Why Does the Regulatory Flexibility Act Matter?

SBA Executive

Order Training

SBA Executive

Order Training

Complying With the Complying With the Regulatory Flexibility Act Regulatory Flexibility Act

Complying With the Complying With the Regulatory Flexibility Act Regulatory Flexibility Act

A presentation of the Office of Advocacy, U.S. Small Business AdministrationPursuant to Executive Order 13272

SBA Executive Order Training2

Welcome!

Who are we? Office of Advocacy, SBA

Deputy Chief Counsel: Claudia Rayford [email protected]

[email protected]

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


Session Objectives

Upon completion of this module, participants willbe 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


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) :158. Exercise: FRFA :309. Key Points Review, Q&A :05

3 hours


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!


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 initiativesExecutive Orders: 12866, 13272, 13563, 13579, and 13610 OIRA works closely with Advocacy on RFA compliance

issues


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


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


RFA Compliance Overview

Threshold (Preliminary)

Analysis

Initial Regulatory Flexibility AnalysisFinal

Regulatory Flexibility Analysis

= check with Advocacy

Yes

AdequateFRFA?

PublishFRFA with

final regulation

Adequate IRFA?

SignificantEconomic Impact…?

Certification“No significant

impact…”

No

Does RFA

apply? Yes

Begin Rule

Development

Yes

No

NoNo

Yes

Yes

NotifyAdvocacy;

Publish in F.R.

Send copy toAdvocacy

DHJohnso


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?


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?


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?


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.


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 bya 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:


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


Exercise 1: Debrief

Review each team’s insights. What problems did you identify? What resolutions did you suggest? How could this problem be avoided?


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?

InitialRegulatoryFlexibilityAnalysis

• 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


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


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


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


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


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


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


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


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



Exercise 2: Debrief



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

FinalRegulatoryFlexibilityAnalysis

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?


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


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


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



Exercise 3: Debrief



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


THANK YOU!

Q&ACourse

Evaluation

Why Does the Regulatory Flexibility Act Matter?

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Transcript of Why Does the Regulatory Flexibility Act Matter?