[Federal Register Volume 59, Number 89 (Tuesday, May 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11166]


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[Federal Register: May 10, 1994]


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Part VI





Office of Management and Budget





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Report on Executive Order No. 12866, Regulatory Planning and Review; 
Notice
OFFICE OF MANAGEMENT AND BUDGET

Report on Executive Order No. 12866, Regulatory Planning and Review

AGENCY: Office of Management and Budget, Executive Office of the 
President.

ACTION: Publication of report to the president.

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SUMMARY: On September 30, 1993, the President signed Executive Order 
No. 12866, ``Regulatory Planning and Review.'' On the same day, the 
President directed the Administrator of the Office of Information and 
Regulatory Affairs to monitor OIRA's review activities during the first 
six months of the Executive Order and submit a report on these 
activities to the President and the Vice President by May 1, 1994. The 
President also directed that the report be published in the Federal 
Register.
    Pursuant to the President's directive, this document contains the 
text of the report and an executive summary of the report, transmitted 
to the President on May 1, 1994.

FOR FURTHER INFORMATION CONTACT: Don Arbuckle, Office of Information 
and Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Washington, DC 20503, (202) 395-7340.
Sally Katzen,
Administrator, Office of Information and Regulatory Affairs.
May 1, 1994.

Report on Executive Order No. 12866

Executive Summary

    On September 30, 1993, President Clinton signed Executive Order No. 
12866, ``Regulatory Planning and Review.'' On that same day, he issued 
a memorandum directing the Administrator of OMB's Office of Information 
and Regulatory Affairs to ``monitor [her] review activities over the 
next six months and, at the end of this period, to prepare a report on 
[her] activities.'' OIRA's Report covers the implementation of 
Executive Order No. 12866 from October 1, 1993, through March 31, 1994.
    As set forth in greater detail in the report, implementation of the 
new Executive Order is well underway. At this point, we are beginning 
to see some of the changes that were envisioned in the Order. We have, 
however, encountered greater delays than anticipated in implementing 
some aspects of the Order. And some of the processes established by the 
Order, while initiated on schedule, are still in the formative stages. 
As a result, it is too early to arrive at a final judgment regarding 
the success of the new system; however, the early indications are that 
there is substantial improvement in the rulemaking process.
    Executive Order No. 12866 clearly articulates President Clinton's 
regulatory philosophy and his view of how the nation's regulatory 
system should work. Most fundamentally, as the Order states in its 
opening lines:
    The American people deserve a regulatory system that works for 
them, not against them: a regulatory system that protects and improves 
their health, safety, environment, and well-being and improves the 
performance of the economy without imposing unacceptable or 
unreasonable costs on society; regulatory policies that recognize that 
the private sector and private markets are the best engine for economic 
growth; regulatory approaches that respect the role of State, local, 
and tribal governments; and regulations that are effective, consistent, 
sensible, and understandable.
    A number of themes run through the Order. Within the Executive 
Branch, it encourages cooperation and coordination among OMB and the 
agencies. With respect to the public, it emphasizes openness and early 
involvement by all of the interested entities, including particularly 
State, local, and tribal participation in the rulemaking process.
    The Order reaffirms the primacy of the agencies in the regulatory 
decision-making process and sets forth principles to which they are to 
adhere, to the extent permitted by law, when developing rules. At the 
same time, the Order reaffirms the legitimacy of centralized review. 
The process established for centralized review distinguishes between 
significant and non-significant regulatory actions so as to focus 
OIRA's review activities on where there will likely be the most 
benefit. It also emphasizes sound and timely analysis, early and 
frequent consultation, and it reduces delay and removes secrecy in the 
review process by establishing time limits and disclosure requirements.
    Many of the objectives of the Order have begun to be realized. 
Regarding cooperation and public involvement, one of the major changes 
during the six-month period is the improved relationships that have 
been developed between OIRA and the agencies. While remnants of the 
mistrust and hostility that often characterized relationships between 
the career staffs over much of the past decade still exist, for the 
most part this has been replaced with a spirit of cooperation.
    Much of the credit for the improved environment goes to the newly 
created Regulatory Policy Officers (RPO), high level agency officials 
who represent the agency head in efforts to implement the Order and 
improve the regulatory process. The RPOs work together in the 
Regulatory Working Group (RWG) chaired by the OIRA Administrator and 
attended by the White House Regulatory Policy Advisors--which meets 
regularly to discuss regulatory issues. The RWG has proven to be a 
useful forum not only for discussion of ideas and the exchange of best 
practices, but also for coordinating regulatory activities that affect 
more than one agency.
    Regarding public participation, agencies appear to be making 
efforts to engage the public earlier and more fully in the regulatory 
process. For its part, OIRA has held two conferences (and is planning a 
third) with representatives of State, local, and tribal governments to 
improve the consultation process between them and Federal regulators. 
OIRA has also taken steps to improve the participation of the small 
business community in the rulemaking process. OIRA joined the Small 
Business Administration (SBA) to sponsor a Small Business Forum on 
Regulatory Reform in March 1994 to discuss how the regulatory process 
can better address the special needs of small businesses.
    With respect to the objectives of selectivity and timeliness, OIRA 
received and reviewed 578 regulatory actions from October 1, 1993, 
through March 31, 1994. (See Table 1.) The 578 rules received and 
reviewed by OIRA for the six-month period is approximately half what it 
was for comparable periods in previous years. The number of rules under 
review at any given time has also shown a significant decline. For 
example, on July 1, 1993 (three months before the Executive Order was 
signed), 254 regulations were under review; on March 31, 1994 (six 
months after the Executive Order was signed), 68 rules were under 
review.
    These figures reflect a longer than anticipated start-up period 
during which many non-significant rules continued to be sent to OIRA 
for review. This is a result of difficulties some agencies have had in 
instituting internal systems to manage the listing process that is to 
distinguish between significant and non-significant regulatory actions. 
Where the process has been implemented it has been helpful.
    In total, OIRA has received lists designating 1,624 regulatory 
actions as significant or non-significant. (These rules would not all 
be rules reviewed during the six-month period--and hence they all do 
not appear on Appendix A--because, if they are non-significant, they 
would not have been submitted for review, and even if they are 
significant, they may not have been ready to be submitted for review 
and reviewed during the period covered by the report.) Of the 1,624 
regulatory actions, almost two-thirds were designated non-significant, 
one-third significant; specifically, agencies designated (and OMB 
agreed) that 1,047 (or 64%) were non-significant; 316 (or 19%) were 
designated by the agency as (and OIRA agreed that they were), 
significant; and the remaining 261 (or 16%), were designated 
significant by OMB. Stated another way, the agency and OMB agreed with 
the initial designation for 83% of the regulatory actions; in only 16% 
was there a difference of view.
    The definition of ``significant'' regulatory action has been the 
source of much discussion both within agencies and departments and 
between OIRA and the agencies (and it has been at least a partial 
source of the start-up delays we have experienced). Some of the 
differences may be attributable to the difference in the natural 
inclinations of rule writers, who might prefer not to have another 
review layer to go through, and the natural inclinations of reviewers, 
who might prefer to see more, rather than fewer rules, to ensure that 
everything that should be reviewed is reviewed. In any event, we have 
found that the number of instances where there is an initial difference 
of opinion as to significance decreases (sometimes substantially) with 
the agencies' increased experience with the process. In some cases, it 
is simply a function of the agencies' not knowing how much information 
to provide to enable OIRA to agree that the regulation is non-
significant. In other cases, the agencies and OMB discuss the reasons 
for their different judgments so that the staffs come to an 
understanding and agreement on the definition of significance.
    With respect to timeliness, the Executive Order establishes strict 
time limits on OIRA review in most cases 90 days to balance the need 
for adequate time to conduct review with the need to streamline the 
regulatory process and prevent unwarranted delay. OIRA has made a 
concerted effort to meet not only the letter of this requirement, but 
its spirit as well, and this goal of the Order is clearly being 
accomplished. Of the 578 rules received and reviewed between October 
and March, only three were extended beyond the 90-day limit. Each of 
these rules was extended at the request of the regulating agency to 
permit completion of interagency reviews that were in fact concluded in 
less than three weeks after the extension was requested.
    In addition, the Order establishes disclosure requirements for both 
OIRA and the agencies to increase openness, accessibility, and 
accountability. On July 1, 1993, as one of her first actions, the OIRA 
Administrator began making available a daily list of draft agency 
regulations under review at OIRA. This was done in order to remove the 
stigma of secrecy that had previously characterized regulatory review, 
and to make the review process more transparent. In addition, lists and 
statistics related to regulatory review for each month are compiled and 
made available by early the following month. Meetings and telephone 
calls with persons outside the Executive Branch on regulations under 
review are now logged, and these logs are made publicly available. And 
other material related to regulatory review is kept in a public file, 
forwarded to the agencies, or made available upon request, in 
accordance with the Order. These various disclosure procedures are 
working well and have helped restore the integrity of the regulatory 
review process.
    Two aspects of the Executive Order--the regulatory planning 
mechanism and review of existing regulations--are not covered in detail 
in the report, because although both are underway and on schedule, it 
is too early to judge their success. The regulatory planning process 
began with an agencies policy meeting held in early April and guidance 
on the process issued by the OIRA Administrator immediately after the 
meeting. This began the planning cycle that will result in the 
publication of the Regulatory Plan in October 1994. Regarding review of 
existing regulations, agencies submitted to OIRA in late December their 
plans for review of existing regulations. Several of the agencies have 
published notices requesting the public to suggest candidates for 
review. These and other approaches to reviewing existing regulations 
are being discussed within the RWG, and further action is planned.
    In the memorandum from the President, we were asked to identify any 
provisions of the Executive Order that should be changed. As noted 
above, it is premature to make specific recommendations. We have, 
however, identified a number of issues that warrant further 
consideration and that ultimately may require changes to the Executive 
Order, its implementation by OIRA, or both.
    The importance of regulations in our society makes it imperative 
that the process by which they are developed and reviewed be 
characterized by integrity and accountability. During the first six 
months of Executive Order No. 12866, we have made major strides toward 
these goals. We have moved the regulatory process from one criticized 
for delay, favoritism, and secrecy to one that is principled, 
professional, and productive. Much remains to be done, but we have made 
a strong beginning.

Report on Executive Order No. 12866

May 1, 1994.
    On September 30, 1993, President Clinton signed Executive Order No. 
12866, ``Regulatory Planning and Review'' (attached). On that same day, 
he issued a memorandum directing the Administrator of OMB's Office of 
Information and Regulatory Affairs (OIRA) to ``monitor [her] review 
activities over the next six months and, at the end of this period, to 
prepare a report on [her] activities'' (attached). The President also 
directed that ``[t]he report . . . identify any provisions of the order 
that, based on [her] experience or on comments from interested persons, 
warrant reconsideration so that the purposes and objectives of this 
order can be better achieved.'' He directed that this report be 
submitted to the Vice President and the President by May 1, 1994, and 
be published in the Federal Register.
    This report will describe and comment on what has occurred during 
the first six months of implementation of Executive Order No. 12866 
(from October 1, 1993, through March 31, 1994), and will identify 
issues that could lead to suggested changes in the future. Although six 
months is a short time to bring about the fundamental changes in the 
Government's regulatory process envisioned by the Executive Order, the 
outlines of the new system have clearly begun to emerge. In some cases, 
we can point to unqualified successes; in others, we have encountered 
unexpected difficulties in implementing the system. To a large degree, 
it is too early to assess the success of the new system.
    This report consists of four chapters. The first section introduces 
the subject with a brief history of the major regulatory programs of 
the U.S. Government and a general discussion of the nature of 
regulation. The second chapter describes the Clinton Administration's 
regulatory philosophy and the objectives of Executive Order No. 12866. 
The third section describes the implementation of the Executive Order 
during the first six months. The fourth section comments generally on 
issues raised as a result of our experience or from comments received 
from agencies and members of the public.

I. History of the Regulatory Programs of the U.S. Government

    The Federal Government affects the lives of its citizens in a 
variety of ways through taxation, spending, grants and loans, and 
through regulation. Over time, regulation has become increasingly 
prevalent in our society, and the importance of our regulatory 
activities cannot now be overstated.

