Why Does the Regulatory Flexibility Act Matter?
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Why Does the Regulatory Flexibility Act Matter?
- 1. SBA Executive Order Training Complying With theComplying With the Regulatory Flexibility ActRegulatory Flexibility Act A presentation of the Office of Advocacy, U.S. Small Business Administration Pursuant to Executive Order 13272
- 2. SBA Executive Order Training 2 Welcome! Who are we? Office of Advocacy, SBA Deputy Chief Counsel: Claudia Rayford Rodgers claudia.rodgers@sba.gov notify.advocacy@sba.gov Why are we here? Executive Order 13272 requires Advocacy to provide training to agencies on compliance with the RFA Advocacy wants to help you improve your RFA compliance
- 3. SBA Executive Order Training 3 Session Objectives Upon completion of this module, participants will be able to: Determine if the Regulatory Flexibility Act (RFA) applies to a rule Explain what a “significant economic impact” and “substantial number” are Create an adequate and specific, fact-based certification for a regulation Identify a missing or incorrect aspect of an Initial Regulatory Flexibility Analysis (IRFA) and address its deficiencies Identify a missing or incorrect aspect of a Final Regulatory Flexibility Analysis (FRFA) and address its deficiencies
- 4. SBA Executive Order Training 4 Session Schedule 1. RFA Compliance Strategy and Process :15 2. Applicability :10 3. Threshold Analysis and Certification :20 4. Exercise: Certification :30 --Break-- :10 5. Initial Regulatory Flexibility Analysis (IRFA) :15 6. Exercise: IRFA :30 7. Final Regulatory Flexibility Analysis (FRFA) :15 8. Exercise: FRFA :30 9. Key Points Review, Q&A :05 3 hours
- 5. SBA Executive Order Training 5 RFA Compliance is beneficial! To you… Minimizes legal problems and challenges Avoids delays due to challenges Improves public and congressional support Improves compliance with the regulation To small business… Provides a more level playing field Supports the largest and most vital segment of the American economy!
- 6. SBA Executive Order Training 6 RFA Compliance is necessary! Congressional interest Enabling legislation in 1980 and 1996 Ongoing committee and budgetary oversight Court intervention Clear court precedents on RFA requirements and agencies’ compliance Advocacy has Amicus status in federal courts White House initiatives Executive Orders: 12866, 13272, 13563, 13579, and 13610 OIRA works closely with Advocacy on RFA compliance issues
- 7. SBA Executive Order Training 7 RFA Compliance is easier… if you start early! Develop your regulations with an eye to small entity impact Less rework due to impacts discovered later Improves project planning, such as scheduling for public comments and outreach activities Use Advocacy as a resource May have ideas on a more effective way Will point you to valuable resources
- 8. SBA Executive Order Training 8 RFA Compliance There are 4 key RFA-related questions to answer: Threshold Analysis: Will there be a significant economic impact on a substantial number of small entities? If yes, will you so certify? The IRFA: What is the rule’s potential economic impact on small entities? What are the significant alternatives? The FRFA: What has been done to minimize the adverse economic impact of the rule on small entities? Applicability: Does the RFA apply?1 2 3 4
- 9. SBA Executive Order Training 9 RFA Compliance Overview Threshold (Preliminary) Analysis Initial Regulatory Flexibility AnalysisFinal Regulatory Flexibility Analysis = check with Advocacy Yes Adequate FRFA? Publish FRFA with final regulation Adequate IRFA? Significant Economic Impact…? Certification “No significant impact…” No Does RFA apply? Yes Begin Rule Development Yes No No No Yes Yes Notify Advocacy; Publish in F.R. Send copy to Advocacy
- 10. SBA Executive Order Training 10 Question One: Applicability Is there good cause to bypass notice and comment under the APA? • “Impracticable, unnecessary, or contrary to the public interest” • Reasons must be included in rule Is the regulation subject to the APA? • No, if military or foreign affairs matter • No, if agency management matter, e.g. personnel, public property, grants, loans, benefits, or contracts Is this an exempt interpretative rule? • Restatement of statute • IRS interpretative rules requiring small entities to collect information are NOT exempt General Principle of Applicability: If notice and comment are required by the Administrative Procedure Act (APA) or some other law, then the RFA applies. Does the RFA apply to the rule? Applicability?
