Statement of Small Business Administration

Jeannie Layson: [0:00] Now we will hear from Bruce Lundegren.
Bruce Lundegren: [0:03] Thank you very much. My name is Bruce Lundegren. I'm with the Office of Advocacy within the US Small Business Administration. The Office of Advocacy is an independent entity within the federal government that advocates on behalf of small entities. [0:20] We are independent of the Small Business Administration. We are independent of the White House. We actually speak for small entities.

[0:29] Interestingly, in this whole debate, generally people think about small business. When I say small entities, we're talking about small business, small nonprofit organizations, and small governmental jurisdictions with a population less than 50,000.

[0:43] Many of these SDOs, standard development organizations as my colleagues on the panel have said, are themselves small entities that we also represent. We have a variety of interests, cutting interests in this issue.

[0:59] We've been involved in the incorporation by reference issue for a long time. We host many series of roundtables regularly that involve environmental, occupational, safety and health, transportation, aviation. All of these industries are subject to or actively participate in the standard development processes and also are subject to the regulations that come out of them.

[1:28] We have really been actively following this issue for a long time. We were at the ACUS plenary. We were at the NIST workshop on this. We filed comment letters on both the Federal Register petition and the OMB request for comment on Circular A-119. I'll tell you in just a minute what we had to say about that.

[1:52] Our comment letters really tried to reflect the views of small entities. As I mentioned, there were several competing factors here. I should also mention that we took a delegation of small business representatives over to OMB and met with OMB, and had a very good discussion of some of these competing interests.

[2:16] Before I get to what we said in the letter, I just want to mention that there are the small entities. We have the standard development organizations. I should say that we had also had a delegation of the SDOs, came over and met with us a couple weeks ago and explained what these presentations have just gone over, especially about the cost models and the participation and who was at all of these deliberations.

[2:42] From a purely small business concern, some of the biggest issues that we've heard over the years about this issue and the small business concerns with the whole process is that some of the standard development organizations tend to be dominated by large business interests and by consultants and equipment manufacturers who have an economic interest in the outcome.

[3:13] A lot of small businesses are concerned that these standard processes are being pushed and they're becoming very complex to the degree that the small businesses have to hire consultants or purchase particular equipment. That's something that they have been very, very concerned with over the years.

[3:37] Another thing that they're concerned about is the processes are open and transparent to the degree that you can be there. Small businesses have been concerned that it's very costly and time consuming to actually participate.

[3:52] It's one thing to say that these are open, but for a small manufacturer to actually send somebody to sit at these meetings...Which I'm sure all of you have been to them. They are very lengthy. They involve a lot of resources and time commitment, particularly to be involved in the working groups where a lot of the actual decisions are made, and there's a whole give and take review of all of the draft documents that go back and forth.

[4:17] It really is almost a full-time job. All of the large businesses have dedicated staff people that do nothing but attend these meetings. There are literally hundreds and hundreds of these going on simultaneously all across the country and, as my colleagues here have pointed out, all across the world now. It's very, very difficult for small businesses to actually participate, and that's something that's been a big concern.

[4:44] Now with respect to the cost issue, as I mentioned, there was really a division of opinion about this. Some of the small businesses wanted the materials to be available for free, as the new statutory mandate requires and others.

[5:04] Others were very concerned that this would break this cost model and that these standard development processes, especially some of the smaller ones for small industries...They like the way they work. They function very well. They were very concerned that this type of thing would disrupt that model, and they didn't want to see that happen. As I mentioned, many of the standards development organizations themselves are small.

[5:33] With respect to the petition that was filed with the Office of the Federal Register, what our comments basically said was that there was no uniform small business perspective on this issue of reasonably available. The standard development organizations want a reliable set of rules that values the services they provide to industry and the federal government, and the federal government should avoid actions that would jeopardize this community.

[6:03] Secondly, there's no one best policy for small entities in all circumstances. Because of the balancing of interests required, the Office of Advocacy recommended that the issues raised in the petition on the availability are highly dependent on the specific circumstances of each standard development process and each rulemaking, and that should be part of the agency's deliberation.

[6:29] Now, as I mentioned at the beginning, one of our chief concerns is agency compliance with the Regulatory Flexibility Act. That requires the agency to understand the small businesses that they're regulating, how much it will cost to comply and the alternatives that are available.

[6:44] When there's an incorporation by reference, the agency is still subject to the Regulatory Flexibility Act. As part of that deliberation, they should assess the impact of the standard on small entities and also determine whether there was adequate small entity input in the particular standard that's being incorporated. That should be an affirmative obligation of the agency.

[7:10] With respect to the OMB letter, which is a similar letter and we raised similar concerns, these are the comments on OMB Circular A-119. Again, we indicated that there was no uniform small entity perspective on the questions of how to revise the circular. There are significant risks to small entities if their interests are not adequately considered when federal agencies incorporate private technical standards.

[7:43] What we heard from the small businesses and small entities that came to our roundtable was that they want a seat at the table when the standards are drafted and easy access to the law. The standard development organizations want a reliable set of rules that values the services they provide. Again, we don't want to disrupt this, but we want to ensure that small business is actually at the table when the standards are developed.

[8:09] Also, with respect to the OMB request for information, the circular should establish policies that will mitigate the risk to the interest of small business. The agency should have, as I mentioned before, an affirmative obligation to consider and request comment on small business issues with respect to the technical standards being incorporated.

[8:33] Now, the Office of Advocacy, I think what I could say what the Office of Advocacy's view of this whole issue is our primary concern is that the agencies comply with their obligations under the Regulatory Flexibility Act. Which is to consider, as I just mentioned, who they're regulating, how much it's going to cost to comply, and what alternatives are available that would minimize any negative impacts on small business and other small entities.

[9:00] Agencies should ensure that small entities actually participated in the standards. Some of these SDOs, standard development organizations, have been making availability of financial resources, and some federal agencies have, to get small entities to the standard development processes.

[9:25] Also, standard development organizations and agencies should be wary where non-regulated entities are pushing the standard where the standard does not reflect actual business practices. We have seen instances and heard many complaints over the years where certain groups are driving standards that do not reflect the consensus of the business community in the actual regulated entities that will have to comply. They represent other political perspectives or economic interests that are contrary to the interests of small business.

[10:11] Finally, with respect to the new statutory mandate on PHMSA, the new rule seems to contradict government policy to support incorporation by reference and to protect the rights of the standard development organizations.

[10:28] We don't really have consensus of small entities on how to address this problem. One issue might be that either agencies are going to have to pay or develop some other cost structure, which the federal government is probably not very well positioned to do.

[10:46] One alternative might be increased use of negotiated rulemaking. That is also going to bring up issues about the copyright rights of these entities, where the government comes up with a standard that is very close or nearly identical to what the private standard would be.

[11:06] With that, I will turn to my next colleague.

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