The History of Major Regulatory Programs

    Federal regulation as we know it began in the late 19th century 
with the creation of the Interstate Commerce Commission, which was 
charged with protecting the public against excessive and discriminatory 
railroad rates. The regulation was economic in nature, setting rates 
and regulating the provision of railroad services. Having achieved some 
success, this administrative model of an independent, bipartisan 
commission, reaching decisions through an adjudicatory approach, was 
used for the Federal Trade Commission (1914), the Water Power 
Commission (1920) (later the Federal Power Commission), and the Federal 
Radio Commission (1927) (later the Federal Communications Commission). 
In addition, during the early 20th century, Congress created several 
other agencies to regulate commercial and financial systems--including 
the Federal Reserve Board (1913), the Tariff Commission (1916), the 
Packers and Stockyards Administration (1916), and the Commodities 
Exchange Authority (1922)--and to ensure the purity of certain foods 
and drugs, the Food and Drug Administration (1931).
    Federal regulation began in earnest in the 1930s with the 
implementation of wide-ranging New Deal regulatory programs.
    Some of the New Deal economic regulatory programs were implemented 
by the Federal Home Loan Bank Board (1932), the Federal Deposit 
Insurance Corporation (1933), the Commodity Credit Corporation (1933), 
the Farm Credit Administration (1933), the Securities and Exchange 
Commission (1934), and the National Labor Relations Board (1935). In 
addition, the jurisdiction of both the Federal Communications 
Commission and the Interstate Commerce Commission were expanded to 
regulate other forms of communications (e.g., telephone and telegraph) 
and other forms of transport (e.g., trucking). In 1938, the role of the 
Food and Drug Administration was expanded to include prevention of harm 
to consumers in addition to corrective action. The New Deal also called 
for the establishment of the Employment Standards Administration 
(1933), and of Social Security (1933) and related programs.
    A second burst of regulation began in the late 1960s with the 
enactment of comprehensive, detailed legislation intended to protect 
the consumer, improve environmental quality, enhance work place safety, 
and assure adequate energy supplies. In contrast to the pattern of 
economic regulation adopted before and during the New Deal, the new 
social regulatory programs tended to cross many sectors of the economy 
(rather than individual industries) and affect industrial processes, 
product designs, and by-products (rather than entry, investment, and 
pricing decisions).
    The consumer protection movement led to creation in the newly 
formed Department of Transportation of several agencies designed to 
improve transportation safety. They included the Federal Highway 
Administration (1966), which sets highway and heavy truck safety 
standards; the Federal Railroad Administration (1966), which sets rail 
safety standards; and the National Highway Traffic Safety 
Administration (1970), which sets safety standards for automobiles and 
light trucks. Regulations were also authorized pursuant to the Truth in 
Lending Act, the Equal Credit Opportunity Act, the Consumer Leasing 
Act, and the Fair Debt Collection Practices Act. The National Credit 
Union Administration (1970) and the Consumer Product Safety Commission 
(1972) were also created to protect consumer interests.
    In 1970, the Environmental Protection Agency was created to 
consolidate and expand environmental protection programs. Its 
regulatory authority was expanded through the Clean Air Act (1970), the 
Clean Water Act (1972), the Safe Drinking Water Act (1974), the Toxic 
Substances Control Act (1976), and the Resource Conservation and 
Recovery Act (1976). This effort to improve environmental protection 
also led to the creation of the Materials Transportation Board (1975) 
(now part of the Research and Special Programs Administration in the 
Department of Transportation) and the Office of Surface Mining 
Reclamation and Enforcement (1977) in the Department of the Interior.
    The Occupational Safety and Health Administration (1970) was 
established in the Department of Labor to enhance work place safety. It 
was followed by the Mining Enforcement and Safety Administration 
(1973), now the Mine Safety and Health Administration, also in the 
Department of Labor. The Pension Benefit Guaranty Corporation was 
directed to administer pension plan insurance systems in 1974.
    Also in the 1970s, the Federal Government attempted to address the 
problems of the dwindling supply and the rising costs of energy. In 
1973, the Federal Energy Administration (FEA) was directed to manage 
short-term fuel shortage. Less than a year later, the Atomic Energy 
Commission was divided into the Energy Research and Development 
Administration (ERDA) and an independent Nuclear Regulatory Commission. 
In 1977, the FEA, ERDA, the Federal Power Commission, and a number of 
other energy program responsibilities were merged into the Department 
of Energy and the independent Federal Energy Regulatory Commission.
    Another significant regulatory agency, the Department of 
Agriculture (1862), has grown over time so that it now regulates the 
price, production, import, and export of agricultural crops; the safety 
of meat, poultry, and certain other food products; a wide variety of 
other agricultural and farm-related activities; and broad-reaching 
welfare programs. Agriculture regulatory authorities have changed over 
time, but now include the U.S. Forest Service (1905), the Farmers Home 
Administration (1921), the Soil Conservation Service (1935), the 
Agricultural Stabilization and Conservation Service (1961), the Food 
and Nutrition Service (1969), the Agricultural Marketing Service 
(1972), the Federal Grain Inspection Service (1976), the Animal and 
Plant Health Inspection Service (1977), the Foreign Agricultural 
Service (1974), The Food Safety and Inspection Service (1981), and the 
Rural Development Administration (1990).
    The consequence of the long history of regulatory activities is 
that Federal regulations now affect virtually all individuals, 
businesses, State, local, and tribal governments, and other 
organizations in virtually every aspect of their lives or operations. 
Some rules are based on old statutes; others on relatively new ones. 
Some regulations are critically important (such as the safety criteria 
for airlines or nuclear power plants); some are relatively trivial 
(such as setting the times that a draw bridge may be raised or 
lowered). But each has the force and effect of law and each must be 
taken seriously.

The Nature of Regulation

    It is conventional wisdom that competition in the marketplace is 
the most effective regulator of economic activity. Why then is there so 
much regulation? The answer is that markets are not always perfect and 
when that occurs, society's resources may be imperfectly or 
inefficiently used. The advantage of regulation is that it can improve 
resource allocation or help obtain other societal benefits. For 
example, consider the following situations:

--Certain markets may not be sufficiently competitive, thus potentially 
subjecting consumers to the harmful exercise of market power (such as 
higher prices or artificially limited supplies). Regulation can be used 
to promote competition (for example, removing barriers to entry) and to 
ensure that firms engage in fair trade practices such as the sale of 
dangerous substances.
--In an unregulated market, firms and individuals may impose costs on 
others--including future generations that are not reflected in the 
prices of the products they buy and sell. They may pollute streams, 
cause health hazards, or endanger the safety of their workers or 
customers. Regulation can be used to reduce these harmful effects by 
prohibiting certain activities or imposing the societal costs of the 
activity in question on those causing harm. One goal of regulation is 
to induce private parties to act as they would if they had to bear the 
full costs that they impose on others.
--Similarly, in an unregulated market, firms and individuals may not 
have incentives to provide individuals with accurate or sufficient 
information needed to make intelligent choices. Firms may mislead 
consumers or take advantage of consumer ignorance to market unsafe or 
risky products. Regulation may be needed to require disclosure of 
information, such as the possible side effects of a drug, the contents 
of a food or packaged good, the energy efficiency of an appliance, or 
the full cost of a home mortgage.
--Even when consumers have full information, the Government may wish to 
protect individuals, especially children, from their own actions. 
Regulation may thus be used to restrict certain unacceptable or harmful 
practices.
--Regulation can also be beneficial in achieving goals that reflect our 
national values, such as equal opportunity and universal education, or 
a respect for individual privacy.

    There are also many potential disadvantages of regulating, to the 
Government, to those regulated, and to society at large.

--The direct costs of administering, enforcing, and complying with 
regulations may be substantial. Some of these costs may be borne by the 
Government, while others are paid for by firms and individuals, 
eventually being reflected in the form of higher prices, lower wages, 
reduced output, and investment, research, and expansion foregone.
--There are also disadvantages of regulation that are difficult to 
measure, such as adverse effects on flexibility and innovation, which 
may impair productivity and competitiveness in the global marketplace, 
and counterproductive private incentives, which may distort investment 
or reduce needed supporting activities.

    In short, regulations (like other instruments of government policy) 
have enormous potential for both good and harm. Well-chosen and 
carefully crafted regulations can protect consumers from dangerous 
products and ensure they have information to make informed choices. 
Such regulations can limit pollution, increase worker safety, 
discourage unfair business practices, and contribute in many other ways 
to a safer, healthier, more productive, and more equitable society. 
Excessive or poorly designed regulations, by contrast, can cause 
confusion and delay, give rise to unreasonable compliance costs in the 
form of capital investments and on-going paperwork, retard innovation, 
reduce productivity, and accidentally distort private incentives.
    The challenge for regulators is to approach their task with an 
appreciation and respect for the complexity of the problems they must 
solve and the diversity of the individuals and institutions their work 
affects. In doing this, they need to balance a number of conflicting 
objectives, to apply sensitivity and judgment to the best available 
information, and ultimately to achieve the most effective means to the 
desired ends. The efforts to do this, especially in the recent past, 
have not been particularly successful, and the American people have 
indicated their irritation, if not anger, at the maze of inconsistent, 
duplicative, and excessive rules that can cause more harm than good.
    Executive Order No. 12866 was developed to bring the Government 
back to the task at hand--to design sensible regulations that improve 
the quality of our life without imposing unnecessary costs and to do so 
in a way that is efficient, fair, and accountable to the American 
people.

II. The Objectives of Executive Order No. 12866

    Executive Order No. 12866 clearly articulates President Clinton's 
regulatory philosophy and his view of how the nation's regulatory 
system should work. Most fundamentally, as the Order states in its 
opening lines:
    The American people deserve a regulatory system that works for 
them, not against them: a regulatory system that protects and improves 
their health, safety, environment, and well-being and improves the 
performance of the economy without imposing unacceptable or 
unreasonable costs on society; regulatory policies that recognize that 
the private sector and private markets are the best engine for economic 
growth; regulatory approaches that respect the role of State, local, 
and tribal governments; and regulations that are effective, consistent, 
sensible, and understandable.
    The Order sets out specific goals:
    The objectives of this Executive Order are to enhance planning and 
coordination with respect to both new and existing regulations; to 
reaffirm the primacy of Federal agencies in the regulatory decision-
making process; to restore the integrity and legitimacy of regulatory 
review and oversight; and to make the process more accessible and open 
to the public.
    In its first section, Executive Order No. 12866 sets forth the 
specific philosophy and principles that are to govern regulatory 
development. This is worth quoting at this point because it so 
succinctly describes the philosophy that the Order is established to 
implement:
    Federal agencies should promulgate only such regulations as are 
required by law, are necessary to interpret the law, or are made 
necessary by compelling public need, such as material failures of 
private markets to protect or improve the health and safety of the 
public, the environment, or the well-being of the American people. In 
deciding whether and how to regulate, agencies should assess all costs 
and benefits of available regulatory alternatives, including the 
alternative of not regulating. Costs and benefits shall be understood 
to include both quantifiable measures (to the fullest extent that these 
can be usefully estimated) and qualitative measures of costs and 
benefits that are difficult to quantify, but nevertheless essential to 
consider. Further, in choosing among alternative regulatory approaches, 
agencies should select those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity), unless a 
statute requires another regulatory approach.

Regulatory Principles

    The Order then lists 12 principles of regulation (Section 1(b)) 
that, to the extent permitted by law, agencies are to follow when 
considering and developing regulating. These principles can be viewed 
as a series of questions to be raised by the agency, begins with 
identifying the problem the agency is trying to solve or the situation 
it is trying to change. How serious is it, compared with other problems 
the agency faces? What will this proposed regulation do? How sure is 
the agency that it will do it? Will the proposed regulation have any 
unintended benefits? Any unintended costs? Create any counterproductive 
private incentives? Is there any other approach that would achieve the 
same objective better? Is there a way of modifying the proposed 
regulation to achieve greater benefits for the same costs or to achieve 
the same benefits for fewer costs?
    Two themes emerge from these principles: the need for data and for 
analysis, particularly of alternative ways to solve the problem. It is 
the responsibility of regulators to obtain and rely on the best 
reasonably obtainable scientific, technical, or economic data, as may 
be called for in a particular instance. The data should be assembled 
and analyzed objectively, without preconceived notions of the outcome. 
At the same time, it is clear that as the state of scientific knowledge 
advances, technology develops and changes, and economic forecasts are 
revised, there may be legitimate disputes about what constitutes the 
best available data. That being the case, the quest for the best should 
not be the enemy of the practicable.
    It is also the responsibility of regulators to be disciplined in 
analyzing the benefits and costs of proposed regulations and 
alternative ways of solving the problem, so that they can attest not 
only that the benefits of their regulations outweigh their costs, but 
also that their regulations are designed in the most cost-effective 
manner possible. Such a statement of principle would not seem to be 
controversial, yet the use of benefit-cost analysis has been one of the 
most contentious issues in the regulatory arena during the last twelve 
years.
    Those who criticize benefit-cost analyses believe that it is often 
difficult (or even impossible or morally improper) to quantify or place 
a dollar value on such benefits as lives saved, improved air quality, 
or reduced discrimination. Others believe that while it may be 
difficult to quantify or place a dollar value on certain costs--such as 
reduced flexibility, the loss of innovation, or counterproductive 
incentives to cheat--generally costs are easier to measure than 
benefits, so that undertaking a benefit-cost analysis will, they 
believe, skew the decision-making process against the adoption of 
needed regulations.
    While there is no easy response to these concerns, the Executive 
Order stresses not only that the anticipated effects of a regulation 
should be quantified to the extent possible, but also that those that 
cannot be quantified--whether they be benefits or costs--should 
nevertheless be considered. This underscores that the decision-maker 
should consider all of the anticipated effects in deciding whether, on 
balance, society as a whole will benefit from the proposed regulatory 
action.

Responsibilities of the Various Participants

    How these objectives are to be incorporated into a regulatory 
system is the subject of the rest of the Executive Order. It begins by 
affirming the primacy of the regulatory agencies, the legitimacy of 
centralized review, and the areas of responsibilities for each.
    The process of developing regulations must begin with the agencies 
to which Congress has assigned statutory regulatory authority and 
responsibilities. These agencies are the repositories of significant 
substantive expertise and experience in a particular field. An agency's 
activities are sometimes driven by statutory mandates; there is also 
frequently a substantial amount of discretion involved. In either 
event, it is the agency itself that must be responsible for carefully 
identifying the problem to be addressed, analyzing the source of the 
problem (including whether existing regulations or other laws have 
created, or contributed to, the problem and whether those regulations 
or other laws can be modified to achieve the regulatory goals more 
effectively), assessing the importance of that problem, and determining 
the proper solution to it.
    The Order assigns the task of centralized review to OMB's OIRA, 
which in the words of the Executive Order, is the ``repository of 
expertise concerning regulatory issues, including methodologies and 
procedures that affect more than one agency, this Executive Order, and 
the President's regulatory policies.'' With such expertise, OIRA's role 
is to ``ensure that regulations are consistent with applicable law, the 
President's priorities, and the principles set forth in this Executive 
Order, and that decisions made by one agency do not conflict with the 
policies or actions taken or planned by another agency.'' (Section 
2(b).)
    The Vice President is designated as ``the principal advisor to the 
President on . . . regulatory policy, planning, and review.'' The Order 
also names 12 White House regulatory policy ``Advisors'' who are to 
assist the President and Vice President in specified tasks. These 
include: (1) The Director of OMB; (2) the Chair (or another member) of 
the Council of Economic Advisors (CEA); (3) the Assistant to the 
President for Economic Policy (NEC); (4) the Assistant to the President 
for Domestic Policy (DPC); (5) the Assistant to the President for 
National Security Affairs (NSA); (6) the Assistant to the President for 
Science and Technology (OSTP); (7) the Assistant to the President for 
Intergovernmental Affairs (IGA); (8) the Assistant to the President and 
Staff Secretary; (9) the Assistant to the President and Chief of Staff 
to the Vice President (OVP); (10) the Assistant to the President and 
Counsel to the President; (11) the Deputy Assistant to the President 
and Director of the White House Office on Environmental Policy (OEP); 
and (12) the Administrator of OIRA, who is to ``coordinate 
communications relating to this Executive Order among the agencies, 
OMB, the other Advisors, and the Office of the Vice President.'' 
(Section 2(c).)