- 11. SBA Executive Order Training 11 Question Two: Threshold (Preliminary) Analysis “Will the rule have a significant economic impact on a substantial number of small entities?” To answer, threshold analysis should determine: 1.Who are the small entities, if any, that will be regulated by the rule? 2.What are the compliance costs?
- 12. SBA Executive Order Training 12 Question Two: Threshold (Preliminary) Analysis, continued 3. Do these costs represent a significant economic impact? Why or why not? 4. How many small entities experience a significant economic impact? 5. Is that number substantial? Why or why not?
- 13. SBA Executive Order Training 13 Certification If the threshold analysis indicates there will not be a significant economic impact on a substantial number of small entities, the head of your agency may so certify.
- 14. SBA Executive Order Training 14 Certification Is your reasoning clear? • Are assumptions explicit and transparent? • Did you justify any judgments such as “significant” and “substantial?” What is a small entity? • Did you use the SBA size standard? • If you used an alternate size standard for RFA analysis, did you consult with Advocacy? Does the statement directly correspond to RFA language? Your certification should state and demonstrate that the regulation will result in: “no significant economic impact on a substantial number of small entities.” Is the certification supported by a factual basis? • Identify number of small entities regulated • Justify and qualify estimates or assumptions • Use and cite sources, e.g. SBA economic research, census figures, agency registration data, etc. Certification Follow these guidelines to be sure your RFA Certification is valid:
- 15. SBA Executive Order Training 15 Exercise 1: Certification Your role: Imagine yourself as a small business advocate Review Certification statements sent to you by an agency Your mission: Review statements for facts and details Respond to the questions Share answers Your instructors will be timekeepers and coaches
- 16. SBA Executive Order Training 16 Exercise 1: Debrief Review each team’s insights. What problems did you identify? What resolutions did you suggest? How could this problem be avoided?
- 17. SBA Executive Order Training 17 Question Three: IRFA What significant alternatives might exist? What small entities are regulated? What are the reasons for the rule? What are the agency objectives? What is the economic impact? What is the potential economic impact of the rule on small entities? Initial Regulatory Flexibility Analysis • Are there multiple ways to achieve the statutory objectives? • Perform outreach activities to identify other alternatives • Compare compliance costs to revenue, profit, other financial/ nonfinancial characteristics • Calculate disproportionality • Often taken from Preamble of the rule • Explains the need for the rule in terms the public can understand • Explains the legal basis • The rule must achieve statutory requirements • Identify and describe diversity • Estimate numbers
- 18. SBA Executive Order Training 18 IRFA What are the reasons for the rule? Often taken from the preamble of the rule Explains the need for the rule in plain language to facilitate public understanding Describe the problem the rule is designed to solve Provide reference to any technical documentation
- 19. SBA Executive Order Training 19 IRFA What are agency objectives? Explains the legal basis for the rule States the statutory requirements the rule must meet, if any State what measures the rule proscribes for addressing the identified problem
- 20. SBA Executive Order Training 20 IRFA What small entities are regulated? Identify and describe the diversity of regulated small entities Estimate the number of affected small entities in each identified category Use the best data available Identify all affected small entity groups
- 21. SBA Executive Order Training 21 IRFA What is the economic impact? Calculate compliance costs to affected small entities Include capital, operating, and paperwork costs as well as losses to revenue Compare costs to revenue and/or profits Use all available data to estimate the per small entity impacts of the rule Relate to revenue and/or profit measures
- 22. SBA Executive Order Training 22 IRFA What alternatives might exist? Search for alternative ways to achieve regulatory standards while mitigating small business impacts Perform outreach to affected small entities to help identify alternatives Identify and analyze significant alternatives that minimize small entity impacts
- 23. SBA Executive Order Training 23 Required elements of an IRFA 1. Description of reasons why action is being considered 2. Objectives of, and legal basis for, rule 3. Description and estimated number of small entities regulated 4. Description and estimate of compliance requirements including differences in cost, if any, for different groups of small entities 5. Identification of duplication, overlap, and conflict with other rules and regulations 6. A description of significant alternatives to the rule E.O. 13272 requires that IRFAs be submitted to Advocacy
- 24. SBA Executive Order Training 24 Hints for IRFA development Use internal agency resources Use Advocacy as a Resource Advocacy wants you to succeed! Contact Advocacy early for suggestions and resources Provide Greater Transparency State your assumptions Explain your estimating process Identify sources of information (e.g., industry estimates, agency and/or census data) List and describe compliance requirements Use simple, clear language
- 25. SBA Executive Order Training 25 Exercise 2: IRFA Your role: Imagine yourself as a small business advocate Agency has been developing an IRFA You have received the draft IRFA for comment Your mission: Review the draft IRFA Respond to the questions Share answers Your instructors will be timekeepers and coaches
- 26. SBA Executive Order Training 26 Exercise 2: Debrief Review each team’s insights. What problems did you identify? What resolutions did you suggest? How could this problem be avoided?
