Regulatory Reform: Implementation of the Small Business Advocacy Review
Panel Requirements (Letter Report, 03/18/98, GAO/GGD-98-36).

Pursuant to a congressional request, GAO reviewed the Environmental
Protection Agency's (EPA) and the Occupational Safety and Health
Administration's (OSHA) implementation of the Small Business Regulatory
Enforcement Fairness Act's (SBREFA) advocacy review panel requirements,
focusing on: (1) whether EPA and OSHA had applied the advocacy review
panel requirements to all rules that they proposed between June 28,
1996, and June 28, 1997, that may have a significant economic impact on
a substantial number of small entities; (2) whether the EPA and OSHA
panels, the regulatory agencies themselves, and SBA's Chief Counsel for
Advocacy followed the statute's procedural requirements for panels
convened between June 28, 1996, and November 1, 1997, and whether there
were differences among the panels in how the statute's requirements were
implemented; (3) the changes, if any, that EPA and OSHA made to notices
of proposed rulemaking as a result of the panels' recommendations; and
(4) any suggestions that EPA and OSHA agency officials and small entity
representatives may have regarding how the advocacy review panel process
could be improved.

GAO noted that: (1) during the first year of the SBREFA advocacy review
panel requirements' implementation, OSHA convened a panel for one draft
rule and published two other proposed rules for which panels were not
held; (2) the Small Business Administration's (SBA) Chief Counsel for
Advocacy agreed with OSHA's certification that neither of these two
proposed rules required an advocacy review panel; (3) as of November 1,
1997, EPA had convened advocacy review panels for four draft rules; (4)
EPA published 17 other proposed rules during the first year of the panel
requirements that were reviewed by the Office of Information and
Regulatory Affairs and for which panels were not held because EPA
certified that the proposed rules would not have a significant economic
impact on a substantial number of small entities; (5) the Chief Counsel
said EPA should have convened panels for 2 of these 17 proposed rules;
(6) it is unclear whether EPA should have convened panels for these
rules because there are no criteria for determining whether a draft rule
will have an impact on small entities; (7) EPA and OSHA panels, the
regulatory agencies themselves, and the SBA Chief Counsel for Advocacy
generally followed SBREFA's advocacy review panel procedural
requirements in the five panels that had been convened as of November 1,
1997; (8) however, the panels did not meet some of the specific
deadlines that SBREFA established; (9) there were some differences in
how the five panels were conducted; (10) some of these differences
appeared to occur because the panel process is new and evolving;
however, the panels have made adjustments to their procedures as they
have gained experience; (11) the five panels' recommendations to the
regulatory agency heads focused on the agencies' consideration of
additional regulatory alternatives and clarification of what the draft
rules would require; (12) as of November 1, 1997, EPA and OSHA each had
published one notice of proposed rulemaking for which they had convened
advocacy review panels; (13) the agencies primarily responded to the
panels' recommendations in the preambles of those notices, soliciting
public comments on issues that the panels had recommended; and (14) many
of the small entity representatives that GAO interviewed suggested ways
to improve the panel process.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-36
     TITLE:  Regulatory Reform: Implementation of the Small Business 
             Advocacy Review Panel Requirements
      DATE:  03/18/98
   SUBJECT:  Proposed legislation
             Regulatory agencies
             Federal regulations
             Economic analysis
             Administrative law
             Reporting requirements
             Small business assistance
             Agency proceedings
             Advisory committees

             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1998

REGULATORY REFORM - IMPLEMENTATION
OF THE SMALL BUSINESS ADVOCACY
REVIEW PANEL REQUIREMENTS

GAO/GGD-98-36

Review Panel Requirements

(410158)


Abbreviations
=============================================================== ABBREV

  EPA - Environmental Protection Agency
  NPDES - National Pollutant Discharge Elimination System
  OIRA - Office of Information and Regulatory Affairs
  OMB - Office of Management and Budget
  OSHA - Occupational Safety and Health Administration
  RFA - Regulatory Flexibility Act
  SBA - Small Business Administration
  SBREFA - Small Business Regulatory Enforcement Fairness Act
  TB - tuberculosis

Letter
=============================================================== LETTER


B-277946

March 18, 1998

The Honorable Christopher Bond
Chairman, Committee on Small Business
United States Senate

The Honorable Roscoe G.  Bartlett
Chairman, Subcommittee on Government
 Programs and Oversight
Committee on Small Business
House of Representatives

The Honorable Sue W.  Kelly
Chairman, Subcommittee on Regulatory
 Reform and Paperwork Reduction
Committee on Small Business
House of Representatives

The Honorable Pete V.  Domenici
United States Senate

Small businesses are a significant part of the nation's economy,
accounting for about 50 percent of the gross domestic product and 53
percent of private industry's workforce.  Small governments make up
97 percent of all of the local governments in the United States. 
However, small businesses and governments can be disproportionately
affected by federal agencies' regulatory requirements, and agencies
may inadequately consider the impact of those requirements on small
entities when the requirements are implemented.\1

In response to concerns about the effect that federal regulations may
have on small entities, Congress passed the Regulatory Flexibility
Act (RFA) of 1980 (5 U.S.C.  601-612).  The RFA requires federal
agencies to analyze the anticipated effects of rules they plan to
propose on small entities unless they certify that the rules will not
have a "significant economic impact on a substantial number of small
entities."\2 The Small Business Administration's (SBA) Office of
Advocacy is responsible for monitoring federal agencies' compliance
with the RFA and for reviewing federal rules for their impact on
small businesses. 

On March 29, 1996, Congress passed the Small Business Regulatory
Enforcement Fairness Act (SBREFA) to strengthen the RFA's protections
for small entities.  Among other things, SBREFA requires that, before
publishing a notice of proposed rulemaking that may have a
significant economic impact on a substantial number of small
entities, the Environmental Protection Agency (EPA) and the
Occupational Safety and Health Administration (OSHA) is to convene a
small business advocacy review panel for the draft rule\3 (5 U.S.C. 
609).  During the advocacy review panel process, the panel must
collect the advice and recommendations of representatives of affected
small entities about the potential impact of the draft rule.  SBREFA
requires that the panel is to consist of employees from the
regulatory agency responsible for the draft rule (EPA or OSHA), the
Office of Management and Budget's (OMB) Office of Information and
Regulatory Affairs (OIRA), and SBA's Chief Counsel for Advocacy.  The
statute also requires the regulatory agencies, the Chief Counsel, and
the panels themselves to undertake certain actions within specified
timeframes.  SBREFA's advocacy review panel requirements took effect
on June 28, 1996. 

This report responds to your request that we examine EPA's and OSHA's
implementation of SBREFA's advocacy review panel requirements.  As
agreed with your offices, our specific objectives were to (1)
determine whether EPA and OSHA had applied the advocacy review panel
requirements to all rules that they proposed between June 28, 1996,
and June 28, 1997, that may have a significant economic impact on a
substantial number of small entities; (2) determine whether the EPA
and OSHA panels, the regulatory agencies themselves, and SBA's Chief
Counsel for Advocacy followed the statute's procedural requirements
for panels convened between June 28, 1996, and November 1, 1997, and
whether there were differences among the panels in how the statute's
requirements were implemented; (3) identify the changes, if any, that
EPA and OSHA made to notices of proposed rulemaking as a result of
the panels' recommendations; and (4) identify any suggestions that
agency officials and small entity representatives may have regarding
how the advocacy review panel process could be improved.  Because of
the volume of rules that EPA proposed between June 28, 1996, and June
28, 1997, we limited our review of EPA rules in our first objective
to those that were subject to review by OIRA pursuant to Executive
Order 12866.\4


--------------------
\1 Thomas D.  Hopkins, A Survey of Regulatory Burdens, June 1995
report to the Small Business Administration, and Senate Report on the
Unfunded Mandate Reform Act of 1995, Report 104-1, January 11, 1995,
Committee on Governmental Affairs. 

\2 The RFA defines "small entities" as small businesses, small
organizations, and small governmental jurisdictions.  The RFA
incorporates the generally accepted meanings of a small business as
established by the SBA through size standards that define whether a
business entity is small.  The RFA defines a small organization as
any not-for-profit enterprise that is independently owned and
operated and is not dominant in its field.  The RFA defines a small
governmental jurisdiction as governments of cities, counties, towns,
townships, villages, school districts, or special districts with a
population of fewer than 50,000 citizens.  These definitions hold
unless an agency establishes, after an opportunity for public
comments, an alternative definition(s) that is appropriate to the
activities of the agency and publishes the definition in the Federal
Register.  This requirement only applies to rules for which the
agency must publish a general notice of proposed rulemaking. 

\3 In this report, we use "draft rule" to indicate a rule that is
being developed by an agency but has not yet been published in the
Federal Register under a notice of proposed rulemaking. 

\4 Executive Order 12866 permits OIRA to review certain agencies'
regulatory actions that are likely to result in rules that may (1)
have an annual effect on the nation's 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 the executive order. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

During the first year of the SBREFA advocacy review panel
requirements' implementation, OSHA convened a panel for one draft
rule and published two other proposed rules for which panels were not
held.  SBA's Chief Counsel for Advocacy agreed with OSHA's
certification that neither of these two proposed rules required an
advocacy review panel.  As of November 1, 1997, EPA had convened
advocacy review panels for four draft rules.  EPA published 17 other
proposed rules during the first year of the panel requirements that
were reviewed by OIRA and for which panels were not held because EPA
certified that the proposed rules would not have a significant
economic impact on a substantial number of small entities.  The Chief
Counsel said that EPA should have convened panels for 2 of these 17
proposed rules--the national ambient air quality standards for ozone
and for particulate matter.  Some of the small entity representatives
that we contacted also said that EPA should have convened advocacy
review panels for these two proposed rules.  EPA said that there is
nothing it could do in setting the ambient air quality standards to
tailor state implementation measures as they apply to small entities
because any effect on small entities would occur only when the states
specifically determine how to implement these rules.  It is unclear
whether EPA should have convened panels for these two rules because
there are no governmentwide criteria for determining whether a draft
rule will have a significant economic impact on a substantial number
of small entities.  In particular, it is unclear whether federal
agencies can separate the establishment of a rule from the subsequent
implementation of that rule by state governments or other entities. 

The EPA and OSHA panels, the regulatory agencies themselves, and the
SBA Chief Counsel for Advocacy generally followed SBREFA's advocacy
review panel procedural requirements in the five panels that had been
convened as of November 1, 1997.  However, the panels did not meet
some of the specific deadlines that SBREFA established.  For example,
three of the five panels took a few days longer than the
SBREFA-mandated 60-day period to issue their reports (i.e., the
period beginning on the date the panel is convened until the panel's
final report is issued).  The EPA panels' decisions to make the panel
reports publicly available only when the proposed rules were
published, although consistent with the intent of SBREFA, was of
concern to some small entity representatives. 

