        small business concerns;
          (5) Study the ability of the private sector to meet 
        the credit needs of small business and determine the 
        impact of government demands for credit on small 
        business concerns;
          (6) Determine the availability of credit and 
        management assistance to small business concerns;
          (7) Evaluate the efforts of Federal agencies and the 
        private sector to help minority-owned and women-owned 
        small business concerns;
          (8) make recommendations to help in the development 
        and strengthening of minority- and women-owned small 
        business concerns;
          (9) 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;
          (11) Make recommendations on issues and regulations 
        affecting small business concerns; and
          (12) Evaluate the efforts of each Federal agency and 
        of private industry to assist small business concerns 
        owned and controlled by veterans and service-disabled 
        veterans.
    Subsection (d) of Section 203 also describes the following 
additional functions of the Office of Advocacy:
          (1) Serve as a focal point for receipt of complaints, 
        criticisms and suggestions concerning the policies and 
        programs of the Federal government that affect small 
        business concerns;
          (2) Counsel small business concerns on how to resolve 
        their difficulties with the Federal government;
          (3) Develop proposals to improve the policies and 
        activities of Federal agencies so that they can better 
        assist small business concerns;
          (4) Represent the interests and views of small 
        business concerns before other Federal agencies;
          (5) Encourage both private and public entities to 
        disseminate information about services and programs for 
        small business concerns; and
          (6) Carry out its responsibilities under the 
        Regulatory Flexibility Act.
    Subsection (e) of Section 203 directs the SBA to provide 
the Office of Advocacy with adequate office space in the 
headquarters and field offices. The SBA shall also provide 
equipment, office supplies, and communications facilities and 
services as are necessary.
    Section 206 of Title II directs the Chief Counsel to submit 
an annual report on Agency compliance with the requirements of 
the Regulatory Flexibility Act to the Senate and House 
Committees on Small Business, the Senate Committee on 
Governmental Affairs, the House Committee on Government Reform 
and the Senate and House Committees on the Judiciary. Further, 
the Chief Counsel is authorized to 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.
    Section 207 of Title II authorizes such sums as are 
necessary to be appropriated for the Office of Advocacy.
    A new Subsection (d) has been added to Section 207 to 
permit the incumbent Chief Counsel for Advocacy, if one exists 
at the time of enactment, to continue to serve in that position 
after the date of enactment of this Act in accordance with the 
requirements of Title II.

                                
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