Scope of the Executive Order

    The scope of the Order is set forth in several different sections. 
``Regulation'' and ``regulatory action,'' the subject of the planning 
and review provisions of the Order, are defined, as are exemptions from 
the definitions, such as formal rulemaking, rules pertaining to 
military or foreign affairs, and rules limited to agency organization, 
management, and personnel matters. (Section 3(d).) In addition, the 
OIRA Administrator is given the authority to exempt any other category 
of regulations. (Section 3(d)(4).) ``Regulation'' and ``regulatory 
action'' are the operative terms used throughout the Order. They are 
defined to include any regulatory pronouncement, regardless of form, 
that has, or is expected to lead to a promulgation that has the force 
and effect of law. Thus, certain guidance documents, directives, 
notices of inquiry, policy statements, and the like may be included 
under the Order depending on the extent to which the agency intends to 
enforce their terms and conditions.
    In general, the Order focusses on ``significant regulatory 
actions,'' rather than all regulations or regulatory actions. This is 
an important distinction between this Order and its predecessor, 
Executive Order No. 12291. This Order makes clear, among other things, 
that centralized review is to be focussed on the most important 
regulatory actions, where OIRA's limited resources can be expected to 
have maximum beneficial effect. Consistent with the spirit of the 
primacy of agencies for regulatory decisions and the streamlining of 
the regulatory process, the agencies themselves are solely responsible 
for review of non-significant regulatory actions.
    A significant regulatory action is defined to mean any regulatory 
action that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order. (Section 3(f).)
    The Order applies as a whole to all Federal agencies, with the 
exception of the independent regulatory agencies. However, the 
independent regulatory agencies are requested on a voluntary basis to 
adhere to the statement of regulatory philosophy and the regulatory 
principles that may be pertinent to their activities. Moreover, these 
independent agencies are included within the provisions relating to the 
planning process. (Section 4(b) and Section 4(c).)

Planning and Coordination

    The objective of the planning process is to identify significant 
issues early in the course of regulatory development so that 
appropriate coordination can be conducted at the beginning of the 
process rather than at the end. Specifically, the purpose of the 
planning and coordinating mechanisms set up by the Order is:
    [T]o provide for coordination of regulations, to maximize 
consultation and the resolution of potential conflicts at an early 
stage, to involve the public and its State, local, and tribal officials 
in regulatory planning, and to ensure that new or revised regulations 
promote the President's priorities and the principles set forth in this 
Executive Order. (Section 4.)
    First, the Order establishes a planning cycle that begins with a 
meeting, convened by the Vice President, with the regulatory policy 
advisors and the heads of agencies to discuss priorities and to 
coordinate regulatory efforts to be accomplished in the upcoming year 
(Section 4(a)). The Order recognizes the continued utility of the 
``Unified Regulatory Agenda,'' a compilation of ``all regulations under 
development or review,'' to be published as specified by the 
Administrator. (Section 4(b).) The Order also calls for agencies to 
develop a ``Regulatory Plan'' (Section 4(c)), a description of the 
``most important significant regulatory actions that the agency 
reasonably expects to issue in proposed or final form in that fiscal 
year or thereafter.'' Agencies' plans are to be submitted to OIRA by 
June 1st of each year, and are then to be coordinated with various 
affected agencies and the regulatory policy advisors. After appropriate 
consultation and coordination, the Plan is to be published annually in 
the October publication of the Unified Regulatory Agenda.
    Another vehicle for increased coordination and cooperation 
regarding regulatory affairs among agencies and between the Executive 
Office of the President and the agencies is the Regulatory Working 
Group (RWG). (Section 4(d).) The RWG--which is to meet at least 
quarterly--is to be chaired by the OIRA Administrator, and consist of 
representatives of the regulatory policy advisors and the heads of 
agencies determined to have significant domestic regulatory 
responsibility. The Order sets forth specific tasks for the RWG:
    To assist agencies in identifying and analyzing important 
regulatory issues (including among others (1) The development of 
innovative regulatory techniques, (2) the methods, efficacy, and 
utility of comparative risk assessment in regulatory decision-making, 
and (3) the development of short forms and other streamlined regulatory 
approaches for small businesses and other entities.)
    In order for agencies to implement the Order's philosophy regarding 
accountability, planning, and coordination, it is necessary for a very 
senior official with sufficient authority to be given responsibility 
for these functions. The Order thus requires each agency to appoint a 
Regulatory Policy Officer (RPO) (Section 6(a)(2)). The RPO is to report 
to the agency head and is to oversee in the agency ``the development of 
effective, innovative, and least burdensome regulations and to further 
the principles set forth in this Executive Order.'' In most cases, the 
RPO also serves as the agency's representative on the RWG.
    To ensure improved coordination between the Government and the 
public, the Order also requires the OIRA Administrator to meet 
quarterly with representatives of State, local, and tribal governments, 
and to convene, from time to time, conferences with representatives of 
businesses, nongovernmental organizations, and the public to discuss 
regulatory issues of common concern. (Section 4(e).)

Centralized Review Process

    A large part of the Order is devoted to the processes for 
implementing centralized regulatory review (Section 6), including a 
mechanism for resolving disputes that may result from such review 
(Section 7). In the most recent Administration, centralized review was 
highly controversial and vigorously attacked by critics who believed 
that it had been misused. Yet, few really challenge the notion that it 
is appropriate for the President to provide an opportunity for an 
appraisal--detached from the originating agency's legitimate focus on 
its programmatic goals--as to whether the agency's regulatory 
activities are consistent with and further the President's overall 
objectives and regulatory philosophy. Centralized review also provides 
an effective vehicle for ensuring that decisions made by one agency do 
not conflict with policies or actions taken or planned by other 
agencies--an increasingly important function as the decentralized 
government takes on increasingly complex responsibilities. And 
centralized review can be helpful in identifying a particular success 
story, or a particular mistake, by an agency that can provide important 
information for other agencies facing the same or similar problems.
    Some of the problems with the way centralized review has been 
implemented in the past can be reduced if the agency rule-writers and 
the reviewer become engaged sooner rather than later in the regulatory 
process. After an agency has spent years, and substantial intellectual 
resources in producing a proposed regulation, it is difficult for it to 
be receptive and responsive to comments questioning the fundamental 
premises on which the regulation is based regardless of the merits of 
those comments. Recognizing the benefits of advance planning and 
coordination in identifying and more importantly resolving major issues 
early in the process, Section 6 establishes a process that focusses on 
selectivity and early determination of what is important, or 
``significant.''
    The process begins with the agency submitting to OIRA a list of 
planned regulatory actions (Section 6(a)(3)(A)), indicating those the 
agency believes to be ``significant regulatory actions'', as defined in 
Section 3(f). OIRA then has ten working days to notify the agency that 
it has determined that a listed regulation is a ``significant 
regulatory action.'' Those regulatory actions that both OIRA and the 
agency agree are not significant are not subject to review. Also, the 
OIRA Administrator may waive review of any regulatory action designated 
by the agency as significant.
    For regulatory actions designated as significant, the agency is to 
send the draft rule and an assessment of its costs and benefits to OIRA 
for review. Additional and more extensive analysis is necessary if the 
rule is ``economically significant.'' (A regulatory action is 
economically significant within the meaning of the Executive Order if 
it appears that it will ``have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities.'' (Section 3(f)(1).) For an economically 
significant rule, the agency, unless it is prohibited by law, is to 
submit with the rule an assessment, including the underlying analysis, 
of the anticipated benefits, the anticipated costs, and of the costs 
and benefits of ``potentially effective and reasonable feasible 
alternatives.'' (Section 6(a)(3)(C).)
    Section 6 also seeks to eliminate unwarranted delays in the 
regulatory review process by establishing deadlines within which OIRA 
must complete its review. (Section 6(b)(2).) For preliminary regulatory 
actions prior to a Notice of Proposed Rulemaking, such as a notice of 
inquiry or advance notice of proposed rulemaking, OIRA must conclude 
review within 10 working days. For most submissions, OIRA must conclude 
review within 90 calendar days, except that if OIRA has previously 
reviewed a submission and there is no material change at its next 
stage, OIRA must complete its review within 45 days. In some cases 
extensions of review may be needed. The Order allows the review period 
to be extended upon written approval of the Director of OMB or at the 
request of the agency head. Finally, if the OIRA Administrator returns 
a regulatory action to the agency for further consideration, this 
action is to be done in writing and is to include an explanation for 
the return, including the pertinent provision of the Order that is the 
basis for the return.

Openness: Public Involvement and Disclosure

    The Order speaks not only to the relationship between the 
centralized reviewer and the agencies, but also to the relationship 
between both of them and the public. It is essential that the public be 
involved in the rulemaking process those benefitting from, those 
incidentally affected by, as well as those who might be burdened by, 
the proposed regulations. The public will often be able to corroborate 
the information that the agency already has in its possession, or 
provide additional relevant information to the agency. The public can 
also provide a useful reality check on the agency's proposal.
    While the Administrative Procedure Act, 5 U.S.C. Sec. 551, et seq., 
the agency's organic statute, and the agency's internal rules provide 
for public input, the Order reflects the fact that more can be done to 
involve the public in the rulemaking process, particularly in the early 
stages (before a formal notice of proposed rulemaking is issued). 
Specifically, the Order requires each agency to ``provide the public 
with meaningful participation in the regulatory process,'' including 
``a meaningful opportunity to comment on any proposed regulation, which 
in most cases should include a comment period of not less than 60 
days.'' (Section 6(a)(1).) The Order also encourages agencies ``to 
explore and, where appropriate, use consensual mechanisms for 
developing regulations, including negotiated rulemaking.'' (Section 
6(a)(1).) An open and easily accessible process generally improves the 
basis for decision-making, increases accountability on the part of the 
agency, and generally enhances the prospect for acceptance of the final 
product by the regulated industry.
    To increase the openness and accountability of the regulatory 
review process itself, the Order sets forth certain disclosure 
responsibilities for both the agencies and OIRA. After a regulatory 
action has been issued, the agency is to make available to the public 
the material that the Order requires to have been submitted to OIRA for 
review. The agency is also to identify for the public the ``substantive 
changes between the draft submitted to OIRA for review and the action 
subsequently announced,'' as well as identifying those changes that 
were made at the suggestion or recommendation of OIRA. (Section 
6(a)(3)(E).)
    OIRA too is subject to a variety of disclosure procedures. (Section 
6(b)(4).) Regarding regulatory actions under review at OIRA, only the 
OIRA Administrator or a particular designee is to receive oral 
communications from persons not employed by the Executive Branch. If 
meetings are held with such persons, OIRA is to invite a representative 
from the appropriate agency to be present. Within 10 working days OIRA 
will forward to the agency a copy of all written communications 
received from persons outside the Executive Branch, as well as the 
names and dates of individuals involved in substantive oral 
communications. OIRA is also to maintain a publicly available log that 
includes a notation of all written communications forwarded to an 
agency and the dates, names of individuals, and subject matter 
discussed in substantive oral communications between OIRA and persons 
outside the Executive Branch. In addition, OIRA will make available the 
status of all regulatory actions under review. Finally, after 
publication or issuance of a regulatory action, OIRA will make 
available all documents exchanged between OIRA and the agency during 
the review.
    The Order also provides a dispute resolution mechanism, in the 
event that the Administrator of OIRA cannot resolve a disagreement 
between or among agency heads or between OMB and an agency. (Section 
7). In that event, the issue will be decided by the President or the 
Vice President acting at his behest. Resolution of an issue under this 
section may be requested only by the Director of OMB, the head of the 
issuing agency, or the head of an agency with a significant interest in 
the outcome. Such review will specifically not be undertaken at the 
request of any other persons.

Review of Existing Regulations

    The Order establishes an ongoing process whereby agencies will 
review existing regulations (Section 5). Agencies were required to 
submit to OIRA by December 31, 1993, a plan under which the agency will 
periodically review its existing significant regulations to determine 
whether any such rules should be modified or eliminated. The 
Administrator of OIRA is directed to work with the RWG and others, 
State, local and tribal governments in particular, to help pursue the 
review of existing regulations. The general purpose of such review is 
as follows:
    [T]o reduce the regulatory burden on the American people, their 
families, their communities, their State, local, and tribal 
governments, and their industries; to determine whether regulations 
promulgated by the executive branch of the Federal Government have 
become unjustified or unnecessary as a result of changed circumstances; 
to confirm that regulations are both compatible with each other and not 
duplicative or inappropriately burdensome in the aggregate; to ensure 
that all regulations are consistent with the President's priorities and 
the principles set forth in this Executive Order, within applicable 
law; and to otherwise improve the effectiveness of existing 
regulations. * * * (Section 5).

