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Report on the Regulatory Flexibility Act

Report on the Regulatory Flexibility Act





FY 2005





Annual Report of the Chief Counsel for Advocacy on



Implementation of the Regulatory Flexibility Act and



Executive Order 13272







April 2006







The full text of this report is available on the Office of

Advocacy's Internet site at http://www.sba.gov/advo/.

Reprints in paper or microfiche are available for purchase

from the National Technical Information Service, 5285 Port

Royal Road, Springfield, VA 22161.







To the President

and the Congress

of the United States



I am pleased to present to Congress and the President this

Report on the Regulatory Flexibility Act, FY 2005. Included

in this report is the status of agency compliance with

Executive Order 13272. The Regulatory Flexibility Act of

1980 (RFA) requires agencies to consider the impact of their

rules on small entities and examine significant alternatives

that minimize small entity impacts. Similarly, Executive

Order 13272 (E.O. 13272) directs agencies to submit draft

rules that may have a significant economic impact on small

entities to the Office of Advocacy for review and to address

Advocacy's comments in the analysis accompanying the final

rule. It also requires the Office of Advocacy to train

regulatory agencies in how to comply with the RFA and E.O.

13272.

September 2005 marked the 25th anniversary of the RFA.

The anniversary marked a significant milestone and gave us

the opportunity to look back at how the law has been working

and to look ahead toward making it work even better. On

September 19-20, 2005, exactly 25 years after the RFA was

signed, the Office of Advocacy convened a symposium with our

key partners in the implementation of the law. Our

invitation list included federal agency contacts, key

members of Congress, regulatory economists, e-regulation

developers, attorneys involved in RFA litigation, oversight

officials from the Office of Management and Budget,

officials involved in regulatory flexibility at the state

level, trade association representatives, and, most

important, small business people. We spent September 20 in

panel discussions on various aspects of how the law is

implemented, including e-rulemaking, regulatory research,

small business outreach, judicial review, and the process

for reducing existing regulatory burdens. Conference

participants had the opportunity to participate in the

training Advocacy has been offering to federal agencies on

proper RFA implementation. The RFA Symposium Conference

Proceedings are available on Advocacy's website at

http://www.sba.gov/advo/rfa_sym0905.pdf.

In conjunction with the symposium, we released a new

Advocacy-sponsored study by Mark Crain on The Impact of

Regulatory Costs on Small Firms. The study shows that the

smallest firms bear the largest per-employee burden of

federal regulatory compliance costs. Firms with fewer than

20 employees annually spend $7,647 per employee to comply

with federal regulations, or 45 percent more than the $5,282

per employee spent by firms with 500 or more employees. The

report analyzes compliance costs for economic, workplace,

environmental, and tax regulations, and details regulatory

costs for five sectors: manufacturing, trade (wholesale and

retail), services, health care, and other (a residual

category). The study finds that the compliance cost per

employee for small manufacturers is at least double that for

medium-sized and large firms. The annual cost of U.S.

federal regulations totaled $1.1 trillion in 2004. The

report can be found on the Office of Advocacy website at

www.sba.gov/advo/research/regulation.html.

The Office of Advocacy trained more than 20 agencies on

the RFA in accordance with the requirements of E.O. 13272 in

fiscal year (FY) 2005. Our office also submitted written

comments on a variety of agency rules, testified before

Congress on small business issues and potential legislative

changes to the RFA as well as agency compliance with the

RFA, and participated in Small Business Regulatory

Enforcement Fairness Act (SBREFA) panels focusing on three

EPA rules. The office worked successfully with seven states

to pass state regulatory flexibility legislation in 2005.

In FY 2005, two cases were decided by the United States

Court of Appeals for the District of Columbia Circuit (D.C.

Circuit) related to the RFA. The first case was U.S. Telecom

Ass'n v. FCC, 400 F.3d 29 (D.C. Cir., March 11, 2005). In

February 2004, Advocacy filed a notice of intent to file a

"friend of the court" brief with the D.C. Circuit. In June

2004, Advocacy withdrew its notice of intent from the court

and reached a settlement with the Federal Communications

Commission (FCC). The FCC agreed to more fully consider

impacts on small business and to urge state regulators to

consider the concerns of small rural telecom providers that

seek waivers to the new portability rules. The other case

decided by the D.C. Circuit was National Association of Home

Builders v. United States Army Corps of Engineers, Case No.

04-5009 (D.C. Cir., July 29, 2005). Plaintiffs challenged

nationwide permits issued under the Clean Water Act because

the Corps did not conduct a flexibility analysis as required

by the RFA. The Corps argued that permits were not rules

subject to the Administrative Procedure Act (APA) or RFA.

The D.C. Circuit disagreed and ruled that permits of general

applicability are rules subject to the APA.

Small entities continued to help us identify and

prioritize regulations that would significantly affect their

operations. Advocacy hosted numerous roundtables to gather

small entity input on the regulatory process and key rules.

Training small business stakeholders on the valuable tools

provided by the RFA and E.O. 13272 continued to help us

engage a broader advocacy community and leverage limited

resources.

RFA training continues to improve agency compliance in

three important ways: 1) Improvements can be seen in agency

submission of draft rules to Advocacy for review through the

increased number of draft rules sent to Advocacy's email

notification system: notify.advocacy@sba.gov. 2)

Improvements in seeking assistance early in the rulemaking

process are evident in the increasing number of

conversations with agency rule writers willing to discuss

predecisional regulatory information with Advocacy lawyers

and economists in an effort to improve RFA compliance. 3)

Improvements in considering significant alternatives

following discussions with Advocacy and affected small

entities have occurred this year as some agency rules have

contained realistic alternatives to their regulations that

would benefit small entities.

In 2005, Advocacy's involvement in agency rulemakings

helped secure $6.62 billion in first-year foregone

regulatory cost savings and $965 million in recurring annual

savings for small entities.

In fiscal year 2006, Advocacy will continue to weave

small entities into the fabric of regulatory decisionmaking

at agencies. Facilitating communications between agencies

and small entities helps agencies achieve compliance with

the RFA and E.O. 13272 and, ultimately, reduce regulatory

burdens on small entities. Efforts to train agencies and

increased attention to small business impact analysis can

change how government treats small entities. We are seeing

results from a greater working knowledge of the RFA and the

Administration's commitment, voiced through E.O. 13272.



Thomas M. Sullivan

Chief Counsel for Advocacy







Contents







To the President and the Congress of the United Statesi

Introduction

1 An Overview of the Regulatory Flexibility Act and Related

Policy

The RFA: A 25-Year History

Historical Success Stories

The Economics of the RFA

Table 1.1 Then and Now: Small Business Economic Indicators

over 25 Years

Training: Learning to Analyze Small Firm Impacts

2 Summary of FY 2005 Federal Agency Compliance with E.O.

13272 and the RFA

Executive Order 13272 Compliance

Table 2.1 RFA Compliance Training under E.O. 13272 in FY

2005

RFA and SBREFA Implementation

Table 2.2 Regulatory Comment Letters Filed by the Office

of Advocacy, Fiscal Year 2005

Chart 2.1 Advocacy Comments by Key RFA Compliance Issue,

FY 2005

Table 2.3 Regulatory Cost Savings, Fiscal Year 2005

Table 2.4 Summary of Estimated Cost Savings, Fiscal Year

2005

3 Advocacy Review of Agency RFA Compliance in Fiscal Year

2005

Department of Agriculture

Department of Commerce

Department of Defense

Department of Education

Department of Energy

Department of Health and Human Services

Department of Homeland Security

Department of Housing and Urban Development

Department of the Interior

Department of Justice

Department of Labor

Department of State

Department of Transportation

Department of the Treasury

Department of Veterans Affairs

Environmental Protection Agency

Federal Acquisition Regulation Council

Federal Communications Commission

National Archives and Records Administration

Securities and Exchange Commission

Small Business Administration

Conclusion

4 State Flexibility: Small Business Regulatory Flexibility

Model Legislation Initiative

Success Stories

Chart 4.1 Mapping State Regulatory Flexibility Provisions,

FY 2005

Table 4.1 State Regulatory Flexibility, 2005 Legislative

Activity

Table 4.2 State Regulatory Flexibility Legislation, Status

as of October 2005

Appendices

A Supplementary Tables

Table A.1 Cabinet Department RFA Procedures in Compliance

with Section 3 (a) of E.O. 13272

Table A.2 Federal Agencies Trained in RFA Compliance, FY

2003-2005

Table A.3 SBREFA Panels through Fiscal Year 2005

The Regulatory Flexibility Act

C Executive Order 13272

D Advocacy Legislative Priorities for the 109th Congress

E Abbreviations







Introduction











"The state of small business regulation has come a long way

since the enactment of the Regulatory Flexibility Act in

1980," said Chief Counsel for Advocacy Thomas M. Sullivan at

the Office of Advocacy's symposium on the 25th anniversary

of the Regulatory Flexibility Act, September 19, 2005. At

the symposium, much was said about the advances in small

business regulatory policy since 1980. For example:

In a panel on e-rulemaking, Jeffrey Lubbers

of American University talked about the benefits of

electronic rulemaking as an opportunity for information

dissemination, government transparency, and public

participation.

Susan Dudley of George Mason University

noted in a regulatory research panel that the volume of

regulations continues to increase and stressed that the

RFA is significant as one of the first legislative

requirements to analyze the impacts of new regulations.

Todd McCracken of the National Small

Business Association in a small business outreach panel

said of the increased small business involvement in the

RFA process, "There's a key qualitative significance to

having real input from real businesses."

Karen Harned of the National Federation

of Independent Business Legal Foundation, speaking about

the judicial review provision introduced in 1995, said

she believes that the possibility of litigation means

that agencies have progressed in their compliance.

In a panel on reducing existing burdens,

Howard Radzely of the U.S. Department of Labor urged

small business owners to get involved in the process and

voice their regulatory concerns about the 200 laws

enforced by the department.

In Chapter 1, Advocacy's Report on the Regulatory

Flexibility Act, FY 2005, takes a look at the developments

in the 25-year history of the RFA. Then the report focuses

on the substance of RFA and E.O. 13272 enforcement in Fiscal

Year 2005, examining Advocacy's role and overall trends in

Chapter 2, individual agency achievements and ongoing

challenges in Chapter 3, and developments in state

regulatory flexibility law in Chapter 4.







1 An Overview of the Regulatory Flexibility Act and Related

Policy



The RFA: A 25-Year History



As soon as President Gerald Ford signed Public Law 94-305

creating the Office of Advocacy in June 1976, the important

work of paying attention to regulations' effects on small

firms came under the wing of the newly created independent

office. Part of Advocacy's mandate was explicitly to

"measure the direct costs and other effects of government

regulation on small businesses; and make legislative and

nonlegislative proposals for eliminating excessive or

unnecessary regulations of small businesses."

In the fall of 1979, President Jimmy Carter added the

Small Business Administration to his Regulatory Council and

issued a memorandum to the heads of executive departments

and agencies. He said, "I want you to make sure that federal

regulations will not place unnecessary burdens on small

businesses and organizations," and directed agencies to

apply regulations "in a flexible manner, taking into account

the size and nature of the regulated businesses." Agencies

were to report on their efforts to the Office of Advocacy.

Meanwhile, the House and Senate Small Business and

Judiciary Committees had been holding hearings on the

effects of regulation. Small business people cited evidence

that uniform application of regulatory requirements made it

difficult for smaller businesses to compete.

By 1980, when delegates assembled for the first of three

White House Conferences on Small Business, the conference

report noted that "during the past decade, the growth of

government regulation has been explosive, particularly in

such areas as affirmative-action hiring, energy

conservation, and protection for consumers, workers, and the

environment. Small business people recognize that some

government regulation is essential for maintaining an

orderly society. But there are now 90 agencies issuing

thousands of new rules each year."

Moreover, the report said, the new Office of Advocacy had

estimated that small firms spent $12.7 billion annually on

government paperwork. Among the conference recommendations,

the fifth highest vote-getter was a recommendation calling

for "sunset review" and economic impact analysis of

regulations, as well as a regulatory review board with small

business representation. The conference delegates

recommended putting the onus of measuring regulatory costs

on the regulatory agencies-to "require all federal agencies

to analyze the cost and relevance of regulations to small

businesses."



1980: The Regulatory Flexibility Act

The White House Conference recommendations helped form the

impetus for the passage, in 1980, of the Regulatory

Flexibility Act (RFA). The intent of the act was clearly

stated:

"It is the purpose of this act to establish as a

principle of regulatory issuance that agencies shall

endeavor, consistent with the objectives.of applicable

statutes, to fit regulatory and informational requirements

to the scale of businesses.To achieve this principle,

agencies are required to solicit and consider flexible

regulatory proposals and to explain the rationale for their

actions to assure that such proposals are given serious

consideration."

The law directed agencies to analyze the impact of their

regulatory actions and to review existing rules, planned

regulatory actions, and actual proposed rules for their

impacts on small entities. Depending on the proposed rule's

expected impact, agencies were required by the RFA to

prepare an initial regulatory flexibility analysis (IRFA), a

certification, and/or a final regulatory flexibility

analysis (FRFA). Rules to be included in the agencies'

"regulatory agendas" were those likely to have a

"significant economic impact on a substantial number of

small entities."



Implementing the RFA

The Office of Advocacy was charged with monitoring agency

compliance with the new law. Over the next decade and a

half, the office carried out its mandate, reporting annually

on agency compliance to the president and the Congress. But

it was soon clear that the law wasn't strong enough. A

briefing paper prepared for the 1986 White House Conference

on Small Business noted: "The effectiveness of the

Regulatory Flexibility Act largely depends on small

business' awareness of proposed regulations and [their]

ability to effectively voice [their] concerns to regulatory

agencies. In addition, the courts' ability to review agency

compliance with the law is limited."

The delegates recommended that the RFA be strengthened by

requiring agencies to comply and by providing that agency

action or inaction be subject to judicial review. President

Ronald Reagan's 1987 report on small business noted:

"Regulations and excessive paperwork place small businesses

at a disadvantage in an increasingly competitive world

marketplace.This Administration supports continued

deregulation and other reforms to eliminate regulatory

obstacles to open competition." But it would take an act of

Congress to make judicial review law-and reaching that

consensus needed more time.

Regulations' effects on the economic environment for

competition also concerned President George H.W. Bush, whose

1992 message in the annual small business report noted: "My

Administration this year instituted a moratorium on new

federal regulations to give federal agencies a chance to

review and revise their rules. And we are looking at ways to

improve our regulatory process over the long term so that

regulations will accomplish their original purpose without

hindering economic growth."

In September 1993, President Bill Clinton issued

Executive Order 12866, "Regulatory Planning and Review,"

designed, among other things, to ease the regulatory burden

on small firms. The order required federal agencies to

analyze their major regulatory undertakings and to take

action to ensure that these regulations achieved the desired

results with minimal burden on the U.S. economy.

An April 1994 report by the General Accounting Office

reviewed the Office of Advocacy's annual reports on agency

compliance with the RFA and concluded: "The SBA annual

reports indicated agencies' compliance with the RFA has

varied widely from one agency to another. .the RFA does not

authorize SBA or any other agency to compel rulemaking

agencies to comply with the act's provisions."



The 1995 White House Conference and SBREFA

In June 1995, a third White House Conference on Small

Business examined the RFA's weaknesses. The Administration's

National Performance Review had recommended that agency

compliance with the RFA be subject to judicial review. Still

it had not happened.

Once again, the White House Conference forcefully

addressed the problem. One of its recommendations fine-tuned

the regulatory policy recommendations of earlier

conferences, asking for specific provisions that would

include small firms in the rulemaking process.

In October, the Office of Advocacy issued a report, based

on research by Thomas Hopkins, that estimated the total

costs of process, environmental, and other social and

economic regulations to be between $420 billion and $670

billion in 1995. The report estimated that the average cost

of regulation was $2,979 per employee for large firms with

500 or more employees and $5,532 per employee for small

firms with fewer than 20 employees.

In March 1996, President Clinton acted on the 1995 White

House Conference recommendation that was taken up by

Congress, by signing Public Law 104-121, the Small Business

Regulatory Enforcement Fairness Act (SBREFA). The new law

gave the courts jurisdiction to review agency compliance

with the RFA. Second, it mandated that the Environmental

Protection Agency (EPA) and the Occupational Safety and

Health Administration (OSHA) convene small business advocacy

review panels to consult with small entities on regulations

expected to have a significant impact on them, before the

regulations were published for public comment. Third, it

reaffirmed the authority of the chief counsel for advocacy

to file amicus curiae (friend of the court) briefs in

appeals brought by small entities from agency final actions.



Executive Order 13272

In March 2002, President George W. Bush announced his Small

Business Agenda. The president gave a high priority to

regulatory concerns, including as a key feature of his

agenda the goal to "tear down the regulatory barriers to job

creation for small businesses and give small business owners

a voice in the complex and confusing federal regulatory

process."

One key goal was to strengthen the Office of Advocacy by

creating an executive order that would direct agencies to

work closely with Advocacy in properly considering the

impact of their regulations on small business.

In August 2002, President Bush issued Executive Order

13272. It requires federal agencies to establish written

procedures and policies on how they would measure the impact

of their regulatory proposals on small entities and to vet

those policies with Advocacy; to notify Advocacy before

publishing draft rules expected to have a significant small

business impact; and to consider Advocacy's written comments

on proposed rules and publish a response with the final

rule. E.O. 13272 requires Advocacy to provide notification

as well as training to all agencies on how to comply with

the RFA. These steps set the stage for agencies to work

closely with Advocacy in considering their rules' impacts on

small entities.



Implementing the Executive Order

As part of its compliance with E.O. 13272, the Office of

Advocacy first reported to the Office of Management and

Budget in September 2003. The report noted that Advocacy had

engaged agencies on E.O. 13272 and instituted an email

address (notify.advocacy@sba.gov) to make it easier for

agencies to comply with notification requirements. Advocacy

developed an RFA compliance guide, posted it on its website,

prepared training materials, and began training agencies

throughout the government.

Nearly all of the cabinet agencies submitted written

plans for compliance to Advocacy and made their RFA

procedures publicly available. Advocacy has also developed a

Regulatory Alerts webpage at

http://www.sba.gov/advo/laws/law_regalerts.html to call

attention to important pending regulations that may affect

small entities. The final chapter on how much small

businesses and other small entities are benefiting from the

RFA as amended by SBREFA and supplemented by E.O. 13272 has

yet to be written. Legislation has been introduced to

further enhance the RFA. Advocacy believes that as agencies

adjust their regulatory development processes to accommodate

the RFA and E.O. 13272's requirements, the benefits will

accrue to small firms. Agencies are making strides in that

direction.







Regulatory Flexibility Timeline





June 1976 President Gerald Ford signs Public Law 94-305,

creating an Office of

Advocacy within the U.S. Small Business

Administration charged, among other things,

to "mea-sure the direct costs and other effects of federal

regulation

small businesses and make legislative and

nonlegislative proposals for

elimi--nating excessive or unnecessary

regulations of small businesses."



January 1980 The first White House Conference on Small

Business calls for "sunset

review" and economic impact analysis of

regulations, and a regulatory

review board that includes small business

representation.



September 1980 President Jimmy Carter signs the Regulatory

Flexibility Act, requiring

agencies to review the impact of proposed rules

and include in published

regulatory agendas those likely to have a

"significant economic impact on a substantial

number of small entities."



October 1981 The Office of Advocacy reports on the first

year of RFA experience in

testimony before the Subcommittee on Export

Opportunities and Special Small Business Problems of

the U.S. House Of Representatives Committee on Small

Business.



February 1983 Advocacy publishes the first annual report on

agency RFA compliance.



August 1986 Delegates to the second White House

Conference on Small Business

recommend strengthening the RFA by, among other

things, subjecting agency compliance to

judicial review.



September 1993 President Bill Clinton issues Executive Order

12866, "Regulatory Planning and Review,"

requiring each federal agency to "tailor its regulations to

impose the least burden on society, including

businesses of different sizes."



June 1995 The third White House Conference on Small

Business asks for specific

provisions to strengthen the RFA-including the

IRS under the law, granting

judicial review of agency compliance, and

including small businesses in the rulemaking

process.



March 1996 President Clinton signs the Small Business

Regulatory Enforcement Fairness

Act, giving courts jurisdiction to review agency

compliance with the RFA,

requiring the Environmental Protection Agency and

the Occupational Safety

and Health Administration to convene small

business advocacy review panels,

and affirming the chief counsel's authority to

file amicus curiae briefs in appeals brought by

small entities from final agency actions.



March 2002 President George Bush announces his Small

Business Agenda, which promises to "tear down

regulatory barriers to job creation for small businesses and

give small business owners a voice in the

complex and confusing federal regulatory process."



August 2002 President Bush issues Executive Order 13272,

"Proper Consideration of Small Entities in Agency

Rulemaking," which requires federal agencies to establish

written procedures to measure the impact of their

regulatory proposals on small

businesses, and to consider Advocacy comments on

proposed rules, and

requiring Advocacy to train agencies in the

requirements of the law.



December 2002 Advocacy presents model state regulatory

flexibility legislation to the

American Legislative Exchange Council (ALEC) for

consideration by state

legislators. ALEC endorses the model legislation,

and states begin adopting

legislation modeled on the federal law.



May 2003 Advocacy issues A Guide for Government Agencies:

How to Comply with the Regulatory Flexibility

Act.



September 2003 Advocacy presents its first report on agency

compliance with E.O. 13272,

noting the start of Advocacy's agency training.



September 2005 In the 25th anniversary year of the RFA,

Advocacy cosponsors a symposium

that looks back at the RFA's achievements and

challenges and looks ahead at

possible improvements. Legislation is considered

in Congress to strengthen

the RFA.