There were some differences in how the five panels were conducted,
including the amount of contact that agency officials had with the
small entity representatives before the panels were convened, how the
regulatory agencies and SBA's Chief Counsel for Advocacy identified
potential small entity representatives, the availability of the
materials that EPA and OSHA provided for the panels and the small
entity representatives to review, and how the panels obtained
comments from the small entity representatives.  Some of these
differences appeared to occur because the panel process is new and
evolving; however, the panels have made adjustments to their
procedures as they have gained experience. 

The five panels' recommendations to the regulatory agency heads
focused on the agencies' consideration of additional regulatory
alternatives and clarification of what the draft rules would require. 
As of November 1, 1997, EPA and OSHA each had published one notice of
proposed rulemaking for which they had convened advocacy review
panels.  The agencies primarily responded to the panels'
recommendations in the preambles of those notices, soliciting public
comments on issues that the panels had recommended.  OSHA also made
some changes to the text of its draft rule.  However, because the
rulemaking process has not been completed, it is unclear whether the
panels' recommendations will result in any changes to the final
rules. 

Many of the small entity representatives that we interviewed
suggested ways to improve the panel process.  These suggestions
primarily focused on the following four issues:  (1) adjusting the
time frames in which the panels are conducted, (2) ensuring that
there is an adequate mix of representatives from the small entities
that could be affected by the rule, (3) enhancing the methods that
the panels used to gather comments, and (4) improving the background
materials provided by the regulatory agencies.  Agency officials also
offered suggestions and observations regarding the panel process. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Administrative Procedure Act (5 U.S.C.  553) generally requires
federal agencies to publish notices of proposed rulemaking in the
Federal Register and to permit interested individuals to participate
in the rulemaking process by submitting written data, views, or
arguments.  Notices of proposed rulemaking may include a preamble
that contains supplementary information providing a context for the
proposed rule and the text of the proposed rule representing the
agency's preferred regulatory option.  Agencies are to consider the
comments received during the public comment period and then publish
the final rule in the Federal Register.  Agencies may incorporate
suggested changes in the text of the final rule or provide other
insights into their consideration of public comments in the rule's
preamble.  After publication in the Federal Register as a final rule,
the text of the rule is then to be codified in the Code of Federal
Regulations. 

The RFA requires agencies to prepare an initial regulatory
flexibility analysis for each draft rule, unless the head of the
agency certifies in the Federal Register that "the rule will not have
a significant economic impact on a substantial number of small
entities." If a draft rule is expected to have a significant economic
impact on a substantial number of small entities, agencies must
publish their initial regulatory flexibility analysis, or a summary
of it, in the Federal Register when they publish the proposed rule. 
Section 603 of the RFA requires that the initial regulatory
flexibility analysis describes the expected impact of the rule on
small entities and describes (1) why the agency is considering the
regulatory action; (2) the objectives and legal basis for the rule;
(3) the type and, where feasible, an estimate of the number of small
entities to which the rule will apply; (4) the projected reporting,
recordkeeping, and other compliance requirements of the rule; (5) all
federal rules, to the extent practicable, that may duplicate,
overlap, or conflict with the proposed rulemaking; and (6)
significant alternatives to the rule that would minimize the impact
on small entities while accomplishing the purpose of the statute. 
Section 604 of the RFA requires agencies to conduct a similar final
regulatory flexibility analysis when they promulgate the final rule
and publish the final analysis, or a summary thereof, with the final
rule.  However, agencies do not have to conduct either the initial
analysis or the final analysis if they certify that the rule will not
have a significant economic impact on a substantial number of small
entities and they explain the reasons for the certification. 

Before publication of an initial regulatory flexibility analysis,
section 609 of the RFA, as amended by SBREFA, requires the
appropriate regulatory agency (EPA or OSHA) to notify the SBA Chief
Counsel for Advocacy and to provide information on the draft rule's
potential impacts on small entities and the type of small entities
that might be affected.  Section 609 also requires the Chief Counsel,
within 15 days of this notification, to identify representatives of
affected small entities for the purpose of obtaining advice and
recommendations from those individuals about the potential impacts of
the draft rule.  The Chief Counsel may waive the requirements to
convene a panel under certain circumstances if he or she, in
consultation with representatives of affected small entities and the
Administrator of OIRA, finds that the panel requirements would not
advance the effective participation of small entities in the
rulemaking process. 

SBREFA also requires each panel to consist of full-time federal
employees from the office within the agency responsible for carrying
out the draft rule and from OIRA and SBA's Chief Counsel for
Advocacy.  SBREFA requires the panel to report on the comments
received from small entities and on the panel's recommendations no
later than 60 days after the panel is convened, and states that the
panel's report shall be made public as part of the rulemaking record. 
Finally, SBREFA requires the heads of EPA and OSHA to each designate
a small business advocacy chair to act as a permanent chair of each
agency's panels no later than April 29, 1996. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To determine whether OSHA and EPA convened all required advocacy
review panels for rules that they proposed in the first year after
the panel requirements took effect, we first did an electronic search
of the Federal Register to identify all OSHA- and EPA-proposed rules
published between June 28, 1996, and June 28, 1997.  That search
indicated that OSHA had published 2 proposed rules during the period,
and that EPA had published more than 350 proposed rules.  Because of
the large number of EPA-proposed rules, we decided to limit our
review of EPA rules to the 17 that were subject to review by OIRA. 

We asked SBA's Chief Counsel for Advocacy whether he agreed with
OSHA's and EPA's certifications that these 19 proposed rules would
not have a significant economic impact on a substantial number of
small entities.  We interviewed officials from SBA's Office of
Advocacy, EPA, OSHA, and OIRA and reviewed the RFA, as amended by
SBREFA, to identify any criteria that could be used to determine what
constitutes a "significant economic impact on a substantial number of
small entities." We also examined the legislative history of the RFA
and SBREFA to determine if there were any discussions relevant to
defining this term or providing criteria for its implementation. 

To determine whether the EPA and OSHA panels, the regulatory agencies
themselves, and SBA's Chief Counsel for Advocacy followed the
advocacy review panel procedural requirements and whether there were
differences in how the panels were conducted, we interviewed (1)
selected officials from EPA, OSHA, SBA's Office of Advocacy, and OIRA
who participated in the panels that had been convened as of November
1, 1997, and (2) 32 of the 63 small entity representatives who were
identified by the agencies and were asked to provide advice and
recommendations to the panels.\5 We selected the agency officials by
contacting at least one official from each agency for each panel.  We
selected the small entity representatives by contacting every other
small entity representative that EPA and OSHA listed for each panel. 

We also interviewed representatives of five associations who had been
identified as possible small entity representatives so that we could
determine why they decided not to participate in the panels.  In
addition, we interviewed 13 of the small entity representatives who
provided advice and recommendations to an unofficial panel that EPA
convened for a draft implementation strategy that related to EPA's
rules establishing national ambient air quality standards for ozone
and particulate matter. 

Finally, we reviewed documents pertaining to the panels, including
the panel requirements in SBREFA; materials that EPA and OSHA
provided to the small entity representatives; and the final reports
prepared by each panel. 

To identify any changes that EPA and OSHA made to their draft rules
as a result of the panels, we compared the recommendations in the
panels' final reports with the related notices of proposed rulemaking
as published in the Federal Register.  As of November 1, 1997, only
two of the five draft rules for which panels had been conducted had
been published as proposed rules.\6 To obtain suggestions about how
the advocacy review panel process could be improved, we asked
officials from EPA, OSHA, OIRA, and SBA's Office of Advocacy and the
32 small entity representatives we interviewed to identify possible
improvements in that process. 

Because EPA and OSHA had convened only five advocacy review panels at
the time of our review (four at EPA and one at OSHA), our review
results should be viewed as preliminary information on the operation
of the panel provisions.  Our first objective was to determine
whether any EPA- or OSHA-proposed rules should have triggered the
advocacy review panel requirements but did not.  As previously
mentioned, we limited our review of EPA rules to those that were
subject to review by OIRA pursuant to Executive Order 12866. 
However, there may have been other EPA rules that had a significant
economic impact on a substantial number of small entities but were
not subject to OIRA review.  Because EPA panel reports for three of
its panels were not publicly available as of November 1, 1997, we did
not include them in our report.  As of November 1, 1997, OSHA had
published a notice for proposed rulemaking for the panel it had held. 
However, EPA had not published notices of proposed rulemaking for
three of the four panels it had held by that date.  Therefore, we
only could identify changes related to one OSHA and one EPA rule. 

We did our work between August 1997 and January 1998 in Washington,
D.C., in accordance with generally accepted government auditing
standards.  We requested comments on a draft of this report from the
Director of OMB, the Secretary of Labor, and the Administrators of
EPA and SBA or their designees.  Their comments are discussed near
the end of this letter. 


--------------------
\5 After the period of our review, EPA convened another panel on
centralized waste treatment effluent guidelines. 

\6 After November 1, 1997, EPA published two additional notices of
proposed rulemaking for which it had convened advocacy review
panels--industrial laundries (Dec.  17, 1997) and stormwater phase II
(Jan.  9, 1998). 


   WHETHER EPA SHOULD HAVE
   CONVENED ADDITIONAL ADVOCACY
   REVIEW PANELS IS UNCLEAR
------------------------------------------------------------ Letter :4

We reviewed a total of 19 notices of proposed rulemaking that EPA and
OSHA published (17 and 2 notices, respectively) during the first
year's implementation of SBREFA's advocacy review panel requirements. 
(See app.  I for a list of these 19 proposed rules.) The agencies did
not convene panels for any of these proposed rules because they
certified that the rules would not have a significant economic impact
on a substantial number of small entities.  SBA's Chief Counsel for
Advocacy agreed with OSHA's certifications that neither of its two
proposed rules required an advocacy review panel.  However, the Chief
Counsel said that EPA should have convened advocacy review panels for
2 of its 17 proposed rules--the national ambient air quality
standards for ozone and for particulate matter.\7

EPA's certification of these two rules was based on EPA's
interpretation of the term "impact" under the RFA.  EPA concluded
that the term refers to the impact of a proposed rule on small
entities subject to the rule's requirements because the purpose of a
regulatory flexibility analysis is to consider ways of easing a
rule's requirements as they will apply to small entities.  According
to EPA, that purpose could not be served in the case of rules such as
these national ambient air quality standards, which do not themselves
impose requirements that apply to small entities.  Because, according
to EPA, the only choice it has in promulgating the national ambient
air quality standards is the level of the standard and not its
implementation, EPA stated that there is nothing it can do in setting
these standards to tailor state implementation measures as they apply
to small entities.  EPA said that any effect on small entities would
occur only when states specifically determine how they will implement
these rules. 

