[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE OFFICE OF ADVOCACY AND THE OFFICE OF THE NATIONAL
OMBUDSMAN AT THE SBA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT AND REGULATIONS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
FEBRUARY 10, 2016
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-042
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Emily Murphy, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Cresent Hardy............................................... 1
Hon. Alma Adams.................................................. 2
WITNESSES
Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United
States Small Business Administration, Washington, DC........... 3
Rear Admiral Earl L. Gay, USN (Ret.), Small Business and
Agriculture Regulatory Enforcement Ombudsman, United States
Small Business Administration, Washington, DC.................. 5
APPENDIX
Prepared Statements:
Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United
States Small Business Administration, Washington, DC....... 14
Rear Admiral Earl L. Gay, USN (Ret.), Small Business and
Agriculture Regulatory Enforcement Ombudsman, United States
Small Business Administration, Washington, DC.............. 20
Questions and Answers for the Record:
Questions and Answers from Hon. Steve Chabot to Hon. Darryl
L. DePriest................................................ 27
Questions and Answers from Hon. Steve Chabot to Rear Admiral
Earl L. Gay................................................ 37
Additional Material for the Record:
None.
OVERSIGHT OF THE OFFICE OF ADVOCACY AND THE OFFICE OF THE NATIONAL
OMBUDSMAN AT THE SBA
----------
WEDNESDAY, FEBRUARY 10, 2016
House of Representatives,
Committee on Small Business,
Subcommittee on Investigations,
Oversight and Regulations,
Washington, DC.
The Subcommittee met, pursuant to call, at 1:00 p.m., in
Room 2360, Rayburn House Office Building, Hon. Cresent Hardy
[chairman of the Subcommittee] presiding.
Present: Representatives Hardy, Velazquez, and Adams.
Chairman HARDY. Good afternoon. I would like to call this
hearing to order. Too often small businesses tell us that the
federal government ignores their concerns about the new
regulation and threats, treats them unfairly. At a hearing in
my district this past November, I heard that the red tape is
making it more difficult and small firms, especially those in
rural areas, harder to operate. Small businesses are even more
worried about the flood of new mandates that are gushing out of
Washington, D.C. And the final year of the Obama administration
gives them grave concern.
Last year, the administration finalized rules totaling $99
billion in costs, and many of those rules, like the EPA's
waters of the U.S. rule, inflict significant burdens upon small
businesses. This year, it could even be worse, as the federal
agencies plan to finalize the rules, like the Department of
Labor's overtime rule, and impose major costs on small
businesses and will hurt their employees.
Two offices, the Office of Advocacy and the Office of the
National Ombudsman at the Small Business Administration, were
created by Congress to help small businesses with their very
regulatory concerns that I have mentioned. The Office of
Advocacy independently represents the views and the interests
of small businesses as regulations are developed. It also
monitors agencies' compliance with the Regulatory Flexibility
Act. The Office of the National Ombudsman provides a way for
small businesses to anonymously comment on excessive and unfair
regulatory enforcement actions.
Today, the Subcommittee will hear from the leaders of both
offices on how they are carrying on their statutory duties.
Given that the regulations continue to be a significant
challenge for small businesses, it is critical that these
offices work efficiently to reduce excessive regulatory burdens
and ensure that small businesses are treated fairly.
I would like to thank the witnesses here today, and I look
forward to hearing your testimony. And I will yield now to the
ranking member, Ms. Adams, for her opening remarks.
Ms. ADAMS. Thank you, Mr. Chairman.
And I want to thank the gentlemen for being here. At nearly
30 million strong, small businesses are central to the U.S.
economy. Responsible for two-thirds of net new jobs, they are
the engine that drives the job creation. The State of North
Carolina alone is home to more than 800,000 small businesses.
Essential to their success is ensuring that their voice can be
heard when it comes to Federal policy and regulation. This
means not only reviewing regulations from a small-business
perspective but also giving entrepreneurs a point of access to
address their concerns.
And this is where the Office of Advocacy and the National
Ombudsman play a critical role. During today's hearing, we will
hear from both of these offices on how they are meeting their
mandates and providing small businesses with a voice in the
Federal Government. At its core, the Office of Advocacy works
to reduce the burden of Federal regulation on small businesses
through its implementation of the Regulatory Flexibility Act.
In 2014, Advocacy achieved nearly $5 billion in annual savings
for small businesses. By right-sizing regulations, small
businesses are better able to focus on their core mission.
In addition to its regulatory work, Advocacy conducts
research on small businesses. During 2014, it published 23
research and data products, exceeding its annual goal of 20
reports. I am interested in how it sets its research agenda and
in what ways it is prioritizing research related to minority-
owned businesses, which make up 15 percent of U.S. businesses
and are growing rapidly.
The Ombudsman plays a complementary role to Advocacy,
providing small firms with the ability to directly resolve
complaints about the Federal Government. Such a mechanism is
critical as small businesses lack the resources that larger
corporations have to address such problems. And I am eager to
understand how the Ombudsman is able to effectively handle its
caseload, which reached a 6-year high last year. In addition,
the Ombudsman is responsible for Regional Regulatory Fairness
Boards, which provide small businesses with an avenue to raise
concerns about Federal policies. Ensuring that these boards are
filled can be a challenge, and I am hoping to hear an update on
such progress, as well as efforts to increase diversity on
these boards.
During the hearing, I am hopeful to hear what is working
and what is not. Ensuring that these offices function
effectively and efficiently is essential to leveling the
playing field for small businesses. So I want to thank both of
the witnesses for being here today, and I look forward to your
testimony.
I yield back, Mr. Chairman.
Chairman HARDY. Thank you. If Committee members have
opening statements prepared, I would like to ask them that they
submit them for the record.