- 27. SBA Executive Order Training 27 Question Four: FRFA Who are the regulated small entities? • Describe • Estimate What are the reasons for and objectives of the rule? May reference other parts of the rule Final Regulatory Flexibility Analysis What significant issues were raised by public comments? • Summarize significant issues and state responses to each • State changes to rule, if any, that resulted from public comments • Give Advocacy comments appropriate consideration What are the compliance requirements and costs? • Describe all compliance requirements, such as reporting and record-keeping • Describe and estimate requirements and costs, if any, by type and size of small entity What steps have been taken to minimize the economic impact on small entities? • Describe steps taken to minimize impact • Include statement of factual, policy, and legal reasons for selecting alternative adopted, and why others were rejected What has been done to minimize adverse economic impact on small entities?
- 28. SBA Executive Order Training 28 Required elements of a FRFA 1. Statement of need for, and objectives of, the rule 2. Summary of significant issues raised by public comments, summary of assessment of such issues, and statement of any changes in rule as result of such comments 3. Description and estimate of number of small entities or explanation of why no such estimate is available 4. Description of compliance requirements, including estimate of small entities regulated by rule 5. Description of steps taken to minimize significant adverse economic impact on small entities RFA requires agency to make copies of FRFA available to public and publish FRFA or its summary in the Federal Register
- 29. SBA Executive Order Training 29 Hints for FRFA development Use internal agency resources Use Advocacy as a Resource Advocacy wants you to succeed! Contact Advocacy early for suggestions and resources Provide Greater Transparency Use simple, clear language State and respond to significant issues raised List and describe significant alternatives List and describe compliance requirements Explain why one alternative adopted and others rejected
- 30. SBA Executive Order Training 30 Exercise 3: FRFA Your role: Imagine yourself as a small business advocate Agency has been developing a FRFA You have received a draft FRFA for your comments Your mission: Review the draft FRFA Answer the four questions Share answers Your instructors will be timekeepers and coaches
- 31. SBA Executive Order Training 31 Exercise 3: Debrief Review each team’s insights. What problems did you identify? What resolutions did you suggest? How could this problem be avoided?
- 32. SBA Executive Order Training 32 Key Points Involve Advocacy early and often! Reach out to small entities for input Consider RFA compliance from the beginning and follow processes step by step Answer 4 key questions: 1. Does the RFA apply to this regulation? 2. Will the rule have a “significant economic impact on a substantial number of small entities?” 3. What is the potential economic impact of the rule on small entities? 4. What has been done to minimize the adverse economic impact on small entities? Ensure conclusions are factual and objective
- 33. SBA Executive Order Training 33 THANK YOU! Q&A Course Evaluation
Notas do Editor
- - - Instructor Guide and Notes Pilot Draft This document provides specific, slide-by-slide details to support your presentation. We suggest that you print these Instructor Notes and keep them with you during the presentation. It is an easy thing to forget a key term or idea in the midst of the presentation. At the same time, it is best to not refer constantly to the notes as it makes you appear less prepared. Keep careful track of the time. If you choose to customize these notes, please be sure to change the file name.