In a November 18, 1996, letter to the EPA Administrator, SBA's Chief
Counsel for Advocacy said that EPA should have convened advocacy
review panels for the ozone and particulate matter rules.  He said
that the promulgation of these proposed rules cannot be separated
from their implementation, and that certain effects on small entities
flow "inexorably" from the standards that these proposed rules would
establish.  Also, 6 of the 13 small entity representatives we
interviewed who provided comments to an unofficial advocacy review
panel on a draft implementation strategy related to these 2 rules
said that they thought EPA should have convened panels for these
standards.  One of these representatives said that by not convening
advocacy review panels for these rules, he believed that EPA had
circumvented the intent of SBREFA.\8

We could not determine whether EPA should have convened advocacy
review panels for the ozone and particulate matter proposed rules
because there are no clear governmentwide criteria for determining
whether a rule has a "significant economic impact on a substantial
number of small entities." The RFA does not define "significant
economic impact" or "substantial number of small entities," and
neither SBA nor any other agency has issued governmentwide guidance
regarding the meaning of these terms.  In particular, there is no
governmentwide guidance or criteria about whether health standards
that an agency establishes by regulation should be considered
separable from implementation requirements established by state
governments or other entities.\9

Therefore, it is unclear whether EPA's ozone and particulate matter
rules should have triggered the requirements for an initial
regulatory flexibility analysis and, therefore, the advocacy review
panel requirements. 

Officials from SBA's Office of Advocacy said that they are frequently
asked to define the phrase "significant economic impact on a
substantial number of small entities." However, the officials said
that the Office of Advocacy has not taken a definitive position on
the meaning of this phrase, and no case law has clearly established
its meaning.  Although no governmentwide criteria exist, both EPA and
OSHA have issued guidance to help their staffs determine when a draft
rule may have a significant economic impact on a substantial number
of small entities and guidance on conducting the SBREFA advocacy
review panel process.  Nevertheless, agencies ultimately determine
the meaning of the phrase on a case-by-case basis, and their
decisions are subject to comment by the public and SBA's Office of
Advocacy, as well as judicial review. 

In our 1991 report on the RFA and small governments, we found that
each of the four federal agencies we reviewed had a different
interpretation of key RFA provisions.\10 In our 1994 report on the
RFA, we noted that, although the act required SBA's Chief Counsel for
Advocacy to monitor agencies' compliance with the act, the RFA did
not expressly authorize SBA to interpret key provisions in the
statute and did not require SBA to develop criteria for agencies to
follow in reviewing their rules.\11 We concluded that this lack of
authority and responsibility for interpretation and guidance
contributed to what the Chief Counsel considered to be some agencies'
noncompliance with the RFA.  We said that if Congress wanted to
strengthen the implementation of the RFA, it should consider amending
the act to (1) provide SBA with clearer authority and responsibility
to interpret the RFA's provisions and (2) require SBA, in
consultation with OMB, to develop criteria as to whether and how
federal agencies should conduct RFA analyses.  Although Congress
amended the RFA when it enacted SBREFA, it did not adopt these
recommendations. 


--------------------
\7 The rules establishing the national ambient air quality standards
for ozone and for particulate matter were proposed on December 13,
1996 (61 Fed.  Reg.  65716 and 65638), and finalized on July 18, 1997
(62 Fed.  Reg.  38856 and 38652). 

\8 The issue of whether EPA properly promulgated the ozone and
particulate matter rules has been questioned by Congress and is
currently under litigation in the United States Court of Appeals for
the District of Columbia Circuit.  See American Trucking
Associations, Inc., et.  al., v.  United States Environmental
Protection Agency (97-1441, July 18, 1997). 

\9 There are other instances, beyond the scope of this review, where
the question of whether a standard can be separated from its
subsequent implementation by states or other entities is at issue. 
For example, three business groups filed suit on January 5, 1998,
citing violations of SBREFA (West Virginia Chamber of Commerce v. 
Browner, No.  98-1013, 4th Cir.) because EPA did not assess the
impact of the proposal on small entities before it proposed requiring
certain states to submit state implementation plans on measures to
reduce the regional transport of ozone.  In its notice of proposed
rulemaking, EPA proposed the levels of nitrogen oxide emissions that
each of the affected states would be required to achieve. 

\10 Regulatory Flexibility Act:  Inherent Weaknesses May Limit Its
Usefulness for Small Governments (GAO/HRD-91-61, Jan.  11, 1991). 
The four agencies included in this review were EPA, the Departments
of Labor and Transportation, and the Federal Communications
Commission. 

\11 Regulatory Flexibility Act:  Status of Agencies' Compliance
(GAO/GGD-94-105, Apr.  27, 1994). 


   THE PANELS, AGENCIES, AND CHIEF
   COUNSEL GENERALLY FOLLOWED
   SBREFA'S PROCEDURAL
   REQUIREMENTS
------------------------------------------------------------ Letter :5

By November 1, 1997, OSHA and EPA had convened five advocacy review
panels.  OSHA convened the first panel on September 10, 1996, to
review its draft standard for occupational exposure to tuberculosis. 
However, OSHA had not convened any additional panels as of November
1, 1997.  EPA convened panels between June 1996 and November 1, 1997,
to review the following four draft rules:  (1) control of emissions
of air pollution from nonroad diesel engines (Mar.  25, 1997); (2)
effluent limitations guidelines and pretreatment standards for the
industrial laundries point source category (June 6, 1997); (3)
stormwater phase II--national pollutant discharge elimination system
(June 19, 1997);\12 and (4) effluent limitations guidelines and
standards for the transportation equipment-cleaning industry (July
16, 1997).  Appendixes II through VI provide descriptions of the five
draft rules that the panels reviewed as well as detailed information
about the time frames for the panels and the number and types of
small entity representatives who provided advice to the panels. 

The EPA and OSHA panels, the regulatory agencies themselves, and the
SBA Chief Counsel for Advocacy generally followed SBREFA's procedural
requirements in these five panels, as shown in the examples below. 

  -- EPA and OSHA notified the Chief Counsel before each of the five
     panels to inform him that they planned to convene a panel to
     review the draft rules.  As part of that notification, they
     provided the Chief Counsel with required information on the
     draft rules' potential impacts and the types of entities that
     might be affected. 

  -- The Chief Counsel responded to EPA and OSHA no later than 15
     days after the date of receipt of these materials and helped
     identify individuals representative of affected small entities
     for the purpose of obtaining advice and recommendations about
     the potential impacts of the draft rules.  For each of EPA's
     four panels, the Chief Counsel reviewed a list of potential
     candidates that EPA provided and in some cases supplemented the
     list.  The Chief Counsel initially identified most of the small
     entity representatives for OSHA's panel in consultation with
     OSHA officials. 

  -- The EPA and OSHA panels consisted of full-time federal employees
     from the office within the agency responsible for carrying out
     the draft rule and officials from OIRA and SBA's Chief Counsel
     for Advocacy. 

  -- Each of the five panels reviewed materials the regulatory
     agencies had prepared and collected advice and recommendations
     from small entity representatives. 

However, a few of the panels' and agencies' actions had minor
inconsistencies with SBREFA's specific statutory requirements.  For
example, SBREFA requires that the advocacy review panels report on
the comments of the small entity representatives and their findings
not later than 60 days after the date the regulatory agency convened
the panels.  However, three of the five panels took a few days longer
than the allotted 60-day period to prepare the panels' final reports. 
OSHA's tuberculosis and EPA's industrial laundries panels took 63
days to prepare their final reports, and the transportation
equipment-cleaning panel took 69 days. 

SBREFA also required both EPA and OSHA to designate by April 29,
1996, using existing personnel to the extent possible, a small
business advocacy chair to be responsible for implementing the panel
requirements and to act as a permanent chair of the agency's advocacy
review panels.  Both agencies appointed officials as panel chairs who
were already employed by the agencies.  OSHA designated its chair in
March 1996, before the statutory deadline.\13 However, EPA did not
designate a small business advocacy chair until June 11, 1996, about
6 weeks later than required by the statute. 

SBREFA states that the advocacy review panels shall "report" within
60 days, "provided that such report shall be made public as part of
the rulemaking record." However, the statute does not specify to whom
the report is to be directed and when the reports should be made
available to the public.  OSHA's panel issued its final report to the
Assistant Secretary for Occupational Safety and Health on November
12, 1996, and OSHA made the report publicly available on December 10,
1996--10 months before the draft rule was published as a proposed
rule.  EPA's panels issued their final reports to the EPA
Administrator.  However, the EPA panels decided that they would make
the final panel reports available to the public by placing them in
the public rulemaking docket only when the related proposed rules
were published in the Federal Register.  This determination appears
to be consistent with SBREFA's procedural requirements and
congressional intent.\14 However, this approach has resulted in
several months delay between the issuance of the panels' final
reports and their availability to the public.\15 Some of the small
entity representatives that we interviewed said they would have liked
to have seen how the panel reports reflected their comments as soon
as the reports became final rather than having to wait until EPA
published the associated notice of proposed rulemaking.  To
accommodate the small entities representatives' concerns regarding
the delay in releasing these reports, EPA's Chair said that he
briefed some of the representatives about the content of the panels'
final reports and how their comments had been reflected in these
reports. 


--------------------
\12 On January 9, 1998, EPA published a notice of proposed rulemaking
in which the Administrator certified that the stormwater phase II
proposed rule would not have a significant economic impact on a
substantial number of small entities. 

\13 From January to November, 1997, the Chair also served as Acting
Assistant Secretary for Occupational Safety and Health.  As a result,
any panel recommendations during this period would have been made
from the panel he chaired to himself.  However, OSHA did not convene
any advocacy review panels during this period, so the potential
conflict never arose. 

\14 See 142 Cong.  Rec.  S3242, S3245 (daily ed.  Mar.  29, 1996)
(Stmt.  of Sen.  Bond) and 142 Cong.  Rec.  E571, 574 (daily ed. 
Apr.  19, 1996) (Stmt.  of Rep.  Hyde). 

\15 EPA published its proposed rule on nonroad diesel engine
emissions about 4 months after the panel issued its final report. 
EPA has published two additional proposed rules for which it convened
panels.  It released the August 8, 1997, final report for the
industrial laundries' panel on December 17, 1997, and the August 7,
1997, final report for the stormwater phase II panel on January 9,
1998.  As of February 1, 1998, EPA had not yet published a notice of
proposed rulemaking related to the SBREFA panel on the transportation
equipment-cleaning industry.  This panel's final report was made on
September 23, 1997. 


   IMPLEMENTATION OF THE PANELS
   DIFFERED
------------------------------------------------------------ Letter :6

Although the five advocacy review panels convened as of November 1,
1997, generally followed SBREFA's procedural requirements, there were
differences among the panels in how those requirements were
implemented and in the general operation of the panels.  Some of
those differences appeared to occur because the panel process was new
and evolving, and the panels made adjustments to their procedures as
they gained experience. 

One of the differences among the panels was the degree of prepanel
contact that the agencies had with the small entity representatives,
which in turn had implications for other aspects of the panel
process.  For example, although OSHA had done some outreach with
small entities before its tuberculosis panel, it had not previously
dealt with some of the types of small entities that were expected to
be affected by the draft tuberculosis exposure rule.  As a result, it
was difficult for OSHA and SBA's Chief Counsel for Advocacy to
identify representatives from those small entities to participate on
that panel.  In contrast, many of the small entity representatives to
the EPA panel regarding stormwater phase II guidelines had worked
with EPA on a related federal advisory committee for 2 years before
the date that EPA convened the advocacy review panel.  As a result,
it was relatively easy for EPA and the Chief Counsel to identify
small entity representatives to provide input to that panel.  Also,
because of their extensive background on this issue, some of the
small entity representatives said that it was relatively easy for
them to review the materials that EPA gave them. 