Historical Success Stories





SBREFA Review Panels Improve Rulemaking

In 1996, Congress fortified the Regulatory Flexibility Act

with the Small Business Regulatory Enforcement Fairness Act

(SBREFA). Among other things, SBREFA directed the

Environmental Protection Agency (EPA) and the Occupational

Safety and Health Administration (OSHA) to convene small

business review panels for regulations expected to have a

significant small business impact. These panels occur before

the rule is published for public comment. Significant

rulemaking improvements have resulted from the SBREFA panel

process.

SBREFA review panels consist of representatives from the

agency, Advocacy, and the Office of Information and

Regulatory Affairs (OIRA) of the Office of Management and

Budget (OMB). The panel reaches out to small entities likely

to be affected by the proposal, seeks their input, and

prepares a report with recommendations for reducing the

potential small business impact. The agency may modify its

proposal in response to the panel report. (See Appendix A,

Table A.3 for a list of SBREFA panels through FY 2005.)



OSHA Panels

OSHA has convened seven panels since 1996. Two of the most

significant were on the Safety and Health Program rule and

the Ergonomics Program Standard. They demonstrate how small

business input early in the regulatory process can help

agencies see new ways to solve a problem through

regulation-by looking at equally effective alternatives that

minimize the harm to small business.

Safety and Health Program Rule. In August 1998, OSHA

notified Advocacy of its intent to propose a safety and

health program rule. The proposal would have required

employers to establish a workplace safety and health

program to ensure compliance with OSHA standards and the

"general duty" clause of the Occupational Safety and

Health Act. Because the proposal covered nearly all

employers (except those in construction and agriculture),

a SBREFA panel was convened that included 19 small entity

representative advisors. The panel report sent the

message loud and clear to OSHA, OMB, and other federal

agencies that realistic costs and accurate data must be

used when promulgating regulations. As a result, this

overly burdensome regulation never moved forward, and it

was eventually removed from OSHA's regulatory agenda,

saving small businesses billions in regulatory compliance

costs.

Ergonomics Standard. In March 1999, OSHA released a

draft ergonomics standard and announced its intention to

convene a SBREFA panel to discuss the potential impact on

small businesses. The draft proposal covered every

industry and business in the United States, except those

in construction, maritime trades, and agriculture. Twenty

small entity representatives (including 13 recommended by

Advocacy) advised the panel. During the deliberations,

the small entities expressed a number of concerns,

especially about OSHA's estimates of the time and money

required to comply. They provided OSHA with types of

costs they felt were omitted and suggested that OSHA

provide the assumptions it used when it proposed the

standard in the Federal Register. The panel completed its

report in April 1999. Congress repealed the ergonomics

rule in March 2001. OSHA's subsequent decision to issue

guidelines instead of creating a new ergonomics rule

showed that the SBREFA panel process works. Advocacy

estimated in 2001 that rescinding the ergonomics standard

saved small businesses $3 billion. Other observers have

estimated that the actual cost would have been up to 15

times higher.



EPA Panels

EPA has convened 29 SBREFA panels since 1996. These panels

have improved the cost-effectiveness of planned

environmental rules and limited the adverse impact on small

entities, including two small communities. Two recent

successes are the panels on nonroad diesel engines and

construction and development runoff.

Nonroad Diesel Engines and Fuel Rule. In summer

2002, EPA notified Advocacy that it would propose further

limits on emissions of nitrogen oxides and particulate

matter from diesel-powered nonroad engines. These engines

are used extensively in construction, agriculture, and

other off-road applications. EPA also planned to

dramatically reduce the allowable level of sulfur in

diesel fuel used by nonroad engines. The rule was

anticipated to have significant economic impacts on small

equipment manufacturers who use diesel engines, and on

small oil refiners and oil distributors. EPA convened a

SBREFA panel with 20 small entity representative advisors

who raised concerns about the technical and cost

feasibility of EPA's proposed rule. The panel concluded

that equipment manufacturers should be allowed to

purchase current engines for several additional years,

while redesigning their products to accommodate the newer

engines. The panel also advised that expensive

aftertreatment devices should not be required on engines

with less than 25 horsepower. The SBREFA panel report

recommendations, which were adopted by EPA in the final

rule, allowed many small equipment manufacturers to stay

in business and gave them valuable time to redesign their

products to comply with the new requirements.

Construction and Development Site Runoff.In June

2002, EPA proposed a rule to reduce stormwater runoff

from construction and development sites of one acre or

more. The original proposal carried a price tag of almost

$4 billion per year, and its requirements overlapped with

existing state and local stormwater programs. Small

businesses provided information about the rule's

potential impact and offered other options. The panel

concluded that the rule's requirements would add

substantial complexity and cost to current stormwater

requirements without a corresponding benefit to water

quality. The panel recommended that EPA not impose the

requirements, and focus instead on improving public

outreach and education about existing stormwater rules.

In March 2004, EPA announced it would not impose new

requirements for construction sites. EPA found that a

flexible scheme would permit state and local governments

to improve water quality without an additional layer of

federal requirements and without unduly harming small

construction firms. In addition to the cost savings for

small businesses, rescinding the original proposal saved

new home buyers about $3,500 in additional costs.



EPA Conducted Two SBREFA Panels in 2005:

Controlling the Interstate Transport of Air

Pollution. In early 2005, EPA notified Advocacy that it

planned to propose two related regulations to address

situations where EPA acts to control emissions of air

pollutants from power plants that are carried across

state lines to a downwind state. On April 27, 2005, EPA

convened a SBREFA panel with 16 small entity

representative advisors, who raised concerns about the

disproportionate cost burden the rule could impose on the

58 small entities (primarily small community municipal

utilities and cooperatives) that EPA estimated would be

subject to the two rules. The panel considered several

regulatory alternatives, and ultimately concluded that

economic burdens on small entities would be minimized by

a "cap and trade" program that allows companies to

purchase and sell emission credits.

Mobile Source Air Toxics Rule. In April 2005, EPA

notified Advocacy that it was planning to propose a rule

that would reduce emissions of benzene, a toxic air

pollutant, from gasoline, portable gasoline containers,

and certain highway vehicles. On September 7, 2005, EPA

convened a SBREFA panel with 11 small entity

representatives chosen from portable gasoline container

manufacturers, small oil refiners, and vehicle

manufacturers. The panel considered several regulatory

alternatives, and ultimately recommended a number of

regulatory flexibilities, including giving small entities

additional time to comply and allowing limited hardship

exemptions for small firms that demonstrate an inability

to meet the full program requirements.



SBREFA Panels Work

These panels illustrate that the SBREFA panel process indeed

works to reduce the burdens on small entities. Because

agencies are required to convene these panels, small

businesses are able to shed light on agencies' underlying

assumptions, rationale, and data behind their draft

rulemaking. In the absence of SBREFA panels, these rules

would have been promulgated as originally drafted, costing

small businesses millions in unnecessary regulatory costs.

The panel reports allowed EPA and OSHA to examine

alternatives that accomplished their regulatory objectives

while protecting small businesses.



Legal History

SBREFA amended the RFA to allow small businesses for the

first time to seek judicial review of agency compliance with

the RFA. In addition to legal challenges brought by small

entities, the chief counsel for advocacy has the right under

the RFA to file amicus curiae (friend of the court) briefs

in RFA cases. These provisions were important in giving the

Office of Advocacy and the small business community recourse

when agencies were unresponsive to the law.



Hardrock Mining

On January 7, 1998, the Office of Advocacy filed an amicus

curiae brief. The case, Northwest Mining v. Babbitt, F.

Supp. 2d 9 (D.D.C. 1998) raised issues about a trade

association's standing to bring a claim under the RFA and

the Bureau of Land Management's (BLM) failure to use the

proper size standard for determining the number of small

businesses that may be harmed by the regulation.

In May 1998, the District Court for the District of

Columbia agreed with Advocacy's arguments and ruled in favor

of the plaintiff. First, the court found that the RFA

extends the standing to trade associations to sue as small

entities. Small entity as defined in the RFA includes the

term "small organization," which means any not-for-profit

enterprise that is independently owned and operated and is

not dominant in its field. Since the plaintiff was a small

not-for-profit organization, it was a small entity and

therefore met the requirements for standing under the RFA.

In terms of the agency use of an alternate size standard,

the court stated that the BLM's reasons for using another

size standard were "unconvincing in light of the clearly

mandated procedure of the RFA. The definitions section of

the RFA uses phrases such as ```small entity' shall have the

same meaning. Words such as these do not leave room for

alternate interpretations by the agency." It found that

since the BLM's certification did not observe the procedure

required by law, the plaintiff was entitled to relief.

Although the agency argued that maintenance of the rule was

necessary to save the environment, the court disregarded

that argument stating:

"While recognizing the public interest in preserving the

environment, the Court also recognizes the public interest

in preserving the rights of parties which are affected by

government regulation to be adequately informed when their

interests are at stake and to participate in the regulatory

process as directed by Congress."



Sharks!

In December 1996, the National Marine Fisheries Service

(NMFS) of the Department of Commerce published a proposal to

reduce the existing shark fishing quota by 50 percent,

certifying that the reduction would not have a significant

impact on a substantial number of small entities. In January

1997, Advocacy questioned NMFS's decision to certify rather

than perform an initial regulatory flexibility analysis. In

its March 1997 final rule, NMFS upheld its original

decision, but prepared a final regulatory flexibility

analysis rather than certifying the rule.

In May 1997, the Southern Offshore Fishing Association

brought suit against the Secretary of Commerce, challenging

the quotas through judicial review provisions of laws

including the RFA. Advocacy filed to intervene as amicus

curiae, but withdrew after the Department of Justice

stipulated that the standard of review for RFA cases should

be "arbitrary and capricious," a higher standard than

originally requested.

In February 1998, the United States District Court for

the Middle District of Florida ruled that NMFS's

certification of "no significant economic impact" and the

FRFA failed to meet APA and RFA requirements. Noting

Advocacy's role as "watchdog of the RFA," the Court remanded

the rule and instructed the agency to analyze the economic

effects and potential alternatives. Further steps culminated

in the court issuing an injunction to NMFS from enforcing

new regulations until the agency could establish bona fide

compliance with the court's earlier orders.

A later settlement involved a delay in any decisions on

new shark fishing quotas pending a review of current and

future shark stocks by a group of independent scientists. In

November 2001 that study was released, indicating that NMFS

had significantly underestimated the number of Atlantic

sharks.



Number Portability

In March 2005, the U.S. Court of Appeals for the D.C.

Circuit issued a ruling that strengthened the RFA and

provided needed relief to small businesses. In U.S. Telecom

Assoc. and CenturyTel, Inc. v. FCC, No. 03-1414 (D.C. Cir.,

decided March 11, 2005), the Court found that the Federal

Communications Commission had not complied with the RFA and

sent the rule, which concerned telephone number portability,

back to the agency with instructions to conduct a regulatory

flexibility analysis. The Court stayed enforcement of the

rule on small businesses until the agency finishes a

regulatory flexibility analysis. Advocacy decided against

filing an amicus brief after the FCC agreed to advise state

regulators to give small telecom providers more flexibility.

The case is significant for three reasons. First, it

reaffirms the importance of the RFA in agency rulemaking.

Other claims in this case were dismissed as harmless error.

Only the claim that the FCC had failed to comply with the

RFA was upheld and sent back to the FCC. Second, this

decision was made by the D.C. Circuit, which is the

appellate court most likely to hear appeals from federal

agency rulemakings. The decision from this court that

upholds the RFA can be used in other appeals from other

agencies. Third, by staying the rules until the RFA analysis

is done, the D.C. Circuit provided immediate relief to the

small entities.





The Economics of the RFA





Office of Advocacy Indicators over the Years

When the Regulatory Flexibility Act was passed in 1980, the

cost of regulation was very much on the minds of economists

and policymakers. Cost studies from that time period show a

general consensus that small firms were being saddled with a

disproportionate share of the federal regulatory burden.

Then as now, one important tool for redressing the

disproportionate impact on small firms was through

implementation of the RFA.

As the Office of Advocacy works with federal agencies

during the rulemaking process, it seeks to measure the

savings of its actions in terms of the compliance costs that

small firms would have had to bear if changes to regulations

not been made. The first year in which cost savings were

documented was 1998. Changes to rules in that year were

estimated to have saved small businesses $3.2 billion. In

2004, Advocacy actions saved small businesses more than $17

billion. Advocacy continues to measure its accomplishments

through cost savings.

Ultimately, if federal agencies institutionalize

consideration of small entities in the rulemaking process,

the goals of the regulatory flexibility process and

Executive Order 13272 will be realized to a large degree,

and the amount of foregone regulatory costs will actually

diminish.

Economics has provided a framework for regulatory actions

and for other public policy initiatives. What has been

Advocacy's impact in influencing public policy and

furthering research? Research by the Office of Advocacy and

others over the past two decades has advanced the

recognition that small firms are crucial to the U.S.

economy.

The economy of 1980 and today differ greatly (Table 1.1).

Real gross domestic product (GDP) and the number of nonfarm

business tax returns have more than doubled since 1980. The

unemployment rate and interest rates are much improved, and

prices are higher, although inflation is significantly

lower. One constant, though, is the lack of timely, relevant

data on small businesses. The Office of Advocacy struggled

throughout much of its early existence to measure the number

of small firms accurately. The good news is that since 1988

the Census Bureau now has credible firm size data, in part

because of funding from the Office of Advocacy.

Despite the data obstacles, Advocacy research shows that

more women and minorities have become business owners since

1980. Small businesses are now recognized to be job

generators and the source of growth and innovation. Not only

are more than 99 percent of all employers small businesses,

but small firms are responsible for 60 to 80 percent of all

new jobs, and they are more innovative than larger firms,

producing 13.5 times as many patents per employee (see the

Office of

Advocacy's "Frequently Asked Questions" at

http://app1.sba.gov/faqs/faqindex.cfm?areaID=24).

Research on small entities has gained more prominence,

and entrepreneurs are widely acknowledged as engines of

change in their regions and industries. The Office of

Advocacy will continue to document the contributions and

challenges of small business owners. Armed with these data,

policymakers will be able to better consider how government

decisions affect small businesses and the economy.



The Impact of Regulatory Costs on Small Firms

Regulatory policy involves difficult choices. Accurate data

on costs are essential to a complete understanding of the

tradeoffs involved. Even though the RFA first required

agencies to consider small business impacts separately 25

years ago, dependable cost estimates have often been hard to

come by.

While measuring the costs of new regulations is a

prerequisite for improving regulatory policy, compliance

with the sum of all current regulations also places a heavy

burden on small businesses. Over the past 25 years,

significant gains have been made in measuring the impact of

regulatory compliance on small firms. During that time, the

Office of Advocacy has produced a series of research reports

on this topic, and the findings have been consistent:

compliance costs small firms more per employee than large

firms. The most significant series of analyses began in the

1990s when Thomas Hopkins first estimated the costs of

regulatory compliance for small firms. This research was

refined by Mark Crain and Hopkins in 2001, and most recently

by Crain in the 2005 study, The Impact of Regulatory Costs

on Small Firms. Crain's latest estimate shows that federal

regulations cost small firms nearly 45 percent more per

employee than large firms.

The 2005 report distinguishes itself from previous

research by adopting a more rigorous methodology for its

estimate on economic regulation, and it brings the

information in the 2001 study up to date.

The research finds that the total costs of federal

regulations have further increased from the level

established in the 2001 study, as have the costs per

employee. Specifically, the cost of federal regulations

totals $1.1 trillion, while the updated cost per employee is

now $7,647 for firms with fewer than 20 employees. The 2001

study showed small businesses with 60 percent greater

regulatory burden than their larger business counterparts.

The 2005 report shows that disproportionate burden shrinking

to 45 percent.

Despite much progress since passage of the RFA 25 years

ago, significant work remains. The hurdles include

determining the total burden of rules on firms in specific

industries or imposed by specific federal agencies.

Estimates of these costs would help show policymakers the

marginal cost of adding new rules or modifying existing

ones; they would also help show the effects of repealing

rules that are no longer relevant, yet still cost small

businesses every year. Such analyses will become crucial as

the mountain of federal regulations continues to rise. The

future of small businesses will be affected by rulemaking

that uses the best data available to balance the costs and

benefits of regulation, while considering how additional

rules will affect small firms.







Table 1.1 Then and Now:



Small Business Economic Indicators Over 25 Years



1980 1985 1990 1995 2000 2005

Real gross domestic product 5.2 6.1 7.1 8.0 9.8 11.1

(trillions of dollars)

Unemployment rate (percent) 7.2 7.2 5.6 5.6 4.0 5.2

Consumer price index 82.4 107.6 130.7 152.4 172.2 193.4

(1982=100)

Prime bank loan rate 15.3 9.9 10.0 8.8 9.2 5.8

(percent)

Employer firms (millions) -- -- 5.1 5.4 5.7 5.7

(e)

Nonemployer firms (millions) -- -- -- -- 16.5 18.3

(e)

Self-employment, 8.6 9.3 10.1 10.5 10.2 10.6

unincorporated (millions)

Nonfarm business tax returns 13.0 17.0 20.2 22.6 25.1 29.3

(millions)

Note: All figures are seasonally adjusted unless otherwise

noted. Figures for "today" represent the latest data

available; 2005 data are year-to-date.

e = Estimate

Source: Federal Reserve Board; U.S. Department of the

Treasury, Internal Revenue Service; U.S. Department of

Commerce, Bureau of the Census and Bureau of Economic

Analysis; U.S. Department of Labor, Bureau of Labor

Statistics





Training: Learning to Analyze Small Firm Impacts



One key aspect of Executive Order 13272, "Proper

Consideration of Small Entities in Agency Rulemaking," is to

educate federal rulemakers on how to comply with the

Regulatory Flexibility Act. Since President Bush signed E.O.

13272 in August 2002, staff at over 40 agencies have been

trained.

Agency staff-attorneys, economists, policymakers and

other employees involved in the regulation writing

process-come to RFA training with varying levels of

familiarity with the RFA, even though it has been in

existence for 25 years. Some are well versed in the law's

requirements, while others are completely unaware of what it

requires an agency to do when promulgating a regulation.

The three-and-a-half hour session consists of discussion,

group assignments (in which participants review fictitious

regulations for small business impact), and a question-and-

answer session. Agency employees receive a hands-on approach

to the RFA and are able to see how the law's many

requirements work in a real-life regulatory setting. By the

end of the course there are always many revelations and

excited faces as agency staff realize what they have to do

to comply with the RFA and that Advocacy is there to help

them along the way.

One of the most important themes throughout the course is

that the agency should bring Advocacy into the rule

development process early in the creation of a regulation.

Advocacy works closely with agencies to help them determine

whether a potential rule will have a significant economic

impact on a substantial number of small entities. Making

this determination is frequently where agencies make their

initial mistakes under the RFA. The training session helps

explain the steps rule writers need to take to make this

decision accurately. By considering the impact of their

regulations on small business from the beginning, agencies

are more likely to promulgate a rule that is less burdensome

with more effective compliance, while avoiding legal hassles

and delays for noncompliance with the RFA.

Changing the culture of agency rule writers is a tall

order, but Advocacy's RFA training is already having an

impact on the way agencies approach rule development. Many

agencies that have been through training are now consulting

with Advocacy earlier in the process, exchanging draft

documents, and recognizing that if they lack the information

they need, Advocacy can help point them in the right

direction for small business data.



2. Summary of FY 2005 Federal Agency Compliance with E.O.





13272 and the RFA









Executive Order 13272 Compliance



In August 2002, President Bush signed E.O. 13272,

recognizing the importance of small businesses and creating

additional RFA compliance requirements on federal regulatory

agencies. Section 3 of E.O. 13272 requires agencies to do

three things when promulgating regulations that affect small

entities.

First, agencies are required to issue written policies

and procedures to ensure that they consider the potential

impact of their regulations on small businesses. These must

have been made publicly available in February 2003 (see

Appendix A, Table A.1 for citations to the agencies' RFA

policy websites).

Second, E.O. 13272 requires agencies to notify Advocacy

of any draft rules that may have a significant economic

impact on a substantial number of small entities under the

RFA.

The third requirement is that agencies address Advocacy's

written comments on a proposed rule in the agency's final

rule published in the Federal Register.

While agency compliance with both the RFA and E.O. 13272

have improved, agencies still do not reach out to Advocacy

early enough in the rule development process to make a real

difference in the impact of the rule on small entities. As

agencies continue to make changes to their regulatory

development processes to accommodate E.O. 13272's

requirements, benefits to small entities will be seen. Some

agencies are making strides in that direction. These can be

seen in the cost savings this fiscal year. Advocacy

continues to stress the importance of agency compliance with

EO 13272 as another crucial step in consideration of the

impact of their rules on small entities and is hopeful that

real change as a result of the executive order will continue

to be seen.



RFA Training under E.O. 13272

In addition to the three agency requirements, E.O. 13272

requires Advocacy to conduct federal agency training in how

to comply with the RFA and the executive order. Advocacy has

trained more than half of the 66 federal agencies and

independent commissions identified as promulgating

regulations that affect small businesses (Table 2.1. See

Appendix A, Table A.2 for a complete list.)

RFA training under E.O. 13272 is having a real impact on

agencies in a number of ways. One of the most important

effects of the training is a closer relationship between the

agency and the Office of Advocacy. As a result of the

training, agency rule writers, economists, attorneys, and

policymakers recognize that there is an office that can

assist them with their RFA and E.O. 13272 compliance. This

closer relationship has led to several agencies contacting

Advocacy earlier in the rule development process regarding

rules that may have a significant impact on a substantial

number of small entities. Early intervention leads to better

rules for small businesses.