- - - In the first minutes of the session, the lead instructor should: Introduce all presenters. Identify the Office of Advocacy as “the voice of small business in the development of government regulation.” Welcome the participants, and in particular indicate who Claudia Rayford Rodgers is and how she can be contacted. Point out the email address for notifications provided here, and that it will be explained later. Explain the fact the Executive Order 13272 addressed a number of concerns about RFA compliance, and mandated that Advocacy train all regulatory agencies in compliance issues. Point out the Participant Guide and explain that it has space for note-taking and to jot down questions. Explain that there are opportunities to ask questions at various moments and again at the end of the session. Ask the participants to focus on the slides and the presentation rather than the Participant Guide. Remind them that the copy of A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act (Guide) and the Participant Guide are theirs to keep.
- - - Read the session objectives from the slide, expanding on them and answering questions if needed. Note: Participants should understand the session’s planned outcomes. It is essential to adult learning that the specific skills and knowledge being taught are clear.
- - - Review the anticipated schedule. This should only take about a minute. Point out the break so participants understand that there will be an opportunity to use the washroom or get a drink. (This will help keep the group together and avoid unnecessary interruptions.) Orient the participants to the facilities, including restrooms and refreshments. Ask if the participants have any questions.
- - - Note: Slides 5 through 7 slides are intended to present RFA compliance as a net positive. Explain that compliance has real benefits to the agency and its regulatory development team. Add any of the following details that are appropriate to the audience. “ Minimizes legal problems and challenges:” Regulations which do not comply can be challenged. Advocacy now has authority to file a brief as Friend of the Court ( Amicus Curiae ). Compliant regulations can avoid litigation and attendant delay. “ Avoids delays” Beyond the delays represented by the legal system, reworking the rule to comply will take more time at the later stages of development, and can hold up your regulation at a key time. OMB is increasingly willing to return non-compliant regulations. “ Improves compliance with the regulation” Small entities are more likely to follow regulations they can understand and which do not impose an unreasonable burden. “ Provides a more level playing field” Cost of regulation per employee, sale, etc. is often less for larger entities. Not all entities even of the same size will be affected in the same way, e.g. some accounting or manufacturing systems might accommodate a regulation better than others. “ Supports largest and most vital segment of American economy” RFA compliance supports the growth and vitality of American small businesses in an increasingly competitive world economy.
- - - Note: The logic has moved from positive benefits of compliance to the increased pressure for compliance. Try to avoid making Advocacy appear to be part of the pressure, but rather portray us as allied with the agency’s regulatory development team. Read the major bullets and use the sub-bullets as evidence. For example, you might say, “Congress has been active over recent years not only by creating and supporting Advocacy, but also by creating and reinforcing the RFA, and also by overseeing the activities of the agencies in committee actions and in the budgetary process.” Depending on the audience you might consider pointing out that all three branches of government have been supportive of small entities and of the RFA.
- - - “ Develop your regulations…” Here you should emphasize the savings in effort . If the participants understand that they will ultimately need to comply, the benefits of building compliance into the development process will become more evident. “ Use Advocacy” You may need to explain that there are specific Advocates assigned to different regulation types. These specialists have considerable expertise and know of many related resources that can be of value to the agency.
- - - Note : This slide is logically connected with the next one. Together they present an integrated process for development of RFA-compliant regulations. Your objective on this slide is to introduce the four questions (decision points) so they will be understood as a part of an integrated development process, which is shown on the next slide. Review the four questions and the decision associated with each. Explain that there are two points at which the process might terminate without completing the whole RFA process: Applicability : If the RFA does not apply, no further analysis is required. Threshold Analysis: A threshold analysis is performed to determine if there will be a “significant economic impact on a substantial number of small entities.” If no, a certification statement can be placed in the rule and no further analysis is required.