The panels also differed in the availability of information for the
small entity representatives to review.  SBREFA states that the
advocacy review panels "shall review any material the agency has
prepared," but the statute does not specify what information the
regulatory agencies must make available to the small entity
representatives.  In the five panels convened as of November 1, 1997,
EPA and OSHA provided the small entity representatives with
information about the draft rules before the representatives provided
input to the panels.  That information usually included a copy of the
initial economic analyses or data on costs the regulatory agency had
prepared for the draft rules.\16

However, EPA did not prepare an initial economic analysis for its
draft stormwater phase II rule until after the small entity
representatives had provided their comments to the panel.  Some of
the small entity representatives to this panel said that their
comments were not as valuable or as well-grounded as they could have
been because they lacked the information in the initial economic
analysis.  This economic analysis, however, led EPA to conclude that
the stormwater phase II rule would not have a significant economic
impact on a substantial number of small entities.  Therefore, if EPA
had completed its initial economic analysis before it convened the
advocacy review panel in June 1997, it probably would not have
convened a panel for this draft rule. 

The panels also differed in how they obtained comments from the small
entity representatives.  Before EPA convened its four panels, the
agency held face-to-face meetings with the representatives to discuss
the draft rules.\17 Officials from OIRA and SBA's Office of Advocacy
were invited to attend all of these meetings, and they attended most
of them.  None of the EPA panels held face-to-face meetings with
small entity representatives after the panels were convened. 
However, three of the four EPA panels had telephone conference calls
with the representatives during the 60-day panel process.  The panel
that did not have a telephone conference call was EPA's stormwater
phase II panel.  The EPA Chair said that because most of the small
entity representatives had worked to develop this draft rule and had
previously provided their comments, he did not believe that either
face-to-face meetings or a telephone conference call was necessary. 
Instead, he sent a letter to the small entity representatives asking
them if they had any additional comments for the panel.  In response,
one small entity representative resubmitted his comments, which had
been previously received by EPA a few days before the panel convened. 

OSHA held individual telephone conference calls with each of the
small entity representatives who provided input to its panel.  Unlike
EPA's approach to telephone conference calling, the small entity
representatives who were individually called by OSHA's panel were
unable to hear the other representatives' comments.  Some of these
small entity representatives said that they would have liked to have
been able to hear the other representatives' comments. 

Another difference among the panels was in how the small entity
representatives were identified.  EPA initially identified most of
the small entity participants for its four panels, and then confirmed
their lists of representatives with SBA's Office of Advocacy.  OSHA,
on the other hand, collaborated with the Office of Advocacy in its
initial efforts to identify potential representatives for its panel
on tuberculosis exposure.  OSHA officials said that they intend to
identify small entity representatives and conduct outreach efforts
related to the panel process before convening future panels. 

EPA and its panels changed some of their procedures as they gained
experience with the panel process.  For example, EPA convened its
first panel on nonroad diesel engine emissions by sending a draft
panel report summarizing the agency's prepanel outreach efforts to
the panel members.  However, EPA's Chair said that subsequent panels
changed this practice because some Members of Congress and
congressional staff viewed convening the panel by sending the draft
report as an attempt to prejudice the panel members' considerations. 
For subsequent panels, EPA developed a summary of prepanel comments
it received regarding the draft rules and submitted these summaries
to the panels, and the panels then drafted their final reports. 
EPA's Chair also said that EPA plans to clarify its guidance on panel
procedures for collecting input from small entity representatives. 
He said that by sending a letter to the small entity representatives
they contacted before the panel was convened, the stormwater phase II
panel followed SBREFA's requirements that the panel itself obtain the
advice and recommendations from the representatives.  However, after
this panel, he said that EPA realized that its guidance did not
specifically address how the panel should obtain small entities
representatives' input.  Therefore, he said that EPA plans to amend
its SBREFA guidance to clarify that the panels themselves must
conduct outreach to collect advice and recommendations from the small
entity representatives. 


--------------------
\16 Although the materials for EPA's first panel (on nonroad diesel
engine emissions) did not include a separate economic or cost
analysis, cost considerations were included with descriptions of some
of the alternatives.  For example, one alternative established a
cost-effectiveness threshold for the regulation of various equipment
types. 

\17 Before EPA convened the panel for the nonroad diesel engine
emissions draft rule, it conducted outreach efforts with small
entities and developed a statement of principles for the rule, which
the small entities reviewed prior to the panel. 


   NOTICES OF PROPOSED RULEMAKING
   CONTAINED SOME PANEL
   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

As of November 1, 1997, two of the draft rules for which EPA and OSHA
held advocacy review panels had been published as notices of proposed
rulemaking in the Federal Register--OSHA's proposed rule on
occupational exposure to tuberculosis and EPA's proposed rule to
control nonroad diesel engine emissions.  As previously mentioned,
EPA's panels do not release their reports until EPA publishes the
related notice of proposed rulemaking in the Federal Register. 
Because three of the panels' reports were not publicly available as
of November 1, 1997, this report does not discuss the degree to which
EPA reflected the panel recommendations for three of the four draft
rules for which EPA convened panels. 

The OSHA tuberculosis exposure panel's and the EPA nonroad diesel
engine panel's recommendations focused on providing small entities
with compliance flexibility and on considering potentially
overlapping local, state, and federal regulations and enforcement. 
OSHA and EPA primarily responded to the panels' recommendations in
the supplementary information sections of their notices of the
proposed rulemakings, although OSHA also made some changes to the
text of its draft rule as a result of its panel's recommendations. 
SBA's Office of Advocacy officials told us they believed that
discussing panel recommendations in the preamble helps to highlight
and elicit comments on the issues raised by the panels, and that such
discussions do not relieve the agencies of the responsibility to make
appropriate changes in the text of the rules themselves.  However,
until EPA and OSHA conclude the public comment periods for these
proposed rules and publish them as final rules, it is too early to
tell whether the rules will reflect the panels' recommendations. 


      OSHA TUBERCULOSIS EXPOSURE
      PANEL
---------------------------------------------------------- Letter :7.1

The panel for OSHA's draft standards for occupational exposure to
tuberculosis made dozens of recommendations in its final report.\18
Most of the panel's recommendations were that OSHA should clarify
certain terms or processes, request comments on certain issues,
obtain additional information, or explain OSHA's regulatory role in
relation to other state and federal agencies.  OSHA responded to
almost all of the panel's recommendations in the supplementary
information section of the notice of proposed rulemaking.  For
example, one of the panel's major recommendations was for OSHA to
reexamine the application of the draft rule to homeless shelters.  In
the supplementary information, OSHA said that it was conducting a
special study of this issue and would hold hearings on issues related
to tuberculosis exposure in homeless shelters before issuing the
final rule.  Other panel recommendations were that OSHA should
clarify a number of terms regarding the coverage of the draft rule
and provide additional explanations and analyses.  OSHA responded to
these recommendations by, among other things, incorporating
definitions of several terms in the supplementary information (e.g.,
defining an "establishment" versus a "facility") and describing
OSHA's assumptions about some of the rule's costs.  OSHA officials
said that they found the small entity representatives' suggestions to
improve clarity and readability to be very helpful. 

A few of the OSHA panel's recommendations resulted in changes in the
text of the draft rule.  For example, the panel recommended that OSHA
examine the potential cost savings associated with allowing
tuberculosis training that a worker received in one place of
employment to be used to satisfy training requirements in another
place of employment.  The panel also recommended that OSHA examine
the need for annual retraining of employees.  In response, OSHA
changed the text of the draft rule to allow the portability of
nonsite specific training and to allow employers to demonstrate to
regulators that their employees are knowledgeable in the area of
occupational exposure to tuberculosis, rather than provide annual
retraining. 


--------------------
\18 The notice of proposed rulemaking (62 Fed.  Reg.  54160, Oct. 
17, 1997) listed the panel's recommendations and described how OSHA
was responding to them on pages 54229-54231. 


      EPA NONROAD DIESEL ENGINE
      PANEL
---------------------------------------------------------- Letter :7.2

EPA's panel on its draft rule to control nonroad diesel engine
emissions recommended that EPA solicit comments on five alternative
implementation strategies in its notice of proposed rulemaking. 
These alternative strategies included gradually phasing in the
requirements, offering manufacturers flexible exemptions, allowing
manufacturers to purchase credits to sell equipment with noncomplying
engines, providing exemptions for certain engine models, and
instituting a hardship relief appeals process.  According to its
final report, the panel believed that these alternative strategies
would maximize compliance flexibility for small manufacturers of
nonroad equipment and small businesses that modify diesel engines for
marine use.\19 In the supplementary information section of the notice
of proposed rulemaking, EPA presented these five alternative
strategies and requested public comments on them.\20

The panel also recommended that EPA continue to seek information and
conduct analyses relating to the number of small entities potentially
affected by the draft rule, consider the potential overlap of the
rule with OSHA regulations related to ambient carbon monoxide levels,
and design the proposed rule to minimize the need for recordkeeping
and reporting.  In the supplementary information section, EPA
requested additional information, comments, and suggestions on the
number of small entities and on the potential overlap with OSHA's
regulations.  EPA also said that it was taking steps to minimize
recordkeeping and reporting requirements. 

According to EPA's Chair, the small entity representatives suggested
several ideas that EPA previously had not considered, and the draft
rule was changed as a result of these contributions.  An official
from SBA's Office of Advocacy said that EPA's experience in
developing this proposed rule was an excellent example of how the
panels have improved the agencies' rulemaking process. 


--------------------
\19 Some of these alternative implementation strategies had been
among a list of 10 alternative strategies developed by EPA staff on
the basis of input from small entity representatives and other
commenters on the supplemental advanced notice of proposed
rulemaking. 

\20 The EPA draft rule to control nonroad diesel engine emissions was
proposed on September 24, 1997 (62 Fed.  Reg.  50151). 


      SMALL ENTITY
      REPRESENTATIVES' VIEWS
---------------------------------------------------------- Letter :7.3

About one-third (11 of 32) of the small entity representatives that
we interviewed (including those who commented on draft rules that had
not been published) said they believed that the agencies planned to
make some changes to the draft rules as a result of their comments. 
For example, four of the six small entity representatives that we
interviewed who provided comments to EPA's nonroad diesel engine
emissions panel said that they believed EPA changed the rule in
response to their comments.  A representative who provided input to
EPA's stormwater phase II panel said that the draft rule had
"reflected many people's comments and was well balanced." Another
representative said that EPA seemed to take the small entity
representatives' suggestions seriously; therefore, he expected that
some of the comments would be reflected in the proposed rule when it
is published. 