III. The Implementation of Executive Order No. 12866

    We would prefer to report that all the regulatory problems of the 
nation have either been resolved or are on their way to being resolved 
by the 6-month mark of the Executive Order. It should be no surprise, 
however, that this is not the case. Improving the regulatory system of 
the nation is tied to reforms that are being undertaken throughout the 
government, many initiated through the Vice President's National 
Performance Review. While changes are underway, most are not yet 
completed; this is true also for implementation of the Executive Order.
    Many of the themes that run through the Order, careful planning, 
cooperation and team work within the Executive Branch, sound and timely 
analysis, focusing of resources, openness and accountability, are also 
being instituted across other programs of the Federal Government. In 
some cases, the ability of agencies to implement changes in the 
regulatory system depends on changes being made in other areas. For 
example, planning and priority setting depend on the existence within 
departments of offices that possess the authority to resist the natural 
tendency of large agencies to seek autonomy within departments. In 
other cases, there may be a tension between reform in one area and 
reform in another. Sound analysis, for example, requires highly skilled 
personnel and budget resources, at a time when the Federal Government 
is reducing personnel and constraining budgets.
    To some extent, our ability to reform the regulatory process is not 
wholly within our control. Regulations are often mandated by statutes, 
most of which attack a single problem without recognition that other 
problems, possibly more important problems, may be implicated by the 
proposed solution. Many statutes also create lengthy, often highly 
detailed regulatory requirements, leaving agencies with little 
discretion to establish reasonable tradeoffs between requirements, and 
in some cases driving agencies to scramble in response to the statutory 
(or, if they miss it, the judicially imposed) deadline of the day.
    Nevertheless, we believe that we have made a very good start in 
implementing Executive Order No. 12866 during its first six months in 
operation, with many measurable improvements. The OMB Director and OIRA 
Administrator issued guidance to the heads of agencies regarding 
implementation of the Order on October 12, 1993, less than two weeks 
after the Order was signed. Since then, as detailed below, both OIRA 
and the agencies have been energetic in implementing the Order.
    We must point out, however, that the start-up time for various 
provisions of the Order has taken longer (and in some cases a lot 
longer) than we anticipated. Many agencies have had to establish new 
oversight mechanisms to enable them to implement provisions in the 
Order. For example, the listing of significant and non-significant 
rules has proven particularly troublesome for some decentralized 
departments, both in terms of the internal decision-making to determine 
the ``significance'' of particular rules, and in terms of clearing 
those determinations with sister agencies or the Office of the 
Secretary (or its equivalent).
    In addition, several provisions of the Order establish processes 
that will take time to implement or simply have not been used yet. The 
regulatory planning process set forth in Section 4 of the Order is on 
schedule, but only just now beginning. The Vice President convened the 
Agencies' Policy Meeting (Section 4(a)) on April 5, 1994, and guidance 
to the agencies on implementation of the Regulatory Plan (Section 4(c)) 
was issued by the OIRA Administrator immediately after the meeting. 
Draft Regulatory Plans are not due to OIRA until June 1st, and the 
first Plan will not be published until October 1994, when it will 
appear with the semi-annual Regulatory Agenda.
    Similarly, the review of existing regulations established by 
Section 5 contemplated that agencies would submit programs under which 
they would periodically review their existing significant regulations 
by December 31, 1993. Several agencies, including DOT, HHS, DOE, and 
DOI, included as part of their plans public notices soliciting 
suggestions for regulations to be reviewed. Other approaches to 
reviewing existing regulations have been discussed within the 
Regulatory Working Group, and next steps are being developed.
    Finally, the provision of the Order that has not yet been 
implemented because it has not been used is Section 7, Resolution of 
Conflicts. To date, there have been no disagreements regarding 
implementation of the Order that have been raised to the President or 
Vice President for resolution.
    To a large extent, the first three months of the Order, October 
through December 1993 were almost exclusively devoted to start-up, by 
both OIRA and the agencies. During January through March 1994, the 
changes created by the Order began to emerge, and now some are clearly 
visible and measurable. Start-up still goes on, however, and, as will 
be discussed below, it may simply be too early to tell whether the 
Order is working as intended.

Cooperation and Coordination

    There are a number of ways to analyze and measure the 
implementation of Executive Order No. 12866. Some of the most important 
changes that have been made, which nourish the spirit of the Order as 
much as carrying out its letter, are intangible and difficult to 
quantify. One of these is the vastly improved relationship that has 
developed between OIRA and the agencies.
    While remnants of the mistrust and hostility that often 
characterized relationships between the career staffs over much of the 
past decade still exist, for the most part this has been replaced with 
a spirit of cooperation. Rule writers and rule reviewers are learning 
to work together as partners rather than as adversaries. Particularly 
good working relationships have evolved between OIRA and DOT, DOI, and 
Education. Substantial changes are evident with DOL and EPA. In all 
cases, working relationships have improved.
    Differences between OMB and the agencies, including significant 
disagreement on issues, continue as one would expect and as is 
contemplated by the Order. But these differences, which are largely the 
product of different perspectives, are functioning for the most part as 
a constructive, professional tension that leads to improved 
regulations.
    The change toward a spirit of cooperation and teamwork has occurred 
largely because it has been fostered by strong leadership within the 
Administration, including that of the President and Vice President 
themselves, as well as by agency heads and managers at OMB. The 
Administrator of OIRA and her staff have visited many of the agencies 
to meet with the senior regulatory officials and entertain comments or 
answer questions about the Executive Order. More work needs to be done, 
however, so the message reaches throughout the agencies. In the end, 
perhaps the best antidote for any residual hostility will be several 
working experiences where the career staffs work together through a 
problem to produce a product that all agree is better for the effort.
    Other serious efforts to improve communications, cooperation, and 
coordination have now been institutionalized.
    As required by the Executive Order, each agency has designated a 
high level Regulatory Policy Officer (RPO) to represent directly the 
agency head in efforts to implement the Order and improve the 
regulatory process. (Section 6(a)(2).) Although departments have 
selected different positions to perform this role, many have designated 
the general counsel as the RPO. This has ensured high level agency 
attention to the regulatory process and efforts to reform it.
    One of the primary forums for the RPOs to work together to improve 
the regulatory process is the Regulatory Working Group (RWG). The RWG 
has met three times, in November, January, and March. These meetings 
have been well attended by the White House advisors and the RPOs and 
have served as a convenient forum for discussion of issues related to 
the implementation of the Order in an organized and collegial manner. 
The meetings have allowed agencies to share techniques and solutions to 
common problems, and have allowed White House and agency officials to 
exchange views as a group on a regular basis.
    The RWG has created four sub-groups to consider specific cross-
cutting issues that affect all or many regulatory agencies: these 
include benefit-cost analysis, risk assessment, streamlining the 
regulatory system, and use of information technology to improve 
rulemaking. The sub-groups are inclusive and any agency that is 
interested has been invited to designate staff to participate. These 
sub-groups have discussed informal work plans and several are in the 
process of developing materials for consideration by the RWG.
    An additional effort to improve working relationships between 
agencies and OIRA is the Regulatory Training and Exchange Program 
instituted by OIRA. Agencies have been encouraged to designate career 
staff who would come to OIRA on a training detail to learn how 
regulatory review is conducted and to work on RWG matters. The purpose 
of the program is to provide expertise among the agency career staff in 
how regulatory review is conducted so that it can be incorporated into 
the working practices of the agency, as the Executive Order envisions. 
This program is still in its start-up phase, but OIRA has hosted two 
trainees, from USDA and DOT. Other exchange program candidates are 
being sought, and are expected to undergo this training during the 
summer and fall.
Openness: Public Involvement and Disclosure
    Executive Order No. 12866 places special emphasis on increased 
openness in the rulemaking process, particularly increased public 
involvement earlier in the regulatory process. Agencies are instructed 
to ``provide the public with meaningful participation in the regulatory 
process * * * which in most cases should include a comment period of 
not less than 60 days.'' In addition, agencies are to ``explore, and 
where appropriate, use consensual mechanisms for developing 
regulations, including negotiated rulemaking.'' (Section 6(a)(1).) 
Agencies are also encouraged, prior to issuing notices of proposed 
rulemaking, to seek the involvement of those affected by it, especially 
State, local, and tribal officials.
    It is difficult to know how much advance consultation is taking 
place. However, with all but a few well justified exceptions, agencies 
are allowing 60 days for public comment. Regarding regulatory 
negotiation, on the same day that the President signed the Executive 
Order, he also signed a memorandum to agency heads further encouraging 
the use of consensual mechanisms and directing each agency, by December 
31, 1993, to identify to OIRA at least one candidate for a regulatory 
negotiation during the upcoming year, or explain why the use of such a 
process would not be feasible. Agencies provided these candidates to 
OIRA on time, or very shortly after the deadline, and many agencies are 
currently undertaking regulatory negotiations. To assist with the 
learning process, OIRA joined with the Administrative Conference of the 
U.S. (ACUS) to sponsor a program for agency officials, which was held 
on November 29, 1993, on how to do regulatory negotiation, using 
expertise and materials that ACUS staff have assembled over the past 
decade.
    As noted above, OIRA has its own responsibilities to meet with 
various affected entities. OIRA has held two conferences with 
representatives of State, local, and tribal governments one in December 
1993, the second in March 1994. The first conference, chaired by the 
OIRA Administrator and attended by about 100 persons, consisted of 
three panel discussions: an overview of the regulatory partnership; 
regulatory burdens and how they may be reduced; and involving all 
affected entities in regulatory development. The panels and audience 
consisted of representatives from State, county, town, and tribal 
governments; academics; association representatives, for example from 
the National Association of Counties, the National Governors' 
Association, the National Association of Towns and Townships, the 
National Association of American Indians, and the Advisory Commission 
on Intergovernmental Relations; and agency intergovernmental affairs 
office representatives.
    The second conference, also chaired by the OIRA Administrator, was 
a working session devoted to discussion of consultations between the 
Federal government and State, local, and tribal officials regarding 
unfunded nonstatutory mandates. This session brought together at one 
table general counsels from several major regulatory agencies and 
various State, local, and tribal governmental officials to discuss how 
to improve the consultative process called for in Executive Order No. 
12875, ``Enhancing the Intergovernmental Partnership''.
    These conferences are the beginning of a significant and continuing 
effort by this Administration to ensure that more effective working 
relationships among the Federal, State, local, and tribal governments 
are institutionalized. A third conference is tentatively scheduled for 
early June. We have asked representatives of the major State, local, 
and tribal associations for suggested topics or formats for this and 
other conferences to be scheduled on a regular basis.
    OIRA has also taken steps to improve the participation of the small 
business community in the rulemaking process. OIRA joined the Small 
Business Administration (SBA) to sponsor a Small Business Forum on 
Regulatory Reform in March 1994 to discuss how the regulatory process 
can better address the special needs of small businesses. The Forum, 
chaired by the OIRA Administrator and the Administrator of the SBA, 
brought together high level officials from regulatory agencies that 
significantly affect small businesses--EPA, DOT, IRS, DOL, DOJ, and 
FDA--to listen to small business owners discuss their concerns 
regarding Federal regulations. This Forum was followed by work session 
meetings focussed on five industry sectors--chemical and metals; food 
processing; transportation and trucking; restaurants; and 
environmental, recycling, and waste disposal--that have been attended 
by both relevant agency officials and small business representatives. A 
second conference, to discuss the results of these work sessions, will 
be scheduled later this summer.
    While the regulatory review process conducted by OIRA cannot 
displace the agencies' responsibilities to seek and accommodate public 
input in rulemaking, OIRA is charged with conducting its work so as to 
``ensure greater openness, accessibility, and accountability in the 
regulatory review process.'' (Section 6(b)(4).) On July 1, 1993, as one 
of her first actions, the OIRA Administrator began making available a 
daily list of draft agency regulations under review at OIRA. This was 
done in order to remove the stigma of secrecy that had previously 
characterized regulatory review, and to make the review process more 
transparent. Now, the fact that a rule is under review at OIRA, or 
``pending,'' is public information available to anyone who seeks it.
    The completion of review is also made public. On the pending list, 
the date of completion of review for any regulation pending that month 
is indicated. Lists and statistics for each month are compiled and made 
available by the tenth day of the following month. This information 
includes a list of all rules on which review was concluded the previous 
month, showing agency, title, an identification number, date received, 
date review completed, type of rule (e.g., proposal, final, etc.), and 
OIRA action taken (e.g. found consistent with the Order without change, 
with change; withdrawn; returned to agency; etc.). In addition, there 
is a list of all economically significant rules reviewed. Finally, this 
monthly compilation includes aggregate statistics on reviews for the 
month and for the calendar year, including the number of reviews by 
agency, OIRA action taken, and average review time.
    As provided for in the Executive Order, meetings and telephone 
calls with persons outside the Executive Branch on regulations under 
review are now logged, and these logs are made publicly available. 
Entries for meetings include the date, the attendees, and the subject 
matter discussed. An agency representative is invited and almost always 
attends such meetings. Any written materials provided by the outside 
person(s) are made publicly available, and, if an agency representative 
is not in attendance, are provided to the agency.
    The OIRA meetings log contains 36 entries, for meetings that 
occurred between July 19, 1993, and March 31, 1994. In all but two, the 
OIRA Administrator chaired the meetings; in these two, other officials 
in the Executive Office of the President acted as chair. An agency 
representative attended all but four meetings. Usually the meetings 
were with persons outside the Federal Government, but in several 
instances the attendees included Congressional representatives. Most of 
the meetings were devoted to EPA regulations, 30 of the 36. The other 
meetings concerned a DOC/NOAA rule and several FDA and USDA food safety 
regulatory actions.
    Any material sent to OIRA on rules being reviewed from anyone 
outside the Executive Branch is kept in a public file. In addition, if 
the material is not merely a copy of documents already sent to the 
agency, a copy is forwarded to the agency. Finally, documents exchanged 
between OIRA and the agency during the review, including the draft rule 
submitted for review and changed pages, are made available to anyone 
requesting them after the rule has been issued (or, if it is not 
issued, after the agency has announced its decision not to issue the 
rule).
    These various disclosure procedures are working well and have 
helped restore the integrity of the regulatory review process. 
Communications with outsiders are controlled and disclosed, but 
apparently this has not had the result of discouraging such 
communications. Also, the results of the review process itself are 
disclosed, making OIRA clearly accountable for its actions.