Another improvement as a result of the training in a few

agencies is a more detailed economic analysis. Where

Advocacy once saw one-paragraph certifications and economic

analyses without any alternatives, there are now more

substantiated certifications and IRFAs that at least

acknowledge an attempt to identify alternatives for small

businesses.

Finally, the RFA training has increased agency use of

Advocacy's email notification system of draft rules that may

have a significant impact on a substantial number of small

entities. Most agencies are still not using the system;

however, the number is increasing as the ease of the system

and the monetary savings is more widely known. Some agencies

still insist on sending Advocacy paper copies of draft rules

that arrive weeks after they are published in the Federal

Register; however, those that utilize the system find it to

be a convenient method of compliance with E.O. 13272. While

these RFA training successes can be noted in some agencies,

most have yet to jump on the E.O. 13272 compliance

bandwagon. Advocacy has continued in FY 2005 to encourage

agencies to comply with E.O. 13272 through its RFA training

activities, including repeat training at some agencies for

new employees and those who missed the initial training.

This fiscal year, in addition to training regulatory

agencies, Advocacy held special sessions for trade

associations, congressional staff, state government

officials, and Advocacy's regional advocates.

A web-based training module planned for FY 2006 will

enable Advocacy to reach agencies that have not yet been

available for training, as well as to receive electronic

course feedback on what agency employees have learned. With

continued training on the importance of complying with the

RFA and E.O. 13272, the number of regulations written with

an eye toward reducing the burden on small entities will

continue to grow.





Table 2.1 RFA Compliance Training under E.O. 13272 in FY



2005



Date Agency/Organization Type

10/06/0 Federal Communications Commission Independent

4 (second session) agency



10/20/0 Telecommunications trade associations Trade

4 associations



10/27/0 Department of Housing and Urban Cabinet

4 Development department



11/10/0 Department of Energy Cabinet

4 department



11/15/0 Department of Health and Human Unit within

4 Services, Cabinet

Centers for Medicare and Medicaid department

Services



12/01/0 Department of Homeland Security Units within

4 Transportation Security Cabinet

Administration department

U.S. Coast Guard



12/15/0 Department of Commerce Unit within

4 Patent and Trademark Office Cabinet

department



01/12/0 Department of Transportation Units within

5 National Highway Traffic Safety Cabinet

Administration department

Federal Highway Administration



01/26/0 Department of Agriculture Unit within

5 Animal and Plant Health Inspection Cabinet

Service department



02/02/0 Department of Education Cabinet

5 department



02/09/0 Department of Housing and Urban Cabinet

5 Development department

(second session)



02/16/0 Department of Homeland Security Units within

5 Bureau of Customs and Border Cabinet

Protection department

Bureau of Citizenship and

Immigration Services



03/02/0 Federal Election Commission Independent

5 agency



03/23/0 Access Board Independent

5 agency



04/06/0 Department of Defense Cabinet

5 Federal Acquisition Regulation department

Commission Independent

agency

04/27/0 Federal Communications Commission Independent

5 (third session) agency



05/11/0 Department of Commerce Unit within

5 Office of Manufacturing Services Cabinet

department

05/18/0 Securities and Exchange Commission Independent

5 agency

06/29/0 Federal Deposit Insurance Corporation Independent

5 agency



07/26/0 Small Business Administration Office Advocacy

5 of Advocacy regional staff

regional advocates (second session)



09/19/0 Training held at RFA Symposium Trade

5 associations,

state officials,

congressional

staff,

nonprofits,

small busi-

nesses, federal

agencies









RFA and SBREFA Implementation



The Office of Advocacy oversees the implementation of the

RFA and E.O. 13272. Following is a summary of Advocacy's FY

2005 efforts:

Advocacy staff continued to review proposed regulations

and to send comment letters to agencies where appropriate.

Two dozen comment letters went to federal agencies in FY

2005 (Table 2.2).

Comment letters went to 11 agencies in FY 2005, the

largest number to the Federal Communications Commission

(FCC) (Chart 2.2).

As a result of Advocacy interventions, cost savings were

achieved for small businesses in 10 regulations that went to

the final stages in FY 2005 (Table 2.3).

Of these regulations, four had been identified in OMB

Reports to Congress on the Costs and Benefits of Federal

Regulations as candidates for regulatory reform because of

their impact on small businesses.

Efforts to reduce the regulatory burden resulted in FY

2005 foregone regulatory cost savings of $6.62 billion in

the first year and $965.6 million in annually recurring

savings (Table 2.4).







Table 2.2 Regulatory Comment Letters Filed by the Office of



Advocacy, Fiscal Year 2005*



Date Agency Comment Subject

10/04/04 FCC Unbundled Access to Network Elements;

Review of the Section 251 Unbundling

Obligations of Incumbent Local Exchange

Carriers, WC Dkt. No. 04-313, FCC 04-179



10/12/04 FWS Notice of Availability of the Draft

Economic Analysis on the Proposed

Critical Habitat for the Santa Ana

Sucker; 69 Fed. Reg. 58876 (October 1,

2004 )



11/17/04 FCC Initial Regulatory Flexibility Analysis

for the Notice of Proposed Rulemaking in

Telephone Number Portability; CC Dkt. No.

95-116, FCC 04-217



11/18/04 FWS Notice of Availability of the Draft

Economic Analysis on the Proposed

Critical Habitat for the Riverside Fairy

Shrimp; 69 Fed. Reg. 61461 (October 19,

2004)



12/15/04 FCC Initial Regulatory Flexibility Analysis

for the Notice of Proposed Rulemaking in

Communications Assistance for Law

Enforcement Act and Broadband Access and

Services; ET Dkt. No. 04-295, FCC 04-187



12/15/04 Commerce/B Notice of Proposed Rulemaking on Revised

IS Knowledge Definition, Revision of Red

Flags Guidance and Safe Harbor; 69 Fed.

Reg. 60829 (October 13, 2004)



12/17/05 OSHA Notice of Proposed Rulemaking on

Occupational Exposure to Hexavalent

Chromium; 69 Fed. Reg. 59306, (October 4,

2004)



12/21/04 FCC Ex Parte Letter regarding the regulatory

flexibility analysis for Developing a

Unified Intercarrier Compensation Regime;

CC Dkt. No. 01-92



01/13/05 SBA Advance Notice of Proposed Rulemaking:

Small Business Selected Size Standards

Issues; 69 Fed. Reg. 70197 (December 3,

2004)



01/18/05 CMS Agency Information Collection Activities;

Proposed Collection; Comment Request; 69

Fed. Reg. 67745 (November 19, 2004)



02/04/05 DOJ/CRD Advance Notice of Proposed Rulemaking;

Nondiscrimination on the Basis of

Disability in State and Local Government

Services; Nondiscrimination on the Basis

of Disability by Public Accommodations

and in Commercial Facilities; 69 Fed.

Reg. 58768 (September 30, 2004)



02/07/05 EPA Standard of Performance for New

Stationary Sources and Emission

Guidelines for Existing Sources: Other

Solid Waste Incineration Units; 69 Fed.

Reg. 71472 (December 9, 2004)



02/25/05 GSA Access to the Federal Procurement Data

System- Next Generation (FPDS-NG); 69

Fed. Reg. 77662 (December 28, 2004)



03/08/05 FCC Verizon's Petition for Forbearance from

Title II and the FCC's Computer Inquiry

Rules; WC Dkt. No. 04-440



03/11/05 SEC Extension of Compliance Dates for the

Final Rule, Management's Report on

Internal Control Over Financial Reporting

and Certification of Disclosure in

Exchange Act Periodic Reports of Non-

Accelerated Filers and Foreign Private

Issuers; 70 Fed. Reg. 11528 (March 8,

2005)



03/29/05 FWS Proposed Designation of Critical Habitat

for the Southwestern Willow Flycatcher;

69 Fed. Reg. 60706 (October 12, 2004)



05/17/05 FCC Ex Parte Letter Supporting the Extension

of the Stay of the Order Regarding Rules

and Regulations Implementing the

Telephone Consumer Protection Act (TCPA)

of 1991 (also known as the "Do-Not-Call"

and the "Do-Not-Fax" rule); CG Dkt. No.

02-278, FCC 03-153



05/23/05 DOJ/CRD Regulatory Alternatives Discussion on the

Advance Notice of Proposed Rulemaking;

Nondiscrimination on the Basis of

Disability in State and Local Government

Services; Nondiscrimination on the Basis

of Disability by Public Accommodations

and in Commercial Facilities; 69 Fed.

Reg. 58768 (September 30, 2004)



05/23/05 FCC Regulatory Flexibility Analysis for

Developing a Unified Intercarrier

Compensation Regime; CC Dkt. No. 01-92



06/28/05 FAA Revisions to Cockpit Voice Recorder and

Digital Flight Data Recorder Regulations;

70 Fed. Reg. 9751 (February 28, 2005)



07/14/05 FWS Reopening the Comment Period on Proposed

Designation of Critical Habitat for the

Southwestern Willow Flycatcher; 70 Fed.

Reg. 39227 (July 7, 2005)



07/27/05 FCC Regulatory Flexibility Analysis for

Special Access Rates for Price Cap Local

Exchange Carriers; WC Dkt. No. 05-25



08/01/05 NMFS Notice of Proposed Rulemaking, Fisheries

of the Exclusive Economic Zone off

Alaska; Groundfish Retention Standard; 70

Fed. Reg. 35054 (June 16, 2005)



08/16/05 FCC Initial Regulatory Flexibility Analysis

for Telephone Number Portability; CC Dkt.

No. 95-116





*Note: The complete text of Advocacy's regulatory comments

is available on Advocacy's website,

http://www.sba.gov/advo/laws/comments/.







Chart 2.1 Advocacy Comments by Key RFA Compliance Issue, FY



2005 (percent)











Throughout Fiscal Year 2005, the Office of Advocacy advised

many agencies on how to comply with the RFA. Chart 2.1

illustrates the key concerns raised by Advocacy's comment

letters and prepublication review of draft rules. The chart

highlights areas for improved compliance based on Advocacy's

analysis of its FY 2005 comment letters and other regulatory

interventions summarized in this report.





Table 2.3 Regulatory Cost Savings, Fiscal Year 2005



Agency Subject Description Cost Savings

USDA/ Mexican Avocado Import Program. The $34.55

APHIS final rule expands existing million each

regulations to allow distribution of year, for the

Mexican Hass avocados to 47 states first two

during all months of the year. The years of the

agency delayed distribution of the rule. Source:

avocados to California, Florida, and APHIS.

Hawaii (the 3 states that have all

avocado producers in the United States

for the first two years of the rule).

69 Fed. Reg. 69748 (November 30,

2004).



EPA Cooling Water Intake. The rule $74 million

requires facilities that have cooling over a ten-

water intake structures to install year period,

devices to protect fish and other and an

aquatic species from being killed by annualized

the intake structures. As a result of cost savings

a SBREFA review panel, EPA proposed an of $10.5

exemption for facilities that have a million.

cooling water intake flow of 50 Source: EPA.

million gallons per day or less. This

removes all small businesses from the

cooling water intake rule. Research

available to the panel indicated that

cooling water intake flow volumes

below the 50 million gallon per day

threshold are unlikely to affect fish

or other aquatic species. 69 Fed. Reg.

68444 (November 24, 2004). Note: This

rule was identified in the OMB 2004

Report to Congress on the Costs and

Benefits of Federal Regulations as a

candidate for regulatory reform

because of its impact on small

business.



EPA Other Solid Waste Incinerators. The $7.5 million

rule requires new and existing per year.

incinerators at institutions such as Source: EPA.

schools, prisons, and churches to

install state-of-the-art control

equipment and meet costly permitting

and operating requirements, or

alternatively, to shut down their

incinerators and send their sold waste

to a landfill. EPA agreed to exempt

several types of incinerators for

which alternative disposal options are

not feasible, including rural

incinerators at institutions located

more than 50 miles from an urban area

where the operator can show that no

other waste disposal alternative

exists. 69 Fed. Reg. 71472 (December

9, 2004).



FCC Restriction on Fax Advertising. $3.5 billion

Advocacy and small businesses initially and

supported legislation that would $711 million

recognize a previous business annually.

relationship exemption. The Junk Fax Source: FCC.

Prevention Act of 2005 was signed into

law by President Bush on July 9, 2005.

Pub. L. No. 109-21, 119 Stat. 359

(2005). Note: This rule was identified

in the 2004 OMB Report to Congress on

the Costs and Benefits of Federal

Regulations as a candidate for

regulatory reform because of its

impact on small business.



NARA Records Center Facility Standard. The $63 million

rule required extreme fire prevention for the first

and control measures at all records year of the

facilities. The 2005 final rule rule.

provides flexibility from some of the Source: PRISM

more stringent standards while still International

maintaining safety standards. 70 Fed. .

Reg. 50982 (August 29, 2005). Note:

This rule was identified in the 2002

OMB Report to Congress on the Costs

and Benefits of Federal Regulations as

a candidate for reform because of its

impact on small businesses.



FWS Designation of Critical Habitat for Not

the Bull Trout. FWS submitted a draft available.

final rule to Advocacy. The general

scope of the rule was to designate

certain areas as critical habitat to

protect the bull trout. The final rule

published by FWS included an exemption

for impounded waters from the final

designation of critical habitat. The

exemption provided flexibility for

small businesses with no impact on the

species. 70 Fed. Reg. 56212 (September

26, 2005).



MSHA Diesel Particulate Matter Exposure in $1.6 million

Underground Metal and Nonmetal Mines. per year.

MSHA has proposed to revise its final Source: MSHA.

rule on diesel particulate matter by

staggering the effective date over a

five-year period to provide greater

flexibility. The final rule mandated a

reduced permissible exposure limit for

diesel particulates in these mines

from 400 micrograms per cubic meter of

air to 160 micrograms per cubic meter

of air. 70 Fed. Reg. 53280 (September

7, 2005).



DOT/FMCSA Hours of Service of Truckers. FMCSA $200 million

amended an earlier 2003 rule that had in first year

been remanded to the agency by the and $200

U.S. Court of Appeals for the D.C. million

Circuit, but left in effect by annually.

Congress pending final agency action. Source:

Advocacy urged FMCSA to reduce the FMCSA.

regulatory burdens on short-haul

drivers by allowing some of them to

drive two extra hours once per week

(offset by rest time) as well as

reducing recordkeeping requirements.

FMCSA agreed to these changes. 70 Fed.

Reg. 49978 (August 25, 2005). Note:

This rule was identified in the 2004

OMB Report to Congress on the Costs

and Benefits of Federal Regulations as

a candidate for regulatory reform

because of its impact on small

business.



SEC Extension of Compliance for Periodic $2.68 billion

Reports. As required by the Sarbanes- in first

Oxley Act of 2002, SEC published final year.

rules June 18, 2003, requiring Source: FEI.

businesses that raise funds from

public investors to report on internal

controls and audit procedures.

Advocacy urged SEC to delay the first

compliance deadline, and the SEC

extended the deadline for one year. 70

Fed. Reg. 56825 (September 29, 2005).







Table 2.4 Summary of Estimated Cost Savings, FY 2005



(Dollars)



Rule / Intervention First-Year Annual Costs

Costs

APHIS Mexican Avocado Import 34,550,000 34,550,000

Program1

EPA Cooling Water Phase III2 10,500,000 10,500,000

EPA Other Solid Waste 7,600,000 7,600,000

Incinerators2

DOD RFID3 62,000,000 --

FCC Do not FAX4 3,556,430,226 711,286,045

NARA Records Center Facility 63,000,000 --

Standards5

FWS Bull Trout Critical -- --

Habitat Designation6

MSHA Diesel Particulate 9,274,325 1,620,869

Matter7

DOT/FMCSA Hours of Service8 200,000,000 200,000,000

SEC Extension of Compliance9 2,680,000,000 --

TOTAL 6,623,354,551 965,556,914



1 Source: Animal and Plant Health Inspection Service (APHIS).

2 Source: Environmental Protection Agency (EPA).

3 Source: Department of Defense (DOD).

4 Source: U.S. Chamber of Commerce survey.

5 Source: PRISM International and National Archive and

Records Administration (NARA).

6 Note: Cost savings for this rule are not publicly available

because savings were accrued during the draft stage of the

rule.

7 Source: Mine Safety and Health Administration (MSHA).

8 Source: Federal Motor Carrier Safety Administration

(FMSCA).

9 Source: Calculations were based on data from a Financial

Executives International (FEI) survey.







Note: The Office of Advocacy generally bases its cost savings

estimates on agency estimates. Cost savings for a given rule

are captured in the fiscal year in which the agency agrees to

changes in the rule as a result of Advocacy's intervention.

Where possible, savings are limited to those attributable to

small businesses. These are best estimates. First-year cost

savings consist of either capital or annual costs that would

be incurred in the rule's first year of implementation.

Recurring annual cost savings are listed where applicable.







3. Advocacy Review of Agency RFA Compliance in Fiscal Year





2005





As agencies grow in their familiarity with the RFA and E.O.

13272, and with the Office of Advocacy, compliance will come

more easily to the agencies. In monitoring agency

compliance, Advocacy has found that there is an increase in

the number of agencies that make a good-faith effort to

comply with the RFA. However, even agencies with generally

good RFA compliance from time to time fail to comply with

the RFA on particular rulemakings.





Department of Agriculture





E.O. 13272 Compliance

The Department of Agriculture (USDA) has made its policies

for considering small entity impacts when promulgating

regulations publicly available as required by section 3(a)

of E.O. 13272. As in previous years, two agencies within

USDA consistently notify Advocacy of rules that may have a

significant economic impact on small entities: the Animal

and Plant Health Inspection Service (APHIS) and the Grain

Inspection, Packers and Stockyard Administration (GIPSA).



Animal and Plant Health Inspection Service

Issue: Mexican Hass Avocado Import Program. On

November 30, 2004, APHIS published a final rule

regulating the importation of Hass avocados into the

United States. The rule contained a final regulatory

flexibility analysis. The final rule expands existing

regulations to allow distribution of Mexican Hass

avocados to 47 states during all months of the year.

APHIS shared the draft regulation with Advocacy prior to

publication. The following description summarizes small

business regulatory flexibility without compromising the

confidentiality of interagency deliberations

Concerned that small avocado producers in California,

Florida, and Hawaii would be significantly affected by

the proposal, Advocacy submitted confidential interagency

comments to the agency. In the final rule, based on

comments from regulated entities and Advocacy, APHIS

decided to delay distribution of the avocados to

California, Florida, and Hawaii for the first two years

of the rule. The delay will allow small avocado producers

in the affected states to better prepare for the change

in market conditions and pricing. Cost savings amounting

to $34.55 million each year for the first two years

resulted from the flexibilities in this final rule.



Issue: National Animal Identification System; Draft

Strategic Plan and Draft Program Standards. On May 6,

2005, APHIS published in the Federal Register a notice of

availability of the Draft Strategic Plan and Draft

Program Standards documents for the National Animal

Identification System (NAIS). The NAIS will be a

mechanism for tracking animals from birth to slaughter

and is designed to enhance the U.S. response to disease

outbreaks across different animal species. The program

will trace animals during a disease outbreak and allow

APHIS and the federal and state governments and private

industry to minimize the impact of an outbreak on

domestic and foreign markets. The documents outline the

process of developing the NAIS and the agency's current

understanding of how the system would work when

implemented. In the notice, the agency solicited public

feedback on various elements of the system. The following

description summarizes coverage of small business

flexibility under consideration without compromising the

confidentiality of interagency deliberations.

Advocacy is concerned that the standards, as written,

could have a significant economic impact on a substantial

number of small producers and slaughtering plants.

Affected entities have informed Advocacy that the

proposed NAIS standards do not adequately consider

existing animal identification technology already in use

by some in the affected industry and that implementing

the system, especially the technology infrastructure,

would be costly for small businesses. Additionally,

industry personnel are concerned that the publication of

the proposed system did not include an initial regulatory

flexibility analysis; thus, the potential costs to the

industry were not clearly outlined in the proposal.

Because of extensive public interest, APHIS extended

the comment period for the proposed system for an

additional 30 days. In confidential interagency comments

submitted to the agency, Advocacy shared industry

concerns with APHIS. Advocacy also urged the agency to

consider the potential economic impacts on small entities

as well as alternatives to minimize the impact. APHIS has

not completed work on the NAIS documents. Advocacy will

continue to monitor this issue and to work with the

agency to address small entity impacts.





Department of Commerce





E.O. 13272 Compliance

The Department of Commerce (DOC) complies with the

requirements of E.O. 13272. Its RFA policies are publicly

available in compliance with section 3(a), and DOC's

agencies notify Advocacy of draft rules as required by

section 3(b). For example, the National Marine Fisheries

Service (NMFS) routinely submits draft proposed and final

rules to the Office of Advocacy. NMFS did not publish any

final rules in FY 2005 that were the subject of any Advocacy

comments; therefore, NMFS' compliance with section 3(c)

cannot be assessed. As one of the agencies involved in

Advocacy's RFA training pilot program, NMFS was one of the

first agencies to receive RFA training.

Advocacy also works with the Patent and Trademark Office

(PTO) at the Department of Commerce. The PTO regularly

submits to Advocacy draft proposed and final rules that may

have a significant economic impact on a substantial number

of small entities. In FY 2005, PTO staff participated in

Advocacy's RFA training program and began submitting draft

regulations to Advocacy's email notification system more

regularly. The agency expressed a willingness to work with

Advocacy earlier in the rulemaking process to ensure proper

completion of agency initial regulatory flexibility analyses

(IRFAs) and certifications. PTO did not publish any final

rules in FY 2005 that were the subject of any Advocacy

comment; therefore, compliance with section 3(c) of E.O.

13272 cannot be assessed. Advocacy plans to train the

remaining agencies at DOC in the next fiscal year.