I would like to take a moment and explain how things work
around here, the timing lights. You will each have 5 minutes to
deliver your testimony. The light will start out green. When
you have 1 minute remaining, the light will turn yellow. And
when it turns red, you are out of time. So I ask you try to
stay within those limits. But we are here to hear from you
also.
I guess we will do an introduction first. Our first witness
is Mr. Darryl DePriest. Mr. DePriest was appointed by President
Obama and confirmed by the United States Senate as the seventh
Chief Counsel of Advocacy this past December. He leads the
Office of Advocacy, which is housed in the Small Business
Administration, but it is independent from the agency. The
office advocates for small businesses as new regulations are
developed by the federal agencies.
And, first, I would like to thank Mr. DePriest for coming
to my office and introducing himself yesterday. Thank you very
much.
Our second witness is Admiral Earl Gay, a Small Business
and Agriculture Regulatory Enforcement Ombudsman--I have a hard
time saying that word, so I don't want to say it too many times
too fast--at the Small Business Administration. Admiral Gay
leads the Office of the National Ombudsman, which assists small
businesses that believe they have been subject to an excessive
and unfair regulatory enforcement action. He has had a
distinguished career as a naval officer and aviator.
And, Admiral Gay, we appreciate your service.
Mr. DePriest, we will begin with you.
STATEMENTS OF THE HONORABLE DARRYL L. DEPRIEST, CHIEF COUNSEL
FOR ADVOCACY, UNITED STATES SMALL BUSINESS ADMINISTRATION,
WASHINGTON, D.C.; AND REAR ADMIRAL EARL L. GAY, USN (RET.),
SMALL BUSINESS AND AGRICULTURE REGULATORY ENFORCEMENT
OMBUDSMAN, UNITED STATES SMALL BUSINESS ADMINISTRATION,
WASHINGTON, D.C.
STATEMENT OF THE HONORABLE DARRYL L. DEPRIEST
Mr. DePRIEST. Chairman Hardy, Ranking Member Adams, and
members of the Committee, good afternoon. As the Chief Counsel
for Advocacy, I would like to thank you for this opportunity to
appear before the Committee today to discuss the office and its
accomplishments during fiscal year 2015, which I think is
responsive to some of the issues that you raised in your
opening statements.
I have provided my complete testimony, and I ask that it be
entered into the record. It includes all of Advocacy's recent
activity, which I will just summarize in these brief remarks.
When the Office of Advocacy was first created in 1976, it
was charged with providing small businesses with an independent
and credible voice in the Federal rulemaking process. Too
often, small businesses were unduly burdened by one-size-fits-
all regulations from Federal agencies. During the past 40
years, the Office of Advocacy has facilitated greater
consideration of small-business impacts through economic
research, regulatory flexibility trainings, comment letters,
roundtables, publications, and collaboration with Federal
officials throughout government. As a result, Federal agencies
treat Advocacy as a partner in the rulemaking process in an
effort to reduce the regulatory burden on small business.
As the seventh Senate-confirmed Chief Counsel, I will
ensure that the office continues to work with Federal agencies
to mitigate the potential costs of regulation on small
entities. To further describe our dedication to this cause, I
would like to update you on Advocacy's efforts and
accomplishments on behalf of small business during fiscal year
2015. During this time, Advocacy hosted 21 roundtables to
highlight the concerns of small businesses on a wide range of
topics, from OSHA standards to FAA regulations. In addition,
Advocacy submitted 28 comment letters to 15 different agencies
on a variety of issues. Specifically, the majority of these
comment letters addressed either, one, the need for flexible
alternatives supporting small business; two, inadequate
analysis of the impact on small entities; three, improper
certification of the rule; or, four, requests for greater
outreach to small entities. The office achieved more than $1.6
billion of first-year cost savings as a result of its efforts
on behalf of small business. Generally, these savings come from
the difference in costs between the proposed rule and the final
rule.
Advocacy's efforts have also produced positive outcomes
that are not quantifiable and are not captured in these cost-
savings projections. Advocacy's work with Federal agencies and
engagement with small businesses often helped facilitate
greater consideration of small-business concerns and Federal
rulemakings in Federal initiatives. For example, Advocacy's
engagement with officials from the Food and Drug Administration
produced more flexible regulations on animal food controls.
Similarly, our work with the Federal Communications Commission
improved competitive bidding rules.
Advocacy's approach to Federal agencies has also included
facilitating greater compliance with the Regulatory Flexibility
Act throughout the government. Since 2002, Advocacy has
conducted formal trainings on RFA compliance for Federal
agencies and other stakeholders. In fiscal year 2015 alone,
Advocacy conducted trainings for 126 Federal officials from a
variety of different agencies, exceeding our annual goal by
more than 25 percent. In addition to these formal trainings,
Advocacy offers Federal agencies technical assistance regarding
RFA compliance. Since its creation, Advocacy has provided
timely and policy-relevant information on important issues
affecting small businesses. During fiscal year 2015, we
released 26 research publications on several topics relevant to
today's economy.
Finally, the 10 regional advocates who are part of the
office play a vital role in maintaining an open dialogue with
the vast majority of small entities that operate outside the
beltway. They interact directly with small-business owners,
small-business trade associations, and State officials to
educate them about the benefits of regulatory flexibility. This
past fiscal year, Advocacy's regional advocates participated in
more than 500 outreach efforts, exceeding their annual goal of
360.
In closing, I would like to thank the Committee and its
staff for its continued support of the Office of Advocacy. As
chief counsel, I look forward to working closely with you on
the important issues of affecting small entities across this
country. Now, if there are any questions, I would be pleased to
answer them.
Chairman HARDY. Thank you, Mr. DePriest.