Regulatory Review Statistics

    The statistics maintained by OIRA of the regulatory review process 
provide another means of measuring the implementation of the Executive 
Order. Indeed, these statistics respond directly to most of the 
questions raised in the President's September 30, 1993, memorandum to 
the OIRA Administrator. In this memorandum, he directed the 
Administrator:
    To monitor your review activities over the next six months and, at 
the end of this period, to prepare a report on your activities. This 
report shall include a list of the regulatory actions reviewed by OIRA, 
specifying the issuing agency; the nature of the regulatory action * * 
*; whether the agency or OIRA identified the reviewed regulatory action 
as ``significant,'' within the meaning of the order; and the time 
dedicated to the review, including whether there were any extensions of 
the time periods set forth in the order, and if so, the reason for such 
extensions.
    OIRA received and reviewed 578 regulatory actions from October 1, 
1993, through March 31, 1994. Appendix A lists these rules, indicating 
the originating department and/or agency, the review time in days, the 
nature of the regulatory action (e.g., Proposed Rule, Final Rule, 
etc.), the rules designated significant by the agency and those 
designated by OIRA, the rules for which review was extended, and the 
title of the rule. Table 1 summarizes information about these rules by 
agency, including the number of rules and average review time for rules 
in the ``economically significant'' and ``other than economically 
significant'' categories. It also indicates the OIRA action taken by 
agency.\1\
---------------------------------------------------------------------------

    \1\On October 1, 1993, OIRA also had 175 rules under review that 
had been submitted under Executive Order 12291. Table 2 summarizes 
the data on these rules. On average, these rules were reviewed in 76 
days. Review was concluded on the last of these pre-Executive Order 
No. 12866 rules on 1/13/94.
    Also, on March 31st, 68 rules that had been submitted between 
October 1st and March 31st were still under review. Table 3 
summarizes the pertinent data on these rules. 45 rules (or 66%), had 
been under review for under 30 days; 66 (or 97%, had been under 
review less than 90 days. Three (or 3%), had been under review over 
90 days, and had been extended.
---------------------------------------------------------------------------

    Table 1 indicates that of the 578 rules reviewed, 63 (11%) were 
economically significant (or ``major,'' a term from Executive Order 
12291 that continued to be used until about the beginning of January). 
The average review time for all the rules was 26 days, well below the 
90-day limit established by Executive Order No. 12866. The 10 agencies 
with the highest volume of submissions were, in order: HHS (126), USDA 
(94), EPA (52), DOT (44), DOC (42), DOI (34), Education (25), HUD (25), 
VA (21), and OPM (17). For about 60% of the submissions, review was 
completed without change to the rule. In 30% of the cases, review was 
completed with change. 4.5% of the rules were withdrawn by the agency; 
2% were returned because they were sent improperly; in about 3% of the 
cases, mostly EPA rules, review was not concluded but was ended because 
of a statutory or judicial deadline.
    These statistics are affected by the fact (discussed later) that 
during the start-up period, during which many non-significant rules 
continued to be sent to OIRA for review. Once the process is fully 
implemented and agencies submit only significant rules to OIRA for 
review, the total number of rules is likely to decrease, as will the 
percentage of rules for which review is concluded without change. At 
the same time, as only the more important rules become the focus of 
OIRA's review, average review time is likely to increase. We will be 
watching these indicators closely during the coming year.
    Of the 578 individual rules listed in Appendix A, three rules were 
extended beyond the 90-day limit, all at the request of the agency to 
permit interagency coordination to be completed. Regarding the 
designation of rules as ``significant,'' the list indicates which rules 
were designated significant by the agency, and which were designated 
significant by OMB. Of the 578 rules reviewed, a total of 238 or 41% 
were designated significant in accordance with Section 6(a)(3)(A). Of 
those designated significant, 166 or 70% were so designated by the 
agency, while 72 or 30% were designated significant by OMB.
Listing Process
    As Appendix A indicates, many of the rules reviewed were not 
designated either ``significant'' or ``not significant.'' This is 
because virtually all agencies needed the first two to three months of 
the Order for start-up activities, and did not have in place their 
listing processes until the second half of the six-month period under 
review. The process was smoother for agencies that either already had 
or created offices to perform the central management function necessary 
for the listing process to succeed. DOT, for example, has had in place 
for many years a central regulatory review office in its Office of the 
General Counsel, whose function is to coordinate and review the DOT 
sub-agencies' rulemaking on behalf of the Secretary. In other 
instances, offices have been established to perform these functions by 
Clinton appointees. The Secretary of the Department of the Interior, 
for example, created an Office of Regulatory Affairs whose director 
reports to the Secretary and Chief of Staff and whose job it is to 
organize, monitor, and manage the Department's rulemaking activities. 
The Department of Education also addressed the need for centralized 
responsibility, assigning this function to its General Counsel, who 
brought on board a Deputy specifically charged with regulatory 
responsibilities. These agencies have done an excellent job instituting 
the listing procedures.
    In other instances, however, it has proven difficult to create a 
centralized, departmental function capable of: collecting information 
from agencies within the department on the status of regulations; 
coordinating a departmental decision on significance; and managing the 
submission of the result to OMB and the discussion with OMB to reach 
agreement on the proper designation. Even now, after six months of 
experience, some agencies have still been unable to submit a single 
list to OIRA designating rules as significant or non-significant. These 
agencies generally continue to submit all rules to OMB for review, 
telling us that it is easier and quicker for them to do so than to go 
through the process of designating rules as significant or non-
significant even though they know that the majority of their rules are 
non-significant and would therefore not need to be reviewed.
    These agencies are examples where internal agency coordination 
needs to be improved. OIRA does not want to review non-significant 
rules; more importantly, it is only when agencies are able to designate 
rules as non-significant well in advance that the benefits of this 
system in streamlining the regulatory processes will be realized. In 
the meantime, OIRA is working with agencies to process all the rules 
that are submitted, accommodating as much as possible the difficulties 
agencies are experiencing starting up their systems.
    OIRA initially envisioned that agencies would send lists 
designating rules significant or non-significant every 30 or 60 days. 
It is now clear that for some agencies, lists may be needed more often; 
for others, less often; and for some, at irregular intervals. The 
process should remain informal and flexible to respond to differences 
among the agencies and to changing circumstances within some agencies. 
For example, DOC's National Marine Fisheries Service must sometimes 
modify Federal fishery management plans on only several weeks, and 
indeed sometimes on several days, notice. Speed in the listing process 
is therefore critical. Also, in some instances, agencies have preferred 
to submit informal drafts of lists to OMB so that discussions can take 
place and additional information be exchanged before the lists are 
finalized. We do not want to discourage any opportunities for early 
exchanges of information, and therefore it has worked with the agencies 
to sort through the various informal lists they are able to provide.
    In total, OIRA has received lists designating 1,624 rules as 
significant or non-significant. (These rules would not all be listed in 
Appendix A because, if non-significant, they would not have been 
submitted for review, and if significant, they may or may not have been 
ready to be submitted for review within the six-month period covered by 
this report.) Of the 1,624 regulatory actions, agencies designated, and 
OIRA agreed, that 1047, or 64% were non-significant; 316, or 19% were 
designated by the agency as, and OIRA agreed they were, significant; 
and the remaining 261, or 16%, were designated significant by OIRA. 
Stated another way, the agency and OIRA agreed with the initial 
designation for 83% of the cases; in only 16% was there a difference of 
view.
    These aggregate data mask the fact that for most agencies the 
number of instances where there is an initial difference of opinion 
between the agency and OIRA as to significance decreases as the agency 
gains experience with the process. In some cases it is simply a 
function of the agencies not knowing how much information to provide to 
enable OIRA to agree with the agency designation. In all cases, 
differences have diminished with time as the agencies and OMB discuss 
the reasons for the different perspectives and develop an understanding 
and agreement on the definition of significance.
    OIRA's experience implementing this listing provision of the 
Executive Order has provided some valuable lessons. In some cases, the 
difficulties described above are symptomatic of agency processes that 
are broken and need to be fixed. But it is also true that the Executive 
Branch is characterized by great variety in agency structures, 
cultures, statutory mandates, and missions. As a consequence, the 
Executive Order must be flexible enough to accommodate such variety and 
not seek to impose rigid constraints that may be counterproductive.
    We believe that so far, the listing system that has been 
implemented contains both discipline and flexibility. Both OIRA staff 
and agency staff have worked to accommodate each other's needs. The 
listing process is serving to focus OIRA efforts on significant rules, 
promote streamlining in the rulemaking process, and establish 
accountability in agencies, without creating unnecessary and burdensome 
additional structures.

Selectivity

    One of the purposes of the Executive Order was to reduce the number 
of rules submitted to OIRA for review, thereby streamlining the 
rulemaking process for the agencies and allowing OIRA to focus its 
limited resources on the more important rules. The start-up issues 
discussed above have clouded to some extent a clear measure of the 
changes that have occurred in regulatory review since the Executive 
Order was signed. Nevertheless, the intended reduction in the number of 
rules reviewed under the Order is clearly demonstrated in the 
statistics.
    Part of the reduction is attributable to the implementation of 
OIRA's authority to exempt both specific agencies and categories of 
regulations from centralized review. In guidance issued to agencies on 
October 12, 1993, the OIRA Administrator exempted 31 smaller agencies 
and 35 categories of regulation so that OIRA review could be more 
usefully focussed. (Lists of these exemptions are included with the 
October 12, 1993, guidance from the OMB Director and OIRA Administrator 
on implementation of the Order, attached. These lists have been updated 
to exempt four additional agencies and approximately 30 additional 
categories of regulations.)
    Overall, the 578 rules received and reviewed by OIRA for the six-
month period is approximately half what it was in previous years. 
Figure A indicates the clear decline in the number of rules OIRA 
received for review, compared to the average monthly receipts for the 
preceding nine months of 1993 (which is comparable to that of previous 
years). The number of rules received for OIRA review decreased from an 
average of about 180 per month from January through September 1993 (the 
monthly average for the years 1989 through 1992 was 192), to well under 
100 for January through March 1994. (Monthly figures will vary 
depending on regulatory activity at agencies. Figure A shows a steady 
decline from October 1993 through February 1994 and an increase for 
March. April's figures are between those of February and March.)
    The number of rules under review at any given time has also shown a 
significant decline. On July 1, 1993, when OIRA began its disclosure of 
rules under review, 254 regulations were listed as pending. On 
September 30, when the President signed Executive Order No. 12866, 175 
regulatory actions were pending review at OIRA. On March 31, 1993, 68 
regulatory actions were pending. All these figures re-emphasize the 
obvious, that OIRA is reviewing far fewer rules than in the past, 
exactly as envisioned by the Executive Order.

Time Limits

    The Executive Order establishes strict time limits on OIRA review, 
in most cases 90 days. The purpose of such limits is to balance the 
need for adequate time to conduct review with the need to streamline 
the regulatory process and prevent unwarranted delay. OIRA has made a 
concerted effort to meet not only the letter of this requirement, but 
its spirit as well, and this goal of the Order is clearly being 
accomplished.
    As can be seen from both Table I and Appendix A, the average review 
times for the rules submitted during the first six months of the Order 
is only 26 days. This is a reduction in the average annual review time 
for the past five years: 1989--29 days; 1990--28 days; 1991--29 days; 
1992--39 days; 1993--44 days. (The average times were particularly high 
during 1992 and 1993 because of, respectively, the Regulatory 
Moratorium instituted by President Bush and the effect of the 
transition to the Clinton Administration, when many agencies were 
without political appointees for a significant portion of 1993.)
    Notwithstanding OIRA's commitment to speed up the review process, 
it is likely that the average review time will go up in the future. As 
non-significant rules, which in the past had generally been reviewed 
quickly and thus helped keep average review times down, are removed 
from the review process, and only significant rules submitted and 
reviewed by OIRA, the time necessary to complete such review may 
increase. To some extent, however, average review time is no longer as 
useful a measure as it was when there were no meaningful limits on 
review. Since all rules, except the small percentage specifically 
extended, must be reviewed within 90 days, it is compliance with that 
deadline that is most important and is therefore discussed in detail 
below. Nevertheless, average review time will continue to be a measure 
carefully watched by OIRA in the coming year.
    A quick look at Appendix A reveals that most reviews were completed 
in under 30 days. This may be as a result of OIRA's still receiving 
non-significant rules, or its receiving some rules on the eve of 
statutory or judicial deadlines, or because OIRA and agency staffs have 
consulted earlier in the process and few issues remain by the time for 
formal submission. Of the 578, 408 or 71% were reviewed in under 30 
days. 512 or 89% were reviewed in under 60 days. Review took greater 
than 60 days for only 66 or 11% of the 578. The OIRA Administrator has 
instituted an internal management system that flags for her attention 
all rules still under review at their 60th day. This has ensured that 
submissions do not languish on staff desks, but are raised to the 
appropriate level well before the 90th day.
    Appendix A and Table I also show how review times compare across 
different agencies. For some agencies, the review time is skewed 
because of lengthy reviews of only a small number of rules. For 
example, the average time for review for OMB of 108 days was for a 
single rule, which was extended. NSF's average of 84 days was for three 
rules; FFIEC's average of 70 days was for a single rule. For the higher 
volume regulatory agencies, review time averages ranged from 15 days 
for DOT's 44 rules to 40 days for VA's 21 rules. Others fall in 
between: HHS--27 days (for 126 rules); USDA--19 days (for 94 rules); 
EPA--35 days (for 52 rules); DOC--16 days (for 42 rules); DOI--23 days 
(for 34 rules); Ed--29 days (for 25 rules); HUD--33 days (for 25 
rules); OPM--19 days (for 17 rules).
    The Order permits the time for review to be extended at the request 
of the agency head, or by the Director of OMB for 30 days. Appendix A 
indicates that of the 578 rules received and reviewed between October 
and March, only three were extended. These were: DOI's Wild Bird 
Conservation Act rule, which was under review for 107 days; OMB's Cost 
Accounting Standards Board Regulations, under review for 108 days; and 
DOD's Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS) rule, under review for 99 days. Each of these rules was 
extended at the request of the originating agency. Wild Birds was 
extended to permit the completion of interagency coordination between 
DOI, DOJ, State and USTR. Cost Accounting Standards was extended to 
allow OIRA staff to meet with the Cost Accounting Standards Board at 
the Board's request. DOD's CHAMPUS rule was extended to ensure 
coordination of the rule with the regulatory programs of other health 
care agencies. In all these cases, extension was used to permit 
completion of reviews that were in fact concluded in less than three 
weeks after the extension was requested.
    As of March 31st, two additional rules had been extended and were 
still under review: USDA's Revisions of Farmland Protection Policy Act 
(received November 9, 1993), and EPA's Lender Liability for Underground 
Storage Tanks (received December 20, 1993). Also, nine rules that were 
submitted before the Executive Order was signed, but for which review 
was concluded after October 1, 1993, were extended after they had been 
under review for 90 days in an effort to comply with the spirit of the 
new Order.2
---------------------------------------------------------------------------

    \2\These rules were: USDA's Export Bonus Program (review 
concluded 12/7/93); DOD's Prompt Payment Act (review concluded 12/
16/93); DOC's Natural Resource Damage Assessment rule (review 
concluded 12/23/93); HHS's Payment of Preadmission Service, Medicare 
Program (review concluded 12/23/93); HHS's Revisions to Freedom of 
Information Regulations, Medicare and Medicaid (withdrawn 12/09/93); 
HHS's Medicare Coverage and Payment of Clinical Psychologists 
(review concluded 12/15/93); HHS's Medicare Secondary Payment 
(review concluded 1/13/94); DOE's Amendment to Workplace Substance 
Abuse Programs (review concluded 12/3/93); and DOE's Workplace 
Substance Abuse Programs at DOE Sites (review concluded 12/3/93).
---------------------------------------------------------------------------

    Overall, OIRA's experience during the first six months with the 
review time limits show them to be working well.