During the past year, Advocacy worked closely with the

Office of Manufacturing and Services at the Department of

Commerce. Although this office is not focused strictly on

small business issues, there is a similarity between the

Office of Advocacy's mission and the purpose of the

Manufacturing and Services office. To capitalize on this,

Commerce loaned an economist to the Office of Advocacy to

learn more about the regulatory process and, conversely, so

that Advocacy could benefit from greater use of Commerce

data in preparing regulatory flexibility analyses. There is

potential for future collaboration between the offices in

the area of impact analysis.



Bureau of Industry Standards (BIS)

Issue: Revised Definition of "Knowledge" for "Red

Flags" Guidance and Safe Harbor. On October 13, 2004, BIS

published a proposed rule: Revised "Knowledge"

Definition, Revision of "Red Flags" Guidance and Safe

Harbor, designed to determine whether an exporter

understood that it was violating exporting control rules.

Current regulations apply a "high probability" standard

that the exporters know that they are violating exporting

controls. The proposed rule would:

- revise the definition of knowledge for determining

whether or not exporters know they are violating export

controls;

- revise the Export Administration regulations to

incorporate a "reasonable person" standard;

- replace the phrase "high probability" with "more

likely than not;"

- update the "red flags" guidance to increase the number

of circumstances identified as expressly creating a red

flag of potential violations of the Export

Administration regulations; and

- create a safe harbor from certain knowledge-based

violations if the exporter takes certain steps.

BIS certified that the rule would not have a

significant economic impact on a substantial number of

small entities. The basis of the certification was that

the proposal was a "mere clarification."

Advocacy discussed the proposal with small entity

representatives and submitted comments questioning

whether the proposed change was a mere clarification.

Advocacy noted that BIS was proposing to change the

definition in a way that lowers the standard for

establishing whether the exporter has knowledge of a

potential export control violation. Small businesses that

might not have been liable in the past could potentially

be held liable for an export control violation under the

proposed new standard and could incur more legal

expenses, fines, and penalties.

In addition, under the proposed "safe harbor"

provision, businesses could learn whether BIS agrees with

them that the transaction qualifies for a safe harbor.

The provision was intended to help businesses avoid fines

and penalties, which BIS believes would mitigate the

impact of the rule. However, small business

representatives are concerned that small businesses would

have to wait for an extended period of time for an

opinion. To prevent this, Advocacy asked BIS to give full

consideration to alternatives from the industry, such as

imposing a 30-day timeframe for BIS to provide an opinion

on whether the transaction qualifies for a safe harbor.

Advocacy also asked BIS to give full consideration to the

suggestion that BIS allow for concurrent consideration of

license applications while an exporter's request is

pending a determination through the safe harbor process.

This rule has not been finalized.



National Marine Fisheries Service

Issue: Designation of Critical Habitat for 12

Evolutionarily Significant Units of West Coast Salmon and

Steelhead in Washington, Oregon, and Idaho. In 2000, the

National Marine Fisheries Service designated critical

habitat for salmon and steelhead across approximately

150,000 miles of rivers, streams, and shores in the

Pacific Northwest. The agency failed to consider the

economic impacts of the designation of critical habitat

on small entities as required by the RFA, instead

attributing all costs from designating critical habitat

to the earlier decision to list the species. In light of

decisions by federal courts that rejected such

attribution of costs to listing decisions, NMFS revisited

the rulemaking. In addition, after the first designation

of critical habitat, the U.S. Geological Survey made

available to NMFS more detailed watershed maps, which

allowed the agency to identify more accurately areas that

should be designated as critical habitat.

The agency withdrew the 2000 rulemaking

and re-proposed the designation on June 14, 2004. The

agency kept the comment period for the notice of proposed

rulemaking open through October 30, 2004. In response to

the designation of critical habitat for the salmon, small

farmers, developers, ranchers and others raised concerns

about the costs the rule would impose. On January 5,

2005, NMFS published a final rule that included less than

30,000 miles of the 2000 rule's original 150,000 miles of

rivers, streams, and shores. In 2000, NMFS did not

provide an estimate of the costs its original rule would

impose on the public, but the agency did estimate the

impacts of its 2005 rule. Though there is insufficient

data to provide an estimate of the cost savings the final

2005 rule represented over the original 2000 rule, it is

likely that the reduction of critical habitat by 80

percent represented major cost savings for small

entities.



Issue: Fisheries of the Exclusive Economic Zone Off

Alaska; Groundfish Retention Standard. On June 16, 2005,

NMFS published a proposed rule on Fisheries of the

Exclusive Economic Zone Off Alaska; Groundfish Retention

Standard. The proposed rule implements Amendment 79 to

the Fisheries Management Plan for groundfish of the

Bering Sea and Aleutian Islands. The purpose of the

action is to reduce bycatch and improve utilization of

groundfish harvested by catcher/processor trawl vessels.

It implements an annual groundfish retention standard

(GRS) as well as monitoring and enforcement measures for

trawl catcher/processors greater than 125 feet.

The catcher/processors for the groundfish industry

contacted Advocacy regarding the size standard used for

determining a small catcher processor. Instead of using

the 500 employee size standard for floating factory ships

in its initial regulatory flexibility analysis, NMFS used

the $3.5 million annual volume standard for fish

harvesting operations. Advocacy argued that without the

appropriate size standard there was no way of knowing

whether NMFS was correct in determining that none of the

industry participants were small. The industry was also

concerned about aspects of the proposal that were not

recommended, like new monitoring and enforcement

measures, a new observer schedule, and the installation

of a new NMFS-approved scale. Advocacy asked NMFS to

perform an economic analysis on the new aspects of the

rule and publish the analysis for public comment. This

rule has not been finalized.





Department of Defense





E.O. 13272 Compliance

The defense-related regulations of greatest interest to

small businesses are procurement regulations issued by the

Federal Acquisition Regulation (FAR) Council. The Department

of Defense (DOD) has procedures in place that comply with

section 3(a) of E.O. 13272. Consideration of small business

impacts in these rulemakings is covered by the policies and

procedures of the FAR Council, submitted to Advocacy by the

General Services Administration. The Department of Defense

has not published procedures that would apply to rulemakings

other than those considered by the FAR Council. In

compliance with section 3(b) of E.O. 13272, DOD submits

prepublication rulemakings for Advocacy consideration. DOD

did not publish any final rules in FY 2005 that were the

subject of any Advocacy written comments; therefore, DOD

compliance with section 3(c) cannot be assessed. DOD staff

received RFA training in FY 2005.



Issue: Radio Frequency Identification Tags. The

Department of Defense issued a proposed regulation on

April 21, 2005, to amend the Defense Federal Acquisition

Regulation Supplement by adding a requirement that

packages be marked with passive radio frequency

identification (RFID) tags. The change would require

contractors to affix passive RFID tags at the case and

palletized unit load levels when shipping packaged

operational rations, clothing, individual equipment, and

tools.

Advocacy was involved in the confidential interagency

deliberations of this rule. Advocacy's early involvement

resulted in a detailed economic analysis of the impact of

the rule on small entities. DOD also conducted outreach

to the small business community. The outreach includes an

ongoing training program for small businesses to develop

the necessary tools and knowledge to comply with the new

DOD acquisition requirements.

The final rule was implemented on September 13, 2005.

The flexibilities achieved in this final rule resulted in

$62 million in first-year cost savings.





Department of Education





E.O. 13272 Compliance

The Department of Education (Education) has made its

policies and procedures publicly available as required by

section 3(a) of E.O. 13272. Education notifies Advocacy

through Advocacy's email notification system of draft rules

that may have a significant impact on a substantial number

of small entities, as required by section 3(b) of E.O.

13272. Education has not published any final rules in FY

2005 that were the subject of any Advocacy comments;

therefore, Education's compliance with section 3(c) cannot

be assessed. Education staff received RFA training in FY

2005.





Department of Energy





E.O. 13272 Compliance

The Department of Energy (DOE) has complied with section

3(a) of E.O. 13272 by making its policies and procedures

publicly available on its website. In FY 2005, DOE provided

Advocacy with all of its draft rules when they were sent to

OMB for review, in compliance with section 3(b) of the

Executive Order. Advocacy has not filed comments on any DOE

rules since the establishment of the section 3(c)

requirement. DOE staff received RFA training in FY 2005.





Department of Health and Human Services





E.O. 13272 Compliance

The Department of Health and Human Services (HHS) made its

policies and procedures publicly available as required by

section 3(a) of E.O. 13272. The Centers for Medicare and

Medicaid Services (CMS) and the Food and Drug Administration

(FDA), two agencies that often promulgate rules that affect

small businesses, did not consistently submit drafts of

rules pursuant to section 3(b) of E.O. 13272 in FY 2005.

Neither CMS nor FDA published final rules in FY 2005 that

were the subject of any Advocacy comments; therefore,

compliance with section 3(c) of E.O. 13272 cannot be

assessed. HHS staff received RFA training in FY 2005.



Centers for Medicare and Medicaid Services

Issue: Agency Information Collection Activities;

Proposed Collection; Comment Request. On November 19,

2004, the Centers for Medicare and Medicaid Services

published in the Federal Register a summary of proposed

collections for public comment pursuant to section

3506(c)(2)(A) of the Paperwork Reduction Act of 1995. In

the summary, CMS sought comment on the national

implementation and utilization of the Hospital Consumer

Assessment of Health Plans Survey (HCAHPS). According to

CMS the goal of the HCAHPS was to "offer consumers choice

and create incentives for hospitals to improve

performance in areas that are important to patients."

Ultimately, CMS plans to publish the data obtained

through HCAHPS to assist consumers in selecting hospitals

that deliver high-quality care. Advocacy commented on the

rule on January 18, 2005, citing its concern that the

HCAHPS would place a significant economic and paperwork

burden on hospitals, many of which are small entities.

Advocacy suggested that CMS revisit its analysis of the

paperwork burden associated with the survey and consider

reducing the number of survey questions.



Food and Drug Adminis-tration

Issue: Current Good Tissue Practice for

Manufacturers of Human Cellular and Tissue-Base Products;

Inspection and Enforcement-Final Rule. Advocacy reviewed

this final rule prepublication via confidential

interagency review. Advocacy commented publicly on the

proposed rule on November 5, 2001, believing that the

rule had the potential to affect small businesses

negatively. The FDA took into account public comments

filed in response to the proposed rule and reflected

those comments in the economic analysis in the final

rule. The final rule allowed affected entities

significant flexibility in determining how to comply with

the rule. The final rule also granted affected entities

the ability to seek an exemption from, or propose an

alternative to, a particular provision of the rule where

appropriate. Cost savings are not available for this

rule.



Issue: Beverages: Bottled Water. On October 28,

2004, Advocacy reviewed and commented through

confidential interagency review on the FDA's proposed

rule seeking to revise the allowable levels of arsenic in

drinking water. As a result of Advocacy's early

intervention, FDA sought comments in the published

proposed rule on the profitability of small water

manufacturers, on compliance costs, and on whether there

were viable alternatives that would reduce the cost of

the rule on small entities.





Department of Homeland Security





E.O. 13272 Compliance

The Department of Homeland Security (DHS) has made progress

in complying with E.O. 13272. DHS received its RFA training

in FY 2005, and it has posted its RFA policy on its website,

as required by section 3(a) of E.O. 13272. DHS did not

submit any draft rules to Advocacy in 2005. DHS has not

published final rules in FY 2005 that were the subject of

Advocacy comments; therefore section 3(c) of E.O. 13272

cannot be assessed.





Department of Housing and Urban Development





E.O. 13272 Compliance

The Department of Housing and Urban Development (HUD) made

its policies and procedures available to the public in the

timeframe required by section 3(a) of E.O. 13272. HUD

notified Advocacy of rules that may have a significant

impact on a substantial number of small entities as required

by section 3(b) of E.O. 13272. HUD received RFA training in

FY 2005. Advocacy and HUD developed a good working

relationship in FY 2005 through the Real Estate Settlement

Procedures Act (RESPA) roundtables Advocacy cosponsored with

HUD (see below) and the RFA training session.



Issue: Real Estate Settlement Procedures Act:

Simplifying and Improving the Process of Obtaining

Mortgages to Reduce Settlement Costs to Consumers. In

2002, HUD issued a proposed rule to revise the

regulations implementing RESPA. The purpose of the

proposal was to simplify and improve the process of

obtaining home mortgages and to reduce settlement costs

to consumers. The proposed rule was strongly opposed by

small businesses throughout the real estate and

settlement services industry.

Advocacy filed comments on behalf of small business on

October 28, 2002. Advocacy's comments suggested that HUD

prepare a revised IRFA to provide information to the

public about the industries affected by the proposal and

alternatives to minimize the impact on small entities.

Advocacy also emphasized its desire to continue working

with HUD to ensure that improvements to the mortgage

financing and settlement process are sensitive to the

impact on small business.

In March 2004, HUD withdrew the draft final RESPA rule

from OMB review. In the with-drawal letter to OMB, HUD

Secretary

Alphonso Jackson stated that based on concerns from

members of Congress and key members of consumer and

industry groups he believed that it would be prudent for

HUD to reexamine the RESPA rule before it is made final.

In FY 2005, Advocacy worked with HUD to perform

outreach to the small business community to discuss the

impact of RESPA reform on small entities and to flush out

less burdensome alternatives. In addition to attending

roundtables that HUD held in Washington, D.C., on RESPA

reform, Advocacy and HUD cosponsored three roundtables

around the country. Members of every aspect of the real

estate community were invited to participate in the

roundtables held in Chicago, Fort Worth, and Los Angeles.

Advocacy will continue working with HUD as it evaluates

the information gained from the roundtables.





Department of the Interior





E.O. 13272 Compliance

The Department of the Interior (DOI) has made its policies

and procedures publicly available in compliance with section

3(a) of E.O. 13272. As required by section 3(b), DOI

notifies Advocacy of rules that it has determined could have

a significant economic impact on a substantial number of

small entities. Prior to publication of a rule, agencies

within DOI typically submitted notifications and a "record

of compliance" to Advocacy. DOI also utilized Advocacy's

email notification system to inform Advocacy of draft rules

that may affect small business.

The Fish and Wildlife Service (FWS) continues to certify

its final designations of critical habitat for endangered

species as not having a significant economic impact on a

substantial number of small entities despite small business

views to the contrary voiced during the process. FWS has not

completed an IRFA or FRFA for its critical habitat

designations. This exception to DOI's attention to the RFA

and E.O. 13272 is of concern and Advocacy will continue to

work with FWS to improve its RFA and E.O. 13272 compliance.

Advocacy has commented on three final rules that were

published by FWS during fiscal year 2005-the final

designations of critical habitat for the Southwestern willow

flycatcher, the Santa Ana sucker, and the Riverside fairy

shrimp (see Table 2.2). FWS did respond to Advocacy's

comments, in compliance with section 3(c).



Fish and Wildlife Service

Issue: Endangered and Threatened Wildlife Plants;

Designation of Critical Habitat for the Bull Trout. FWS

submitted a draft final rule to Advocacy that would

designate areas as critical habitat to protect the bull

trout. The final rule published by FWS included an

exemption for impounded waters from the final designation

of critical habitat, providing significant relief for

small farmers and businesses in the affected area while

preserving the protections intended in the critical

habitat designation. Cost savings achieved in this rule

cannot be determined because they are based on

confidential FOIA-exempt material.





Department of Justice





E.O. 13272 Compliance

The Department of Justice (DOJ) has made its policies and

procedures publicly available as required by section 3(a) of

E.O. 13272. DOJ notifies Advocacy through Advocacy's email

notification system of draft rules that may have a

significant impact on a substantial number of small

entities, as required by section 3(b) of E.O. 13272. DOJ did

not publish any final rules in FY 2005 that were the subject

of any Advocacy comment; therefore, DOJ's compliance with

section 3(c) cannot be assessed. Staff at DOJ have not yet

received RFA training.





Department of Labor





E.O. 13272 Compliance

The Department of Labor (DOL) has made its policies and

procedures publicly available as required by section 3(a) of

E.O. 13272. Agencies within DOL notify Advocacy by mail and

by Advocacy's email notification system of rules that may

have a significant impact on a substantial number of small

entities, as required by section 3(b) of E.O. 13272. There

were no electronic notifications by OSHA or the Mine Safety

and Health Administration (MSHA). Neither OSHA nor MSHA

published any final rules during FY 2005 that were the

subject of any Advocacy comment; therefore, compliance with

Section 3(c) of E.O. 13272 cannot be assessed. Advocacy

submitted comments to OSHA on its proposed occupational

exposure to hexavalent chromium standard, but that rule has

yet to be finalized. OSHA and MSHA frequently participate in

Advocacy small business regulatory roundtables on

occupational safety and health and mine safety and health

issues. OSHA's Office of Small Business Assistance has been

proactive in discussing small business issues with Advocacy.

As part of the SBREFA process, OSHA has contacted Advocacy

to discuss rules that may have a significant economic impact

on a substantial number of small entities and where a SBREFA

panel is expected. The Department of Labor was previously

trained in RFA compliance.



Mine Safety and Health Administration

Issue: Diesel Particulate Matter Exposure of Underground

Metal and Nonmetal Mines Rule. MSHA proposed to revise

its final rule on Diesel Particulate Matter Exposure of

Underground Metal and Nonmetal Mines. The final rule

mandated a reduced permissible exposure limit (PEL) for

diesel particulates in underground metal and nonmetal

mines from 400 to 160 micrograms per cubic meter of air

(total carbon) effective on January 20, 2006. MSHA

proposes staggering the effective date of the final

regulation over a five-year period to provide greater

flexibility to mine operators. Advocacy reviewed this

rule prepublication via confidential interagency review.

The rule would ease the regulatory burden on small mine

operators, who argued that meeting the final exposure

limit was not technologically feasible (using existing

filter technology) and was unduly expensive.

Advocacy raised this issue at several of its small

business labor safety roundtables. The roundtables

included presentations by both small business

representatives and MSHA personnel. Advocacy also

communicated directly with OMB and MSHA on a confidential

interagency basis regarding this rule. The agency was

convinced that technological feasibility issues justify

the staggered implementation schedule. As a result of the

flexibilities contained in this rule, first-year cost

savings of $9.3 million and annual cost savings of $1.6

million will be realized by small businesses.



Occupational Safety and Health Administration

Issue: Occupational Exposure to Hexavalent Chromium

Rule. OSHA has proposed to revise its existing standard

for employee exposure to hexavalent chromium (Cr(VI))

from the current level of 52 micrograms per cubic meter

of air (for an 8-hour time-weighted average) to one

microgram per cubic meter of air. Advocacy reviewed this

rule prepublication via confidential interagency review.

The rulemaking was mandated by the U.S. Court of Appeals

for the Third Circuit. OSHA initiated a SBREFA panel

process in 2003 that included conferring with

representatives from affected small entities in several

industries, including chemical, alloy, and pigment

manufacturing, electroplating, welding, and aerospace.

Advocacy participated in the SBREFA panel process and

submitted detailed comments to the agency recommending a

permissible exposure limit of 23 micrograms per cubic

meter of air based on technological and economic

feasibility. This issue has been the subject of

presentations by small business representatives likely to

be affected by the standard at several small business

labor safety roundtables hosted by Advocacy. Advocacy has

worked directly with OMB and OSHA in confidential

interagency deliberations. The final permissible exposure

limit is expected to be published in 2006.



Issue: Electric Power Generation, Transmission, and

Distribution Rule. OSHA has proposed to update the

existing standard for the construction of electric power

transmission and generation installations to make them

more consistent with the more recently promulgated

general industry standard. Advocacy reviewed this rule

prepublication via confidential interagency review. The

proposal would also make miscellaneous changes to both

standards, including adding provisions related to the

relationship between host employers and contractors, the

requirements for flame-resistant clothing, training, and

electrical protective equipment. OSHA initiated a SBREFA

panel process in 2003 and obtained comments on its draft

proposal from representatives of small entities that

would be affected by the rule.

Advocacy participated in the SBREFA panel process and

has discussed the proposed rule at several of its small

business labor safety roundtables. In addition, Advocacy

recently hosted a conference call of the small entity

representatives to obtain their input on the proposed

rule and has also communicated directly with OMB and OSHA

in confidential interagency deliberations. The final rule

is expected to be published in 2006.



Issue: Notice of Section 610 Review of Lead In

Construction Standard. OSHA is undertaking a review of

its lead in construction standard under Section 610 of

the Regulatory Flexibility Act. Section 610 requires

federal agencies to review their existing rules

periodically to determine whether they should be

continued without change, amended, or rescinded

consistent with the underlying statute. OSHA's lead

standard is designed to prevent occupational exposures to

lead on construction sites. It applies to many small

businesses in the construction industry that must comply

with its worker protection requirements.

Small business representatives from the residential

remodeling industry presented issues at several small

business labor safety roundtables hosted by Advocacy.

Advocacy also hosted a specific small business roundtable

on this issue, where small business representatives from

affected industries and representatives from OSHA, HUD,

and EPA (each has regulations concerning lead hazards)

attended. Advocacy continues to monitor the rulemaking

process.





Department of State





E.O. 13272 Compliance

The Department of State did not provide any draft rules to

Advocacy in 2005. Although the State Department has

solicited input from Advocacy on rulemakings in the past,

the State Department did not publish any final rules in FY

2005 that were the subject of Advocacy comment; therefore,

the State Department's compliance with section 3(c) cannot

be assessed.