However, one-third (10 of 32) of the small entity representatives
that we interviewed said that they did not believe that their
comments would result in any changes to the proposed rules.\21 Six of
the representatives said they believed that the regulatory agency
officials had already decided how the rules would be written before
convening the panel, and that the officials were not interested in
making any significant changes to the rules.  One of these
representatives, who provided input to EPA's stormwater phase II
panel, said that he did not believe that the regulatory agency would
change the rule in "any meaningful way," and that word changes were
"just window dressing." Another representative, who also provided
input to this panel, said that he perceived the panel process as
another opportunity for EPA to defend its draft rule as written. 
Some of the small entity representatives we interviewed said that
they would have liked a more open, give-and-take discussion with the
agency officials on the issues related to the draft rule. 


--------------------
\21 The remaining one-third of the small entity representatives said
they did not know whether their comments would result in any changes
to the proposed rules. 


   SMALL ENTITY REPRESENTATIVES
   OFFERED SUGGESTIONS TO IMPROVE
   THE PANEL PROCESS
------------------------------------------------------------ Letter :8

Most of the small entity representatives we spoke with who
participated in the advocacy review panel process said that they
thought the process was worthwhile.  About three-fourths of the 32
small entity representatives suggested changes to improve how the
agencies have implemented the panel process.  Their comments
primarily focused on the following four issues:  (1) the time frames
in which the panels were conducted, (2) the composition of the groups
of small entity representatives commenting to the panels, (3) the
methods the panels used to gather comments, and (4) the materials
about the draft rule that the agencies provided for the small
entities representatives' review. 


      TIME FRAMES
---------------------------------------------------------- Letter :8.1

Seven of the 32 small entity representatives who participated in the
panel process said that they would have liked to have had more
advance notice of panel meetings and telephone conference calls with
the panels.  Some of these representatives said that short advance
notice had prevented them from participating in certain efforts.  One
individual, who had been identified as a possible small entity
representative, said that short notice of these meetings prevented
him from participating in the panel process at all.\22 Most of those
who voiced this concern said that they would have liked at least 1
additional week of advance notice for panel meetings and telephone
conference calls to avoid conflicts with other scheduled commitments. 

Eighteen small entity representatives we interviewed said that they
had sufficient time to study the materials that the agencies provided
to them before being asked to provide comments on the draft rules. 
However, 14 representatives said they felt that they were not given
enough time to study those materials.  Many of these representatives
said that an additional 1 to 2 weeks would have allowed them to
consult with others (e.g., members of their professional
associations) before providing comments.  One small entity
representative said that requiring comments from the representatives
shortly after they receive materials from the agencies prevents them
from providing the panels with an in-depth perspective regarding the
draft rule. 

Five small entity representatives recommended holding the panels
earlier in the rulemaking process.  They said that, in some cases,
decisions were made regarding the draft rules before the panels were
convened.  As a result, they said, it was less likely that the panels
would have much impact on the draft rules. 


--------------------
\22 Other potential small entity representatives said that they did
not participate in the panel process because of scheduling conflicts
or lack of interest in the draft rules. 


      COMPOSITION OF SMALL ENTITY
      REPRESENTATIVES' GROUPS
---------------------------------------------------------- Letter :8.2

The 32 small entity representatives we interviewed were evenly split
on whether they believed that the individuals and organizations
providing comments to their panels adequately represented the types
of entities that would be affected by the associated draft rule. 
Fourteen small entity representatives said they thought the
representation was adequate.  However, 14 other small entity
representatives said they thought the composition of the panels could
be improved.\23 Specifically, they said that (1) they would have
liked the panels to hear from more representatives from individual
small entities, in addition to representatives from associations; (2)
certain types of affected small entities were not included (e.g.,
representatives from certain geographical areas); and (3) those
entities that would bear the burden of implementing the draft rule
were underrepresented (e.g., small municipalities). 

In some cases, the small entity representatives who provided input to
the EPA panels had been working with the agency for some time to
assist in developing the draft rules.  Some of the small entity
representatives who provided input to one EPA panel said they thought
that the mix of those providing advice to the panels should have
included other representatives who would have been reviewing and
commenting on the draft rule for the first time, and who, therefore,
might have been able to provide a fresh perspective or some different
ideas to the panel. 


--------------------
\23 The remaining four small entity representatives that were
interviewed said they were unsure whether the representatives'
composition was adequate. 


      METHODS USED TO GATHER
      REPRESENTATIVES' COMMENTS
---------------------------------------------------------- Letter :8.3

Although EPA officials met face-to-face with small entity
representatives before EPA convened its panels, none of the panels
themselves met with the representatives to obtain their comments
about the draft rules after the panels had been convened.\24 The OSHA
panel and all but one of the EPA panels convened as of November 1,
1997, relied on telephone conference calls with the small entity
representatives to gather input during the panel process.  The
remaining EPA panel only obtained input during the panel process as a
result of a letter from the Chair to the small entity representatives
requesting any additional comments that had not already been provided
during prior outreach and federal advisory committee efforts
regarding the draft rule. 

Four small entity representatives said that they viewed telephone
conference calls as an efficient way to gather comments from the
representatives.  However, nine small entity representatives felt
that telephone conference calls limited the amount of discussion that
could take place between them and the panels.  Most of these
representatives also expressed a preference for face-to-face meetings
instead of telephone conference calls because they believed the
discussions would be fuller and would provide greater value to the
panels.  When telephone conference calls were used, four of the small
entity representatives said they found it confusing when there were
numerous participants on the phone at once.  One of these
representatives, for example, suggested setting an agenda to clarify
participation in the telephone conference calls. 


--------------------
\24 An OSHA official said that OSHA offered the small entity
representatives the option of having a face-to-face meeting, but that
all of the representatives chose the telephone conference option. 


      MATERIALS PROVIDED TO
      REPRESENTATIVES
---------------------------------------------------------- Letter :8.4

Twenty-four small entity representatives said the materials that the
agencies provided to them about the draft rules permitted an
intelligent and informed discussion of the rules' potential effects
on small entities.  However, eight of the representatives said they
believed that the materials that the regulatory agencies provided
could have been improved.  Six of the representatives who believed
the materials could be improved said that the materials were too
vague or did not provide enough information regarding the potential
economic impact on small entities.  Conversely, two representatives
said that the materials were too voluminous and complex to review
expeditiously.  Three of the small entity representatives for EPA's
industrial laundries panel said that EPA seemed unwilling to share
information with the small entity representatives. 


   AGENCY OFFICIALS' SUGGESTIONS
   AND OBSERVATIONS
------------------------------------------------------------ Letter :9

The agency officials we interviewed offered fewer suggestions for
improving the panels than the small entity representatives.  EPA's
and OSHA's Chairs and some of the agency officials we interviewed
said that it may be a good idea to hold future panels earlier in the
rulemaking process.  SBA's Office of Advocacy officials said that
they thought it was beneficial for EPA and OSHA to identify small
entity representatives and start conducting outreach efforts before
convening the panel.  Officials from the Office of Advocacy also
suggested improving the adequacy and timing of the materials that the
regulatory agencies provide to small entity representatives and the
panels.  They said that the small entity representatives and the
panels cannot comment without appropriate and timely materials. 
However, the Chair of EPA's panels said that some of the panels and
the small entity representatives wanted data or types of analyses
that were not available.  He said that EPA is willing to provide
additional information and analysis to the panels "within reason,"
given the time constraints of the rulemaking process.\25 For two of
its panels, EPA provided background materials and held a meeting with
the small entity representatives before convening the panel to
determine what information would be needed for that panel. 

Many of the agency officials we spoke with said that the 60-day
period that SBREFA mandates for the panels is adequate.  Both SBA's
Office of Advocacy and EPA officials said that, although 60 days is a
tight time frame, it encourages agencies and small entity
representatives to focus on the issues and get the job done.  They
said that additional time might just expand the panel process without
producing better results.  Several agency officials also said that
telephone conference calls were an effective and efficient method for
panel members to gather small entity representatives' comments within
the 60-day period.  For example, the EPA Chair said that telephone
conference calls save travel expenses and time away from work for the
small entity representatives. 

Many of the agency officials we interviewed also said that the
process has changed and will continue to change as the agencies gain
more experience with the panel process.  Some EPA and OSHA officials
also said that the demands of the panel process should be placed in
the context of their agencies' other efforts to conduct a timely
rulemaking process.  These agency officials pointed out that there
are costs associated with the advocacy review panel process in terms
of the time and resources expended.  A few EPA and OSHA program
officials who had each participated in one panel also said that there
are other opportunities for small entities to provide input during
the public comment period.  For example, an EPA official said that in
some cases, such as when the small entity representatives did not
have the opportunity to comment to the advocacy review panel on an
initial economic analysis, the representatives could provide their
views and any relevant information during the public comment period
after the rule is proposed. 

Although there were some individual small entities included in all
but one of the groups of small entity representatives that provided
input to the panels, most of the representatives to the panels were
from associations, such as those associations representing the health
care industry, the construction industry, or local governments.  Some
agency officials told us that they believed it was important for
agencies to identify representatives from individual small entities
and not to rely solely on representatives from associations. 
However, SBA's Office of Advocacy officials pointed out that
representatives from associations may have more resources and
expertise available to participate in the advocacy review panels than
do individual small entities. 

Finally, although some officials in OSHA, EPA, OIRA, and SBA's Office
of Advocacy said they had already noticed benefits from the panels,
they also said that it is too soon to tell whether the panel process
would result in better rules until after the public comments have
been received for the rules and the rules are finalized. 


--------------------
\25 An EPA official said that some of the data that the small entity
representatives wanted to see were confidential business information
regarding industrial laundries, which EPA could not share with the
small entity representatives. 


   CONCLUSIONS
----------------------------------------------------------- Letter :10

Although federal agencies' experiences with the advocacy review
panels have been limited thus far, some initial observations about
the panel process can be made.  Agency officials and small entity
representatives generally agreed that the panel process is
worthwhile, providing valuable insights and opportunities for
participation in the rulemaking process.  Many of the panel
participants we interviewed said they welcomed the panel process
because it has provided an opportunity to identify significant
impacts on small entities and has given the agencies a better
appreciation of small entities' concerns. 

However, implementation of the panel process has not been without
controversy or concern.  The SBA Chief Counsel for Advocacy and some
small entity representatives believe that EPA should have convened
advocacy review panels for two rules for which advocacy review panels
were not held.  EPA and three of the five panels that were held did
not meet some of the specific time requirements of the statute.  In
addition, although consistent with the statute, the EPA panels'
policy regarding when their final reports can be made public may
result in reports not being made available to the small entity
representatives or the public until months after the reports are
provided to the EPA Administrator.  Some of the small entity
representatives believe that the panels should be held earlier in the
rulemaking process, that the materials provided to the
representatives could be improved, that they should have more time to
review those materials, and that the agencies should improve the
means by which they obtain small entity representatives' comments. 

Some of the concerns that small entity representatives expressed
about the panel process appear to be inconsistent and may be
difficult to resolve.  For example, when panels are held early in the
rulemaking process, some of the data and analyses that the small
entity representatives said they need to have an informed discussion
about a draft rule are less likely to be available than later in the
process.  Conversely, delaying the panels until the data are
available may limit the panels' opportunity to influence key
decisions. 