- - - Trace the process from beginning to end. The best approach is to physically trace the arrow graphic with a pointer or similar. Do not attempt to fully explain the process steps, but instead simply point out how the decisions are integrated into a logical process. Explain that the specific requirements of each step will be covered individually, beginning with Applicability on the next slide. Point out the following critical points in the process flow: The points where Advocacy supports development (checkmarks). The two places where the process can stop without completing the process flow (stop signs). The three required points where Advocacy must be notified (lightning bolts). Ask the participants how this process compares to the process they are currently using. Be careful not to present their current process as being “wrong” so much as possibly less efficient. See if the participants agree with this presentation of the process. Ask the participants if they have any questions.
- - - Read and point out the red heading text, as it introduces the thrust of the slide. Explain that these represent the key information needed to determine whether the RFA is applicable to the rule. Point out that most regulations should be assumed to fall under the APA and RFA unless there is specific reason to believe otherwise. Read and Discuss each of the 4 topics as they build on the screen.
- - - Note: this list is continued to the next slide. Emphasize that “significant” and “substantial” are not defined in the RFA, but in general must be interpreted in light of the universe of regulated small entities. Depending on the experience level of the audience, be prepared to clarify the difference between the first two decisions: A regulation may be exempt from the RFA altogether under the applicability decision. In that case, no “reg-flex” analysis is required. A regulation that is NOT exempt must undergo a Threshold Analysis to see whether it has a “significant economic impact on a substantial number of small entities.” If the analysis shows that there is no such impact, the Certification step completes RFA compliance. Explain that the Threshold Analysis is sometimes referred to under other terms: Screening analysis can be confusing because some organizations use the term differently. Preliminary is also sometimes used, but may give a false impression that this analysis is less consequential than some later analysis. Ask how this process varies from the way the participants currently do their jobs. Be prepared to discuss alternative processes in use in the agency. Explain that Certification is covered next.
- - - Remind the participants that the key terms “significant” and “substantial” require careful assessment, and the analysis must be factual. Refer the participants to the extended discussion of these terms in the Participant Guide. Depending on the interests and needs of the audience, you may wish to take a few moments to discuss the detail in the Participant Guide, but if so, you should take care to return their attention to the slides. Ask if anyone has had experiences with RFA-complaint regulations that illustrate the meaning of these terms in the context of their agency’s areas of responsibility.
- - - Read the content of the slide. Point out that it uses the key words from the RFA, and that that language should be used in a certification. Emphasize that a certification statement actually comes from the head of the agency.
- - - Read and point out the red heading text, as it introduces the thrust of the slide. Explain that these represent the key information needed to create an adequate Certification under the RFA. Read and Discuss each of the 4 topics as they build on the screen. Ask the participants if they follow a similar process now, either explicitly or informally. Ask whether their agency’s procedure guides fully detail what is required in a Certification. Ask the participants if they have any questions.
- - - Divide the participants into groups of 4-6. Suggest that each team identify a spokesperson who will report the team’s insights and observations to the class. Distribute the scenario packets. Have the participants turn with you to the exercise scenario you are using. Offer advice, help, or additional challenges as required. Give a 2-minute warning when the time is almost up. Remind the participants that there is a break coming up. Try to discourage participants from leaving the room unnecessarily.
- - - Ask for each team to report what it observed in the various certification statements. Encourage participation by pointing out that there are many possible answers. Encourage individuals to respond to one another’s ideas, even if there is disagreement. Try to use the available resources to resolve any conflicting perspectives. Avoid making statements that cause individuals to feel they were “wrong.”
- - - Explain that these represent the key information needed to create an adequate IRFA under the RFA. Point out that the IRFA is a critical step that represents to Agency’s best information about the impact of the regulation on small entities Read each of the 5 topics. Explain that the next few slides will explain each topic in detail. Ask the participants whether their department’s procedure guides prescribe a similar process. Add the following discussion to the slide: IRFAs can sometimes be waived or delayed: Basis: it is an emergency regulation or compliance is impracticable Explanation must be provided. FRFA still required, usually in 180 days. Ask the participants if they have any questions.