IV. Issues for Further Consideration

    In his September 30, 1993, memorandum, the President requested that 
the Administrator of OIRA ``identify any provisions of the order that, 
based on your experience or on comments from interested persons, 
warrant reconsideration . . . .'' There are a number of provisions that 
qualify, although it is too early to say whether the problems lie with 
the terms of the Executive Order, with its implementation, or some 
combination of the two. As discussed above, in many cases start-up 
activities implementing certain provisions of the Order are still in 
progress. The process of listing rules as significant or non-
significant, for example, while well underway at most agencies is 
nevertheless still in its formative stages at many other agencies. As a 
result, we are not now able to judge the effectiveness of this approach 
in achieving the objectives of the Order.
    By the same token, we do not know if agencies are giving to non-
significant regulatory actions the review and care that they deserve. 
It was anticipated that, because there would be no OIRA review, 
agencies themselves would have to ensure that non-significant rules, as 
well as significant regulations, meet the principles of the Order. Some 
agencies have told OIRA that they are fulfilling this responsibility. 
OIRA has no independent basis for confirming or denying these reports. 
With time, however, there should be sufficient information to enable 
informed judgment on the issue. With time, OIRA should also be able to 
better evaluate the effects of earlier communication between OIRA and 
agency staffs and more selective review to ensure that significant 
regulations adhere to the principles of the Order. And, as noted above, 
additional time is needed to evaluate the planning process and the 
process for review of existing regulations.
    While it is premature to recommend specific revisions to the 
Executive Order, we have enough experience to suggest some areas that 
are likely to require further consideration.

Review Time Limits

    One such issue is the 90-day review time limit (Section 
6(b)(2)(B).) In general, we have found the discipline of this limit 
useful and fair. Along with the disclosure procedures, the time limits 
have helped remove the stigma of secrecy and delay that have 
characterized regulatory review in the past. As shown in Appendix A, 
only a small percentage of the rules submitted for review are extended.
    There are two types of situations, however, where the balance 
between adequate review and the limits on review time is problematic. 
First, OIRA's experience is that interagency coordination can sometimes 
be unexpectedly lengthy. In the case of the USDA Farmland Protection 
rule, for example, coordination among multiple agencies, in this case 
USDA, DOT, HUD, Treasury, and GSA, has required the resolution of 
significant issues at the highest levels in major regulatory 
departments. As a practical matter, it takes time to arrange meetings, 
define and analyze issues, circulate and coordinate exchanges between 
the agencies, and negotiate solutions. It has proven extremely 
difficult to keep this process moving to resolution.
    The second situation is where the agency and OIRA agree that 
additional analysis is necessary to meet the requirements of the Order. 
In some instances, where issues are highly technical--legally, 
mechanically, or economically--such analysis can take months to 
complete. If this is the case, the rule is technically still under 
review at OIRA, although in fact no review can be conducted--either by 
OIRA or the agency--until the further data and analysis are generated. 
In such cases, the time limits on review serve to discourage rather 
than encourage efforts to develop the most effective, minimally 
burdensome regulation.
    The current mechanism to deal with such circumstances is the 
provision for extension of review by either the Director or the agency 
head. (Section 6(b)(2)(C).) While this provision has functioned to keep 
some rules under review that might otherwise have been returned to the 
agency, it gives the misleading impression that OIRA is reviewing the 
rule when in fact the originating agency, or an affected agency, is 
engaged in further analysis or coordination or even in some cases 
simply making changes that have already been agreed to in principle by 
policymakers.
    There is another area where the 90-day limit may not be 
appropriate--namely, an economically significant regulatory action, 
which may have taken several years to develop to the proposed stage and 
which arrives at OIRA with several hundred pages of detailed analysis. 
Even if the OIRA and agency staffs have conferred during the 
developmental stages, it is very difficult to review all of the 
materials presented, and particularly to consider not only what is 
presented, but also what is not (which often is equally, if not more, 
important), within the 90-day limit under the best of circumstances 
(e.g., no intervening statutory or judicial deadlines or agency 
requests for expedited consideration of high priority agency 
initiatives).
    At the other extreme are those instances where review is triggered 
by section 3(f)(4)--that is, a rule raises novel legal or policy issues 
arising out of legal mandates, the President's priorities, or the 
principles set forth in the Order. Here, if there has been advance 
consultation as there should be, and other agencies are not affected, 
OIRA may need very little, if any, time to conclude review.
    By contrast, OIRA is often given a few days for review--even though 
substantially more time is necessary--because there is an imminent 
statutory and/or judicial deadline. Some agencies, notably EPA, but 
also HHS, DOL, DOI and others, often must develop regulations under 
severe time constraints set in statutes or arising from litigation 
resulting from missed statutory deadlines. In such cases, the 
discretion of the agency is often severely limited, both in terms of 
time to conduct adequate analysis and discretion to devise flexible, 
innovative, and cost-effective solutions to difficult problems. In some 
of these cases, OIRA has received rules for review only days before a 
deadline; in fact, in some cases, the agency managers themselves have 
only a few days to deal with deadline cases.
    While this is a serious problem, it may be beyond our ability to 
remedy through the Executive Order. It is our view that highly 
prescriptive legislation, including dictating time lines for 
promulgating regulations, has contributed to a regulatory system that 
is sometimes unmanageable or is driven by plaintiffs rather than by a 
rational planning process that directs the government's limited 
resources to the most important problems and the most cost-effective 
solutions. However, the solution, if there is one, clearly invites the 
Legislative Branch and extends beyond the issues covered in this 
report.
    A different problem, but one related to review time limits, is the 
question of when the clock should start. OIRA has encouraged agencies 
to consult early in the development of a regulatory action. This brings 
the perspectives of both the reviewer and the agency to bear on the 
rule early in the process, informing the regulatory development and 
permitting early identification and resolution of any major policy 
differences. Adequate front-end involvement is especially important 
when statutory or judicial deadlines dictate a rapid pace in the 
development of the rule. The starting of the clock with the submission 
of a relatively complete formal draft does not encourage such advance 
consultation. On the other hand, some have expressed concern that with 
such advance consultation, the measurement of review time beginning 
with the submission of a relatively formal draft does not accurately 
state (indeed, may substantially understate) the time that OIRA has in 
fact spent reviewing (in some sense) the regulatory action.

Definition of ``Significant''

    Another area where further monitoring and additional thought is 
warranted involves the term ``significant,'' which is the trigger for 
determining whether or not there will be OIRA review. The definition of 
``significant'' is not, apparently, self-executing, and argument over 
its meaning has been at least partly responsible for the long start-up 
time in implementing the listing process. In some cases, debate takes 
place within the agency as to whether or not a rule is significant. In 
some of those same cases, and in others, the debate takes place between 
OMB and the agency, typically with OMB thinking that a regulatory 
action which the agency initially thinks is non-significant is, in 
OMB's view, significant.
    To some extent these debates are part of the initial adjustment 
period as the Order is implemented; some reflect residual mistrust from 
the previous regulatory review system; and, some reflect the natural 
tension between the agency responsible for the regulation and a 
reviewing entity. But some may reflect the lack of precision 
(deliberate at the time of drafting) in the definition set forth in the 
Executive Order.
    The uncertainty centers in particular around two of the four 
criteria that define ``significant regulatory action''--the first and 
the fourth. The first criterion defines what has become known as an 
``economically significant'' rule. (Section 3(f)(1).) Although the 
initial clause of the criterion--a $100 million annual effect on the 
economy--is clear, the remainder is not as easily understood. What does 
it mean to ``adversely affect in a material way the economy, a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, or tribal governments or 
communities''? Similarly, looking at the fourth criterion, what are 
``novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in this Executive 
Order''? Some have read it very narrowly; others have read it to 
include everything. While it is too early to suggest specific changes 
to the definition, we will be monitoring it to see if further 
clarification is required.

Identification of Changes Made During Review

    Another area that may warrant further consideration are sections 
6(a)(3)(E) (ii) and (iii), which require the agency to identify the 
substantive changes made in a regulatory action during OIRA review, and 
to identify those changes made at the suggestion or recommendation of 
OIRA. These provisions are intended to make the results of OIRA review 
transparent to the public. Some agencies have told us they are 
identifying such changes, and while we have not conducted a survey, we 
have no reason to think that all are not complying with the terms of 
the Order.
    From our perspective, however, changes that result from regulatory 
review are the product of collegial discussions, involving not only 
OIRA and the agency, but frequently other White House Offices--such as 
OVP, DPC, NEC, CEA, OEP, OSTP--and other agencies as well (including at 
times, other sister agencies in the same department as the originating 
agency). After an extended process, it is not clear that identifying 
changes made at the suggestion of OIRA is accurate (if the only choice 
is OIRA suggestions or agency proposals) or meaningful (if OIRA 
suggestions are only those suggestions originating at OIRA rather than 
at another agency). We expect to explore this subject with the agencies 
and see if any further guidance is necessary or desirable.

Intergovernmental Relations

    There are two areas that are touched on in the Executive Order 
where perhaps more should be done. The first involves Executive Order 
No. 12875. It provides, among other things, that Federal agencies that 
impose nonstatutory, unfunded mandates on State, local, or tribal 
government either: (1) assure that funds necessary to pay the costs of 
compliance are provided by the Federal Government, or (2) describe the 
extent of the agency's prior consultations with affected units of 
government, the nature of their concerns, any written submissions from 
them, and the agency's position supporting the need to issue the 
regulation containing the mandate. The purpose of this provision is, in 
part, to improve communications between the agencies and State, local, 
and tribal officials, particularly those responsible for funding the 
programs, and to establish a meaningful working relationship between 
them where none may now exist. This is very much a part of the 
philosophy of Executive Order No. 12866, and OMB has provided guidance 
to the agencies that regulatory actions that contain an unfunded 
mandate should be submitted to OIRA for review under Executive Order 
No. 12866. Further clarification of OIRA's role in this regard could be 
considered.

Small Business Concerns

    The second area involves the burdens of regulation on small 
businesses. Concerns voiced by the small business community have led to 
a variety of proposals to increase the focus of regulators on the 
unique problems of small businesses, and in particular the agencies' 
compliance (or lack of compliance) with the Regulatory Flexibility Act. 
5 U.S.C. 601. One suggestion is to have OIRA and the Small Business 
Administration (SBA) coordinate review of agency rules to assure that 
the agencies prepare and use high quality regulatory flexibility 
analyses when it would be appropriate to do so. SBA could notify OIRA 
of any concerns it has with an agency's regulatory flexibility analysis 
within a certain time after publication (e.g., 20 days) of a notice of 
proposed rulemaking, and OIRA could be authorized to direct the agency 
to issue a supplemental notice raising regulatory flexibility analysis 
concerns or announcing the intent to prepare a regulatory flexibility 
analysis by a date certain. Other forms of collaboration are also 
possible to encourage better interagency coordination and compliance 
with existing law.

Post Hoc Evaluation of Rules

    Finally, regulations are developed based on estimates of behavior 
and events in the future. Even the best of such predictions can turn 
out to be wrong. After a regulation has been issued, however, there is 
little, if any, effort made to review estimates and analyses to see 
what was right and what was wrong, both to change the current rule to 
make it more effective and to learn how to do better analyses for 
future rules. Agencies with increasingly limited staffs and new 
mandates to meet have little incentive for such exercises, although 
they could be critical to an efficient and effective rulemaking 
program.
    It is possible that the appropriate incentives could be provided by 
requiring, at least in selected cases, that agencies manage their 
regulations toward results. That is, a rule could be written with 
specific goals, initial baselines against which to measure achievement 
of these goals, and an evaluation plan, including comment by affected 
parties with an expectation that based on such input and analysis the 
rule would be modified to improve its effectiveness and efficiency. If 
so, review of an existing regulation would become part of its 
development rather than an after-the-fact exercise.

Conclusion

    The importance of regulations in our society makes it imperative 
that the process by which they are developed and reviewed be 
characterized by integrity and accountability. Regrettably, this 
Administration did not inherit such a process from the prior 
Administration. On the contrary, that process was severely criticized 
for delay, uncertainty, favoritism, and secrecy. Significant 
improvements have been made with the implementation of Executive Order 
No. 12866. While it is still too early to judge the effects of the new 
Order, the regulatory process has been made more principled, 
professional, and productive. The Executive Office of the President is 
working in concert with the agencies and listening to the public in 
order to solve problems, not pretending they do not exist.
    The American people deserve a regulatory system that improves their 
health, safety, and economic well-being without imposing unacceptable 
or unreasonable costs on society. The regulatory system being 
established by Executive Order No. 12866 demands quality, efficiency, 
and accountability, and is well on its way to improving the functioning 
of government, the economy and, most importantly, the quality of life 
for the American people.

List of Attachments

1. Executive Order No. 12866 (This Executive Order does not appear in 
this document. See 58 FR 51735; October 4, 1993).
2. Presidential Memorandum for the Administrator of OIRA dated 
September 30, 1993. (This Presidential memorandum does not appear in 
this document. Copies are available from the EOP Publications Office at 
202-395-7332.)
3. Guidance from the Administrator of OIRA for Implementing E.O. 12866.
4. Appendix A--Executive Order 12866 Reviews October 1, 1993-March 31, 
1994; Received Since October 1, 1993
5. Table 1--Executive Order Reviews October 1, 1993-March 31, 1994; 
Received After October 1, 1993
6. Table 2--Executive Order Reviews October 1, 1993-March 31, 1994; 
Received Prior to October 1, 1993
7. Table 3--Executive Order Reviews Pending on April 1, 1994
8. Figure A--Executive Order 12866 Receipts From Agencies

October 12, 1993.