Some EPA and OSHA program officials who had each participated in one
panel made comments regarding the panel process that indicated they
did not fully appreciate the intent of the process.  For example, an
EPA official said that small entity representatives who did not have
an opportunity to review and comment on a draft rule's initial
economic analysis could do so during the standard public comment
period for the proposed rule.  However, this view fails to recognize
that Congress established the advocacy review panel process as an
addition to the public comment period to facilitate receiving the
views of small entities at an earlier stage of the rulemaking
process.  Therefore, the standard public comment period cannot
substitute for the panel process. 

How agencies implement the advocacy review panel process will have a
pronounced effect on the continued viability of that process.  If
small entity representatives can discuss the issues related to draft
rules that they believe are important and see that their input is
seriously considered, it is likely that they will continue to view
the panel process as a useful opportunity to provide their comments
on draft rules relatively early in the rulemaking process. 
Similarly, if panels continue to make adjustments to the process as
they learn from their experiences, they can help alleviate some of
the concerns voiced by the small entity representatives. 

Many of the suggestions that small entity representatives made
regarding the panel process would not require changes to SBREFA.  For
example, although SBREFA requires that agencies convene panels before
a notice of proposed rulemaking is published, the statute does not
preclude convening the panels even earlier in the rule development
process, as the small entity representatives suggested.  Although
some of the representatives said they needed more advance notice of
meetings and telephone conference calls and more time to review
background materials provided by the agencies, those changes would
not necessarily require increasing the 60-day period that SBREFA
allows between the date the panels are convened and the issuance of
their final reports.  The regulatory agencies could provide
representatives with materials before the panels convene; better
planning could alleviate the short advance notice problem. 

The lack of clarity regarding whether EPA should have convened
advocacy review panels for its two proposed rules on ozone and
particulate matter is traceable to the lack of agreed-upon
governmentwide criteria as to whether a rule has a "significant
economic impact on a substantial number of small entities" under the
RFA.  We raised this issue in our 1994 report on the RFA, in which we
said that "[i]f Congress wishes to strengthen the implementation of
the RFA, it should consider amending the act to (1) provide SBA with
clearer authority and responsibility to interpret the RFA's
provisions and (2) require SBA, in consultation with OMB, to develop
criteria as to whether and how federal agencies should conduct RFA
analyses." If governmentwide criteria had been established regarding
when initial regulatory flexibility analyses should be prepared (and,
therefore, when SBREFA advocacy review panels should be convened),
the dispute regarding whether EPA should have convened additional
panels would likely not have arisen.  Governmentwide guidance could,
for example, address the specific question at issue with regard to
these two rules--whether establishment of regulatory standards by a
federal agency should be separated from their implementation
requirements imposed by the individual states (or other entities) for
purposes of compliance with the RFA and SBREFA. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
----------------------------------------------------------- Letter :11

If Congress wishes to clarify and strengthen the implementation of
the RFA and SBREFA, it should consider providing SBA or another
entity with clearer authority and responsibility to interpret the
RFA's provisions on a governmentwide basis.  Congress could also
consider establishing, or requiring SBA or another entity to develop,
governmentwide criteria defining the phase "significant economic
impact on a substantial number of small entities." Those criteria
should specify whether the establishment of regulatory standards by a
federal agency should be separated from their implementation
requirements imposed by other entities for the purposes of the RFA
and SBREFA. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :12

We provided copies of a draft of this report to the Director of OMB,
the Secretary of Labor, and the Administrators of EPA and SBA for
review and comment.  The comments we received from officials at OIRA,
OSHA, EPA, and SBA's Office of Advocacy generally agreed with the
information presented in this report.  An OIRA official said that the
SBREFA panel process is a valuable aid to the rulemaking process and
that the initial panels have worked well.  EPA and OSHA officials
suggested some specific clarifications and technical changes to the
draft, which we have incorporated into the text of the final report
as appropriate.  For example, at EPA's and OSHA's suggestion we
clarified the methodology we used to select the proposed rules we
reviewed to determine whether they should have been subject to the
panel process. 

Our draft report indicated that it was unclear whether SBREFA permits
SBA's Chief Counsel for Advocacy to initially identify individuals
representative of affected small entities in consultation with the
regulatory agencies, or whether that initial identification should be
done without receiving input from the regulatory agency.  Officials
from SBA's Office of Advocacy said that they believed it was prudent
to use the regulatory agencies' list of small entity representatives
as a starting point in the process of identifying small entity
representatives, thereby building on the agency's prior outreach
efforts.  The officials also said that their additional contacts with
small entities can enable them to identify additional small entities
that should be asked to provide advice and recommendations to the
advocacy review panels.  After considering the officials' comments
and researching the legislative history of the provision, we changed
the text in this report to indicate that SBA's use of draft agency
lists was consistent with the statutory requirements. 

EPA officials said that they strongly believe that they correctly
interpreted the RFA and SBREFA regarding the ozone and particulate
matter rules, and that convening advocacy review panels for those
rules was not required.  In this report, we expanded our discussion
of EPA's position on this issue, but we continued to describe both
sides of this argument and to note that the issue was under
litigation. 

EPA officials also expressed concerns regarding our draft report's
Matter for Consideration section in which we suggested,
conditionally, that Congress should require SBA to develop
governmentwide criteria regarding RFA analyses.  The officials said
that EPA had developed detailed, interim guidance on the RFA, as
amended by SBREFA, including guidance regarding the panel process and
determination of what constitutes a "significant economic impact on a
substantial number of small entities." They stated that
governmentwide criteria on what constitutes a significant economic
impact on a substantial number of small entities cannot be both
prescriptive enough to be authoritative, but flexible enough to take
into account the many section-by-section, statute-by-statute, and
agency-by-agency variations that must be considered.  EPA officials
said that EPA's guidance allows it to use its judgment in making
case-by-case determinations.  The officials said that they would
prefer to maintain the agency's flexibility in making certifications
and to rely on Department of Justice decisions resolving any disputes
in interpretations among agencies as well as any case law that arises
under the new judicial review provisions of SBREFA regarding
agencies' interpretations of the RFA. 

Although agency-specific guidance may also be needed, we believe that
governmentwide criteria regarding RFA analysis could help promote a
more consistent and less contentious approach for agencies to use in
complying with the RFA and SBREFA requirements.  In our 1991 report
on the RFA, we identified instances of agencies' interpreting key
provisions of the RFA differently.  Congress enacted the RFA and
SBREFA to ensure that small entities' views are taken into
consideration in developing notices of proposed rulemaking. 
Establishing governmentwide criteria could help small entities as
well as agencies more clearly understand when and how the RFA and
SBREFA requirements should be applied.  While we recognize that
governmentwide criteria need to be flexible enough to allow for some
agency-by-agency variations, we believe that the criteria should be
sufficiently standardized to provide for consistent implementation
among federal regulatory agencies.  Although challenging to develop,
a set of criteria would help ensure that the intent of the RFA and
SBREFA requirements is understood and fairly implemented.  Therefore,
we retained the Matter for Congressional Consideration section in
which we suggest that governmentwide criteria be established, and we
stated that those criteria should specify whether the establishment
of regulatory standards by a federal agency should be separated from
their implementation requirements imposed by other entities for the
purpose of the RFA and SBREFA. 

EPA officials also said that, if governmentwide criteria were to be
developed, SBA should not be the agency designated to develop these
criteria.  They said that previous SBA interpretations of the RFA
have differed from those of many other agencies, and in some
instances, from the language of the statute.  EPA officials also said
that giving SBA the authority to interpret the RFA could bind the
regulatory agencies to a single (and possibly incorrect) view of the
statute's requirements.  For example, both EPA and OSHA officials
disagree with SBA's interpretation that a "significant economic
impact" could be either a positive or negative impact.  EPA and OSHA
officials said that the language in the statute as well as the great
weight of its legislative history clearly indicate that the purpose
of the RFA is to consider regulatory alternatives that would minimize
negative impacts on affected small entities, and the officials do not
consider positive or beneficial regulatory effects to constitute a
"significant economic impact" under the RFA.  In response to these
officials' comments, we indicated in the Matter for Congressional
Consideration section that Congress could establish, or could require
SBA or another entity to develop, governmentwide criteria defining
the phrase "significant economic impact on a substantial number of
small entities."


--------------------------------------------------------- Letter :12.1

We are sending copies of this report to the Ranking Minority Members
of the Senate Committee on Small Business and the House Committee on
Small Business' Subcommittees on Government Programs and Oversight,
and Regulatory Reform and Paperwork Reduction; the Director of OMB;
the Secretary of Labor; and the Administrators of EPA and SBA.  We
will also make copies available to others on request. 

Major contributors to this report are listed in appendix VII.  Please
contact me on (202) 512-8676 if you or your staff have any questions
concerning this report. 

L.  Nye Stevens
Director, Federal Management
 and Workforce Issues


SELECTED EPA- AND OSHA-PROPOSED
RULES FOR WHICH PANELS WERE NOT
HELD
=========================================================== Appendix I

This appendix lists the proposed rules that the Environmental
Protection Agency (EPA) and the Occupational Safety and Health
Administration (OSHA) published under notices of proposed rulemaking
in the Federal Register during the first year's implementation of the
Small Business Regulatory Enforcement Fairness Act (SBREFA) advocacy
review panel process.  EPA and OSHA did not convene advocacy review
panels for these proposed rules because they certified that the rules
would not have a significant economic impact on a substantial number
of small entities.  Because of the large volume of proposed rules
that EPA published in the Federal Register during this period (June
28, 1996, through June 28, 1997), we limited our review of
EPA-proposed rules to those that were subject to review by OIRA,
pursuant to Executive Order 12866. 



                               Table I.1
                
                Selected EPA-Proposed Rules Published in
                 the First Year of the SBREFA Advocacy
                 Review Panel Process for Which Panels
                             Were Not Held

Date                    Proposed rule
----------------------  ----------------------------------------------
July 9, 1996            Transportation Conformity Rule Amendments:
                        Flexibility and Streamlining

July 23, 1996           Prevention of Significant Deterioration (PSD)
                        and Nonattainment New Source Review (NSR)

August 14, 1996         Hazardous Waste Management System;
                        Identification and Listing of Hazardous Waste;
                        Solvents; CERCLA Hazardous Substance
                        Designation and Reportable Quantities

September 26, 1996      National Emission Standards for Hazardous Air
                        Pollutants for Source Categories; National
                        Emission Standards for Hazardous Air
                        Pollutants for Primary Aluminum Reduction
                        Plants

December 13, 1996       National Ambient Air Quality Standards for
                        Particulate Matter: Proposed Decision

December 13, 1996       National Ambient Air Quality Standards for
                        Ozone: Proposed Decision

December 13, 1996       Proposed Requirements for Designation of
                        Reference and Equivalent Methods for
                        Particulate Matter (PM)2.5 and Ambient Air
                        Quality Surveillance for Particulate Matter

December 27, 1996       Acid Rain Program: Permits, Allowance System,
                        Sulfur Dioxide Opt-Ins, Continuous Emission
                        Monitoring, Excess Emissions, and Appeal
                        Procedures

January 2, 1997         Proposed Implementation Requirements for
                        Reduction of Sulfur Oxide (Sulfur Dioxide)
                        Emissions

February 11, 1997       Emission Standards for Locomotives and
                        Locomotive Engines

March 28, 1997          Regulation of Fuels and Fuel Additives:
                        Modification of the Covered Areas Provision
                        for Reformulated Gasoline

March 28, 1997          Transitional and General Opt Out Procedures
                        for Phase II Reformulated Gasoline
                        Requirements

April 2, 1997           National Emission Standards for Hazardous Air
                        Pollutants Pharmaceuticals Production

May 6, 1997             Regulation of Fuels and Fuel Additives:
                        Baseline Requirements for Gasoline Produced by
                        Foreign Refiners

May 7, 1997             Addition of Dioxin and Dioxin-Like Compounds;
                        Modification of Polychlorinated Biphenyls
                        (PCBs) Listing; Toxic Chemical Release
                        Reporting; Community Right-to-Know

May 12, 1997            Land Disposal Restrictions Phase IV: Second
                        Supplemental Proposal on Treatment Standards
                        for Metal Wastes and Mineral Processing
                        Wastes, Mineral Processing and Bevill
                        Exclusion Issues, and the Use of Hazardous
                        Waste as Fill

May 21, 1997            Protection of Stratospheric Ozone
----------------------------------------------------------------------
Source:  The Federal Register for the relevant dates. 