Admiral Gay, you have your 5 minutes.
STATEMENT OF REAR ADMIRAL EARL L. GAY, US N (RET.)
Admiral GAY. Thank you, Chairman Hardy and Ranking Member
Adams for providing me this opportunity to comment on how the
Office of the National Ombudsman can and does help improve the
regulatory environment for America's small businesses. I look
forward to working with this Committee to improve the
regulatory enforcement environment for our Nation's 28 million
small businesses.
I am also excited that Darryl L. DePriest is now on board
as the Chief Counsel for Advocacy. I meet with Mr. DePriest
weekly to discuss synergies our offices execute to ensure a
fair regulatory environment. We both agree that a strong
working relationship with frequent communication and
collaboration is critical to the SBA's mission of counseling
and protecting America's small businesses against unnecessary
regulatory burdens. Now, while the Office of Advocacy is
responsible for ensuring fairness in implementation stages of
Federal regulations, the Office of the National Ombudsman, or
ONO, works to ensure regulations are being fairly enforced once
they are enacted. Pursuant to the Small Business Regulatory
Enforcement and Fairness Act, or SBREFA Act of 1996, this
office was created to serve as a powerful voice for America's
small businesses. In fulfilling this role, we conduct public
hearings, outreach events, and roundtables in each of SBA's 10
regions, where we provide small businesses with forums where
they can voice their concerns and comments about regulatory
enforcement actions without fear of retaliation. We work with
and encourage regulators to address entrepreneurs' comments and
concerns promptly and, wherever possible, to opt for compliance
assistance and education rather than moving directly to levying
fines and penalties.
Additionally, we rate Federal agencies on the timeliness
and the quality of their responses in our annual report to
Congress. Our office also facilitates Regulatory Fairness
Boards, as you talked about earlier, ma'am, or RegFair Boards
in each of the SBA regions. Each board consists of five small-
business owners who serve as the eyes and ears for small
businesses in their communities, States, and regions. They work
with local business and regional business offices, addressing
any concerns with regulatory enforcement issues. Now, those reg
boards are very vital assets, and they continue to be advocates
for our efforts. In addition to receiving comments regarding
regulatory fairness, our ONO office also receives comments in
other issues, such as contracting, access to capital, loan
policy and business training, counseling, and other support.
During fiscal year 2015, our staff conducted more than 80
outreach events and four regional regulatory fairness hearings.
Through the aggressive efforts of our district and regional
offices, these roundtables and hearings continue to be very
well attended. In my brief 3 months onboard, this office has
held one regulatory enforcement fairness hearing, three small-
business roundtables, one in Nevada recently and Florida, and
several outreach events with small-business owners and
entrepreneurs. I have met and established personal
relationships with senior leaders at 12 Federal agencies,
discussing ways we can better work together to reduce
regulatory burdens against small businesses.
During the next 6 months, we plan on conducting several
roundtables and hearings, and also hosting our annual meeting
with members of the 10 Regional Fairness Boards. It is
important to note that all of our hearings, meetings, and
partnership programs with small-business stakeholders have been
in close collaboration with other Federal agencies. We truly
value their critical presence and participation. I provided you
a schedule of our activities for fiscal year 2015, as well as
the planned events for the first two quarters of fiscal year
2016.
In closing, I would like to state that on behalf of
Administrator Contreras-Sweet and the great staff in the Office
of the National Ombudsman, we look forward to working with all
of our teammates and the Members of Congress to eliminate
unnecessary regulatory burdens on small businesses as they
continue to fuel America's economic prosperity. I thank you
again for the opportunity to appear here today and will be
happy to answer any questions. Thank you.
Chairman HARDY. Thank you, Admiral Gay.
I appreciate both your testimonies. Thank you for being
here again.
I would like to start with Mr. DePriest. Small-business
owners are feeling like they are drowning in a sea of red tape.
You know, 82,000 pages last year of new regulations written.
Can you tell us a little bit about what your office is doing to
prepare for this upcoming flood of new red tape that is coming
to be able to make sure that we protect those small businesses?
Mr. DePRIEST. Certainly. I am blessed with having a
terrific staff that has been through this process repeatedly,
especially as we move toward the end of this administration, to
make sure that every regulation that is proposed goes through
the Regulatory Flexibility Act analysis and is analyzed for its
effect on small businesses.
We will continue to do the things we do, such as the
roundtables, coordinating the panels, doing the analysis,
having our economists look at it, everything that we can do to
make sure that while an agency is able to achieve its
regulatory goal, at the same time, we are looking for ways to
minimize the effect that any proposed regulation would have on
small businesses.
Chairman HARDY. Thank you.
Over the last couple years, the Office of Advocacy has
filed public comment letters with federal agencies raising
significant concerns about the RFA compliance. For example, the
Office of Advocacy wrote the EPA and the Corps a comment letter
on the waters of the United States rule and asked the agencies
to withdraw the rule and comply with the RFA. The agencies
ignored the Advocacy letter and finalized the rule without
conducting a SBAR panel and assessing the impacts of the rule
on small businesses. While the small business community was
pleased that the Office of Advocacy stood up for them, some
view it as a failure of the office also. What legal authority
do you have for the chief counsel of Advocacy? And is there
anything that you need us to do to help you ensure that you
have the ability to make sure that agencies comply?