Memorandum for Heads of Executive Departments and Agencies, and 
Independent Regulatory Agencies

From: Sally Katzen, Administrator, Office of Information and Regulatory 
Affairs
Subject: Guidance for Implementing E.O. 12866

    The President issued Executive Order No. 12866, ``Regulatory 
Planning and Review,'' on September 30, 1993 (58 Fed. Reg. 51735 
(October 4, 1993)).\1\ It calls upon Federal agencies and the Office of 
Information and Regulatory Affairs (OIRA) to carry out specific actions 
designed to streamline and make more efficient the regulatory process. 
This memorandum provides guidance on a number of the provisions of the 
new Order. Undoubtedly, with experience, additional questions will be 
raised, and we will attempt to respond promptly as they arise.
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    \1\This Order replaces E.O. 12291 and E.O. 12498.
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1. Coverage

    The Order as a whole applies to all Federal agencies, with the 
exception of the independent regulatory agencies (Sec. 3(b)). The 
independent regulatory agencies are included in provisions concerning 
the ``Unified Regulatory Agenda'' (Sec. 4(b)) and ``The Regulatory 
Plan'' (Sec. 4(c)). However, while the President's ``Statement of 
Regulatory Philosophy and Principles'' (Sec. 1) applies by its terms 
only to those agencies that are not independent, the independent 
regulatory agencies are requested on a voluntary basis to adhere to the 
provisions that may be pertinent to their activities.
    In addition, the Order states that the OIRA Administrator may 
exempt agencies otherwise covered by the Order. Appendix A is a first 
cut of those agencies that have few, if any, significant rulemaking 
proceedings each year; effective immediately, these agencies are exempt 
from the scope of the Order.\2\ Like the independent agencies, those 
agencies listed in Appendix A are requested to adhere voluntarily to 
the relevant provisions of the Order, particularly the President's 
``Statement of Regulatory Philosophy and Principles'' (Sec. 1).
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    \2\To assure that the purposes of the Executive Order are 
carried out, we may ask these agencies to review particular 
significant regulatory actions of which we become aware. These 
Agencies should advise OIRA if they believe that a particular rule 
warrants centralized review.
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2. Designation of Regulatory Policy Officer

    The Order directs each agency head to designate a Regulatory Policy 
Officer ``who shall report to the agency head'' (Sec. 6(a)(2)). This 
Regulatory Policy Officer is to be involved at each stage of the 
regulatory process to foster the development of effective, innovative, 
and least burdensome regulations. Because the Regulatory Policy Officer 
will in most circumstances serve as the agency representative to the 
Regulatory Working Group (see below), please provide us with the name, 
mailing address, and telephone and fax numbers of your designee as soon 
as possible.

3. Regulatory Working Group

    The Order directs the OIRA Administrator to convene a Regulatory 
Working Group consisting, in part, of the representatives of the heads 
of each agency having significant domestic regulatory responsibility 
(Sec. 4(d)).
    Again, we have made a first cut of a list of those agencies which 
should be members of the Regulatory Working Group, which is attached as 
Appendix B. Some of the Departments that have separate regulatory 
components may qualify for multiple representatives. Please notify us 
if you believe that your Department should have more than one 
representative. In suggesting additional representatives, please 
identify these persons and provide us with their mailing addresses, and 
telephone and fax numbers.
    The Administrator is to convene the first meeting of the Regulatory 
Working Group within 30 days. It is therefore essential that we have 
your response as soon as possible.

4. Regulatory Planning Mechanism

    The Order emphasizes planning as a way of identifying significant 
issues early in the process so that whatever coordination or 
collaboration is appropriate can be achieved at the beginning of the 
regulatory development process rather than at the end (Sec. 4).
    There are two specific planning documents discussed in the Order. 
The first, the semiannual Unified Regulatory Agenda (Sec. 4(b)), is on 
schedule and will be published before the end of October. 
Traditionally, all agencies participate, describing briefly the 
regulations under development. The Order does not call for any change 
in either the scope or format of this document.
    The second planning document is the annual Regulatory Plan (Sec. 
4(c)), which is to be published in October as part of the Unified 
Regulatory Agenda. The Regulatory Plan seeks to capture the most 
important significant regulations. In advance of agencies drafting 
their Regulatory Plans, the Vice President will meet with agency heads 
to seek a common understanding of regulatory priorities and to 
coordinate regulatory efforts to be accomplished in the upcoming year 
(Sec. 4(a)). The Vice President will convene the first meeting in early 
1994. Following that meeting, we will provide appropriate guidance on 
the scope and structure of the submissions for the 1994 Regulatory 
Plan.
    As you may recall, OMB had asked in OMB Bulletin No. 93-13 (May 13, 
1993) that certain agencies prepare a draft 1993 Regulatory Program 
under the then applicable Executive Order No. 12498. Many agencies sent 
in some or all of their proposed programs. Other agencies informed us 
that they wanted to wait for the confirmation of political appointees 
or the issuance of the new Executive Order. While there is now 
insufficient time for all of the steps necessary to prepare a formal 
regulatory plan for this year, the materials we have received will be 
useful in preparing for the meeting with the Vice President and our 
other coordination efforts. Those agencies that have already drafted 
but not submitted materials, as well as those who wish to augment what 
we have already received, are encouraged to send these materials to 
OIRA.

5. Review of Existing Regulations

    The Order directs each agency to create a program under which it 
will periodically review its existing significant regulations to 
determine whether any should be modified or eliminated to make the 
agency's regulatory program more effective, less burdensome, and in 
greater alignment with the President's priorities and regulatory 
principles (Sec. 5). Specifically, within 90 days, agencies are to 
submit to the OIRA Administrator a program establishing, consistent 
with the agency's resources and regulatory priorities, the procedures 
for carrying out a periodic review of existing significant regulations 
and identifying any legislative mandates that may merit enactment, 
amendment, or rescission (Sec. 5(a)).
    We are aware that past Administrations have required agencies to 
undertake similar review efforts. Some of these have been so broad in 
scope that necessary analytic focus has been diffused, or needed 
follow-up has not occurred. This current effort should be more 
productive because it focuses only on significant regulations and the 
legislation that mandates them, and because we will be looking at 
groups of regulations across agencies with the help of the Vice 
President and the White House Regulatory Advisers, as well as the 
public.
    Pursuant to the Order, we are asking each agency to send to the 
OIRA Administrator within 90 days a work-plan which identifies who and 
which office within the agency will be responsible for assuring that 
periodic reviews take place; the criteria to be used for selecting 
targets of review; the kinds of public involvement, data collection, 
economic and other analysis, and follow-up evaluation that are planned; 
the timetables to be applied; and, to the extent then known, the 
targets selected. As the program is implemented and an agency selects 
specific targets for review, please identify the specific programs, 
regulations, and legislation involved. To the extent they are relevant, 
we will share with you the review efforts of other agencies.

6. Centralized Review of Regulations

    One of the themes in the Order is greater selectivity in the 
regulations reviewed by OIRA, so that we can free up our resources to 
focus on the important regulatory actions and expedite the issuance of 
those that are less important. Another theme is that we are to 
determine early in the process which regulations are important (the 
term in the Order is--``significant''). Among other things, this will 
permit agencies to conduct the needed analyses for these regulations as 
part of the development process, not as an after-the-fact exercise 
(Sec. 6(a)(3)(B)).
    The Order defines ``significant'' regulatory actions'' as those 
likely to lead to a rule (1) having an annual effect on the economy of 
$100 million or more or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) creating a serious inconsistency or otherwise 
interfering with an action taken or planned by another agency; (3) 
materially altering the budgetary impact of entitlements, grants, user 
fees, or loan programs; or (4) raising novel legal or policy issues 
(Sec. 3(f)).3 This definition is not wholly susceptible to 
mechanical application; rather, in many instances, it will require the 
exercise of judgment. We will work with the agencies to come to a 
consensus on the meaning of this term in the context of the specific 
programs and characteristics of each agency.
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    \3\The Order is intended to cover any policy document of general 
applicability and future effect, which the agency intends to have 
the force and effect of law, such as guidances, funding notices, 
manuals, implementation strategies, or other public announcements, 
designed to implement, interpret, or prescribe law or policy or to 
describe the procedure or practice requirements of an agency. Such 
documents are normally published in the Federal Register, but can 
also be made available to the affected public directly.
---------------------------------------------------------------------------

    To begin, we ask the appropriate personnel at each agency to work 
with the OIRA desk officer(s) to develop an appropriate list of 
rulemakings that are under development for submission to OIRA. For each 
rulemaking, please use the format below:
    DEPARTMENT/REGULATORY COMPONENT. Title: ([Indicate 
significance4]; Upcoming Action: [Identify]5) Planned 
Submission/Publication: [date]; RIN: [number6]. Statutory/Judicial 
Deadline: [date, if any].
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    \4\ State one of the following: ``Not Significant'', 
``Significant'', or ``Economically Significant''. A designation as 
``Economically Significant'' means that the regulatory action is 
likely to result in the effects listed in the first subsection--
namely, i.e., ``have an annual effect on the economy of $100 million 
or more or adversely affect in a material way the economy, a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, or tribal governments or 
communities.'' A regulatory action that is considered ``Economically 
Significant'' must ultimately be supported by the analyses set forth 
in Section 6(a)(3)(C).
    \5\ Indicate whether the upcoming regulatory action is a 
``Notice of Inquiry'', ``Funding Notice'', ``ANPRM'', ``NPRM'', 
``Interim Final Rule'', ``Final Rule'', or what other action it may 
be.
    \6\ ``RIN'' is the Regulation Identifier Number published in the 
Unified Regulatory Agenda. If a RIN has not been assigned, the 
agency should obtain one through the normal process by contacting 
the Regulatory Information Service Center.
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    [Describe briefly what the agency is intending to do and why, 
including whether the program is new or continuing and, if continuing, 
the significant changes in program operations or award criteria. 
Briefly describe issues associated with the rulemaking, as appropriate, 
e.g., impacts (both benefits and costs), interagency and 
intergovernmental (State and local) effects, budgetary effects (e.g., 
outlays, number of years and awards, administrative overhead), time 
pressures, and why the regulatory action is important, sensitive, 
controversial or precedential. For final regulatory actions, include a 
brief statement of the nature and extent of public comment, and the 
nature and extent of changes made in response to the public comments.] 
([Name and telephone number of program official who can answer detailed 
questions])
    We are not looking for a lengthy or detailed description of the 
issues listed above. All we need is information sufficient to confirm 
the characterization of ``significant'' or ``not significant''. 
Similarly, for final regulatory actions, the description of the public 
comments and changes is simply to enable us to decide whether we can 
expedite or waive our review of the final rule where, for example, 
there are few or no public comments and little or no substantive change 
from the previously reviewed NPRM.
    Under the Executive Order, within 10 working days after OIRA 
receives this list, we will meet with or call your office to discuss 
whether or not listed regulatory actions should be submitted for 
centralized review (Sec. 6(a)(3)(A)). The purpose of this meeting is to 
confirm the characterization of the proposal as ``significant'' or 
``not significant,'' the characterization is important because, absent 
a material change in the development of the rule, those characterized 
as ``not significant'' need not be submitted for OIRA review before 
publication.
    OIRA will also want to discuss the timing for updates that would 
identify any new regulatory actions under development. OIRA implemented 
this procedure with several agencies on a pilot basis while the Order 
was being drafted. We are most pleased by the results. It has in some 
instances taken one or two tries to develop a process that works for a 
particular agency. In most instances, submission of a list once a month 
has proven sufficient for our purposes.
    Once it is clear that a rulemaking warrants review by OIRA, the 
process will be facilitated by your advising the OIRA staff as soon as 
possible on the basic concept, direction, and scope of the rulemaking. 
This will enable us to identify early the issues that we are concerned 
about and to inform agency personnel of the type of analyses that OIRA 
will look for when it reviews the regulatory action. All of this is 
designed to make the review process more efficient and avoid last 
minute problems.
    When an agency submits a significant regulatory action for review, 
the Order sets forth certain information that each agency should 
provide a description of the need for the regulatory action, how the 
regulation will meet that need, and an assessment of the potential 
costs and benefits of the regulatory action, together with an 
explanation of how it is consistent with a statutory mandate, promotes 
the President's priorities, and avoids undue interference with State, 
local, and tribal governments. This should not impose additional burden 
on the agency. All of the information should have been prepared as part 
of the agency's deliberative process; and much, if not all, of this 
information should already be set forth in the preamble of the proposal 
so as to allow more informed public comment.
    If the regulatory action is economically significant (as defined in 
Sec. 3(f)(1)),7 the Order sets forth additional information that 
an agency must provide--an assessment of benefits, costs, and of 
potentially effective and reasonably feasible alternatives to the 
planned regulatory action (Sec. 6(a)(3(C)). We recognize that this 
material may take different forms for different agencies. We are 
reviewing our current guidance to see what changes, if any, are 
appropriate. Pending the conclusion of this review, agencies should 
continue to adhere to the existing OMB guidance on how to estimate 
benefits and costs.
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    \7\See footnote 4.
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    In order to assure that the public is aware of our review under the 
Order and the possible effects that this review may have had, agencies 
should indicate in the preamble to the regulatory action whether or not 
the regulatory action was subject to review under E.O. 12866. On the 
other hand, there is no requirement that an agency document (in the 
preamble or in its submissions to OIRA) compliance with each principle 
of regulation set forth in the beginning of the Executive Order (Sec. 
1(b)); we do, however, expect agencies to adhere to these principles 
and to respond to any questions that may be raised about how a 
regulatory action is consistent with these provisions of the Order.
    The OIRA Administrator was given the authority to exempt any 
category of agency regulations from centralized review (Sec. 3(d)(4)). 
To begin with, we have decided that the previously granted exemptions 
should be kept in effect, except as the Order specifically includes 
them.8 Several additional exemptions have been added as a result 
of our ongoing discussions with agencies. A list of current exemptions 
is set forth in Appendix C. We will add to this list as experience 
warrants. We urge you to contact the Administrator, or have your staff 
contact your OIRA desk officer, to discuss those categories you believe 
may be suitable for exemption.
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    \8\Section 3(d)(2) includes within the definition of 
``regulation'' or ``rule'' those pertaining to ``procurement'' and 
the ``import or export of non-defense articles and services.'' The 
OIRA Administrator interprets the latter to include within the scope 
of the Order the regulations of the Bureau of Export Administration, 
and to exclude State Department regulations involving the Munitions 
List.
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7. Openness and Public Accountability

    To assure greater openness and accountability in the regulatory 
review process, the Order sets forth certain responsibilities for OIRA 
(Sec. 6(b)(4)). Among other things, OIRA is placing in its public 
reading room a list of all agency regulatory actions currently 
undergoing review. This list is updated daily, and identifies each 
regulatory action by agency, title, date received, and date review is 
completed.
    The reading room also contains a list of all meetings and telephone 
conversations with the public and Congress to discuss the substance of 
draft regulations that OIRA is reviewing. Within OIRA, only the 
Administrator (or an individual specifically designated by the 
Administrator--generally the Deputy Administrator) may receive such 
oral communications.
    When these meetings are scheduled, we are asking those outside the 
Executive branch to have communicated their concerns and supporting 
facts to the issuing agency before the meeting with OIRA. To assure 
that the matters discussed are known to the agency, we are inviting 
policy-level officials from the issuing agency to each such meeting.
    In addition, written materials received from those outside the 
Executive branch will be logged in the reading room and forwarded to 
the issuing agency within 10 working days. It will be up to each agency 
to put these in its rulemaking docket.
    After the regulation is published, OIRA is making available to the 
public the documents exchanged between OIRA and the issuing agency. 
These materials will also be made public even if the agency decides not 
to publish the regulatory action in the Federal Register. In addition, 
the Order directs that, after a regulatory action has been published in 
the Federal Register or otherwise released, each agency is to make 
available to the public the text submitted for review, and the required 
assessments and analyses (Sec. 6(a)(3)(E)). In addition, after the 
regulatory action has been published in the Federal Register or 
otherwise issued to the public, each agency is to identify for the 
public, in a complete, clear, and simple manner, the substantive 
changes that it made to the regulatory action between the time the 
draft was submitted to OIRA for review and the action was subsequently 
publicly announced, indicating those changes that were made at the 
suggestion or recommendation of OIRA (Sec. 6(a)(3)(E) (ii) and (iii)). 
Should you have any questions about these matters, please call the 
Administrator or one of your OIRA Desk Officers.

