The U.S. General Accounting Office (GAO) has released a report that points out the deficiencies in the Small Business Regulatory Enforcement Fairness Act (SBREFA), which is designed to ensure that small businesses are adequately represented in the federal regulatory process. The statute requires certain federal agencies to prepare “regulatory flexibility analyses” to determine the impact of proposed regulations on small businesses. It also requires agencies to prepare compliance guides for each rule or group of new rules that are projected to have a significant economic impact on a “substantial number” of small businesses. The report was prepared at the request of Senator Christopher “Kit” Bond (R-MO), the Ranking Minority Member of the Senate Committee on Small Business and Entrepreneurship.
In its report, entitled “Regulatory Reform: Compliance Guide Requirement Has Had Little Effect on Agency Practices” (GAO-02-170), GAO concludes that the compliance guide provisions of SBREFA (found in Section 212) have “not had much of an impact” and that Section 212’s implementation has varied widely both among and within agencies. GAO found that none of the agencies reviewed provided guidance documents that met all of the statutory requirements for covered rules, and that the six agencies under review had completely different views regarding the types of regulations that required guidance documents.
Sen. Bond believes that the GAO’s findings demonstrate the failure of SBREFA to adequately protect small businesses. He notes that Congress gave agencies wide latitude in determining how best to help small businesses, but believes that they have abused their discretion by ignoring their obligations. For example, the GAO report reveals that, during 1999 and 2000, the Environmental Protection Agency (EPA) published 1,183 final rules, 100 of which were deemed to be “significant.” Of those, only five were considered to be covered by Section 212 of SBREFA, and EPA provided guidance documents for only three. In contrast, the Federal Communications Commission (FCC) published 481 final rules, and applied SBREFA Section 212 to 128 of these rules, and provided guidance documents for all but three.
GAO stated that EPA explained its decisions by saying that, in many cases, guidance documents were not provided, because the regulated community “is well aware of how to comply” with its rules. In other cases, guidance documents were not prepared because such a guide would be just a restatement of current industry practices, not useful, or not necessary.
Sen. Bond has introduced legislation to strengthen SBREFA, maintaining that small businesses are being harmed economically by excessive regulation. The “Agency Accountability Act” (S. 849) would allow small businesses to seek judicial review of an agency decision to avoid a small business analysis if they believe that the agency has not supported it with adequate data. He noted "federal regulators continue to put the cart before the horse by favoring citations and litigation over practical guidance to help small businesses comply. The agencies are playing an elaborate game of gotcha that is projected to cost small firms nearly $7,000 per employee each year. That is a needless drain on small firms’ potential to boost the economy.” Sen. Bond now intends to introduce additional legislation to "ratchet up" the requirements of SBREFA Section 212 to make clear what is expected of agencies “when it comes to assisting small businesses shoulder their regulatory burden.”