Mr. DePRIEST. Thank you. The office has, under the
amendments to the Regulatory Flexibility Act, particularly the
Small Business Regulatory Enforcement Fairness Act, has the
ability to file amicus briefs in court if there is a legal
challenge to a regulation. The comment letters that we write,
such as the one that you referenced, can also be used as
evidence in court to see whether the agency has complied with
the Regulatory Flexibility Act. Now, insofar as whether there
is more that we need, in talking with the staff, we found that
the vast majority of agencies comply with the Regulatory
Flexibility Act. Our mantra is better information, better
rules. So we try to put small businesses together with the
agencies so that they get the input from small businesses. For
example, in the waters of the United States, we did conduct
roundtables with representatives of small business, with the
EPA, and with the Corps. So they heard the concerns of small
business. And we will just have to see, as we go forward, as we
monitor the situation, you know, what effect it has. Now, I
understand that that particular rule has been enjoined by the
courts. But we will continue to monitor it.
Chairman HARDY. Thank you. Admiral Gay, your office's
annual report indicates the office is spending a lot of time
helping small businesses resolve federal procurement disputes.
This appears to be duplicative work of other offices within the
SBA and the Federal Government. Can you explain what your
office does when it receives the comments from the small
business regarding the Federal procurement?
Admiral GAY. Yes, sir. Thank you for that question. As in
all cases, we receive the comments. And in the comment forms,
we ask that the small business state what their issues are,
what they want to come out of it, and the impact that that
regulation has on their ability to operate. But most
importantly, we require them to provide supporting
documentation, so we have ample evidence to support their
issues.
Once that happens, it comes to my office, and I have two
outstanding case management specialists. Our office is four
now. We were seven. We are down to four now. And we are working
hard to replace those two. But at any rate, once the case
management specialist looks over the case, I prepare a letter,
signed by myself, to the corresponding entity, stating the
issues that were in the comment.
The agency has 30 days or less to provide me a timely and
quality response. So when that happens, I in turn review the
letter that they have returned back to me, and I usually phone
call to the commenter to state what is happening. And then we
send that letter back to the commenter.
Chairman HARDY. Thank you.
My time has expired. I will turn the time over to Ms.
Adams.
Ms. ADAMS. Thank you, Mr. Chair.
And thank you, gentlemen. In 2014, Advocacy published 23
research reports. One of my priorities is to increase research
into minority-owned small businesses as a means of
understanding the challenges that they face. Mr. DePriest, how
do you determine these research priorities? And what type of
research are you planning on for minority businesses for this
year?
Mr. DePRIEST. Thank you. We solicit, insofar as our
economic research is concerned, we solicit ideas from the
small-business community, from Members of Congress, from
members of this Committee, from the mother SBA of what they
might want us to research. And in that process, we try to pull
together what our research agenda is going to be for the year.
Now, insofar as minorities, that is a special focus of the
office. When the office was created, the statute creating it
specified that we are supposed to do research on issues
involving minorities. As a matter of fact, we are doing some
research right now on minorities in the technology area,
minorities and immigrants and what their effect is in the
technology area. As a matter of fact, in a couple weeks, I am
going out to San Francisco and Silicon Valley to talk with
individuals who are involved in the effort of increasing
minority entrepreneurship. And at that time, we are also going
to present our research on what is going on and things that can
be helpful. So we are mindful of our requirements to do so, and
we actively do it and do it as best we can.
Ms. ADAMS. Thank you.
Advocacy received over $9 million in the recently enacted
omnibus, with staffing making up nearly 90 percent of the
office's budget. Mr. DePriest, do you believe that this funding
is sufficient for the office to carry out its responsibilities?
Mr. DePRIEST. Yes. I believe that it is. In talking with
the members of the staff since I have been there, I believe
that it is a sufficient amount of money for us to carry on our
activities.
Ms. ADAMS. Good. Most people want more. Advocacy and
Ombudsman play different yet similar roles in supporting small
businesses. They both provide a conduit for small businesses to
raise problems with the Federal Government.
Admiral Gay, how do you coordinate with each other to
ensure that your work is not duplicative? It sort of gets back
on what maybe the chairman----
Admiral GAY. Yes, ma'am. As I stated before, I meet with
Darryl weekly, sometimes biweekly, to discuss the systemic
issues that I have seen or my case management specialists have
seen in dealing with the small businesses' concerns and the
comment forms as well. We also participate in roundtables
together. As a matter of fact, the recent one that we had out
in Las Vegas with Sara Wagner, sir--we had Yvonne Lee, who
works under Darryl's Advocacy department, attend those, as well
as fairness hearings. I attended a U.S. Air Force contracting
summit. And we go toe and toe. We usually attend the same
forums and business get-togethers, so we are not duplicative at
all. We try to reduce the duplication.
Ms. ADAMS. Okay. I was going to ask if you thought Congress
should consider merging the offices, considering the overlaps.
I guess your answer is no?
Admiral GAY. Well, give me 2 more months, ma'am, and I can
come back and give you my opinion on that.
Ms. ADAMS. Okay. Then I would also, you know, as a
connected question, would that result in better service to
small businesses with better potentially lower costs?
Admiral GAY. I think right now I think we work together
pretty closely. Before Darryl and I got here, the people who
were in our individual offices, they know each other. They
worked close together. They have a very nurturing relationship.
And our job as leaders is to maintain that and make sure we
grow that congeniality.
Ms. ADAMS. Thank you very much.
Mr. Chair, I yield back.
Chairman HARDY. Thank you. I turn the time over to Ms.
Velazquez.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Mr. DePriest, President Obama issued two executive orders,
13563 and 13610, as well as related memoranda to help reduce
regulatory burdens on small business. Advocacy has provided
counsel to the administration on these measures. In your view,
have these executive orders made any difference in reducing
regulatory burdens to small businesses?
