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
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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
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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
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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
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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!
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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
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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
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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
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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
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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?
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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?
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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?
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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.
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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:
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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
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Exercise 1: Debrief
Review each team’s insights.
What problems did you identify?
What resolutions did you suggest?
How could this problem be avoided?
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Exercise 2: Debrief
Review each team’s insights.
What problems did you identify?
What resolutions did you suggest?
How could this problem be avoided?
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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?
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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
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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
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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
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Exercise 3: Debrief
Review each team’s insights.
What problems did you identify?
What resolutions did you suggest?
How could this problem be avoided?
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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
- - 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.
