Regulatory Flexibility Act: Implementation of the Small Business Advocacy
Review Panel Requirements (Testimony, 03/18/98, GAO/T-GGD-98-75).
GAO discussed the Small Business Regulatory Enforcement Fairness Act's
(SBREFA) advocacy review panel provisions, focusing on: (1) whether the
Environmental Protection Agency (EPA) or the Occupational Safety and
Health Administration (OSHA) had applied the advocacy review panel
requirements to all applicable rules that they proposed in the first
year of the panel requirements; (2) whether the EPA and OSHA panels, the
regulatory agencies themselves, and the Small Business Administration's
(SBA) Chief Counsel for Advocacy followed the statute's procedural
requirements; (3) identify any changes that EPA and OSHA made to the
draft rules as a result of the panels' recommendations; and (4) identify
any suggestions that agency officials and small entity representatives
had regarding how the advocacy review panel process could be improved.
GAO noted that: (1) as of November 1, 1997, EPA and OSHA had convened
five review panels; (2) EPA and SBA's Chief Counsel for Advocacy
disagree regarding the applicability of the panel requirements to two
other rules that EPA proposed in December 1996--the national ambient air
quality standards for ozone and for particulate matter; (3)
specifically, EPA and the Chief Counsel disagree regarding whether the
effects of states' implementation of these health standards can be
separated from the standards themselves in determining whether EPA's
rules may have a significant economic impact on a substantial number of
small entities; (4) GAO suggested that Congress resolve this issue by
taking steps to clarify the meaning of the term "significant impact";
(5) the agencies and the panels generally met SBREFA's procedural
requirements, but there were several differences in how the panels
operated; (6) the panels' recommendations regarding the two proposed
rules that had been published as of November 1, 1997, focused on various
issues, such as providing small entities with greater compliance
flexibility and considering the effects of potentially overlapping
regulations; (7) the agencies generally responded to those
recommendations in the supplementary information sections of the
proposed rules; and (8) the small entity representatives with whom GAO
spoke and, to a lesser extent, the agency officials GAO interviewed,
offered several suggestions to improve the advocacy review panel
process.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-GGD-98-75
TITLE: Regulatory Flexibility Act: Implementation of the Small
Business Advocacy Review Panel Requirements
DATE: 03/18/98
SUBJECT: Regulatory agencies
Advisory committees
Reporting requirements
Interagency relations
Standards evaluation
Proposed legislation
Small business assistance
Agency proceedings
Economic analysis
******************************************************************
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Cover
================================================================ COVER
Before the Subcommittees on Government Programs and Oversight and
Regulatory Reform and Paperwork Reduction,
Committee on Small Business
House of Representatives
For Release on Delivery
Expected at
10:00 a.m. EST
Wednesday
March 18, 1998
REGULATORY FLEXIBILITY ACT -
IMPLEMENTATION OF THE SMALL
BUSINESS ADVOCACY REVIEW PANEL
REQUIREMENTS
Statement of L. Nye Stevens
Director, Federal Management and Workforce Issues
General Government Division
GAO/T-GGD-98-75
GAO/GGD-98-75T
(410303)
Abbreviations
=============================================================== ABBREV
EPA - Environmental Protection Agency
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
REGULATORY FLEXIBILITY ACT:
IMPLEMENTATION OF THE SMALL
BUSINESS ADVOCACY REVIEW PANEL
REQUIREMENTS
==================================================== Chapter STATEMENT
Mr. Chairman, Madam Chairwoman, and Members of the Subcommittees:
I am pleased to be here to discuss our report that is being issued
today, which examines the Small Business Regulatory Enforcement
Fairness Act's (SBREFA) advocacy review panel provisions.\1 These
provisions took effect on June 28, 1996, and require the
Environmental Protection Agency (EPA) and the Occupational Safety and
Health Administration (OSHA) to convene advocacy review panels for
draft rules that may have a significant economic impact on a
substantial number of small entities. The review panels are to
collect advice and recommendations from representatives of affected
small entities about the potential impact of draft rules before they
are published as notices of proposed rulemaking in the Federal
Register. SBREFA requires that several specific procedural steps be
followed in convening the panels, and that the panels 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 the Small Business
Administration's (SBA) Chief Counsel for Advocacy.