Mr. DePRIEST. Yes, I believe they have. As I said during my
opening remarks, we calculate that we saved businesses in the
first year $1.6 billion. And that is the difference between
what the agencies proposed as their initial rule and what they
ended up with after consultation with us. We think that is a
significant savings. As I said, there are other savings that
are perhaps not as quantifiable, but we think $1.6 billion is
significant savings. We are constantly looking for ways to
represent the interests of small business. As I said, we do
roundtables where we try to put the small businesses together
with the agencies. We help with the panels. We do everything
that we can to be the voice of small business and reduce the
burden. Now, I think that the executive orders that the
President has issued, some of which lead to actually looking
back at regulations and see whether they are still remaining in
force, you know, we do that. We help the agencies put together
an agenda for doing that lookback. So I think that we are on
the right track there.
Ms. VELAZQUEZ. Okay. Mr. DePriest, under Dodd-Frank, the
newly created Consumer Financial Protection Bureau became
subject to the Small Business Advocacy Review Panel process.
Given that the CFPB is a newer agency, can you comment on
Advocacy's experience in establishing the panel process there?
Mr. DePRIEST. Yes, I can. The CFPB has really embraced the
process. I did have the number here. I would have to get it to
you, but they have done a number of the panels that they are
required to do. And, in some instances, you know, we think that
there has been a benefit insofar as the rules that they were
thinking about versus what they proposed. So even though it is
a newer agency, they come at it and we come at them with the
history of what we have been doing with OSHA and the EPA. And I
would say that the agency has embraced that process.
Ms. VELAZQUEZ. Well, one of our concerns is we don't want
for regulations to hinder the ability of small banks to provide
access to capital for small businesses. So this is why it is so
important that you work with the CFPB to make sure that
consideration is taken when they issue regulations regarding
the cost of credit for small businesses.
Mr. DePRIEST. I see. Yes, we do that. And we will continue
to monitor that.
Ms. VELAZQUEZ. Thank you.
I yield back. Thank you, Mr. Chairman.
Chairman HARDY. Thank you. If you don't mind, we are going
to go a second round if everybody is fine with that.
Admiral Gay, I would like to ask, on procurement
complaints, small businesses not getting paid, are you dealing
with that within your office, or are you getting it out to the
appropriate people to look at it?
Admiral GAY. Yes, sir. As we deal with the Federal contract
disputes, that is one of the issues that we see. And that is
businesses not receiving prompt payments on contracts. So, yes,
sir, we do see that, along with time delays in processing of
the contract, and so on and so forth. So we do see some of
those that involve late payments.
Chairman HARDY. The question, I guess, though, is these are
regulatory issues. Are you referring them over to the proper--
--
Admiral GAY. Yes, sir. Yes, sir.
Chairman HARDY. Okay.
Admiral GAY. Absolutely.
Chairman HARDY. Another question for you, Admiral Gay.
According to the office's website, there are board member
vacancies on six of the 10 regional Regulatory Fairness Boards.
For example, region 9, which includes Nevada, there are only
three board members, and none of them are from my home State of
Nevada. Can you explain why there are so many vacancies, and
what are you doing to fill those vacancies?
Admiral GAY. First of all, thank you for funding that would
allow me to leave the beltway area to get out there. This is an
all-hands-on-deck effort. You can't do that while here inside
the beltway. And so what that does is allow me to go out and
get recommendations from the RegFair Board members, and also
Members of Congress as well, on people that are viable
candidates to serve on these boards. Another issue is the
vetting process. The vetting process, as you may or may not
know, is meticulous, and it is prudent. And I think it should
be because these candidates are representing the federal
government. They are speaking on behalf of the government as
well.
Chairman HARDY. If I may on that.
Admiral GAY. Yes, sir.
Chairman HARDY. Your selection process, are you involving
small-business owners, operators, and officers that serve
within that regional regulatory fairness area?
Admiral GAY. Yes, sir.
Chairman HARDY. Okay. Could you also please provide the
Committee with a list of current Regulatory Fairness Board
members for each region and the date that they were appointed
by the SBA?
Admiral GAY. Yes, sir, I will do that.
Chairman HARDY. You know, each Regional Regulatory Fairness
Board is supposed to have five members that are appointed by
the Administrator, receiving recommendations from the chair and
the ranking member of the House and the Senate Small Business
Committees. The current and previous chairmen of the House
Committee on Small Business have never been asked by the SBA
for a recommendation. I believe this is a little bit concerning
that we have never been asked. And it appears the SBA is not
complying with their statutory requirements.
Admiral GAY. Well, I understand the statutory requirements,
and I will ensure that any new members on my watch will be
reviewed by the chairs.
Chairman HARDY. With that, I will turn the time over to Ms.
Adams.
Ms. ADAMS. Thank you, Mr. Chair.
Mr. DePriest, Advocacy is required to carry out the panel
process at EPA, OSHA, and CFPB. Can you comment on what is
working in this panel process and what can be improved?
Mr. DePRIEST. I think that what is working is that the
agencies are listening to the concerns from the small-entity
representatives and implementing less burdensome regulations.
To follow on with Congresswoman Velazquez' comment,
particularly with the CFPB, they have held six of the panels
since 2012. Some of the issues involved mortgage loan
origination and arbitration and payday lending. And we think
that we have seen some benefits here. For example, with the
mortgage servicing rule, small entities which service less than
5,000 loans are exempt from some parts of the rule. And so that
was a result of the agency listening to the concerns of small
business.
As I said earlier, the mantra is, you know, better
information, better rules. And these panel processes allow
small businesses to be directly involved in the process of
writing the regulations. And I think there is definitely a
benefit to that.
Ms. ADAMS. One of the ongoing concerns with the Regulatory
Flexibility Act has been the ability of agencies to continually
forego the requirement in section 610 that require periodic
review of the rules. Do you believe that this requirement
should be strengthened?