                               Table I.2
                
                  OSHA-Proposed Rules Published in the
                First Year of the SBREFA Advocacy Review
                Panel Process for Which Panels Were Not
                                  Held

Date                    Proposed rule
----------------------  ----------------------------------------------
July 22, 1996           Miscellaneous Changes to General Industry and
                        Construction Standards; Proposed Paperwork
                        Collection, Comment Request for Coke Oven
                        Emissions and Inorganic Arsenic

September 10, 1996      Exit Routes (Means of Egress)
----------------------------------------------------------------------
Source:  The Federal Register for the relevant dates. 


OSHA PANEL ON OCCUPATIONAL
EXPOSURE TO TUBERCULOSIS
========================================================== Appendix II

In October and November, 1995, OSHA held a series of meetings with
representatives from labor unions, professional organizations, trade
associations, state and federal governments, and employees of
business and industry to receive input on the approaches OSHA was
considering for its draft rule on occupational exposure to
tuberculosis (TB).  According to OSHA, the draft rule would set
standards requiring employers to protect TB-exposed employees by
means of infection prevention and control measures that had been
demonstrated to be effective. 

In a letter dated August 16, 1996, OSHA's Small Business Advocacy
Chair notified the Small Business Administration's (SBA) Chief
Counsel for Advocacy that the OSHA draft rule might have a
significant economic impact on a substantial number of small
entities.  The OSHA Chair also identified the types of entities that
might be affected by the rule.  The Chief Counsel consulted with OSHA
officials and identified 11 small entity representatives who he
believed could provide comments on the draft rule to the panel. 
However, a number of these representatives withdrew from
participating or recommended other representatives as being more
appropriate.  Ultimately, eight small entity representatives provided
input to the panel--one representative from a homeless shelter, two
representatives from homeless shelter associations, two
representatives from health care associations, one representative
from a home health care service, one emergency medical care service
representative, and one representative from a ventilation and air
conditioning contractor. 

The OSHA Chair convened the review panel at a meeting on September
10, 1996.  The panel formally consisted of the Deputy Assistant
Secretary of Labor, OSHA (Panel Chair); the Associate Solicitor for
Occupational Safety and Health, Department of Labor; the Director of
the Directorate of Health Standards Programs, OSHA; the Director of
the Office of Regulatory Analysis, OSHA; the Chief Counsel for
Advocacy, SBA; and the Administrator of the Office of Management and
Budget's (OMB) Office of Information and Regulatory Affairs (OIRA). 
However, OIRA's Administrator was represented on the panel by OIRA
staff members. 

On September 13, 16, and 24, 1996, OSHA provided the eight small
entity representatives with background materials on the draft rule,
including the text of the draft rule.  In a letter dated September
16, 1996, the OSHA Chair instructed the small entity representatives
to provide the panel with their written comments on the background
materials within 30 days.  All of the small entity representatives
provided written comments, although some representatives took more
than the allotted 30 days.  On October 7, 1996, the panel met and
addressed the questions of the small entity representatives through a
conference telephone call.  About 3 weeks later, on October 30, 1996,
and November 1, 1996, the panel met to review the comments and
recommendations they had received from the small entity
representatives and to draft the panel's report.  The panel's report
was completed on November 12, 1996, and was signed by the Chair, the
Administrator of OIRA, and the SBA Chief Counsel for Advocacy.  OSHA
then made the final report available to the public in the docket
related to this draft rule on December 10, 1996.  OSHA published the
proposed rulemaking for the TB standards nearly a year later, on
October 17, 1997.  This notice of proposed rulemaking asked for
public comments on, among other things, the advocacy review panel's
recommendations. 

The review panel's final report included what the panel characterized
as 22 major recommendations and 24 other recommendations.  Several of
the major recommendations stated that OSHA should take the following
actions: 

  -- Simplify and clarify the text of the proposed rule and define
     such terms as "firm" and "facility" so that they are readily
     understood. 

  -- Consider analyzing additional size classes of small entities
     where existing analysis suggests that such examination would
     provide opportunities to minimize small entity impacts while
     accomplishing statutory objectives. 

  -- Either change the definition of a "suspect case" or develop an
     alternative approach for homeless shelters. 

  -- Reexamine the costs and impacts of some of the standard's
     requirements for homeless shelters and substance abuse treatment
     centers. 

  -- More carefully address the economic impacts of the proposed rule
     on facilities, including a reexamination of the ability of
     various facilities to pass on costs (especially those facilities
     receiving Medicare and Medicaid funding), and incorporate the
     results into its determination of feasibility. 

  -- Solicit comments on whether there are any conflicts between OSHA
     regulations and those of other regulatory and voluntary
     organizations, and on ways OSHA could better coordinate with
     these groups.  The panel's final report said OSHA should
     specifically include a discussion of similar state requirements
     in the preamble to the rule, examine possible interaction with
     Health Care Financing Administration rules, and provide greater
     detail on how OSHA's proposed standard compares with Centers for
     Disease Control guidelines. 

Although the panel's final report contained a single set of major and
other recommendations, the report indicated that the panel members
were not always in agreement regarding certain issues.  For example,
OIRA and SBA's Office of Advocacy panel members suggested that OSHA
analyze the potential impact of the draft rule on volunteers. 
However, OSHA panel members said that such an analysis was not
necessary because the Occupational Safety and Health Act does not
cover volunteers.  The panel report ultimately recommended that OSHA
consider estimating the rule's effect on volunteers and include a
discussion explaining that the draft rule does not apply to
volunteers, although some states may choose to do so. 


EPA PANEL ON NONROAD DIESEL ENGINE
EMISSIONS
========================================================= Appendix III

As part of the process by which EPA developed its draft rule on the
control of air pollution emitted by nonroad diesel engines, EPA
conducted outreach efforts with a number of organizations that were
expected to be affected by the rule, including small entity
representatives.  In this draft rule, EPA plans to establish new
emission standards for nonroad diesel engines that are used in
equipment, such as tractors, and some marine applications.  The draft
rule includes a program that consists of stringent new emission
standards, requirements to ensure that engines maintain their level
of emission performance as they age, provisions allowing compliance
flexibility to engine and equipment manufacturers, and a voluntary
program to encourage the introduction of low-emitting engines. 

In a letter dated November 13, 1996, EPA's Small Business Advocacy
Chair notified SBA's Chief Counsel for Advocacy that this draft rule
might have a significant economic impact on a substantial number of
small entities, thereby triggering the SBREFA advocacy review panel
requirements.  The Chair also provided the Chief Counsel with a
suggested list of six small entity representatives to provide advice
and recommendations to the panel.  As required by SBREFA, the Chief
Counsel responded within 15 days and agreed with EPA's suggested list
of small entity representatives.  Subsequently, EPA and SBA's Office
of Advocacy agreed to add five additional representatives to the
panel process.  The 11 representatives consisted of 1 small nonroad
diesel engine manufacturer, 3 association representatives, 1
individual business representative of small nonroad equipment
manufacturers, 4 representatives of small businesses that modify
engines for marine use ("marinizers"), and 2 association
representatives of engine rebuilders or remanufacturers. 

In January 1997, EPA published and sought comments on a statement of
principles in a Supplemental Advance Notice of Proposed Rulemaking in
the Federal Register.  The statement of principles, which called for
more stringent emission standards, had been signed earlier by EPA,
the California Air Resources Board, and members of the nonroad diesel
engine industry.  EPA also held a workshop in Chicago, Illinois,
during the comment period for this notice that devoted a significant
amount of time to discussing equipment manufacturer regulatory
flexibilities and small entity issues.  The written comments received
from the supplemental advance notice and suggestions received at
EPA's workshop and other outreach efforts resulted in 10 concepts to
make emission standards for nonroad diesel engines flexible and
reduce the regulatory burden for small entities. 

In a letter dated March 25, 1997, the EPA Chair convened the review
panel, which consisted of the Director of the Office of Regulatory
Management and Information, EPA (Panel Chair); the Director, Engine
Programs and Compliance Division, EPA; the Chief Counsel for
Advocacy, SBA; and the Administrator of OMB's OIRA.  However, OIRA's
Administrator was represented on the panel by an OIRA staff member. 

On April 24, 1997, the Chair sent the 10 concepts developed during
EPA's outreach efforts to the 11 small entity representatives and
requested that they provide the panel with any written comments and
recommendations on these concepts within 2 weeks.  Four of the 11
representatives responded (2 businesses and 2 association
representatives).  On May 2, 1997, the panel held a telephone
conference call with 7 of the 11 small entity representatives (3 of
which also had provided written comments) during which they discussed
and clarified potential regulatory options.  The panel had a third
meeting on May 14, 1997, and issued its final report to the EPA
Administrator on May 23, 1997.  The report's cover letter was signed
by all four panel members.  The report was made available to the
public on September 24, 1997, when EPA published the associated
notice of proposed rulemaking in the Federal Register. 

In its final report, the review panel recommended that EPA (1)
continue to seek information and conduct analyses relating to the
number of small entities potentially affected by the proposed rule;
(2) consider the potential overlap of the rule with OSHA regulations
related to ambient carbon monoxide levels; (3) design the rule to
minimize the need for recordkeeping and reporting; and (4) consider
conducting further analysis on 5 of the 10 concepts that were
considered to provide significant flexibility and burden reduction
for small entities, and soliciting comments on these concepts when it
published its notice of proposed rulemaking.  The panel's final
report stated that incorporating these five concepts into the notice
of proposed rulemaking would allow EPA to meet the program's
emission-reduction goals while maximizing the compliance flexibility
for small manufacturers of nonroad equipment and small marinizers. 
These concepts addressed such issues as exemption and volume
allowances, equity between engine size categories, engine program
credits, and relief for hardship cases. 