Our review focused on how the advocacy review panel process has
worked in the early period of its implementation. Our specific
objectives were to (1) determine whether EPA and OSHA had applied the
advocacy review panel requirements to all applicable rules that they
proposed in the first year of the panel requirements; (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; (3) identify any changes that EPA and OSHA
made to the draft rules as a result of the panels' recommendations;
and (4) identify any suggestions that agency officials and small
entity representatives had regarding how the advocacy review panel
process could be improved.
As of November 1, 1997, EPA and OSHA had convened five review panels.
EPA and SBA's Chief Counsel for Advocacy disagree regarding the
applicability of the panel requirements to two other rules that EPA
proposed in December 1996--the national ambient air quality standards
for ozone and for particulate matter. Specifically, EPA and the
Chief Counsel disagree regarding whether the effects of states'
implementation of these health standards can be separated from the
standards themselves in determining whether EPA's rules may have a
significant economic impact on a substantial number of small
entities. In our report being issued today, we suggest that Congress
resolve this issue by taking steps to clarify the meaning of the term
"significant impact."
The agencies and the panels generally met SBREFA's procedural
requirements, but there were several differences in how the panels
operated. The panels' recommendations regarding the two proposed
rules that had been published as of November 1, 1997, focused on
various issues, such as providing small entities with greater
compliance flexibility and considering the effects of potentially
overlapping regulations. The agencies generally responded to those
recommendations in the supplementary information sections of the
proposed rules. Finally, the small entity representatives with whom
we spoke and, to a lesser extent, the agency officials we interviewed
offered several suggestions to improve the advocacy review panel
process.
--------------------
\1 Regulatory Reform: Implementation of the Small Business Advocacy
Review Panel Requirements (GAO/GGD-98-36, Mar. 18, 1998).
EPA AND SBA'S CHIEF COUNSEL FOR
ADVOCACY DISAGREE REGARDING
WHETHER EPA SHOULD HAVE
CONVENED ADDITIONAL ADVOCACY
REVIEW PANELS
-------------------------------------------------- Chapter STATEMENT:1
During the first year of the 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 also published 17 other proposed rules that
were reviewed by OIRA 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. SBA's
Chief Counsel said that EPA should have convened panels for 2 of
these 17 proposed rules--the rules setting national ambient air
quality standards for ozone and for particulate matter. Some of the
small entity representatives that we interviewed also said that EPA
should have convened advocacy review panels for these two proposed
rules.
EPA officials said that review panels were not required for the ozone
and particulate matter rules because they would not, by themselves,
have a significant economic impact on a substantial number of small
entities. The officials said that any effects that the rules would
have on small entities would only occur when the states determine how
the standards will be specifically implemented. However, SBA's Chief
Counsel for Advocacy disagreed with EPA's assessment. He said that
the promulgation of these two rules cannot be separated from their
implementation, and that effects on small entities will flow
"inexorably" from the standards EPA established.
We could not determine whether EPA should have convened advocacy
review panels for the ozone and particulate matter 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." Specifically, it is unclear whether health standards
that an agency establishes by regulation should be considered
separable from implementation requirements established by state
governments or other entities. The Regulatory Flexibility Act (RFA),
which SBREFA amended, does not define the term "significant economic
impact on a substantial number of small entities." Although the RFA
requires the SBA Chief Counsel for Advocacy to monitor agencies'
compliance with the act, it does not expressly authorize SBA or any
other entity to interpret key provisions. In a previous report we
noted that agencies had different interpretations regarding how the
RFA's provisions should be interpreted.\2 In another report, we said
that if Congress wishes to strengthen the implementation of the RFA
it should consider amending the act to provide clear authority and
responsibility to interpret key provisions and issue guidance.\3
In our report that is being issued today, we again conclude that
governmentwide criteria are needed regarding what constitutes a
"significant economic impact on a substantial number of small
entities." Therefore, we said that if Congress wishes to clarify and
strengthen the implementation of the RFA and SBREFA, it should
consider providing SBA or another entity with clear authority to
interpret the RFA's key provisions. We also said that Congress could
consider establishing, or requiring SBA or some other entity to
develop, governmentwide criteria defining the phrase "significant
economic impact on a substantial number of small entities."