Mr. DePRIEST. I would have to really look at that and talk
with my staff about their experiences with that. My
understanding is that we have helped agencies map out a plan
for how they do their 610 compliance. And I would like to have
the opportunity to talk with the staff to see whether that is a
possibility. Now, I know that later on this year, I will have
the opportunity to present some legislative priorities. And I
will take a special look at that to see whether that should be
one of the ones I recommend.
Ms. ADAMS. All right. Great.
Admiral Gay, your office is responsible for operating 10
Regional Regulatory Fairness Boards, which are comprised of
small-business owners. What challenges do you face in getting
small-business owners to devote their time to serve on the
boards?
Admiral GAY. Again, ma'am, as a segue or a reverse segue
back to the previous question, I think that in my short time
onboard, from what I have seen is we have the RegFair Board
members are very engaged. They are very, very engaged. And they
represent small businesses well there. The challenges that we
have right now, again, are getting the vetting process, getting
folks through the vetting process and me getting out conducting
increased outreach events to identify those viable candidates.
You had an earlier comment about diversity of the board. And it
is my job, our job to ensure that that board remains diverse.
And we are working hard to increase the diversity. But I need
to get out and be on the road to make sure that I recruit
viable candidates for your approval.
Ms. ADAMS. Okay. So you have a process for ensuring that
the boards are diverse in terms of minority businesses and
their participation?
Admiral GAY. Yes, ma'am. I think if you look at our report,
you will see that our membership is diverse.
Ms. ADAMS. Okay.
Admiral GAY. Yes, ma'am.
Ms. ADAMS. Your office had in 2014 its highest caseload in
6 years, with 420 cases. Do you have sufficient resources,
staff and otherwise, to handle this volume of cases
effectively?
Admiral GAY. Yes, ma'am. As I stated earlier, we were at
seven. We are at four now, and that came because someone
retired; someone was promoted; someone was transferred. But our
boss has given me the right H.R. resources to fill those two
positions that need to be filled. And we should have those two
positions filled in the next couple of weeks, because I need to
get out on the road.
Ms. ADAMS. Great. Thank you very much.
I yield back, Mr. Chairman.
Chairman HARDY. Thank you.
I turn the time over to Ms. Velazquez.
Ms. VELAZQUEZ. I have no more questions, Mr. Chairman.
Thank you.
Chairman HARDY. Thank you. I have one more. Mr. DePriest,
you know, your office actually submitted a letter to the
Department of Labor on the overtime rule and said the
Department's analysis had said, I quote: ``Does not properly
inform the public about the impact of this rule on small
business entities. And due to those problems with the analysis,
DOL cannot fully consider alternatives that would reduce the
burdens on small businesses.'' Can you elaborate on the Office
of Advocacy concerns on the overtime rule?
Mr. DePRIEST. Well, I actually think that the quotation
that you made really does sum it up. I mean, when we were first
presented with this rule, we held several roundtables across
the country--three in Washington, one in New Orleans, and one
in Louisville--on this issue. And the letter that we wrote was
really based upon the comments, the small business concerns
that these changes will add significant compliance costs and
paperwork burdens. We are going to actively work with DOL to
seek regulatory alternatives that have been recommended by
small businesses. I mean, one of the ones that they are really
concerned about is the difference between--or how this
regulation would affect those in low-wage states versus others.
One of the reasons we went to New Orleans and Louisville was
because dollars are spent differently in those regions. And we
have been advocating for the Department of Labor to take that
into account. Now, we understand that the DOL plans to release
their rule later this year. So we are looking at it anxiously
to see what they determine.
Chairman HARDY. So, at this point, have they indicated
whether they are going to revisit and redo their initial
regulatory or give you any indication?
Mr. DePRIEST. I don't have any further information on that.
Chairman HARDY. With that, I would like to thank you both
for coming. I appreciate your being here and your testimonies.
I appreciate what you do. And if there is anything this Small
Business Committee can do to help strengthen those issues that
will help strengthen our small businesses, that is what we are
here for. As we know, our small businesses operate nimbly and
swiftly to build and create and offer some of the most
innovative and reliable goods and services in the marketplace.
They pour their hearts and minds into their companies. However,
navigating the rulemaking process and complying with
regulations is a huge challenge. This Administration is making
it a lot more difficult for small businesses to keep their
doors open. That is why your offices and duties are so
important. Small businesses need you to continue to
aggressively advocate for them and assist them.
This Subcommittee will continue to closely monitor your
offices and your activities and work to ensure that the federal
agencies comply with their statutory obligations under RFA.
I ask unanimous consent that the members have 5 legislative
days to submit their statements and support materials for the
record.
Without objection, this meeting is adjourned.
[Whereupon, at 1:48 p.m., the subcommittee was adjourned.]
A P P E N D I X
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Created by Congress in 1976, the Office of Advocacy of the U.S.
Small Business Administration (SBA) is an independent voice for
small business within the federal government. The Chief Counsel
for Advocacy, who is appointed by the President and confirmed
by the U.S. Senate, directs this office. The Chief Counsel
advances the views, concerns, and interests of small business
before Congress, the White House, federal agencies, federal
courts, and state policy makers. Issues are identified through
economic research, policy analyses, and small business
outreach. The Chief Counsel's efforts are supported by
Advocacy's staff in Washington, D.C., and by Regional Advocates
throughout the country. For more information about the Office
of Advocacy, visit http://www.sba.gov/advocacy, or call (202)
205-6533.
Chairman Hardy, Ranking Member Adams, and Members of the
Committee, good afternoon. As the Chief Counsel for Advocacy, I
would like to thank you for the opportunity to appear before
the Committee today to discuss the Office of Advocacy and its
many accomplishments during Fiscal Year 2015 (FY2015).
When the Office of Advocacy was first created in 1976, it
was charged with providing small businesses with an independent
and credible voice in the federal rulemaking process. Too
often, small businesses have been unduly burdened by one-size-
fits-all regulations from federal agencies.