Department of Transportation





E.O. 13272 Compliance

The Department of Transportation (DOT) has made its policies

and procedures publicly available as required by Section

3(a) of E.O. 13272. The Federal Highway Administration

(FHWA) and the National Highway Traffic Safety

Administration (NHTSA) were trained in RFA compliance in FY

2005. Agencies within DOT notify Advocacy in a timely

manner, through Advocacy's email notification system, of

draft rules that may have a significant economic impact on a

substantial number of small entities, as required by Section

3(b) of E.O. 13272. DOT submitted 10 electronic

notifications to Advocacy in FY 2005; however, it did not

notify Advocacy of the Federal Aviation Administration's

(FAA) proposed Washington, D.C., Special Flight Rules Area

rule as required by Section 3(b) of E.O. 13272. DOT agencies

did not finalize any rules during FY 2005 upon which

Advocacy filed comments; therefore, compliance with Section

3(c) of E.O. 13272 cannot be assessed. Advocacy submitted

comments to the Federal Aviation Administration on its

proposed revisions to cockpit voice recorder and digital

flight data recorder regulations, but that rule has yet to

be finalized. In addition, the Federal Motor Carrier Safety

Administration (FMCSA) finalized its Hours of Service of

Drivers rule. While the agency certified under the RFA that

the final rule would not have a significant economic impact

on a substantial number of small entities, the agency did

make several revisions to the rule that reduced regulatory

burdens on small short-haul drivers.



Federal Aviation Administration

Issue: Revisions to Cockpit Voice Recorder and Digital

Flight Recorder Regulations. FAA has proposed to require

upgraded cockpit voice recorder (CVR) and digital flight

data recorder (DFDR) equipment on all aircraft with 10 or

more seats, including increased recording time for CVRs,

an independent backup power source, separate CVR and DFDR

containers, and increased data recording rates. The

proposed rule would also require onboard recording of

data-link communications if they are installed. FAA's

proposed rule is based largely on recommendations from

the National Transportation Safety Board (NTSB) and is

intended to help improve the speed of aircraft accident

investigations. FAA's proposed rule would apply to both

large scheduled airlines and other small business

segments of the aviation industry, such as on-demand air

charters, fractional aircraft programs, and small

regional carriers.

Small business representatives affected by the rule

raised issues at the small business aviation safety

roundtable hosted by Advocacy. Advocacy filed a comment

letter with the agency expressing concern that the

agency's IRFA did not capture many small businesses that

will be affected by the proposed rule, failed to use the

correct SBA size standard, and did not consider less

burdensome alternatives for small business.

FAA is currently reviewing the comments on its proposed

rule and is expected to issue a final rule in 2006.



Federal Motor Carrier Safety Administration

Issue: Hours of Service of Drivers Rule. FMCSA issued a

final rule on Hours of Service of Truckers. The final

rule amended an earlier 2003 rule that was remanded to

the agency by the U.S. Court of Appeals for the D.C.

Circuit, but left in effect by Congress pending final

agency action. Advocacy reviewed this rule prepublication

via confidential interagency review. The final rule

establishes requirements for commercial truck drivers,

including maximum driving time, mandatory duty and off-

duty time, recovery periods, and sleeper berth

provisions, as well as new requirements for short-haul

drivers. Approximately 70 percent of both the long-haul

and short-haul sectors are small businesses.

Small business representatives affected by the rule

raised issues at several small business transportation

safety roundtables hosted by Advocacy. Advocacy has

worked directly with OMB and FMCSA in confidential

interagency deliberations to resolve issues raised by the

affected small entities.

The agency decided to reduce the regulatory burdens on

short-haul drivers by allowing some of them to drive two

extra hours once per week (offset by rest time) as well

as reduced recordkeeping requirements. These reduced

burdens were justified because short-haul drivers return

to their work-reporting location each night and operate

within a 150-mile radius from that location. The agency

found that short-haul drivers experience significantly

fewer fatigue-related crashes than long-haul drivers.

Cost savings of $200 million the first year and $200

million annually resulted from the flexibilities

contained in this rule.



Pipeline and Hazardous Materials Safety Administration



E.O. 13272 Compliance

In 2005, the Pipeline and Hazardous Materials Safety

Administration (PHMSA, formerly the Research and Special

Programs Administration or RSPA) submitted draft regulations

to Advocacy in compliance with section 3(b) of E.O. 13272.

Although not always consistent with its submissions, the

agency has expressed a desire to consult more frequently

with Advocacy on initial regulatory flexibility analyses and

certifications.



Issue: Hazardous Materials: Safety Requirements for

External Product Piping on Cargo Tanks Transporting

Flammable Liquids. On December 30, 2004, PHMSA published

a proposed rule that would limit the amount of flammable

liquid that could be left in external product piping on

cargo tank motor vehicles. External product piping,

commonly known as wetlines, is the series of pipes

located underneath cargo tank motor vehicles that are the

conduit through which the tanks are loaded or unloaded

with petroleum or other flammable products. After a tank

truck is either filled or emptied, approximately 30-50

gallons of product can remain in the wetlines. PHMSA's

proposal established a new standard that limits to one

liter or less the amount of flammable product that could

remain in each wetline after drainage. After reviewing

the proposed rule and conferring with affected entities,

Advocacy determined that the rule essentially established

a de facto requirement for cargo tank operators involved

in the transport of flammable liquids to install either a

manual or automatic purging device to meet the new

standard.

Recognizing that the proposed rule could have a

significant economic impact on a substantial number of

small entities, PHMSA completed an initial regulatory

flexibility analysis (IRFA) for the proposed rule.

Advocacy and affected small entities expressed concern

that the IRFA did not adequately estimate the number of

businesses that would be adversely affected by the

regulation. On March 24, 2005, Advocacy hosted a

roundtable to discuss the proposed rule and obtain data

from industry personnel that would be affected. The

industry informed Advocacy that the regulation would be

extremely expensive to implement. In particular, industry

representatives questioned the efficacy and ease of

installation of the purging device discussed in the

proposed rule.

Although PHMSA has not finalized the rule, the agency

has committed to working with Advocacy to address

industry concerns and meet their obligation under the RFA

to identify less burdensome alternatives in the final

rule.



Issue: Applicability of the Hazardous Materials

Regulations to Loading, Unloading, and Storage. During

fiscal year 2004, small entity representatives approached

Advocacy to discuss PHMSA's final regulation on

Applicability of the Hazardous Materials Regulations to

Loading, Unloading, and Storage; Final Rule (HM-223).

Although the rule was finalized in October 2003, it was

not effective until June 1, 2005. Industries affected by

the regulation filed appeals with PHMSA and notified

Advocacy of their concerns.

Industry representatives indicated that the final rule

would either severely limit or terminate PHMSA's

jurisdiction over the loading, unloading and storage of

hazardous materials in transportation in areas that PHMSA

has historically regulated and that the industry was

comfortable with the agency's historical jurisdiction.

Affected entities informed Advocacy that complying with

the regulation would create extensive costs, complexity,

and confusion, especially for small entities.

Additionally, the industry was concerned that limiting

the agency's jurisdiction would have an adverse impact on

safety and would contribute to conflicting regulation by

other federal agencies, and state and local

jurisdictions.

Advocacy used a research firm to complete a report that

analyzed problems with the HM-223 regulation and

recommend revisions. Advocacy shared the draft document

with PHMSA, other federal agencies with jurisdiction over

hazardous materials, and several industry peer reviewers.

Industry commenters, PHMSA, and the other federal

agencies submitted comments on the draft report to

Advocacy in March 2005. On February 18, 2005, Advocacy

participated as an observer at a meeting on HM-223

between the Office of Management and Budget's Office of

Information and Regulatory Affairs (OIRA), PHMSA

personnel, and industry groups affected by the

regulation.

Despite the concerns raised by Advocacy in its report

and the appeals presented by the industry, the agency

published a final rule with little change on April 15,

2005. The October 2004 regulation, as amended by the new

final rule, was effective as of June 1, 2005. Advocacy is

continuing to work with PHMSA and other federal agencies

to address unresolved concerns about the final rule.



Issue: Hazardous Materials: Transportation of

Lithium Batteries. On April 2, 2002, PHMSA published a

proposed rule regulating lithium batteries. The rule

would require producers and transporters of lithium

batteries to comply with stricter packaging and testing

requirements. Concerned about the potential economic

impact of the regulation, small entities affected by the

rule contacted Advocacy. Advocacy's analysis of the

regulation and discussions with regulated entities

suggested that there were problems with the costs of the

rule, the estimate of the number of small businesses

affected, and the impact on annual revenues of affected

small businesses. Advocacy questioned whether the

agency's certification

was appropriate.

On August 22, 2003, after conferring with Advocacy,

OIRA issued a return letter to the agency. In its letter,

OIRA recommended that the agency either complete an

initial regulatory flexibility analysis or provide a

statement of factual basis for the certification in

accordance with section 605 of the RFA. Additionally,

Advocacy submitted interagency comments to the agency on

the proposed rule.

On June 15, 2005, PHMSA issued an IRFA for the proposed

rule in the Federal Register. The agency addressed

Advocacy's comments in the IRFA. Advocacy will continue

to monitor this issue, as the agency has not taken final

action on the rule.





Department of the Treasury





E.O. 13272 Compliance

The Department of the Treasury (Treasury) made its policies

and procedures available to the public as required by

section 3(a) of E.O. 13272. The agencies within Treasury

that most concern small business are the Internal Revenue

Service (IRS), the Office of the Comptroller of the Currency

(OCC), and the Office of Thrift Supervision (OTS).

While the IRS has not notified Advocacy of any draft

proposed rules under section 3(b), Advocacy has been invited

to, and has participated in, several prepublication and some

predrafting meetings on IRS regulatory proposals regarding

potential effects on small business. Under section 3(c) of

E.O. 13272, the IRS has made reference to Advocacy comments

in general, but the comments were not attributed to

Advocacy. During FY 2005 Advocacy consulted with the IRS

about the RFA. Early in the year the IRS sent some rules to

Advocacy early in the process; however, as the year

progressed, fewer rules were submitted prepublication. IRS

did not publish any final rules in FY 2005 that were the

subject of any Advocacy comment; therefore, IRS' compliance

with section 3(c) cannot be assessed.

Both OCC and OTS notify Advocacy in accordance with the

requirements of section 3(b). Advocacy did not file any

comments with OCC and OTS in FY 2005.





Department of Veterans Affairs





E.O. 13272 Compliance

The Department of Veterans Affairs (VA) continues to take a

position that most of its regulations do not affect small

entities. A review of E.O. 13272 notifications to Advocacy

will support this position. Notwithstanding, VA has fully

complied with E.O. 13272 by notifying Advocacy of proposed

regulatory actions that may have a significant impact on a

substantial number of small entities, as required by section

3(b) of E.O. 13272. The VA did not publish any final rules

in FY 2005 that were the subject of Advocacy comment;

therefore VA's compliance with section 3(c) cannot be

assessed.





Environmental Protection Agency





E.O. 13272 Compliance

The Environmental Protection Agency (EPA) has made its

comprehensive policies and procedures document available on

its website, in compliance with section 3(a) of E.O. 13272.

In FY 2005, EPA provided Advocacy with all of its draft

rules when they were sent to OMB for review in compliance

with section 3(b) of E.O. 13272. EPA addressed

Advocacy's comments in its final rules as required by

section 3(c) of E.O. 13272. EPA already has a high level of

compliance with the RFA and E.O. 13272, so they were able to

assist Advocacy in the development of the RFA training

program. Two training sessions for EPA staff were held in FY

2005.



Issue: Clean Water Act Requirements for Industrial

Cooling Water Intake Structures. On November 24, 2004,

the EPA published a proposed Clean Water Act rule that

would require facilities that have cooling water intake

structures to install devices to protect fish and other

aquatic species from being killed when they are pulled

into intake structures. As originally conceived by EPA,

the rule would have applied to more than 700 facilities,

including more than 80 owned by small entities. As a

result of the recommendations of a SBREFA review panel

conducted in early 2004, EPA proposed an exemption for

facilities that have a cooling water intake flow of 50

million gallons per day or less. Research available to

the panel indicated that cooling water intake flow

volumes below the 50 million gallon per day threshold are

unlikely to affect fish or other aquatic species. EPA's

proposed exemption would remove almost all small entities

from coverage by the cooling water intake rule. This

exemption means annual cost savings to small businesses

of $10.5 million.



Issue: Clean Air Act Requirements for Institutional

Incinerators. On December 9, 2004, the EPA published a

proposed rule that would establish new air pollution

control requirements for very small municipal waste

combusters and for institutional waste incinerators that

burn nonhazardous waste such as paper, cardboard, and

food waste. The rule would require new and existing

incinerators at institutions such as schools, prisons,

and churches to install state-of-the-art control

equipment and meet costly new permitting and operating

requirements. Alternatively, EPA would require these

institutions to shut down their incinerators and send

their solid waste to landfills. Advocacy was concerned

that EPA had not adequately considered the additional

costs imposed on small communities and rural institutions

to transport their solid wastes over long distances. As a

result of Advocacy's intervention on behalf of these

small entities, EPA agreed to propose an exemption for

rural incinerators located more than 50 miles from an

urban area. The exemption means cost savings to small

firms of $7.6 million annually.





Federal Acquisition Regulation Council





E.O. 13272 Compliance

The policies and procedures required by section 3(a) that

were provided by DOD apply also to the FAR Council. While

the FAR Council has not provided Advocacy with notification

as required by E.O. 13272, Advocacy now has an open

invitation to attend the regulatory council's deliberations,

which provides Advocacy with access to the predecisional

deliberative rulemaking process. Advocacy has provided

confidential input on several predecisional regulations this

past fiscal year. One case is DFARS 2003-D101, Quality

Control of Aviation Critical Safety. The Office of Advocacy

worked very closely with OIRA and the DOD regulatory team to

improve the regulatory analysis. The FAR Council has had

several RFA training sessions, including a session in FY

2005 to increase its awareness and understanding of the RFA

requirements. The FAR Council did not publish final rules in

FY 2005 that were the subject of Advocacy comment; therefore

FAR Council compliance with section 3(c) cannot be assessed.



Issue: Access to Federal Procurement Data System-NG.

The Federal Procurement Data System (FPDS) is the primary

database of the federal government for information

relating to federal procurement. Reliable, timely, and

quality information is a keystone in the decisionmaking

process. Small entities especially rely on public data.

On December 28, 2004, the Federal Acquisition

Regulation (FAR) Council and the General Services

Administration (GSA) published an interim final rule with

request for comments establishing the rate to charge

nongovernmental entities for a direct computer connection

with the Federal Procurement Data System.

The FAR Council and GSA issued this interim regulation

under the good cause exception of the Administrative

Procedure Act, citing the existence of urgent and

compelling reasons to publish an interim rule prior to

the opportunity for public comment.

On February 7, 2005, Advocacy held a procurement

roundtable to discuss, among other things, the accuracy

of federal procurement data from the Federal Procurement

Data System. This roundtable also discussed problems

small users had in gaining access to the electronic

system. Based on comments from small businesses, Advocacy

filed written comments on February 25, 2005.

Advocacy urged the FAR Council and GSA to make the

summary procurement data free of charge and to improve

upon the timeliness, quality, and reliability of the

data.





Federal Communications Commission





E.O. 13272 Compliance

In response to E.O. 13272, the Federal Communications

Commission (FCC) sent Advocacy a letter about its commitment

to uphold the spirit of E.O. 13272 and to review its rules

for impacts on small entities. The FCC said it would not

make its policies and procedures publicly available,

contrary to the requirements of section 3(a) of E.O. 13272,

maintaining that as an independent agency, it is not covered

by E.O. 13272. The agency has reiterated its intent to abide

by the spirit of E.O. 13272 and to work with Advocacy in

training its rule writers on the RFA. The FCC consistently

mails Advocacy proposed and final rules that have a

significant impact on a substantial number of small

entities. The FCC does so after the rule has been adopted

and released to the general public, but before it is sent to

the Federal Register. This provides Advocacy with additional

time to review proposed rules before the comment deadline,

but does not entirely meet the requirements of E.O. 13272,

section 3(b). In FY 2005, the agency addressed Advocacy's

comments in final rules as required by section 3(c) of E.O.

13272. FCC staff received RFA training in FY 2005.



Issue: Broadband Reporting. On November 9, 2004, the

FCC issued a notice of proposed rulemaking (NPRM) for

Local Competition and Broadband Reporting. The rule

became effective in March 2005. In the NPRM, the FCC

asked for comment on: (1) extending the local competition

and broadband reporting program for five years beyond its

current sunset in March 2005; and (2) revising the

program to improve data collection on broadband

deployment.

The initial regulatory flexibility analysis

accompanying the NRPM did not identify or analyze the

impacts of the proposed reporting requirements on

currently exempt small entities, nor did it identify or

analyze significant alternatives that would meet the

FCC's objective. Advocacy filed a comment recommending

that the FCC consider simplifying the revised reporting

form or establishing a short form for small carriers

previously exempt from reporting. Advocacy urged the FCC

to consider comments from small carriers on ways to meet

its improved data gathering objectives while minimizing

the impact on small entities.

On November 12, 2004, the FCC issued a Report and Order

that altered the FCC's local competition and broadband

data reporting program and extended the program for five

years. The new report eliminated existing reporting

thresholds, required small businesses that were

previously exempt to report their broadband deployment,

and required service providers to report more detailed

information on the speed of the broadband service

deployed. In addition, the FCC simplified the reporting

form proposed in the rule, which would lessen the burden

on all entities required to submit reports. The FCC

stated that these modifications would satisfy Advocacy's

request while allowing the FCC to determine whether

broadband is being deployed to all Americans.



Issue: Communications Assistance for Law Enforcement

Act. On August 9, 2004, the FCC issued a proposed rule to

apply the Communications Assistance for Law Enforcement

Act (CALEA) to packet-mode services, which are broadband

Internet access service and Voice over Internet Protocol

(VoIP). CALEA is designed to (1) preserve the ability of

law enforcement agencies to carry out wiretaps and other

properly authorized intercepts, (2) protect privacy, and

(3) avoid impeding the development of new technologies.

The FCC also proposed to limit the availability of

compliance extensions and require carriers to deploy

equipment that is CALEA-compliant.

The FCC issued an IRFA as part of its proposed rule,

but did not, in Advocacy's opinion, adequately analyze

the impacts of the proposed rule on small businesses. On

December 15, 2004, Advocacy filed a reply comment with

the FCC on the applicability of the CALEA to packet-mode

services, recommending that the FCC publish a revised

IRFA for comment that would include the estimates of the

costs small carriers will incur to be CALEA-compliant

under the proposed rule. Small entities would then be

able to comment on the accuracy of the estimates and ways

to minimize the impact. Advocacy also recommended that

the FCC develop alternative schemes to allow for the

purchase and operation of equipment that will enable

small telecommunications carriers to become compliant.

On September 23, 2005, the FCC issued a Report and

Order that required all facilities-based broadband

Internet access providers and providers of interconnected

VoIP service to be CALEA-compliant. The FCC rejected

Advocacy's recommendation to complete an economic

analysis by stating that it had described what the

potential economic impact on small businesses would be.

The FCC also rejected Advocacy's comments that the FCC

had failed to provide significant alternatives, stating

that the proposed rule combined with the IRFA

appropriately identified all ways in which the FCC could

lessen regulatory burdens on small entities. Accordingly,

the FCC declined Advocacy's recommendation to publish a

revised IRFA.



Issue: Computer Inquiry Rules. On December 23, 2004,

the FCC issued a public notice asking for comment on a

petition filed by Verizon under Section 10 of the

Telecommunications Act of 1996 asking the FCC to forbear

from applying Title II regulations and the Computer

Inquiry rules to broadband services offered by Verizon.

Section 10 allows the FCC to forbear from applying any

regulation to a telecommunications carrier if the FCC

determines that:

(1) enforcement of the regulation is not necessary to

ensure that the charges and practices are just and

reasonable and are not unreasonably discriminatory; (2)

enforcement is not necessary for the protection of

consumers; and (3) forbearance is consistent with the

public interest.

On March 8, 2005, Advocacy filed a reply comment with

the FCC urging the FCC to conduct an economic analysis

consistent with the RFA when considering Verizon's

petition for forbearance. A thorough economic impact

analysis would assist the FCC in answering whether or not

a Section 10 petition is in the public interest. Advocacy

encouraged the FCC to reach out to small entities,

especially small Internet service providers (ISPs), to

determine the economic impact Verizon's petition would

have on them. The FCC can draw a significant amount of

information from the initial comments from small ISPs,

including the number of small ISPs affected and some

general information on how they are affected.

As of September 30, 2005, the FCC had not issued a

final rule or a supplemental rulemaking.



Issue: Intercarrier Compensation. On December 21,

2004, Advocacy filed a letter with the FCC discussing its

views on the analysis required of the FCC by the RFA on

an expected regulatory proposal on Developing a Unified

Intercarrier Compensation Regime. Intercarrier

compensation is how telecom carriers reimburse each other

for terminating telephone calls on each others' networks.

The FCC is considering intercarrier compensation plans

submitted by various coalitions and companies within the

telecommunications industry. The FCC has been attempting

to reform and unify the current system of compensation

schemes for several years.

As a guide to what issues the FCC should consider in

the IRFA, Advocacy reviewed four of the industry

compensation plans and spoke with representatives of

several small telecom carriers and their organizations.

Advocacy notified the FCC that a unified intercarrier

compensation regime could have a significant impact on

the cost recovery of small rural carriers. Advocacy also

informed the FCC that small carriers, both rural and

competitive, are less able to recover their costs through

increased subscriber line charges. Small carriers

recommend a cost-based compensation system rather than a

system in which carriers terminate on other carriers'

networks for no charge and recover the costs from their

own customers.

On March 3, 2005, the FCC issued a proposed rule on

intercarrier compensation, officially asking for comment

on the compensation schemes. The FCC took into account

Advocacy's comments and grouped the plans into general

categories in the IRFA and conducted an impact analysis

on each category.

On May 23, 2005, Advocacy filed an additional comment

with the FCC in response to the FCC's proposed rule.