Specifically, those criteria should state whether the establishment
of regulatory standards by a federal agency should be separated from
implementation requirements imposed by other entities.
Governmentwide criteria can help ensure consistency in how the RFA
and SBREFA are implemented across federal agencies. However, those
criteria must be flexible enough to allow for some agency-by-agency
variations in the kinds of impacts that should be considered
"significant" and what constitutes a "substantial" number of small
entities.
--------------------
\2 Regulatory Flexibility Act: Inherent Weaknesses May Limit Its
Usefulness for Small Governments (GAO/HRD-91-61, Jan. 11, 1991).
\3 Regulatory Flexibility Act: Status of Agencies' Compliance
(GAO/GGD-94-105, Apr. 27, 1994).
PANELS, REGULATORY AGENCIES,
AND SBA'S CHIEF COUNSEL FOR
ADVOCACY GENERALLY FOLLOWED
STATUTORY REQUIREMENTS,BUT
PANEL PROCEDURES DIFFERED
-------------------------------------------------- Chapter STATEMENT:2
As of November 1, 1997, EPA and OSHA 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 (TB). EPA convened panels 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); and (4) effluent
limitations guidelines and standards for the transportation
equipment-cleaning industry (July 16, 1997).
The panels, EPA and OSHA, and SBA's Chief Counsel for Advocacy
generally followed SBREFA's procedural requirements on how those
panels should be convened and conducted. For example, as required by
the statute:
-- EPA and OSHA notified the SBA Chief Counsel before each of the
panels and provided him with information on the potential
impacts of the draft rules and the types of small entities that
might be affected.
-- The Chief Counsel responded to EPA and OSHA no later than 15
days after receipt of these materials and helped identify
individuals representative of the affected small entities.
-- Each of the five panels reviewed materials that the regulatory
agencies had prepared and collected advice and recommendations
from the small entity representatives.
However, there were a few minor inconsistencies with SBREFA's
specific statutory requirements in the five panels we reviewed. For
example, three of the panels took a few days longer than the 60 days
allowed by the statute to conclude their deliberations and issue a
report. Also, EPA did not formally designate a chair for its panels
until June 11, 1996--about 6 weeks later than the statute required.
Although generally consistent with SBREFA's requirements, the panels
differed in some respects, including the degree of prepanel contact
that the agencies had with the small entity representatives and the
amount and types of information about the rules that were provided to
the small entity representatives for review. At least some of the
differences between the panels appeared to occur because the panel
process was new and evolving, and the agencies and the panels made
adjustments to their procedures as they gained experience. For
example, EPA convened its first panel by sending a draft report
summarizing the agency's prepanel outreach to the panel members.
However, EPA's panel chair said that some Members of Congress and
congressional staff viewed this as an attempt to prejudice the panel
members' consideration, and the practice was changed. For subsequent
panels, EPA developed a summary of the comments it had received from
small entities before the panels were convened, which it provided to
the panel members. The panel members themselves then gathered advice
and recommendations from the small entity representatives and drafted
the final reports.
AGENCIES RESPONDED TO PANEL
RECOMMENDATIONS IN PROPOSED
RULES
-------------------------------------------------- Chapter STATEMENT:3
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 the
occupational exposure to TB and EPA's proposed rule to control
nonroad diesel engine emissions. The panels' recommendations for
these draft rules focused on providing small entities with
flexibility in how to comply with the rules and on the need to
consider potentially overlapping local, state, and federal
regulations and enforcement. OSHA and EPA primarily responded to the
panels' recommendations in the supplementary information sections of
the proposed rules, although OSHA also made some changes to the text
of its rule.
For example, one of the TB panel's major recommendations was that
OSHA reexamine the application of the draft rule to homeless
shelters. In the supplementary information section of the proposed
rule, OSHA said that it was conducting a special study of this issue
and would hold hearings on issue\ related to TB exposure in homeless
shelters. The TB panel also recommended that OSHA examine the
potential cost savings associated with allowing TB training that a
worker received in one place of employment to be used to satisfy
training requirements in another place of employment. In response,
OSHA changed the text of the draft rule to allow the portability of
nonsite specific training.
Although EPA and OSHA appeared to have been responsive to the panels'
recommendations in the proposed rules, it is too early to tell
whether the final rules will reflect the panels' recommendations.