In the preamble of its notice of proposed rulemaking, EPA said that
it was (1) requesting additional information, comments, and
suggestions on the number of small entities potentially affected by
the rule and the potential overlap with OSHA's carbon monoxide
limits; (2) taking steps to minimize recordkeeping and reporting; and
(3) proposing or soliciting comments on the five regulatory
alternatives. 


EPA PANEL ON STORMWATER PHASE II
(NATIONAL POLLUTANT DISCHARGE
ELIMINATION SYSTEM)
========================================================== Appendix IV

EPA began developing proposed revisions to its National Pollutant
Discharge Elimination System (NPDES) regulations in 1992.  To help
the agency develop the draft rule, EPA convened a federal advisory
committee comprised of various stakeholders, including
municipalities, industrial and commercial sectors, and public
interest groups.  The advisory committee met 11 times between
September 1995 and February 1997. 

EPA's proposed revisions to the NPDES regulations were intended to
address unregulated discharges of stormwater associated with small,
municipal separate storm sewer systems and construction activities at
small construction sites.  Therefore, EPA concluded that the draft
rule might have a significant economic effect on a substantial number
of small entities.\1 On April 10, 1997, EPA's Small Business Advocacy
Chair sent a letter to SBA's Chief Counsel for Advocacy notifying him
that EPA believed its draft rule might trigger the requirements for
an advocacy review panel. 

The Chair also provided the Chief Counsel with a list of 10 small
government and business representatives that EPA had been in contact
with during the development of the draft rule since 1995, and that
the agency believed could serve as small entity representatives for
the panel process.  The Chief Counsel responded within 15 days of
EPA's notification, as required by SBREFA, and suggested adding 13
additional representatives.  Ultimately, 29 small entity
representatives participated in the panel process.  These
representatives included 12 individuals from associations
representing city and county governments and the construction
industry, individual municipalities, and Indian tribes, most of whom
had previously served on the federal advisory committee that helped
to develop the draft rule.  The remaining 17 representatives were
affiliated with industrial or commercial associations, many of whom
were suggested by SBA.  Twenty-two of the representatives were from
business or small government associations, and 7 were individuals
from small governments or Indian tribes. 

EPA conducted telephone conference calls on May 14 and 15, 1997, and
held an 1-day meeting at EPA headquarters in Washington, D.C., on May
22, 1997, to brief the small entity and streamlining representatives
on the draft rule.  Officials from OIRA and SBA's Office of Advocacy
also participated in these telephone conference calls and the 1-day
meeting.  By June 13, 1997, 25 of the small entity representatives
had submitted 12 sets of written comments.  Two sets of written
comments had multiple signatures:  1 letter was signed by 6 municipal
representatives and the other letter was signed by 13 industry
representatives.  Three representatives signed more than one set of
letters sent to the panel. 

The stormwater phase II advocacy review panel convened on June 19,
1997, and formally consisted of the Director of the Office of
Regulatory Management and Information, EPA (Panel Chair); the
Director of the Office of Wastewater Management, Office of Water,
EPA; the Chief Counsel for Advocacy, SBA; and the Administrator of
OIRA, OMB.  For this meeting, OIRA's Administrator and the Chief
Counsel were represented by members of their staffs.  On June 23,
1997, the Chair sent a letter to each representative that summarized
the comments that had been received by June 13, 1997, and requested
any additional comments.  In response, one small entity
representative resubmitted his comments, which had been previously
received by EPA a few days before the panel convened. 

Because the panel's report was not publicly available as of November
1, 1997, we did not describe the panel's recommendations or EPA's
reaction to those recommendations in this report. 


--------------------
\1 After completion of the panel process, additional data and
analysis led EPA to conclude that the rule would not have such an
impact.  When EPA published the notice of proposed rulemaking on
January 9, 1998, the EPA Administrator certified that the proposed
rule would not have a significant economic impact on a substantial
number of small entities. 


EPA PANEL ON EFFLUENT LIMITATIONS
GUIDELINES AND PRETREATMENT
STANDARDS FOR INDUSTRIAL LAUNDRIES
POINT SOURCE CATEGORY
=========================================================== Appendix V

On February 20, 1997, a Project Manager from EPA's Office of Water
sent a letter to two individuals in the industrial laundry industry
and five representatives of business and trade associations regarding
the agency's draft effluent guidelines and standards for industrial
laundries.  The letter stated that the representatives had been
identified as candidates to serve as small entity representatives for
an anticipated SBREFA advocacy review panel regarding the draft rule. 
Attached to the letter was background information about the draft
rule.  The letter also reminded these representatives of a March 4,
1997, public meeting sponsored by EPA to discuss the development of
the draft rule with interested parties. 

In a letter dated March 3, 1997, EPA's Small Business Advocacy Chair
notified SBA's Chief Counsel for Advocacy that EPA may convene a
review panel for its draft rule on effluent limitations guidelines
and standards for industrial laundries.  The Chair also provided the
Chief Counsel with a list of the seven individuals that EPA had
identified in February 1997 who could provide advice and
recommendations to the panel by serving as small entity
representatives.  As required by SBREFA, the Chief Counsel responded
within 15 days.  He agreed with EPA's list and suggested an
additional name.  Another representative was added following the
March 4, 1997, public meeting on the draft rule.  These nine small
entity representatives included five trade association
representatives and four representatives from individual businesses
within the industrial laundries sector.  EPA reported that it had
been working with some of these representatives since 1992 to develop
regulatory options for the draft rule. 

On April 15, 1997, seven of the nine small entity representatives
attended a meeting with EPA officials to discuss the background
material the agency had sent to them and to provide EPA with some
initial comments on the draft rule.  Five small entity
representatives subsequently responded to EPA's request for written
comments on the background material by the agency's May 12, 1997,
deadline.  In a memorandum dated June 4, 1997, EPA's Chair provided a
summary of the small entity representatives' advice and
recommendations, as well as background material on the draft rule, to
the panel members and the nine small entity representatives. 

On June 6, 1997, the Chair convened the industrial laundries review
panel, which formally consisted of the Director of the Office of
Regulatory Management and Information, EPA (Panel Chair); the
Director of the Office of Science and Technology, Office of Water,
EPA; the Chief Counsel for Advocacy, SBA; and the Administrator of
OIRA, OMB.  OIRA's Administrator was represented in the panel
meetings and telephone conference calls by an OIRA staff member.  EPA
staff (not the panel) held a conference call on June 11, 1997, with
five of the nine small entity representatives to discuss different
exemptions, enforcement options, and other regulatory issues.  On
June 19, 1997, the panel held a conference call with five of the
small entity representatives (four of whom had participated in the
June 11, 1997, conference call) to address their questions and gather
additional input.  On June 27, 1997, EPA provided the panel members
with additional analyses of regulatory alternatives requested by the
panel during the June 19, 1997, conference call.  Six of the nine
small entity representatives (four association representatives and
two representatives of individual businesses) provided written
comments during the panel process.  During a meeting on July 18,
1997, the review panel requested additional analysis and information
from EPA, which was sent to the panel members on July 23, 1997.  The
panel issued its final report, with a cover letter signed by all four
panel members, on August 8, 1997. 

Because the panel's report was not publicly available as of November
1, 1997, we did not describe the panel's recommendations or EPA's
reaction to those recommendations in this report. 


EPA PANEL ON EFFLUENT LIMITATIONS
GUIDELINES AND STANDARDS FOR THE
TRANSPORTATION EQUIPMENT-CLEANING
INDUSTRY
========================================================== Appendix VI

EPA began developing a draft rule on effluent limitations guidelines
and pretreatment standards for the transportation equipment-cleaning
industry in 1992.  The intent of the draft rule was to limit the
discharge of pollutants into the nation's waters and the introduction
of pollutants into publicly owned treatment works.  Between 1992 and
1997, EPA officials made 39 visits to transportation
equipment-cleaning facilities and attended numerous meetings to
gather information to develop the draft rule.  The agency also worked
with three trade associations and several small businesses to
identify potential regulatory options and compliance issues. 

On April 10, 1997, EPA's Small Business Advocacy Chair sent a letter
to SBA's Chief Counsel for Advocacy notifying him that EPA expected
to convene a SBREFA review panel for this draft rule.  In his letter,
the EPA Chair suggested four small entity representatives (three of
which had been involved with the draft rule's development) to provide
advice and recommendations to the panel.  The Chief Counsel responded
to the EPA Chair's letter within 15 days and suggested two additional
small entity representatives that EPA's panel could contact.  The
Chief Counsel and EPA officials agreed on six small entity
representatives, all of whom were from trade associations related to
the transportation equipment-cleaning industry.  One of these
additional representatives was later replaced by another association
representative who came forward at a public meeting held on the draft
rule. 

EPA sent background material to the small entity representatives on
June 6 and 27, 1997, and met with the representatives on July 2,
1997, to discuss the material.  EPA held another meeting between EPA
staff and one small entity representative on July 14, 1997, to
clarify EPA's analyses involving some facilities that might be
impacted by the draft rule. 

On July 16, 1997, the EPA Chair convened the review panel by sending
a letter to the panel members.  At the same time, he provided
additional background material to the small entity representatives on
the draft rule's projected impacts and EPA's regulatory options.  The
panel held its first meeting on July 22, 1997, and held two
subsequent meetings on August 13, 1997, and September 9, 1997.  The
panel formally consisted of the Director of the Office of Regulatory
Management and Information, EPA (Panel Chair); the Acting Director,
Engineering and Analysis Division, Office of Water, EPA; the Chief
Counsel for Advocacy, SBA; and the Administrator of OIRA, OMB. 
However, OIRA's Administrator was represented on the panel by an OIRA
staff member who had participated in related meetings and telephone
conference calls. 

By July 24, 1997, four of the six small entity representatives had
provided the panel with their written comments and recommendations on
the draft rule.  In a July 29, 1997, letter, the EPA Chair informed
all of the small entity representatives that any additional comments
needed to be received by August 15, 1997.  Two of the four small
entity representatives who provided initial comments submitted
additional comments by the August 15 deadline. 

The panel held a telephone conference call with two of the six small
entity representatives who were available on August 13, 1997, during
which EPA officials agreed to provide additional information on
compliance costs and other impacts on facilities in the
transportation equipment-cleaning industry.  On August 19, 1997, EPA
sent a memorandum to the panel and the small entity representatives
providing them with the agreed-upon information.  The panel's final
report was issued on September 23, 1997, summarizing the small
entities' written and oral comments and listing the panel's
recommendations.  Each panel member signed the cover letter
accompanying the final report. 

Because the panel's report was not publicly available as of November
1, 1997, we did not describe the panel's recommendations or EPA's
reaction to those recommendations in this report. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Curtis W.  Copeland, Assistant Director, Federal Management and
Workforce Issues, (202) 512-8101
Susan Ragland, Evaluator-in-Charge
Steven G.  Lozano, Senior Evaluator
Kiki Theodoropoulos, Senior Evaluator
Thomas M.  Beall, Technical Analyst
Stuart M.  Kaufman, Technical Analyst

OFFICE OF THE GENERAL COUNSEL

Jill P.  Sayre, Senior Attorney


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