Advocacy spoke with small telecommunications carriers and

their representatives to identify issues that will have a

significant impact on small businesses. These issues

include: regulatory complexity, cost recovery,

interconnection, and universal service. Advocacy

presented these issues to the FCC and asked the agency to

consider the impact each of the proposed plans would have

upon small businesses. Advocacy presented significant

alternatives based on its outreach. These alternatives

included: making "bill and keep" optional, providing a

minimum interconnection agreement rather than removing

the requirement altogether, making universal service

portable, and moving to a capacity-based interconnection

regime.

As of September 30, 2005, the FCC had not issued a

final rule or a supplemental rulemaking.



Issue: Restrictions on Fax Advertising. On July 3,

2003, the FCC released a rule in the "do-not-call"

proceeding, which the FCC initiated to curb intrusive

telemarketing and promote consumer privacy. As part of

the "do-not-call" rules, the FCC adopted a "do-not-fax"

provision, which required any person to obtain prior

express permission in writing, with a signature from the

recipient, before sending an unsolicited fax

advertisement. Unlike the general "do-not-call"

provisions of the rule, the FCC removed the "established

business relationship" exemption and did not grant an

exception to trade associations or nonprofit

organizations when communicating through a facsimile

device to their members.

Advocacy requested that the FCC revisit this decision

in light of the economic impact on small businesses,

small trade associations, and small nonprofit

organizations (all within the small entity definition of

the RFA). Specifically, Advocacy requested that the FCC

reinstate the "established business relationship"

exemption and the nonprofit exemption, create a

presumption that membership in a trade association acts

as consent, and clarify the definition of an unsolicited

commercial advertisement. The FCC stayed the fax portion

of their rule on August 18, 2003, and the established

business relationship portion on October 3, 2003,

resulting in a significant costs savings to small

businesses.

Small business trade associations worked with Congress

to draft a bill that would make the established business

relationship exemption permanent. Advocacy sent letters

to the House of Representatives and the Senate

encouraging Congress to pass legislation that would grant

additional flexibility to small businesses. The House of

Representatives passed a bill on July 20, 2004, while the

Senate Commerce, Science, and Transportation Committee

reported out an identical bill on July 22, 2004. After

the full Senate failed to take action, the legislation

was reintroduced in the 109th Congress.

On August 10, 2004, business groups filed petitions

with the FCC to extend the stay for an additional six

months. Advocacy wrote a letter in support of the

extension, saying that it would give Congress the

opportunity to adequately consider the pending

legislation and give the FCC an opportunity to clarify

their rule. On October 1, 2004, the Federal

Communications Commission granted a six-month extension

(until June 30, 2005) of the stay of enforcement of the

"do not fax" rules. As the deadline approached, business

groups asked the FCC to extend the stay for another six

months. On May 17, 2005, Advocacy filed a letter

supporting the extension of the stay. The FCC granted the

extension until January 7, 2006. Shortly after the

extension, Congress passed the Junk Fax Prevention Act of

2005 (P.L. 109-21) which President Bush signed into law

on July 9, 2005. This bill codified the established

business relationship exemption, allowing small

businesses to fax their customers if they include an opt-

out provision on the cover page. As a result of the

legislation, small businesses saved more than $3.5

billion initially and will save $711 million annually.



Issue: Special Access Rates. On January 31, 2005,

the FCC issued a proposed rule on Special access rates.

Special access services are dedicated wires and other

facilities that run directly between two customers or

between a customer and a telecommunications carrier other

than the incumbent carrier. The FCC considered modifying

its rules in response to the expiration of the current

regulatory scheme for price cap carriers, which was

intended to run until June 30, 2005, but now will

continue until the FCC adopts a subsequent plan.

On July 27, 2005, Advocacy filed a reply comment with

the FCC to discuss regulatory impacts and available

alternatives in response to the FCC's proposed rule on

special access rates. Advocacy agreed with the FCC's

determination that this proposed rule will have a

significant economic impact on a substantial number of

small telecommunications carriers and urged the FCC to

give careful consideration to alternatives that would

minimize that impact.

Advocacy presented alternatives based on its outreach

to small businesses, including: use of a forward-looking

model for setting price caps, use of downward pricing

flexibility, revisiting FCC's cost studies, reliance on a

surrogate rate, restriction on bundling, restriction on

previous purchase level, restriction on length of term

commitments, and restriction on terminating calls with

competitors.

As of September 30, 2005, the FCC had not issued a

final rule or a supplemental rulemaking.



Issue: Telephone Number Portability: Wireline-to-

Wireless Porting. On April 22, 2005, the FCC issued a

public notice containing an IRFA for an order which

requires small rural telecommunications carriers to

provide wireline-to-wireless telephone number

portability. Porting is the transfer of a telephone

number from one carrier to another at a customer's

request. Wireline-to-wireless porting is the transfer of

a number from a wireline carrier to a wireless carrier,

and wireless-to-wireline porting is a transfer in the

opposite direction. The FCC published the IRFA in

response to a court order which held that the FCC had not

complied with the RFA and directed the agency to conduct

the analysis.(1)

On August 16, 2005, Advocacy filed a comment in

response to the IRFA. In its comment Advocacy said that

the IRFA did not satisfy the requirements of the RFA, as

the FCC did not provide any estimates on the costs,

projected recordkeeping, or professional skills necessary

to implement wireline-to-wireless number portability.

Advocacy advised the FCC that its treatment of

alternatives to minimize significant economic impact on

small entities was deficient.

To determine what alternatives the FCC should consider

in the IRFA, Advocacy spoke with representatives of small

telecommunications carriers and their trade associations

and reviewed the comments by small businesses submitted

during the course of the rulemaking. In its comment,

Advocacy discussed the regulatory impacts on small rural

wireline carriers and presented alternatives based on its

outreach. These alternatives included: require physical

interconnection for wireline-to-wireless number

portability, waive the enforcement of wireline-to-

wireless number portability, and exempt small rural

wireline carriers from the portability requirement.

Advocacy urged the FCC to consider the regulatory

impact on small rural carriers and recommended that the

FCC issue a supplemental IRFA with a more thorough

analysis of the impacts and significant alternatives. As

of September 30, 2005, the FCC had not issued a final

regulatory flexibility analysis.



Issue: Local Number Portability - Porting Interval.

On September 16, 2004, the FCC issued a proposed rule

that sought comment on a recommendation of the North

American Numbering Council (NANC) that would reduce the

intermodal porting interval. Intermodal porting is the

transfer of a number from a wireline carrier to a

wireless carrier at a customer's request. The NANC

recommended a combination of two proposals, which it

determined would result in a shorter porting interval.

The NANC predicted that this would reduce the porting

interval from 96 hours to 53 hours.

The FCC issued an IRFA as part of its proposed rule.

The FCC recognized that reducing the porting interval may

require system upgrades and impose new obligations and

costs on carriers. The agency sought comment on the

impacts of the proposed rule on small telephone companies

and ways to reduce the burden, pursuant to the RFA.

Advocacy filed a comment with the FCC stating that the

cost of requiring small telephone companies to comply

with a shorter porting interval would outweigh the

benefits of shortening the time their customers have to

wait for their numbers to be ported from wireline to

wireless phones in rural areas. Advocacy recommended that

the FCC grant an exemption to small businesses because of

the small number of porting requests received in rural

areas and the expense to small telephone companies that

must either rely on third parties or perform the ports

manually.

As of September 30, 2005, the FCC had not issued a

final rule or a supplemental rulemaking.



Issue: Unbundled Network Elements (UNEs). On August

20, 2004, the FCC issued a proposed rule to determine

which network elements under the Telecommunications Act

of 1996 must be unbundled and made available by incumbent

telecom carriers to competitive carriers to ensure that

competitive carriers have access to essential network

elements necessary for providing competitive telephone

service.

On October 4, 2004, Advocacy filed a comment with the

FCC addressing two significant deficiencies in the IRFA.

First, the FCC did not analyze the economic impact on

small businesses of eliminating UNEs. Instead, the FCC

listed small entities that would be affected, but posed

the question of actual impact to the general public. The

RFA encourages the FCC to conduct its own analysis and

rely on public comment to improve the quality of analysis

prior to making a final decision. To correct this

deficiency, Advocacy recommended that the FCC issue a

revised IRFA to analyze the impacts of this rule on small

businesses.

Second, the FCC did not identify or analyze

alternatives to minimize the burden on small businesses

in the IRFA. Advocacy spoke with several small

competitive carriers about possible alternatives that

would minimize the impact on small businesses. Advocacy

identified alternatives that could help the FCC minimize

the rule's small business impact.

On Feb. 23, 2005, the FCC issued an order on remand

modifying the FCC's unbundling rules and made unbundled

access to transport and loops conditional upon the

competitive deployment at a wire center or along routes.

The FCC set forth specific transition plans to govern

competitive carriers' migration from UNEs to alternative

arrangements, where necessary. The FCC rejected

Advocacy's recommendation that small entities were

disadvantaged by any lack of specificity regarding

specific results potentially resulting from this proposed

rule. Instead, the FCC claimed that the proposed rule

posed specific questions to commenters and solicited

comment from all parties sufficient to comply with the

RFA even though the FCC did not propose specific rules.

With this justification, the FCC declined to issue a

revised IRFA.



Issue: Voice over Internet Protocol. On March 10,

2004, the FCC issued a proposed rule on whether Internet

Protocol (IP)-enabled services should be considered a

telecommunications service or an information service and

which regulatory scheme should be applied to this

technology. On May 28, 2004, Advocacy filed comments with

the FCC, noting that the proposed rule did not contain

concrete proposals and was more akin to an advance notice

of proposed rulemaking or a notice of inquiry. Because of

the vagueness of the NPRM, the IRFA did not provide an

analysis of proposed compliance burdens, consideration of

alternatives, or discussion of overlapping regulations.

Should the FCC decide to adopt regulations for IP-

enabled services after consideration of the comments to

the NPRM, Advocacy recommended that the FCC publish for

public comment a further notice of proposed rulemaking

with a revised IRFA to consider the impact of the

proposed requirements on small entities, to provide

analysis of significant alternatives that minimize the

economic impact on them, and to review overlapping

regulations.

On June 3, 2005, the FCC released a report and order

requiring providers of interconnected Voice over Internet

Protocol (VoIP) service to supply enhanced 911

capabilities to their customers. The FCC rejected

Advocacy's recommendation that it issue a revised IRFA,

stating that small entities had already received

sufficient notice of the issues because the FCC

considered the economic impact on small entities and what

ways are feasible to minimize the burdens imposed on

those entities, and, to the extent feasible, implemented

those less burdensome alternatives.





National Archives and Records Administration



Issue: Standards for Federal Record Centers. In

August 2005, the National Archives and Records

Administration (NARA) published a final regulation on

Federal Record Centers. This final rule modifies NARA

facility standards established by a final rulemaking in

1999 for records storage facilities that house federal

records. In the 1999 rulemaking process, Advocacy

commented on the proposed rule and worked with NARA to

improve its RFA compliance. Specifically, the 1999 rule

required special roof construction, certification of

multi-story structures, and fire protection system

certification. The final rule abolished these

requirements and simply requires that small entities

comply with state and local building codes instead.

The final August 2005 rule addresses records center

industry concerns identified in the 2003 OMB Report to

Congress on Costs and Benefits of Federal Regulations.

Advocacy continued to work with NARA and the small

business record center trade organizations in the

finalization of the August 2005 rule. Cost savings in the

amount of $63 million in the first year of the rule were

achieved for small businesses.





Securities and Exchange Commission





E.O. 13272 Compliance

The Securities and Exchange Commission (SEC) has not made

public its written policies and procedures for the

consideration of small entities in its rulemaking as

required by section 3(a) of E.O. 13272. The SEC does

consistently notify Advocacy of rules which may have a

significant economic impact on a substantial number of small

entities, as required by section 3(b). The SEC did not

publish any final rules in FY 2005 that were the subject of

any Advocacy comment; therefore, SEC's compliance with

section 3(c) cannot be assessed.



Issue: Advisory Committee on Smaller Public

Companies. Small business representatives and Advocacy

recommended to the SEC that the agency could benefit from

the advice of a balanced committee of representatives of

smaller public companies. This recommendation stemmed

from a combination of recent changes to securities law

and changed circumstances required by the Sarbanes-Oxley

Act of 2002 (SOA). In January 2005, the SEC officially

convened the SEC Advisory Committee on Smaller Public

Companies, and assigned an office to support the

committee's activities. Since its convening, the SEC's

advisory committee has met several times, collected

expert and small business testimony on securities law

reform, and made preliminary recommendations to the SEC.

The SEC has demonstrated a commitment to working with the

public to balance the impacts of its regulatory actions

on small businesses, and Advocacy looks forward to

working with the SEC on the advisory committee's final

recommendations.



Issue: Extension of Small Public Company Compliance

Deadline for New Internal Control Reporting Requirement.

In response to one recommendation under consideration at

the SEC's advisory committee, the SEC provided small

businesses with an extension of time for implementation

of Section 404 of the SOA to ensure that the advisory

committee's final recommendations on Section 404 have

time to be implemented. SEC's action is estimated to save

nonaccelerated filers (smaller public companies)

approximately $2.68 billion in first-year compliance

costs.





Small Business Administration





E.O. 13272 Compliance

The Small Business Administration (SBA) provides Advocacy

with notification of draft rules that may have a significant

impact on a substantial number of small entities, as

required by section 3(b) of E.O. 13272. As a result of RFA

training and continued RFA discussions on draft rules, SBA

personnel have sought Advocacy input earlier in the

regulatory development process. SBA did not publish any

final rule in FY 2005 that was the subject of any Advocacy

comment; therefore, SBA's compliance with section 3(c)

cannot be assessed.



Issue: Selected Size Standard Issues. On December 3,

2004, SBA issued an advance notice of proposed rulemaking

(ANPRM) in the Federal Register on Small Business

Selected Size Standards Issues. This regulation attempted

to seek comments on size standard issues not discussed in

the March 2004 proposed restructuring of SBA's system of

size standards. The ANPRM was seeking comments on whether

there should be an exclusion from the affiliation rule

with venture capital companies and how to best simplify

size standards.

Based on conversations with affected small businesses

and a procurement roundtable held on April 4, 2004,

Advocacy filed a written comment letter on January 13,

2005. Advocacy urged SBA to seek public input on the need

to streamline the duplicative regulatory impact analysis

requirements that agencies must follow under the

Regulatory Flexibility Act and SBA size standard

regulations. SBA has not taken further action on this

ANPRM.





Conclusion



Advocacy has seen the beginnings of a transformation in

regulatory flexibility analysis from a process that in 1980

relied primarily on paperwork and formal written comments to

a broader technology-enhanced process that allows for

earlier, more real-time, and more direct information

exchange among agency rule writers, the Office of Advocacy,

and affected small entities.

A careful look at the last three years of RFA experience

since President Bush's announcement of E.O. 13272 indicates

signs of progress:

As of the end of FY 2005, more than 40 agencies had

been trained in how to comply with the RFA, and more

agencies were taking the initiative to examine their

rules for small entity impacts.

Almost all Cabinet-level departments that issue

regulations have adopted a written policy on how they

will comply. Many have offices to help small businesses

understand and comply with their regulations.

As evidenced in a number of the 2005 cases reported

here, the Office of Advocacy's involvement was much more

likely to start at a proposal's prepublication stage, so

that small entity concerns could be addressed earlier,

resulting in more carefully targeted improvements to

proposed rules.

Agencies are responding to Advocacy's comments on

proposed rules when they publish the final rules in the

Federal Register.

Technology played a key role in small entities'

ability to comment earlier and more meaningfully on new

regulatory proposals. Advocacy posted key regulatory

proposals of interest to small businesses on its

Regulatory Alerts page and provided for small entities to

comment on regulations through regulations.gov at

http://www.sba.gov/advo/laws/law_regalerts.html.

SBREFA panels continued to give federal regulators

new insights during the rule drafting stage into how

their rules would affect small businesses and other small

entities on the ground. Some agencies that are not

required to use these panels are nevertheless meeting

informally with small businesses in roundtables in an

effort to determine the likely effects of their rules.

Overall, regulatory development and sensitivity to

impacts on small entities have improved considerably since

the RFA was enacted in 1980. More improvements are needed:

new 2005 research indicates that the disproportionate

regulatory burden on small entities continues. Advocacy's

top legislative priority articulated in FY 2005 for the

109th Congress was to amend the RFA and SBREFA to improve

the regulatory climate for small businesses and "to give

small businesses a legitimate voice in the regulatory

process" (see Appendix D).

At the September 2005 symposium, Chief Counsel for

Advocacy Thomas M. Sullivan noted "The past 25 years have

taught us that monitoring federal agency compliance is an

ongoing task, and it is something that advocates will be

doing 25 years from now as well." If the result is

regulations that are better designed to achieve their

mission with relatively less burden on small entities, the

effort will be well worthwhile.







4. State Flexibility: Small Business Regulatory Flexibility





Model Legislation Initiative







While federal measures are in place to reduce regulatory

burdens on small businesses, the need for flexibility does

not stop at the federal level. At least 92 percent of

businesses in every state are small businesses, and they

bear a disproportionate share of regulatory costs and

burdens. However, sometimes because of their size, the

aggregate importance of small businesses to the economy is

overlooked. Because of this, it is very easy to fail to

notice the negative impact of regulatory activities on them.

Recognizing that state and local governments can be a source

of burdensome regulations on small business, Advocacy

drafted model regulatory flexibility legislation for the

states based on the federal Regulatory Flexibility Act.



"This bill is all about making life easier for our state's



small businesses, which is a big step forward in stimulating



job creation and economic growth in South Carolina.



Ultimately, though, letting those businesses keep more of



what they earn so they can reinvest in new people, new



equipment and new technologies is going to have the biggest



impact on our state's economy."



South Carolina Governor Mark Sanford





The intent of Advocacy's model legislation is to foster a

climate for entrepreneurial success in the states so that

small businesses will continue to create jobs, produce

innovative new products and services, and bring more

Americans into the economic mainstream. Excessive regulation

can be reduced and the economy improved without sacrificing

important regulatory goals such as higher environmental

quality, greater travel safety, better workplace conditions,

and increased family financial security.

According to Advocacy's state model legislation,

successful state-level regulatory flexibility laws should

address the following: 1) a small business definition that

is consistent with state practices and permitting

authorities; 2) a requirement that state agencies perform an

economic impact analysis on the effect of a rule on small

businesses before they regulate; 3) a requirement that state

agencies consider alternatives that are less burdensome for

small businesses while still meeting the agency's regulatory

goals; 4) a provision that requires state governments to

review existing regulations periodically; and 5) judicial

review to give the law "teeth."



"Small business is the dynamo that powers our economy, and



every dollar a small business puts towards complying with



cumbersome government regulations is a dollar that cannot be



spent expanding the business, providing benefits or hiring



new employees. I sponsored HB 33 because I see smarter



regulations as an economic development tool and strongly



feel that we can add an awareness of the needs of small



businesses to the regulatory process without compromising



the health, safety, or welfare of the public."



Alaska State Representative Kevin Meyer





Many states have some form of regulatory flexibility laws

on the books. However, many of these laws do not contain all

of the five critical elements addressed in Advocacy's model

legislation. Recognizing that some laws are missing key

components that give regulatory flexibility its

effectiveness, legislators continue to introduce legislation

to strengthen their current systems.

Since 2002, 14 states have enacted regulatory flexibility

laws,(2)33 state legislatures have considered regulatory

flexibility legislation(3) and four executive orders have

been signed by governors implementing regulatory

flexibility.(4)

In 2005, 18 states introduced regulatory flexibility

legislation.(5)Alaska Governor Frank Murkowski, Indiana

Governor Mitch Daniels, Missouri Governor Matt Blunt, New

Mexico Governor Bill Richardson, and Virginia Governor Mark

Warner signed regulatory flexibility legislation into law

and Arkansas Governor Mike Huckabee implemented regulatory

flexibility through an executive order in 2005.



"Adding judicial review is an important step forward for our



state's small businesses. Now the law has some teeth, and



that will help small business and state agencies work



together to produce good regulations that get the job done



without causing serious harm. It means a better business and



job creating climate for Missouri."



Scott George, President and CEO



of Mid American Dental & Hearing Center



in Mt. Vernon, MO





Advocacy welcomes the opportunity to work with state

leaders on regulatory flexibility. The office's 10 regional

advocates located across the country help educate governors,

state officials, state legislators, and small business

representatives about the benefits of reducing state

regulatory burdens on small businesses.

The text of Advocacy's model legislation, updated

versions of the state regulatory flexibility legislative

activity map and contact information for the regional

advocates can be found on the website

http://www.sba.gov/advo/ under "State Activities."





Success Stories





Colorado's Cork and Go Rule: Regulation 47-918

Under Colorado law, hotels and restaurants are permitted to

reseal, and allow a customer to remove from the premises, an

open bottle of partially consumed wine purchased at the

hotel or restaurant with some limitations.

To implement this law, the Colorado Department of Public

Health and Environment (DPHE) proposed a rule amendment that

would require hotels and restaurants offering resealing of

opened bottles to purchase commercially manufactured

stoppers and sealable containers such as bags or boxes. The

overall cost of compliance for this regulatory proposal was

estimated at approximately $1,771,500 to $3,275,000.(6)

A small business is defined under the Colorado

Administrative Procedure Act as having 500 or fewer

employees. More than 4,000 firms in the state operate with

an active liquor license and would have been affected by the

rule. Under Colorado's regulatory flexibility structure, the

Department of Regulatory Agencies (DORA) reviews proposed

rules affecting small businesses and can request that an

agency prepare an analysis of a proposed rule's economic

impact on small entities. In this circumstance, DORA asked

DPHE to determine the cost that would be incurred by small

businesses to comply with the proposed rule.