8. Time Limits for OIRA Review

    The Order sets forth strict time limits for OIRA review of 
regulatory actions. For any notices of inquiry, advance notice of 
proposed rulemaking, or other preliminary regulatory action, OIRA is to 
complete review within 10 working days (Sec. 6(b)(2)(A)). For all other 
regulatory actions, OIRA has 90 calendar days, unless OIRA has 
previously reviewed it and there has been no material change in the 
facts and circumstances upon which the regulatory action is based, in 
which case there is a limit of 45 days (Sec. 6(b)(2)(B)). Because of 
these tight time limits, we must work closely together to ensure that 
requests for clarification or information are responded to promptly. 
Upon receipt of a regulatory action, we plan to take a quick look and 
make certain that whatever analyses should be included are included, 
and to get back promptly to the agency to ask for whatever is missing.
    In some instances, a reason for OIRA review will be the potential 
effect of a regulation on other agencies. In these circumstances, OIRA 
will attempt to provide the affected agencies with copies of the draft 
regulatory action as soon as possible. If you are aware that another an 
agency has an interest in the draft regulatory action, please let us 
know quickly.
    We also want to stress the provision in the Order that calls upon 
each agency, in emergency situations or when the agency is obligated by 
law to act more quickly than normal review procedures allow, to notify 
OIRA as soon as possible and to schedule the rulemaking proceedings so 
as to permit sufficient time for OIRA to conduct an adequate review 
(Sec. 6(a)(3)(D)).

9. Regulation Identifier Number (RIN)

    We ask that each agency include a Regulation Identifier Number in 
the heading of each regulatory action published in the Federal 
Register.9 This will make it easier for the public and agency 
officials to track the publication history of regulatory actions 
throughout their life cycles and to link documents in the Federal 
Register with corresponding entries in the Unified Agenda of Federal 
Regulations (Sec. 4(b)) and the Regulatory Plan (Sec. 4(c)).
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    \9\The Office of the Federal Register has issued guidance to 
agencies on the placement of the RIN number in their documents. See 
Document Drafting Handbook, 1991 ed., p. 9.
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* * * * *
    We look forward to working with you to implement this Executive 
Order. If you have any questions, please let us know. We will, of 
course, provide additional guidance as experience and need dictate.

Appendix A--Agencies Exempt From E.O. 12866

Advisory Council on Historic Preservation
African Development Foundation
Alaska Natural Gas Transportation System, Office of the Federal 
Inspector
American Battle Monuments Commission
Arms Control and Disarmament Agency
Board for International Broadcasting
Central Intelligence Agency
Commission of Fine Arts
Committee for Purchase from the Blind and Severely Handicapped
Export-Import Bank of the United States
Farm Credit System Assistance Board
Federal Financial Institutions Examination Council
Federal Mediation and Conciliation Service
Harry S. Truman Scholarship Foundation
Institute of Museum Services
Inter-American Foundation
International Development Corporation Agency
James Madison Memorial Fellowship Foundation
Merit Systems Protection Board
Navajo Hopi Indian Relocation Commission
National Capital Planning Commission
Office of Special Counsel
Overseas Private Investment Corporation
Panama Canal Commission
Pennsylvania Avenue Development Corporation
Peace Corps
Selective Service System
Tennessee Valley Authority
United States Metric Board
United States Information Agency
United States International Development Cooperation Agency

Appendix B--Members of the Regulatory Working Group

Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of Transportation
Department of the Treasury
Department of Veterans Affairs
Environmental Protection Agency
Small Business Administration
General Services Administration
Equal Employment Opportunity Commission

Appendix C--Regulatory Actions Exempted From Centralized Regulatory 
Review

Department of Agriculture

    Food and Nutrition Service--Special Nutrition program notices that 
revise reimbursement rates and eligibility criteria for the School 
Lunch, Child Care Food, and other nutrition programs.
    Food and Nutrition Service--Food Stamp program notices that set 
eligibility criteria and deduction policies.
    Agricultural Marketing Service--Regulations that establish 
voluntary standards for grading the quality of food.
    Animal and Plant Health Inspection Service--Rules and notices 
concerning quarantine actions and related measures to prevent the 
spread of animal and plant pests and diseases.
    Animal and Plant Health Inspection Service--Rules affirming actions 
taken on an emergency basis if no adverse comments were received.
    Rural Electrification Administration--Rules concerning standards 
and specifications for construction and materials.

Department of Commerce

    National Oceanic and Atmospheric Administration--Certain time-
sensitive preseason and in season Fishery Management Plan regulatory 
actions that set restrictions on fishing seasons, catch size, and 
fishing gear.

Department of Education

    Certain Final Rules Based on Proposed Rules--Final regulations 
based on proposed regulations that OMB previously reviewed where: (1) 
OMB had not previously identified issues for review in a final 
regulation stage; (2) Education received no substantive public comment; 
and (3) the proposed regulation is not substantively revised in the 
final regulation.
    Rules Directly Implementing Statute--Final regulations that only 
incorporate statutory language with no interpretation.
    Notices of Final Funding Priorities--Notices of final funding 
priorities for which OMB has previously reviewed the proposed priority.

Department of Energy

    Power Marketing Administrations--Regulations issued by various 
power administrations relating to the sale of electrical power that 
they produce or market.

Department of Health and Human Services

    Food and Drug Administration--Agency notices of funds availability.
    Food and Drug Administration--Medical device reclassifications to 
less stringent categories.
    Food and Drug Administration--OTC monographs, unless they may be 
precedent-setting or have large adverse impacts on consumers.
    Food and Drug Administration--Final rules for which no comments 
were received and which do not differ from the NPRM.

Department of the Interior

    Office of Surface Mining--Actions to approve, or conditionally 
approve, State regulatory mining actions or amendments to such actions.
    Office of Surface Mining--Approval of State mining reclamation 
plans or amendments.
    Office of Surface Mining--Cooperative agreements between OSM and 
States.
    United States Fish and Wildlife Service--Certain parts of the 
annual migratory bird hunting regulations.

Department of Transportation

    All Office of DOT--Amendments that postpone the compliance dates of 
regulations already in effect.
    Coast Guard--Regatta regulations, safety zone regulations, and 
security zone regulations.
    Coast Guard--Anchorage, drawbridge operations, and inland waterways 
navigation regulations.
    Coast Guard--Regulations specifying amount of separation required 
between cargoes containing incompatible chemicals.
    Federal Aviation Administration--Standard instrument approach 
procedure regulations, en route altitude regulations, routine air space 
actions, and airworthiness directives.
    National Highway Traffic Safety Administration--Federal Motor 
Vehicle Safety Standard 109 table of tire sizes.

Department of the Treasury

    Internal Revenue Service, Bureau of Alcohol, Tobacco, and Firearms, 
and Customs Service--Revenue rulings and procedures, Customs decisions, 
legal determinations, and other similar ruling documents. Major 
legislative regulations are covered fully.

Environmental Protection Agency

    Office of Pesticides and Toxic Substances--Actions regarding 
pesticide tolerances, temporary tolerances, tolerance exemptions, and 
food additives regulations, except those that make an existing 
tolerance more stringent.
    Office of Pesticides and Toxic Substances--Unconditional approvals 
of TSCA section 5 test marketing exemptions, and of experimental use 
permits under FIFRA.
    Office of Pesticides and Toxic Substances--Decision documents 
defining and establishing registration standards; decision documents 
and termination decisions for the RPAR process; and data call-in 
requests made under section 3(c)(2)(B) of FIFRA.
    Office of Air, Noise, and Radiation--Rules that unconditionally 
approve revisions to State Implementation Plans.
    Office of Air, Noise, and Radiation--Unconditional approvals of 
equivalent methods for ambient air quality monitoring and of NSPS, 
NESHAPS, and PSD delegations to States; approvals of carbon monoxide 
and nitrogen oxide waivers; area designations of air quality planning 
purposes; and deletions from the NSPS source categories list.
    Office of Water--Unconditional approvals of State Water Standards.
    Office of Water--Unconditional approval of State underground 
injection control programs, delegations of NPDES authority to States; 
deletions from the 307(a) list of toxic pollutants; and suspension of 
Toxic Testing Requirements under NPDES.
    Office of Solid Water and Emergency Response--Unconditional 
approvals of State authorization under RCRA of State solid waste 
management plans and of hazardous waste delisting petitions under RCRA.

Pension Benefit Guaranty Corporation

    Interest Rates--Changes in interest rates on later premium payments 
and delinquent employer liability payments under sections 6601 and 6621 
of the Internal Revenue Code as amended by the Tax Equity and Fiscal 
Responsibility Act of 1982.

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_______________________________________________________________________

Part VII





Department of Agriculture





_______________________________________________________________________



Cooperative State Research Service



_______________________________________________________________________



Small Business Innovation Research Grants Program; Notice
DEPARTMENT OF AGRICULTURE

Cooperative State Research Service

 
Small Business Innovation Research Grants Program for Fiscal Year 
1995; Solicitation of Applications

    Notice is hereby given that under the authority of the Small 
Business Innovation Development Act of 1982 (Pub. L. 97-219), as 
amended (15 U.S.C. 638) and section 630 of the Act making 
appropriations for Agriculture, Rural Development, and Related Agencies 
programs for fiscal year ending September 30, 1987, and for other 
purposes, as made applicable by section 101(a) of Public Law Number 99-
591, 100 Stat. 3341, the U.S. Department of Agriculture (USDA) expects 
to award project grants for certain areas of research to science-based 
small business firms through Phase I of its Small Business Innovation 
Research (SBIR) Grants Program. This program will be administered by 
the Office of Grants and Program Systems, Cooperative State Research 
Service. Firms with strong scientific research capabilities in the 
topic areas listed below are encouraged to participate. Objectives of 
the three-phase program include stimulating technological innovation in 
the private sector, strengthening the role of small businesses in 
meeting Federal research and development needs, increasing private 
sector commercialization of innovations derived from USDA-supported 
research and development efforts, and fostering and encouraging 
participation of women-owned and socially and economically 
disadvantaged small business concerns in technological innovation.
    The total amount expected to be available for Phase I of the SBIR 
Program in fiscal year 1995 is approximately $3,500,000. The 
solicitation is being announced to allow adequate time for potential 
recipients to prepare and submit applications by the closing date of 
September 1, 1994. The research to be supported is in the following 
topic areas:

1. Forests and Related Resources
2. Plant Production and Protection
3. Animal Production and Protection
4. Air, Water and Soils
5. Food Science and Nutrition
6. Rural and Community Development
7. Aquaculture
8. Industrial Applications
9. Marketing and Trade

    The award of any grants under the provisions of this solicitation 
is subject to the availability of appropriations.
    This program is subject to the provisions found at 7 CFR part 3403, 
as amended. These provisions set forth procedures to be followed when 
submitting grant proposals, rules governing the evaluation of proposals 
and the awarding of grants, and regulations relating to the post-award 
administration of grant projects. In addition, USDA Uniform Federal 
Assistance Regulations, as amended (7 CFR part 3015), Governmentwide 
Debarment and Suspension (Non-procurement) and Governmentwide 
Requirements for Drug-free Workplace (Grants) (7 CFR part 3017), New 
Restrictions on Lobbying (7 CFR part 3018), and Managing Federal Credit 
Programs (7 CFR part 3) apply to this program. Copies of 7 CFR part 
3403, 7 CFR part 3015, 7 CFR part 3017, 7 CFR part 3018, and 7 CFR part 
3 may be obtained by writing or calling the office indicated below.
    The solicitation, which contains research topic descriptions and 
detailed instructions on how to apply, may be obtained by writing or 
calling the office indicated below. Please note that applicants who 
submitted SBIR proposals for fiscal year 1994 or who have recently 
requested placement on the list for fiscal year 1995 will automatically 
receive a copy of the fiscal year 1995 solicitation.

Proposal Services Branch, Awards Management Division, Cooperative State 
Research Service, U.S. Department of Agriculture, Ag Box 2245, 
Washington, DC 20250-2245, telephone: (202) 401-5048.

    Done at Washington, DC, this 4th day of May 1994.
William D. Carlson,
Associate Administrator, Cooperative State Research Service.
[FR Doc. 94-11166 Filed 5-9-94; 8:45 am]
BILLING CODE 3410-22-M