The 32 small entity representatives we interviewed were evenly split
on whether they thought that changes would be made to the rules as a
result of their comments. About one-third of the representatives
believed that the agencies would make changes, and another one-third
were unsure whether changes would be made. A final one-third of the
small entity representatives said that they did not believe that the
agencies would change the rules as a result of their comments. Some
of these representatives said that the regulatory agency officials
had already decided how the rules would be written before convening
the panels, and that the officials were not interested in making any
significant changes to the rules.
SMALL ENTITY REPRESENTATIVES
AND AGENCY OFFICIALS OFFERED
SUGGESTIONS TO IMPROVE THE
PANEL PROCESS
-------------------------------------------------- Chapter STATEMENT:4
Although most of the 32 small entity representatives with whom we
spoke said that they thought the review panel process was worthwhile,
about three-fourths of them suggested changes to improve that
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 rules that the
regulatory agencies provided.
Seven of the small entity representatives said they would have liked
more advance notice of panel meetings and telephone conference calls
with the panels. Some of these representatives said that short
notices had prevented them from participating in certain panel
efforts. Fourteen representatives said they were not given enough
time to study the materials provided before being asked to comment on
the draft rules. Five representatives suggested holding the panels
earlier in the rulemaking process to increase the likelihood that the
panels could affect the draft rules.
Fourteen small entity representatives thought that the composition of
those providing input to the panels could be improved. Specifically,
they said that the panels should have obtained input from more
representatives of (1) individual small entities, not just
representatives from associations; (2) certain types of affected
small entities that were not included (e.g., from certain geographic
areas); (3) small entities that would bear the burden of implementing
the draft rules (e.g., small municipalities); and (4) small entities
that were reviewing the draft rule for the first time, and that had
not been previously involved in developing the draft rules.
Nine of the small entity representatives said that the conference
calls that OSHA and EPA typically used to obtain their views limited
the amount of discussion that could take place. Most of these
representatives expressed a preference for face-to-face meetings
because they believed the discussions would be fuller and provide
greater value to the panels.
Although most of the small entity representatives said that the
materials the regulatory agencies provided to them permitted an
intelligent and informed discussion of the rules' potential impacts
on small entities, eight representatives said they believed the
materials could have been improved. Six thought the materials were
too vague or did not provide enough information. However, two
representatives said that the materials were too voluminous and
complex to expeditiously review.
The agency officials we interviewed also offered suggestions for
improving the panels. Because you will be hearing from those same
officials later in this hearing, I will not go into detail about
those suggestions. However, their comments centered on some of the
same issues raised by the small entity representatives, including the
timing of the panels, the materials provided to the representatives,
and the manner by which comments are obtained.
CONCLUSIONS
-------------------------------------------------- Chapter STATEMENT:5
Many of the agency officials and small entity representatives that we
interviewed said they believed the panel process has provided an
opportunity to identify significant impacts on small entities and has
given the agencies a better appreciation of the small entities'
concerns. However, implementation of the panel process has not been
without controversy or concern.
Our greatest concern about the panel process is the lack of clarity
regarding whether EPA should have convened advocacy review panels for
its national ambient air quality standards for ozone and for
particulate matter. That concern is directly traceable to the lack
of agreed-upon governmentwide criteria as to when a rule has a
"significant economic impact on a substantial number of small
entities" under the RFA. 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. In
particular, governmentwide criteria should address whether the
establishment of regulatory standards by a federal agency should be
separated from the subsequent implementation requirements imposed by
states or other entities.
Some of the concerns that small entity representatives expressed
about the panel process may be difficult to resolve. When panels are
held earlier in the process, it is less likely that the materials
will be fully developed to provide detailed data and analyses to the
small entity representatives. However, delaying the panels until
such data are available could limit the opportunity for small
entities to influence key decisions.
How agencies implement the advocacy review panel process will have a
pronounced effect on its continued viability. If small entity
representatives are given the opportunity to discuss the issues they
believe are important and see that their input is taken seriously, 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.
------------------------------------------------ Chapter STATEMENT:5.1
Mr. Chairman and Madam Chairwoman, this completes my prepared
statement. I would be pleased to answer any questions.
*** End of document. ***