DORA's review of the proposal found that the law under

which the rule was promulgated did not specify how bottles

were required to be re-corked, nor did it specify that

sealable containers, in addition to the stoppers, are

required. The Colorado Restaurant Association, on behalf of

its small members, objected to the rule on the basis that

the cost of compliance would be overly burdensome to the

regulated small entities.

After discussions with DORA and the Colorado Restaurant

Association, and before going further with the rulemaking

process, DPHE agreed to revise its initial proposal. The

revised rule is a success for small business because it

provides an economical way for businesses to comply with the

rule. The final rule allows the use of the original cork to

re-cork the bottle. Businesses are still required to use

sealable bags, but are not required to incur the expense of

commercially manufactured stoppers and corks.

DPHE, DORA, and small businesses worked together under

Colorado's regulatory flexibility law. DORA's small business

outreach was an important tool. Small businesses proved to

be an invaluable resource to the agency in determining which

alternatives might be less burdensome. The end result was a

cost savings to small business without compromising the

agency's objective. This example demonstrates how agencies,

as well as small businesses, can benefit by implementing a

comprehensive regulatory flexibility system.



Chart 4.1 Mapping State Regulatory Flexibility

Provisions, FY 2005









Lizzy's Ice Cream: A Case for Common Sense Regulation

Under the Food Protection Program in the Massachusetts

Department of Public Health (MDPH), businesses transporting

frozen or refrigerated products are required to purchase or

lease a mechanically refrigerated vehicle (105 CMR 561.000).

This provision costs businesses approximately $50,000 per

truck and several thousand dollars annually in operating

costs.

Nick Pappas decided to leave the corporate world and open

Lizzy's Ice Cream Parlor in Waltham, Massachusetts. Lizzy's

homemade "super premium" ice cream was a hit, and Nick

eventually decided to sell his product through supermarkets

around Greater Boston. As he was unable to afford a

mechanically refrigerated vehicle and would be making only a

small number of deliveries, he developed a system to operate

a refrigerator unit on his own truck using the truck's

existing power system. After conducting diligent research,

he determined that his approach was equally effective and

would save him thousands of dollars.

Nick was unable to gain approval for his method from

MDPH. Not only was his evidence ignored, but there appeared

to be no rational or scientific basis for the standards

required by the agency. He found no studies justifying the

regulation and no supporting evidence of any citizens

sickened by ingesting improperly refrigerated ice cream.

MDPH conducted hearings on updating their frozen dessert

regulations and Nick, along with other small business

owners, used the opportunity to voice concerns about the

adverse impact of the rule on their businesses. As a result

of the hearing, MDPH revised the regulations to allow anyone

proposing to use an alternative method for transporting

frozen or refrigerated products to apply for a variance,

accompanied by an explanation of how safe temperatures would

be maintained. Allowing small businesses affected by the

rule to present alternatives saved the small firms the

$50,000 for a new vehicle, plus the annual insurance and

operating costs.

Although Massachusetts does not require any agency to

conduct a review or analysis of the impact of regulations on

small businesses, MDPH decided to employ this good

government practice. Other agencies, as well as small

businesses, would benefit greatly by implementing a similar

process. This can be accomplished by enacting a strong

regulatory flexibility law.

Nick's story validates a key element of regulatory

flexibility, which is the requirement that agencies review

existing regulations periodically to determine whether they

should be continued without change, or be amended or

rescinded to minimize the economic impact of the rule on

small businesses. In the case resolved by the Massachusetts

Department of Public Health, a less burdensome alternative

was achieved for Lizzy's Ice Cream and other small firms

without compromising the health, safety, and welfare of

citizens.





Table 4.1 State Regulatory Flexibility 2005 Legislative



Activity



Seven states enacted regulatory flexibility legislation or an

executive order in 2005:



Alaska (HB33) Missouri (HB576) Virginia

(HB1948/SB1122)



Arkansas (EO) New Mexico (HB869)



Indiana (HB1822) Oregon (HB3238)





Eighteen states introduced regulatory flexibility legislation

in 2005:



Alabama (HB 745) Missouri (HB576) Oregon (HB3238)



Alaska (HB33) Montana (HB630) Pennsylvania

(HB236/SB842)



Hawaii (HB602/SB422) New Jersey Tennessee

(A3973/S2754) (HB279/SB1276)



Indiana (HB1822) New Mexico Utah (HB209)

(HB869/SB842)

Iowa (SB65) North Carolina Virginia

(SB664) (HB1948/SB1122)



Mississippi Ohio (SB15) Washington (HB1445)

(HB1472/SB2795)









Table 4.2 State Regulatory Flexibility Legislation, Status



as of October 2005



14 states and one territory have active regulatory

flexibility statutes:



Arizona Michigan North Dakota2 South Carolina 1



Connecticut1 Missouri Oklahoma Virginia



Hawaii Nevada Oregon Wisconsin 2



Indiana New York Puerto Rico





28 states have partial or partially used regulatory

flexibility statutes:



Alaska Illinois Mississippi Rhode Island1



Arkansas Iowa New Hampshire South Dakota1



California Kentucky1 New Jersey Texas



Colorado2 Maine New Mexico Utah



Delaware Maryland North Carolina Vermont



Florida Massachusett Ohio Washington

s2

Georgia Minnesota Pennsylvania West Virginia2





Eight states, two territories, and the District of Columbia

have no

regulatory flexibility statutes:



Alabama Idaho Montana Virgin Islands



District of Kansas Nebraska Wyoming

Columbia

Guam Louisiana Tennessee



1. In 2004, the state enacted legislation or an executive

order that offered regulatory relief for state small

businesses.

2. In 2003, the state enacted legislation or an executive

order that offered regulatory relief for state small

businesses.











Appendix A Supplementary Tables









Table A.1 Cabinet Department RFA Procedures in Compliance



with Section 3(a) of E.O. 13272







Department Document made available at:

Agriculture www.ocio.usda.gov/directives/files/dr

/DR1512-001.pdf



Commerce www.ogc.doc.gov/ogc/legreg/testimon/1

08f/guidelines.htm



Defense DOD has not submitted procedures

separate from the FAR

Council/ GSA's submission.



Education www.ed.gov/legislation/FedRegister/fi

nrule/2003-2/051203d.html



Energy www.gc.doe.gov/rulemaking/eo13272.pdf



Health and Human www.hhs.gov/execsec/smallbus.html

Services

Homeland Security www.tsa.gov/public/display?theme=5



Housing and Urban www.hud.gov/offices/osdbu/policy/impa

Development ct.cfm



Interior http://elips.doi.gov/elips/release/32

07.htm



Justice www.usdoj.gov/olp/execorder13272.pdf



Labor www.dol.gov/dol/regs/guidelines.htm



State The Department of State has not

submitted written procedures.



Transportation www.regs.dot.gov/docs/eo-13272.pdf



Treasury www.treas.gov/regs/2002-rfa-

compliance.pdf?IMAGE.X=24\

&IMAGE.Y=8



Veterans Affairs www.va.gov/OSDBU/library/eo13272.htm









Table A.2 Federal Agencies Trained in RFA Compliance, FY



2003-2005



In fulfillment of E.O. 13272, Advocacy trained regulatory

staff from the following federal departments and agencies on

how to comply with the Regulatory Flexibility Act from July

2003 through September 2005.



Department of Agriculture

Animal and Plant Health Inspection Service

Department of Commerce

National Oceanic and Atmospheric Administration

Manufacturing and Services

Patent and Trademark Office

Department of Education

Department of Energy

Department of Health and Human Services

Centers for Medicare and Medicaid Services

Food and Drug Administration

Department of Homeland Security

Bureau of Citizenship and Immigration Services

Bureau of Customs and Border Protection

Transportation Security Administration

United States Coast Guard

Department of Housing and Urban Development

Community Planning and Development

Fair Housing and Equal Opportunity

Manufactured Housing

Public and Indian Housing

Department of the Interior

Bureau of Indian Affairs

Bureau of Land Management

Fish and Wildlife Service

Minerals Management Service

National Park Service

Office of Surface Mining, Reclamation, and Enforcement

Department of Justice

Bureau of Alcohol, Tobacco, and Firearms

Department of Labor

Employee Benefits Security Administration

Employment and Training Administration

Employment Standards Administration

Mine Safety and Health Administration

Occupational Safety and Health Administration

Department of Transportation

Federal Aviation Administration

Federal Highway Administration

Federal Motor Carrier Safety Administration

Federal Railroad Administration

National Highway Traffic Safety Administration

Research and Special Programs Administration

Department of the Treasury

Financial Crimes Enforcement Network

Financial Management Service

Internal Revenue Service

Office of the Comptroller of the Currency

Tax and Trade Bureau

Department of Veterans Affairs

Independent Federal Agencies

Access Board

Environmental Protection Agency

Federal Communications Commission

Federal Deposit Insurance Commission

Federal Election Commission

General Services Administration / FAR Council

Securities and Exchange Commission

Small Business Administration





Table A.3 SBREFA Panels through Fiscal Year 2005



Date Report Final

Rule Subject Convened Complete NPRM 1 Rule

d Publishe

d

Environmental Protection Agency



Non-Road Diesel Engines 03/25/9 05/23/97 09/24/97 10/23/98

7

Industrial Laundries 06/06/9 08/08/97 12/12/97 Withdraw

Effluent Guideline 7 n 2



Stormwater Phase 2 06/19/9 08/07/97 01/09/98 12/08/99

7

Transport Equipment 07/16/9 09/23/97 06/25/98 08/14/00

Cleaning Effluent 7

Guideline



Centralized Waste Treatment 11/06/9 01/23/98 01/13/99 12/22/00

Effluent 7

Guideline



Underground Injection 02/17/9 04/17/98 07/29/98 12/07/99

Control 8

Class V Wells



Ground Water 04/10/9 06/09/98 05/10/00

8

Federal Implementation Plan

for 06/23/9 08/21/98 10/21/98

Regional Nitrogen Oxides 8

Reductions

Section 126 Petitions 06/23/9 08/21/98 09/30/98 05/25/99

8

Radon in Drinking Water 07/09/9 09/18/98 11/02/99

8

Long Term 1 Enhanced 08/21/9 10/19/98 04/10/00 01/14/02

Surface Water 8

Treatment



Filter Backwash Recycling 08/21/9 10/19/98 04/10/00 06/08/01

8

Light Duty Vehicles/Light

Duty Trucks 08/27/9 10/26/98 05/13/99 02/10/00

Emissions and Sulfur in 8

Gasoline

Arsenic in Drinking Water 03/30/9 06/04/99 06/22/00 01/22/01

9

Recreational Marine Engines 06/07/9 08/25/99 10/05/01 11/08/02

9 08/14/02



Diesel Fuel Sulfur Control 11/12/9 03/24/00 06/02/00 01/18/01

Requirements 9

Lead Renovation and 11/23/9 03/03/00

Remodeling Rule 9

Metals Products and 12/09/9 03/03/00 01/03/01 05/13/03

Machinery Effluent 9

Guideline



Concentrated Animals 12/16/9 04/07/00 01/12/01 02/12/03

Feedlots Effluent 9

Guideline



Reinforced Plastic 04/06/0 06/02/00 08/02/01 04/21/03

Composites 0



Date Report Final

Rule Subject Convene Complete NPRM1 Rule

d d Publishe

d



Stage 2 Disinfection 04/25/0 06/23/00

Byproducts 0

Long Term 2 Enhanced 04/25/0 06/23/00 08/11/03

Surface Water 0 08/18/03

Treatment

Emissions from Non-Road and 05/03/0 07/17/01 10/05/01 11/08/02

Recreational 1 08/14/02

Engines and Highway

Motorcycles

Construction and 07/16/0 10/12/01 06/24/02 Withdraw

Development Effluent 1 n3

Guideline



Aquatic Animal Production 01/22/0 06/19/02 09/12/02 08/23/04

Industry 2

Lime Industry-Air Pollution 01/22/0 03/25/02 12/20/02 01/05/04

2

Non-Road Diesel 10/24/0 12/23/02 05/23/03 06/29/04

Emissions-Tier 4 Rules 2

Cooling Water Intake 02/27/0 04/27/04 11/24/04

Structures-Phase III 4

Facilities



Section 126 Petition (2005 04/27/0 06/27/05 08/24/05

Clean Air 5

Implementation Rule)



Federal Implementation Plan 04/27/0 06/27/05 08/24/05

for Regional 5

Nitrogen Oxides (2005 Clean

Air

Implementation Rule)



Mobile Source Air Toxics - 09/07/0

Control of 5

Hazardous Air Pollutants

From Mobile Sources



Occupational Safety and Health Administration



Tuberculosis 09/10/9 11/12/96 10/17/97 Withdraw

6 n4



Safety and Health Program 10/20/9 12/19/98 Withdraw

Rule 8 n



Ergonomics Program Standard 03/02/9 04/30/99 11/23/99

9 11/14/00

5



Electric Power Generation, 04/01/0 06/30/03 06/15/05

Transmission, 3

and Distribution



Confined Spaces in 09/26/0 11/24/03

Construction 3

Occupational Exposure to 10/21/0 12/19/03

Respirable 3

Crystalline Silica Dust



Occupational Exposure to 01/30/0 04/20/04 10/04/04

Hexavalent 4

Chromium







1 Notice of proposed rulemaking (NPRM).

2 Proposed rule was withdrawn August 18, 1999. EPA does not

plan to issue a final rule.

3 Proposed rule was withdrawn on April 26, 2004. EPA does

not plan to issue a final rule.

4 Proposed rule was withdrawn on December 31, 2003. OSHA

does not plan to issue a final rule.

5 President Bush signed Senate J. Res. 6 on 03/20/01, which

eliminated this final rule under the Congressional Review

Act.







Appendix B The Regulatory Flexibility Act







The following text of the Regulatory Flexibility Act of

1980, as amended, is taken from Title 5 of the United States

Code, Sections 601-612. The Regulatory Flexibility Act was

originally passed in 1980 (P.L. 96-354). The act was amended

by the Small Business Regulatory Enforcement Fairness Act of

1996 (P.L. 104-121).



Congressional Findings and Declaration of Purpose



(a) The Congress finds and declares that -

(1) when adopting regulations to protect the health, safety

and economic welfare of the Nation, Federal agencies should

seek to achieve statutory goals as effectively and

efficiently as possible without imposing unnecessary burdens

on the public;

(2) laws and regulations designed for application to large

scale entities have been applied uniformly to small

businesses, small organizations, and small governmental

jurisdictions even though the problems that gave rise to

government action may not have been caused by those smaller

entities;

(3) uniform Federal regulatory and reporting requirements

have in numerous instances imposed unnecessary and

disproportionately burdensome demands including legal,

accounting and consulting costs upon small businesses, small

organizations, and small governmental jurisdictions with

limited resources;

(4) the failure to recognize differences in the scale and

resources of regulated entities has in numerous instances

adversely affected competition in the marketplace,

discouraged innovation and restricted improvements in

productivity;

(5) unnecessary regulations create entry barriers in many

industries and discourage potential entrepreneurs from

introducing beneficial products and processes;

(6) the practice of treating all regulated businesses,

organizations, and governmental jurisdictions as equivalent

may lead to inefficient use of regulatory agency resources,

enforcement problems and, in some cases, to actions

inconsistent with the legislative intent of health, safety,

environmental and economic welfare legislation;

(7) alternative regulatory approaches which do not conflict

with the stated objectives of applicable statutes may be

available which minimize the significant economic impact of

rules on small businesses, small organizations, and small

governmental jurisdictions;

(8) the process by which Federal regulations are developed

and adopted should be reformed to require agencies to

solicit the ideas and comments of small businesses, small

organizations, and small governmental jurisdictions to

examine the impact of proposed and existing rules on such

entities, and to review the continued need for existing

rules.



(b) It is the purpose of this Act [enacting this chapter and

provisions set out as notes under this section] to establish

as a principle of regulatory issuance that agencies shall

endeavor, consistent with the objectives of the rule and of

applicable statutes, to fit regulatory and informational

requirements to the scale of the businesses, organizations,

and governmental jurisdictions subject to regulation. To

achieve this principle, agencies are required to solicit and

consider flexible regulatory proposals and to explain the

rationale for their actions to assure that such proposals

are given serious consideration.





Regulatory Flexibility Act





601 Definitions

602 Regulatory agenda

603 Initial regulatory flexibility analysis

604 Final regulatory flexibility analysis

605 Avoidance of duplicative or unnecessary analyses

606 Effect on other law

607 Preparation of analyses

608 Procedure for waiver or delay of completion

609 Procedures for gathering comments

610 Periodic review of rules

611 Judicial review

612 Reports and intervention rights



601 Definitions

For purposes of this chapter -



(1) the term "agency" means an agency as defined in section

551(1) of this title;

(2) the term "rule" means any rule for which the agency

publishes a general notice of proposed rulemaking pursuant

to section 553(b) of this title, or any other law, including

any rule of general applicability governing Federal grants

to State and local governments for which the agency provides

an opportunity for notice and public comment, except that

the term "rule" does not include a rule of particular

applicability relating to rates, wages, corporate or

financial structures or reorganizations thereof, prices,

facilities, appliances, services, or allowances therefor or

to valuations, costs or accounting, or practices relating to

such rates, wages, structures, prices, appliances, services,

or allowances;

(3) the term "small business" has the same meaning as the

term "small business concern" under section 3 of the Small

Business Act, unless an agency, after consultation with the

Office of Advocacy of the Small Business Administration and

after opportunity for public comment, establishes one or

more definitions of such term which are appropriate to the

activities of the agency and publishes such definition(s) in

the Federal Register;

(4) the term "small organization" means any not-for-profit

enterprise which is independently owned and operated and is

not dominant in its field, unless an agency establishes,

after opportunity for public comment, one or more

definitions of such term which are appropriate to the

activities of the agency and publishes such definition(s) in

the Federal Register;

(5) the term "small governmental jurisdiction" means

governments of cities, counties, towns, townships, villages,

school districts, or special districts, with a population of

less than fifty thousand, unless an agency establishes,

after opportunity for public comment, one or more

definitions of such term which are appropriate to the

activities of the agency and which are based on such factors

as location in rural or sparsely populated areas or limited

revenues due to the population of such jurisdiction, and

publishes such definition(s) in the Federal Register;

(6) the term "small entity" shall have the same meaning as

the terms "small business," "small organization" and "small

governmental jurisdiction" defined in paragraphs (3), (4)

and (5) of this section; and

(7) the term "collection of information" -

(A) means the obtaining, causing to be obtained,

soliciting, or requiring the disclosure to third parties or

the public, of facts or opinions by or for an agency,

regardless of form or format, calling for either -

(i) answers to identical questions posed to, or

identical reporting or recordkeeping requirements imposed

on, 10 or more persons, other than agencies,

instrumentalities, or employees of the United States; or

(ii) answers to questions posed to agencies,

instrumentalities, or employees of the United States which

are to be used for general statistical purposes; and

(B) shall not include a collection of information

described under section 3518(c)(1) of title 44, United

States Code.

(8) Recordkeeping requirement - The term "recordkeeping

requirement" means a requirement imposed by an agency on

persons to maintain specified records.



602. Regulatory agenda

(a) During the months of October and April of each year,

each agency shall publish in the Federal Register a

regulatory flexibility agenda which shall contain -

(1) a brief description of the subject area of any rule

which the agency expects to propose or promulgate which is

likely to have a significant economic impact on a

substantial number of small entities;

(2) a summary of the nature of any such rule under

consideration for each subject area listed in the agenda

pursuant to paragraph (1), the objectives and legal basis

for the issuance of the rule, and an approximate schedule

for completing action on any rule for which the agency has

issued a general notice of proposed rulemaking, and

(3) the name and telephone number of an agency official

knowledgeable concerning the items listed in paragraph (1).

(b) Each regulatory flexibility agenda shall be transmitted

to the Chief Counsel for Advocacy of the Small Business

Administration for comment, if any.

(c) Each agency shall endeavor to provide notice of each

regulatory flexibility agenda to small entities or their

representatives through direct notification or publication

of the agenda in publications likely to be obtained by such

small entities and shall invite comments upon each subject

area on the agenda.

(d) Nothing in this section precludes an agency from

considering or acting on any matter not included in a

regulatory flexibility agenda, or requires an agency to

consider or act on any matter listed in such agenda.



603. Initial regulatory flexibility analysis

(a) Whenever an agency is required by section 553 of this

title, or any other law, to publish general notice of

proposed rulemaking for any proposed rule, or publishes a

notice of proposed rulemaking for an interpretative rule

involving the internal revenue laws of the United States,

the agency shall prepare and make available for public

comment an initial regulatory flexibility analysis. Such

analysis shall describe the impact of the proposed rule on

small entities. The initial regulatory flexibility analysis

or a summary shall be published in the Federal Register at

the time of the publication of general notice of proposed

rulemaking for the rule. The agency shall transmit a copy of

the initial regulatory flexibility analysis to the Chief

Counsel for Advocacy of the Small Business Administration.

In the case of an interpretative rule involving the internal

revenue laws of the United States, this chapter applies to

interpretative rules published in the Federal Register for

codification in the Code of Federal Regulations, but only to

the extent that such interpretative rules impose on small

entities a collection of information requirement.

(b) Each initial regulatory flexibility analysis required

under this section shall contain -

(1) a description of the reasons why action by the agency is

being considered;

(2) a succinct statement of the objectives of, and legal

basis for, the proposed rule;

(3) a description of and, where feasible, an estimate of the

number of small entities to which the proposed rule will

apply;

(4) a description of the projected reporting, recordkeeping

and other compliance requirements of the proposed rule,

including an estimate of the classes of small entities which

will be subject to the requirement and the type of

professional skills necessary for preparation of the report

or record;

(5) an identification, to the extent practicable, of all

relevant Federal rules which may duplicate, overlap or

conflict with the proposed rule.