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- - - Read the 6 items aloud Reasons: The WHY of the regulation. Objectives: The WHAT of the regulation– its practical outcomes. Describe and estimate the regulated universe of small entities. Explain burden of regulation. Identify other federal regulations: overlap, duplication etc. Describe alternatives to the rule so the public can respond Ask whether the participants have any questions before the exercise. Note : you may wish to return to this slide while the participants are performing the IRFA exercise.
- - - Explain that an IRFA represents a major investment of time and effort, and is available to the public for comment. This slide provides hints for efficient and successful IRFA development. Explain the three points as they appear: Begin with familiar resources at hand, such as using similar previous IRFAs that were well received, and the input of agency experts. Invite informal Advocacy input. Since the IRFA must ultimately be sent to us anyway, the informal input may save later rework. It is sometimes difficult purposely to choose to be transparent with things like estimations. However, since part of the IRFA process is to ask for public comment and input, it is in your best interest to provide the best information available to you and explain clearly how you derived it. Then, if the public has more or better information, you will be in a position to use it to improve your FRFA.
- - - Divide the participants into groups of 4-6. If the groups worked well in the previous exercise, ask the participants to rejoin the same group. Distribute the scenario packets. Have the participants turn with you to the exercise components you have selected, and have them mark the ones you are asking them to complete. Get involved with the groups, offering advice, help, or additional challenges as required. Give a 2-minute warning when the time is almost up.
- - - Note : Use this opportunity to make adjustments to the methods you used in the first exercise. For example, if there was a lot of discussion and engagement that infringed on the presentation time, make sure you directly ask the team spokespersons and avoid open-ended questions. Ask for each team to report what it observed in the various certification statements. Encourage participation by pointing out that there are many possible answers. Encourage individuals to respond to one another’s ideas, even if there is disagreement. Try to use the available resources to resolve any conflicting perspectives. Avoid making statements that cause individuals to feel they were “wrong.”
- - - Read and point out the red heading text, as it introduces the thrust of the slide. Emphasize that the FRFA builds directly from the IRFA as modified in the public comment phase. Read and explain the points as they build on the screen. Ask if there are any questions before the FRFA exercise.
- - - Note: It is important to have assessed the dynamics of the group in regard to their existing mastery of this material. In some cases you will need to read and explain this slide, while for others you will be able to move over it quickly, simply touching quickly on each point. Point out that these elements are specifically required by law.
- - - Explain that an FRFA represents a major investment of time and effort, and is available to the public for comment. This slide provides hints for efficient and successful FRFA development. Explain the three points as they appear: Begin with familiar resources and helps at hand, such as using similar previous FRFAs that were well received, and the input of agency experts. Invite Advocacy input informally. It is sometimes difficult purposely to choose to be transparent when your work includes uncertainty or estimations.
- - - Divide the participants into groups of 4-6. Use the same groups if they were working well, or rearrange the participants if not. Distribute the scenario packets. Get involved with the groups, offering advice, help, or additional challenges as required. Give a 2-minute warning when the time is almost up. Explain that this is the last exercise .
- - - Note: By now the exercise format is well established, and since the class is nearly finished many participants will be hesitant to volunteer, thinking that it will only extend the class. If this is the case, rather than pressing for participation against the preferences of the group, use simple, closed-ended questions such as “What did you find to be missing from this FRFA?” If you ask for a question, however, it is best to wait for an answer or you will set an expectation that silence will shorten the debrief. Ask for each team to report what it observed in the various certification statements. Encourage participation by pointing out that there are many possible answers. Encourage individuals to respond to one another’s ideas, even if there is disagreement. Try to use the available resources to resolve any conflicting perspectives. Avoid making statements that cause individuals to feel they were “wrong.”
- - - Summarize the content of the course. This is the final slide for you to provide information. Allow the participants a moment to review. Ask the participants if there are other key points that are not mentioned on the slide.
- - - Take a moment to solicit questions and feedback informally. If there are questions for which you do not have an answer, arrange to get an answer to the person. Distribute the curse evaluation forms and explain how you wish to collect them. Thank the audience for their time and attention.