During the past 40 years, the Office of Advocacy has
facilitated greater consideration of small business impacts
through economic research, regulatory flexibility trainings,
comment letters, roundtables, publications, and collaboration
with federal officials throughout government. Federal agencies
treat Advocacy as a partner in the rulemaking process in the
effort to reduce the regulatory burden on small business.
As the seventh Senate-confirmed Chief Counsel, I will
ensure that the office continues to work with federal agencies
to mitigate the potential costs of regulation on small
entities. To further describe our dedication to this cause, I
would like to update you on Advocacy's efforts and
accomplishments on behalf of small business during FY2015.
Regulatory Outreach
From draft until final proposal, Advocacy engages federal
officials throughout the entire rulemaking process. Advocacy's
roundtables, comment letters, and interagency discussions are
vital to alerting federal officials to the potential impacts on
small entities and producing alternatives to help reduce any
burdens.
Roundtables
Advocacy's regulatory roundtables gather federal officials,
trade associations, and small business stakeholders from across
the country for substantive presentations and open discussions
about regulatory issues. During topics that included: (1)
occupational exposure limits and other safety requirements; (2)
overtime pay; (3) regulation of small drones; (4) federal
procurement; (5) national emission standards; and (6) tax
reform. Notably, our staff conducted roundtables in Louisville,
New Orleans, and Washington, D.C. to discuss new federal
procurement regulations.
Comment Letters
Once a proposed rule has been published and is open for
public comment. Advocacy will often submit written comments
voicing the concerns of small entities. These comment letters
are a major tool used by Advocacy to ensure federal officials
consider the impacts on small business, as federal agencies are
compelled by statute to respond. During FY2015, Advocacy
submitted 28 comment letters to 15 different agencies on a
variety of issues. The majority of these comment letters
addressed either: (1) the need for flexible alternatives
supporting small business; (2) inadequate analysis of the
impact on small entities; (3) improper certification of the
rule; or (4) requests for greater outreach to small entities.
Regulatory Impact
The Office of Advocacy has worked for nearly forty years to
create a more flexible regulatory environment for small
business in the United States. Advocacy's positive impact on
the federal rulemaking process can be seen in many ways: (1) as
first-year cost-savings; (2) as greater consideration of small
business concerns in particular areas; and (3) as greater
compliance with the RFA by federal agencies. Taking each of
these parts into account provides an accurate portrayal of
Advocacy's success.
Cost Savings
During FY2015, Advocacy achieved over $1.6 billion in
first-year cost savings as a result of its efforts on behalf of
small business. Generally, savings come from the difference in
cost between the proposed rule and the final rule. These
savings resulted from eleven separate rules proposed by five
different agencies: (1) the Department of Energy; (2) the Food
and Drug Administration; (3) the Occupational Safety and Health
Administration; (4) the Bureau of Land Management; and (5) the
Environmental Protection Agency.
For the majority of rules, the first-year cost savings
arises from a one-time implementation cost. However, for rules
such as OSHA's final Cranes and Derricks in Construction final
rule, the initial implementation of the rule was delayed for
three years. Advocacy's efforts resulted in over $13 million in
savings for each year, saving small businesses $40 million
cumulatively over those three years.
Greater Consideration of Small Business Concerns
Advocacy's efforts have also produced positive outcomes
that are not quantifiable and are not captured in cost-savings
projections. Advocacy's partnering approach to federal agencies
and small business trade associations often help facilitate
greater consideration of small business concerns in federal
rulemakings and federal initiatives. For example, during
FY2015, Advocacy obtained greater consideration of small
business concerns in three federal rulemakings and three
federal initiatives. Advocacy's engagement of federal officials
from the Food and Drug Administration and the Federal
Communications Commission produced more flexible regulations on
animal food controls and on competitive bidding rules,
respectively. Advocacy's leadership and hard work on a federal
cybersecurity framework resulted in the National Institute of
Standards and Technology conducted a panel on the impacts of
federal cybersecurity regulations on small federal contractors.
Similarly, Advocacy provided valuable regulatory advice to the
agencies involved in the Transatlantic Trade and Investment
Partnership negotiations. Advocacy's participation in several
rounds of negotiations helped garner greater consideration of
small business issues on the international stage.
Greater Compliance with the RFA
Advocacy has established cooperative relationships with
most federal agencies, and has successfully facilitated greater
compliance with the RFA throughout the government. As federal
agencies have become more familiar with the RFA and have
actively partnered with Advocacy, agencies throughout the
government have produced more flexible and less burdensome
regulations. Such success has been achieved through Advocacy's
respected publications, technical assistance, and formal
trainings on the RFA.
Since 2002, Advocacy has conducted formal trainings on RFA
compliance for federal agencies and other stakeholders. These
trainings have been a valuable resource in achieving greater
regulatory flexibility and greater consideration of small
business concerns. Over the past thirteen years, Advocacy has
conducted trainings for 18 cabinet-level departments and
agencies, 67 separate component agencies and offices, 22
independent agencies, and various special groups including
congressional staff, small business organizations, and trade
associations. In FY2015 alone, Advocacy conducted trainings for
126 federal officials from a variety of different agencies,
exceeding our annual goal by over 25 percent.
In addition to these formal trainings, Advocacy offers
federal agencies technical assistance regarding RFA compliance.
Throughout the rulemaking process, Advocacy is in daily contact
with agencies to provide technical assistance in complying with
the RFA. Such assistance can include: (1) estimates of the
numbers of businesses likely to be affected by a proposal; (2)
legal opinions on RFA issues; (3) the review of draft
materials; (4) arranging roundtables with affected industry
representatives; and (5) other assistance specific to each
case.