(c) Each initial regulatory flexibility analysis shall also

contain a description of any significant alternatives to the

proposed rule which accomplish the stated objectives of

applicable statutes and which minimize any significant

economic impact of the proposed rule on small entities.

Consistent with the stated objectives of applicable

statutes, the analysis shall discuss significant

alternatives such as -

(1) the establishment of differing compliance or reporting

requirements or timetables that take into account the

resources available to small entities;

(2) the clarification, consolidation, or simplification of

compliance and reporting requirements under the rule for

such small entities;

(3) the use of performance rather than design standards; and

(4) an exemption from coverage of the rule, or any part

thereof, for such small entities.



604. Final regulatory flexibility analysis

(a) When an agency promulgates a final rule under section

553 of this title, after being required by that section or

any other law to publish a general notice of proposed

rulemaking, or promulgates a final interpretative rule

involving the internal revenue laws of the United States as

described in section 603(a), the agency shall prepare a

final regulatory flexibility analysis. Each final regulatory

flexibility analysis shall contain -

(1) a succinct statement of the need for, and objectives of,

the rule;

(2) a summary of the significant issues raised by the public

comments in response to the initial regulatory flexibility

analysis, a summary of the assessment of the agency of such

issues, and a statement of any changes made in the proposed

rule as a result of such comments;

(3) a description of and an estimate of the number of small

entities to which the rule will apply or an explanation of

why no such estimate is available;

(4) a description of the projected reporting, recordkeeping

and other compliance requirements of the rule, including an

estimate of the classes of small entities which will be

subject to the requirement and the type of professional

skills necessary for preparation of the report or record;

and

(5) a description of the steps the agency has taken to

minimize the significant economic impact on small entities

consistent with the stated objectives of applicable

statutes, including a statement of the factual, policy, and

legal reasons for selecting the alternative adopted in the

final rule and why each one of the other significant

alternatives to the rule considered by the agency which

affect the impact on small entities was rejected.

(b) The agency shall make copies of the final regulatory

flexibility analysis available to members of the public and

shall publish in the Federal Register such analysis or a

summary thereof.



605. Avoidance of duplicative or unnecessary analyses

(a) Any Federal agency may perform the analyses required by

sections 602, 603, and 604 of this title in conjunction with

or as a part of any other agenda or analysis required by any

other law if such other analysis satisfies the provisions of

such sections.

(b) Sections 603 and 604 of this title shall not apply to

any proposed or final rule if the head of the agency

certifies that the rule will not, if promulgated, have a

significant economic impact on a substantial number of small

entities. If the head of the agency makes a certification

under the preceding sentence, the agency shall publish such

certification in the Federal Register at the time of

publication of general notice of proposed rulemaking for the

rule or at the time of publication of the final rule, along

with a statement providing the factual basis for such

certification. The agency shall provide such certification

and statement to the Chief Counsel for Advocacy of the Small

Business Administration.

(c) In order to avoid duplicative action, an agency may

consider a series of closely related rules as one rule for

the purposes of sections 602, 603, 604 and 610 of this

title.



606. Effect on other law

The requirements of sections 603 and 604 of this title do

not alter in any manner standards otherwise applicable by

law to agency action.



607. Preparation of analyses

In complying with the provisions of sections 603 and 604 of

this title, an agency may provide either a quantifiable or

numerical description of the effects of a proposed rule or

alternatives to the proposed rule, or more general

descriptive statements if quantification is not practicable

or reliable.



608. Procedure for waiver or delay of completion

(a) An agency head may waive or delay the completion of some

or all of the requirements of section 603 of this title by

publishing in the Federal Register, not later than the date

of publication of the final rule, a written finding, with

reasons therefor, that the final rule is being promulgated

in response to an emergency that makes compliance or timely

compliance with the provisions of section 603 of this title

impracticable.

(b) Except as provided in section 605(b), an agency head may

not waive the requirements of section 604 of this title. An

agency head may delay the completion of the requirements of

section 604 of this title for a period of not more than one

hundred and eighty days after the date of publication in the

Federal Register of a final rule by publishing in the

Federal Register, not later than such date of publication, a

written finding, with reasons therefor, that the final rule

is being promulgated in response to an emergency that makes

timely compliance with the provisions of section 604 of this

title impracticable. If the agency has not prepared a final

regulatory analysis pursuant to section 604 of this title

within one hundred and eighty days from the date of

publication of the final rule, such rule shall lapse and

have no effect. Such rule shall not be repromulgated until a

final regulatory flexibility analysis has been completed by

the agency.



609. Procedures for gathering comments

(a) When any rule is promulgated which will have a

significant economic impact on a substantial number of small

entities, the head of the agency promulgating the rule or

the official of the agency with statutory responsibility for

the promulgation of the rule shall assure that small

entities have been given an opportunity to participate in

the rulemaking for the rule through the reasonable use of

techniques such as-

(1) the inclusion in an advanced notice of proposed

rulemaking, if issued, of a statement that the proposed rule

may have a significant economic effect on a substantial

number of small entities;

(2) the publication of general notice of proposed rulemaking

in publications likely to be obtained by small entities;

(3) the direct notification of interested small entities;

(4) the conduct of open conferences or public hearings

concerning the rule for small entities including soliciting

and receiving comments over computer networks; and

(5) the adoption or modification of agency procedural rules

to reduce the cost or complexity of participation in the

rulemaking by small entities.

(b) Prior to publication of an initial regulatory

flexibility analysis which a covered agency is required to

conduct by this chapter-

(1) a covered agency shall notify the Chief Counsel for

Advocacy of the Small Business Administration and provide

the Chief Counsel with information on the potential impacts

of the proposed rule on small entities and the type of small

entities that might be affected;

(2) not later than 15 days after the date of receipt of the

materials described in paragraph (1), the Chief Counsel

shall identify individuals representative of affected small

entities for the purpose of obtaining advice and

recommendations from those individuals about the potential

impacts of the proposed rule;

(3) the agency shall convene a review panel for such rule

consisting wholly of full time Federal employees of the

office within the agency responsible for carrying out the

proposed rule, the Office of Information and Regulatory

Affairs within the Office of Management and Budget, and the

Chief Counsel;

(4) the panel shall review any material the agency has

prepared in connection with this chapter, including any

draft proposed rule, collect advice and recommendations of

each individual small entity representative identified by

the agency after consultation with the Chief Counsel, on

issues related to subsections 603(b), paragraphs (3), (4)

and (5) and 603(c);

(5) not later than 60 days after the date a covered agency

convenes a review panel pursuant to paragraph (3), the

review panel shall report on the comments of the small

entity representatives and its findings as to issues related

to subsections 603(b), paragraphs (3), (4) and (5) and

603(c), provided that such report shall be made public as

part of the rulemaking record; and

(6) where appropriate, the agency shall modify the proposed

rule, the initial regulatory flexibility analysis or the

decision on whether an initial regulatory flexibility

analysis is required.

(c) An agency may in its discretion apply subsection (b) to

rules that the agency intends to certify under subsection

605(b), but the agency believes may have a greater than de

minimis impact on a substantial number of small entities.

(d) For purposes of this section, the term "covered agency"

means the Environmental Protection Agency and the

Occupational Safety and Health Administration of the

Department of Labor.

(e) The Chief Counsel for Advocacy, in consultation with the

individuals identified in subsection (b)(2), and with the

Administrator of the Office of Information and Regulatory

Affairs within the Office of Management and Budget, may

waive the requirements of subsections (b)(3), (b)(4), and

(b)(5) by including in the rulemaking record a written

finding, with reasons therefor, that those requirements

would not advance the effective participation of small

entities in the rulemaking process. For purposes of this

subsection, the factors to be considered in making such a

finding are as follows:

(1) In developing a proposed rule, the extent to which the

covered agency consulted with individuals representative of

affected small entities with respect to the potential

impacts of the rule and took such concerns into

consideration.

(2) Special circumstances requiring prompt issuance of the

rule.

(3) Whether the requirements of subsection (b) would provide

the individuals identified in subsection (b)(2) with a

competitive advantage relative to other small entities.



610. Periodic review of rules

(a) Within one hundred and eighty days after the effective

date of this chapter, each agency shall publish in the

Federal Register a plan for the periodic review of the rules

issued by the agency which have or will have a significant

economic impact upon a substantial number of small entities.

Such plan may be amended by the agency at any time by

publishing the revision in the Federal Register. The purpose

of the review shall be to determine whether such rules

should be continued without change, or should be amended or

rescinded, consistent with the stated objectives of

applicable statutes, to minimize any significant economic

impact of the rules upon a substantial number of such small

entities. The plan shall provide for the review of all such

agency rules existing on the effective date of this chapter

within ten years of that date and for the review of such

rules adopted after the effective date of this chapter

within ten years of the publication of such rules as the

final rule. If the head of the agency determines that

completion of the review of existing rules is not feasible

by the established date, he shall so certify in a statement

published in the Federal Register and may extend the

completion date by one year at a time for a total of not

more than five years.

(b) In reviewing rules to minimize any significant economic

impact of the rule on a substantial number of small entities

in a manner consistent with the stated objectives of

applicable statutes, the agency shall consider the following

factors-

(1) the continued need for the rule;

(2) the nature of complaints or comments received concerning

the rule from the public;

(3) the complexity of the rule;

(4) the extent to which the rule overlaps, duplicates or

conflicts with other Federal rules, and, to the extent

feasible, with State and local governmental rules; and

(5) the length of time since the rule has been evaluated or

the degree to which technology, economic conditions, or

other factors have changed in the area affected by the rule.

(c) Each year, each agency shall publish in the Federal

Register a list of the rules which have a significant

economic impact on a substantial number of small entities,

which are to be reviewed pursuant to this section during the

succeeding twelve months. The list shall include a brief

description of each rule and the need for and legal basis of

such rule and shall invite public comment upon the rule.



611. Judicial review

(a) (1) For any rule subject to this chapter, a small

entity that is adversely affected or aggrieved by final

agency action is entitled to judicial review of agency

compliance with the requirements of sections 601, 604,

605(b), 608(b), and 610 in accordance with chapter 7. Agency

compliance with sections 607 and 609(a) shall be judicially

reviewable in connection with judicial review of section

604.

(2) Each court having jurisdiction to review such rule for

compliance with section 553, or under any other provision of

law, shall have jurisdiction to review any claims of

noncompliance with sections 601, 604, 605(b), 608(b), and

610 in accordance with chapter 7. Agency compliance with

sections 607 and 609(a) shall be judicially reviewable in

connection with judicial review of section 604.

(3) (A) A small entity may seek such review during the

period beginning on the date of final agency action and

ending one year later, except that where a provision of law

requires that an action challenging a final agency action be

commenced before the expiration of one year, such lesser

period shall apply to an action for judicial review under

this section.

(B) In the case where an agency delays the issuance of

a final regulatory flexibility analysis pursuant to section

608(b) of this chapter, an action for judicial review under

this section shall be filed not later than-

(i) one year after the date the analysis is made

available to the public, or

(ii) where a provision of law requires that an action

challenging a final agency regulation be commenced before

the expiration of the 1-year period, the number of days

specified in such provision of law that is after the date

the analysis is made available to the public.

(4) In granting any relief in an action under this section,

the court shall order the agency to take corrective action

consistent with this chapter and chapter 7, including, but

not limited to -

(A) remanding the rule to the agency, and

(B) deferring the enforcement of the rule against small

entities unless the court finds that continued enforcement

of the rule is in the public interest.

(5) Nothing in this subsection shall be construed to limit

the authority of any court to stay the effective date of any

rule or provision thereof under any other provision of law

or to grant any other relief in addition to the requirements

of this section.

(b) In an action for the judicial review of a rule, the

regulatory flexibility analysis for such rule, including an

analysis prepared or corrected pursuant to paragraph (a)(4),

shall constitute part of the entire record of agency action

in connection with such review.

(c) Compliance or noncompliance by an agency with the

provisions of this chapter shall be subject to judicial

review only in accordance with this section.

(d) Nothing in this section bars judicial review of any

other impact statement or similar analysis required by any

other law if judicial review of such statement or analysis

is otherwise permitted by law.



612. Reports and intervention rights

(a) The Chief Counsel for Advocacy of the Small Business

Administration shall monitor agency compliance with this

chapter and shall report at least annually thereon to the

President and to the Committees on the Judiciary and Small

Business of the Senate and House of Representatives.

(b) The Chief Counsel for Advocacy of the Small Business

Administration is authorized to appear as amicus curiae in

any action brought in a court of the United States to review

a rule. In any such action, the Chief Counsel is authorized

to present his or her views with respect to compliance with

this chapter, the adequacy of the rulemaking record with

respect to small entities and the effect of the rule on

small entities.

(c) A court of the United States shall grant the application

of the Chief Counsel for Advocacy of the Small Business

Administration to appear in any such action for the purposes

described in subsection (b).







Appendix C





Executive Order 13272











Appendix D





Advocacy Legislative Priorities for the 109th Congress







The Office of Advocacy was established pursuant to P.L. 94-

305 to represent the views of small business before federal

agencies and Congress. Advocacy is an independent office

within the U.S. Small Business Administration (SBA), so the

views expressed by Advocacy do not necessarily reflect the

views of the SBA or the Administration.

The Office of Advocacy's top legislative priority is to

give small businesses a legitimate voice in the regulatory

process.

Advocacy's research shows that small businesses pay an

average of $7,647 per employee annually to comply with

federal regulations-45 percent more than large businesses.

Yet, small businesses generate 60-80 percent of all net new

jobs, represent 99.7 percent of employers, employ half of

all private sector employees, and innovate at a rate 13

times greater than large firms.

For twenty-five years, the Regulatory Flexibility Act

(RFA) has required that agencies consider less burdensome

approaches to regulation in order to level the playing field

for small business. The RFA was amended in 1996 by the Small

Business Regulatory Enforcement Fairness Act (SBREFA). Among

other things, the 1996 amendments made agency small business

impact analysis subject to judicial review and required two

agencies, the Occupational Safety and Health Administration

(OSHA) and the Environmental Protection Agency (EPA), to

seek direct input from small entities prior to issuing

regulatory proposals.

Government has saved small entities billions of dollars

by following the RFA's direction and minimizing the impact

of regulatory mandates on small business. History has shown

that regulatory sensitivity towards small entities can be

achieved without sacrificing the underlying purpose of

environmental protection, workplace safety, border security,

and other governmental priorities.

The 109th Congress has the opportunity to amend the RFA

and SBREFA to improve the regulatory climate for small

business. The following four amendments fill in loopholes

that currently reduce the effectiveness of both statutes.



I. Review of Existing Rules

The W. Mark Crain study on regulatory costs showed a cost to

Americans of $1.1 trillion. Much of that regulatory burden

falls on the business community. Since new regulations are

promulgated each year, the cumulative impact can be

staggering. It is necessary to evaluate existing regulations

periodically to minimize this impact.



Amendment:

Modify section 610 of the Regulatory Flexibility Act, 5

U.S.C. 601-612 (RFA), that requires federal agencies to

review 10-year-old regulations to assess their present-day

impact. Section 610 should be broadened so that agencies

review all rules periodically and not just those viewed as

significant when initially promulgated. This change would

encourage agencies to update their rules every 10 years to

ensure that regulatory protections reflect current

conditions.



II. Proper Consideration of Small Entities in Agency

Rulemaking

The President prioritized the need for government agencies

to consider their impact on small entities under the RFA

when he signed Executive Order 13272. Section 3 of the

Executive Order requires agencies to notify the Office of

Advocacy of draft rules that will have a significant

economic impact on a substantial number of small entities.

It also requires agencies to give appropriate consideration

to Advocacy's comments and address the comments in final

rules.



Amendment:

Codify section 3 of the Executive Order to ensure that the

President's attention to the impact of regulation on small

entities becomes a permanent part of how government

operates. This amendment will also ensure that independent

agencies comply with the RFA.



III. Help States Consider

Alternatives to Costly Regulation

The federal government sometimes issues regulations that

must be implemented by the states. When this happens,

federal agencies are not required to do the detailed

analysis of impacts and alternatives required under the RFA.

Instead, states with RFA-type laws on the books, and with

fewer resources than federal agencies, must do the analysis

themselves, resulting in what amounts to an unfunded

mandate. Under current law, agencies are only required to

analyze direct impacts, even though there may be foreseeable

and costly indirect impacts when states enforce federal

regulations.



Amendment:

Amend the RFA to ensure that agencies analyze the impact of

their rules on small entities and provide states with

regulatory alternatives that will enable states to meet

federal requirements while minimizing the impact on small

entities.



IV. Help Small Business Comply with Regulations

Sometimes small business noncompliance with federal

regulations is simply due to the fact that they do not

understand the regulations. The intent behind section 212 of

SBREFA was to ensure that small businesses had a way to

understand often complex and technical federal regulations.

Section 212 of SBREFA requires federal agencies to publish a

small business compliance guide for each final rule that has

a significant economic impact on a substantial number of

small entities. However, small businesses continue to be

frustrated with rules that are not published with adequate

compliance information.



Amendment:

Amend SBREFA to require that agencies publish plain language

small business compliance guides whenever a final rule

requires a final regulatory flexibility analysis (FRFA).

Agencies would also be required to report annually on their

efforts to comply with this section.



Appendix E Abbreviations





AED automated external defibrillator

ALEC American Legislative Exchange Council

AMS Agricultural Marketing Service

ANPRM advance notice of proposed rulemaking

APA Administrative Procedure Act

APHIS Animal and Plant Health Inspection Service

BIS Bureau of Industry and Security

BLM Bureau of Land Management

CALEA Communications Assistance for Law Enforcement

Act

CMS Centers for Medicare and Medicaid Services

CRD Civil Rights Division (U.S. Department of Justice)

Cr(VI) hexavalent chromium

CVR cockpit voice recorder

DFDR digital flight data recorder

DHS Department of Homeland Security

DOC Department of Commerce

DOD Department of Defense

DOE Department of Energy

DOI Department of the Interior

DOJ Department of Justice

DOL Department of Labor

DORA Department of Regulatory Agencies (Colorado)

DOT Department of Transportation

DPHE Department of Public Health and Environment

(Colorado)

E.O. Executive Order

EPA Environmental Protection Agency

FAA Federal Aviation Administration

FAR Federal Acquisition Regulation

FCC Federal Communications Commission

FDA Food and Drug Administration

FEI Financial Executives International

FHWA Federal Highway Administration

FMCSA Federal Motor Carrier Safety Administration

FPDS Federal Procurement Data System

FRFA final regulatory flexibility analysis

FWS Fish and Wildlife Service

FY fiscal year

GDP gross domestic product

GIPSA Grain Inspection, Packers and Stockyard

Administration

GRS groundfish retention standard

GSA General Services Administration

HCAHPS Hospital Consumer Assessment of Health Plans

Survey

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IP Internet Protocol

IRFA initial regulatory flexibility analysis

IRS Internal Revenue Service

ISP Internet service provider

MDPH Massachusetts Department of Public Health

MSHA Mine Safety and Health Administration

NAIS National Animal Identification System

NANC North American Numbering Council

NARA National Archives and Records Administratoin

NHTSA National Highway Traffic Safety

Administration

NMFS National Marine Fisheries Service

NPRM notice of proposed rulemaking

NTSB National Transportation Safety Board

OCC Office of the Comptroller of the Currency

OIRA Office of Information and Regulatory Affairs

OMB Office of Management and Budget

OSHA Occupational Safety and Health Administration

OTS Office of Thrift Supervision

PEL permissible exposure limit

PHMSA Pipeline and Hazardous Materials Safety

Administration

P.L. Public Law

PRISM Professional Records and Information Services

Management International

PTO Patent and Trademark Office

RESPA Real Estate Settlement Procedures Act

RFA Regulatory Flexibility Act

RFID radio frequency identification

RSPA Research and Special Programs Administration

SBA Small Business Administration

SBREFA Small Business Regulatory Enforcement Fairness Act

SEC Securities and Exchange Commission

SOA Sarbanes-Oxley Act

TCPA Telephone Consumer Protection Act

UNEs unbundled network elements

U.S.C. United States Code

USDA United States Department of Agriculture

VA Department of Veterans Affairs

VoIP Voice over Internet Protocol







Endnotes





1. U.S. Telecom Ass'n v. FCC, 400 F.3d 29 (D.C. Cir. 2005)

stated that the FCC failed to comply with the RFA's

requirement to prepare a final regulatory flexibility

analysis regarding the order's impact on small entities and

remanded the order to the FCC to prepare a final regulatory

flexibility analysis.

2. The states are Alaska, Colorado, Connecticut, Indiana,

Kentucky, Missouri, New Mexico, North Dakota, Oregon, Rhode

Island, South Carolina, South Dakota, Virginia, and

Wisconsin. Missouri enacted two laws.

3. The states are Alabama, Alaska, California, Colorado,

Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana,

Iowa, Kansas, Kentucky, Mississippi, Missouri, Montana,

Nebraska, New Jersey, New Mexico, North Carolina, North

Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South

Carolina, South Dakota, Tennessee, Texas, Utah, Virginia,

Washington, and Wisconsin.

4. These states include Arkansas, Massachusetts, Missouri

(whose executive order was later superseded by

legislation), and West Virginia.

5. The states are Alabama, Alaska, Hawaii, Indiana, Iowa,

Mississippi, Missouri, Montana, New Jersey, New Mexico,

North Carolina, Ohio, Oregon, Pennsylvania, Tennessee,

Utah, Virginia, and Washington.

6. This number is approximate and based on the cost of a

commercially manufactured stopper, corks and overstocking

charges multiplied by the number of small businesses in

Colorado subject to the rule.







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