Economic Research and Outreach
Since its creation, Advocacy has provided current and
policy-relevant information on important issues affecting small
businesses. During FY2015, the Office of Advocacy provided
small business owners, researchers, policymakers, and other
stakeholders with 26 contracted and internal research
publications on several topics relevant to today's economy,
including: (1) access to capital; (2) employment; (3)
innovation; (4) veterans; and (5) minority- and women-owned
businesses.
During FY2015, Advocacy also established a new program
series entitled ``Small Business Economic Research Forums.''
These forums provide interested parties with an opportunity to
discuss relevant small business issues with our research team
and other stakeholders. These forums also inform Advocacy's
staff of the cutting-edge topics that are affecting small
businesses across the country. During the series' inaugural
year, eight research forums were held on topics such as
consumer credit, student loan debt, tax exemptions, and new
sources of capital.
Communications Outreach
Advocacy's information team keeps in touch with concerned
stakeholders through Advocacy's website, various publications,
email alerts, and social media presence. Our monthly
newsletter, The Small Business Advocate, reaches nearly 37,000
electronic subscribers. In addition, our specialized email
alerts provide valuable information to thousands more,
including over 28,000 research subscribers and over 25,000
regulatory subscribers. Advocacy also frequently updates
stakeholders on Facebook, Twitter, and Advocacy's blog.
Regional Advocates
The ten Regional advocates play a vital role in maintaining
an open dialogue with the vast majority of small entities that
operate outside of the Washington, D.C. area. They interact
directly with small business owners, small business trade
associations, and state officials to educate them about the
benefits of regulatory flexibility. Regional advocates conduct
outreach to identify areas of concern for small business and
assist headquarters staff with specific actions, such as
recommending participants for Small Business Regulatory
Enforcement Fairness Act panels that require small entity
representatives. They also alert businesses in their respective
regions about regulatory proposals that could affect them.
During FY2015, Advocacy's regional advocates participated in
more than 500 outreach events, exceeding their annual goal of
360.
Conclusion
In closing, I would like to thank the Committee and its
staff for its continued support of the Office of Advocacy. As
Chief Counsel, I look forward to working closely with you on
the important issues affecting small entities across this
country. If there are any questions, I would be pleased to
answer them.
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Thank you Chairman Hardy and Ranking Member Adams for
providing me this opportunity to comment on how the Office of
the National Ombudsman can and does help improve the regulatory
environment for America's small businesses.
I look forward to working with this committee to improve
the regulatory enforcement environment for our nation's 28
million small businesses. I am also excited that Darryl L.
DePriest is now on bard as the Chief Counsel for the Office of
Advocacy. I meet with Mr. DePriest weekly to discuss synergies
our offices execute to ensure a fair regulatory environment. We
both agree that a strong working relationship with frequent
communication and collaboration is critical to the SBA's
mission of counseling and protecting America's small businesses
against unnecessary regulatory burdens.
While the Office of Advocacy is responsible for ensuring
fairness in the implementation stages of federal regulations,
the Office of the National Ombudsman (ONO) works to ensure
regulations are being fairly enforced once they are enacted.
Pursuant to the Small Business Regulatory Enforcement Fairness
Act (``SBREFA''), this office was created to serve as a
powerful voice for America's small businesses.
In fulfilling this role, we conduct public hearings and
outreach events (including roundtables and meetings) in each of
SBA's ten regions, providing small businesses with forums where
they voice their comments about federal regulatory enforcement
actions without fear of retaliation.
We work with and encourage regulators to address
entrepreneurs' comments and concerns promptly, and wherever
possible, to opt for compliance assistance and education rather
than moving directly to levy penalties and fines. Additionally,
in our annual report to Congress, we rate federal agencies on
the timeliness and quality of their responses to comments
received from small businesses.
Our office also facilitates regional regulatory fairness
boards (RegFair boards) in each of the SBA regions. Each
RegFair board consists of 5 small business owners who serve as
the eyes and ears for small businesses in their communities,
states, and regions. They work with local small businesses to
address regional concerns regarding federal regulatory
enforcement or compliance issues. These RegFair boards have
been and continue to be vital assets and advocates. In addition
to receiving comments regarding regulatory fairness, our office
also receives comments regarding other issues; such as,
contracting, access to capital, loan policy and business
training, counseling and other support.
During FY-15, our staff conducted more than 80 outreach
events, 4 regional regulatory fairness hearings and 1 national
hearing here in Washington, DC. Through the aggressive efforts
of our district and regional offices and SBA resource partners
and federal agency representatives, these roundtables and
hearings continue to be very well attended and productive.
In my brief three months onboard, this office has held one
regulatory enforcement fairness hearing, 2 small business
roundtables in Nevada and several outreach events with small
business owners and entrepreneurs. I have met and established
personal relationships with senior leaders at 12 federal
agencies, discussing ways we can better work together to reduce
regulatory burdens for small businesses. During the next six
months we plan on conducting several roundtables and hearings
and hosting our annual meeting with members of the ten regional
regulatory fairness boards.
It is important to note that all of our hearings, meetings,
and partnership programs with small business stakeholders, have
been in close collaboration with other federal agencies, we
truly value their critical presence and participation.
Attached you will find a schedule of the ONO activities for
FY-15, as well as the planned events for the first two quarters
of FY-16.
In closing, I'd like to state that, on behalf of
Administrator Contreras-Sweet, and the great staff in the
Office of the National Ombudsman, we look forward to working
with all of our teammates and the members of Congress, to
eliminate unnecessary regulatory burdens on small businesses as
they continue to fuel America's economic prosperity.
I thank you again for the opportunity to appear here today
and will be happy to answer any questions.
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