The Small Business Administration's (SBA) Office of Advocacy has launched a new program that may expand SBA's influence into agency regulatory activity. The Office of Advocacy acts as a liaison between the business community and the federal government, particularly the executive branch.

The new program is an attempt by the Office of Advocacy to influence agency reviews of regulations already in effect. Agencies conduct these reviews for a variety of reasons. Section 610 of the Regulatory Flexibility Act (RFA) requires agencies to review every ten years rules having a "significant economic impact" on small businesses or other small entities. Some agencies have internal policies for how frequently they review rules, and others conduct reviews on an ad hoc basis.

The new program, the Regulatory Review and Reform Initiative, or "R3," includes uniform recommendations for the conduct of agency reviews. More significantly, the Office of Advocacy will solicit the business community for recommendations on which existing rules agencies should review and transmit those recommendations to the appropriate agency.

The Office of Advocacy cites a new report by the Government Accountability Office (GAO) as the major reason for the inception of the new program. In the report, Reexamining Regulations: Opportunities Exist to Improve Effectiveness and Transparency of Retrospective Reviews, GAO examined the reviews of nine regulatory agencies completed from 2001-2006.

GAO found the nine agencies reviewed at least 1,300 regulations. Of the 1,300, the majority were conducted at the discretion of agencies, not as a result of statutory requirements such as Section 610 of the RFA.

The report finds room for improvement in the conduct of agency reviews. The report urges agencies to employ uniform standards for conducting its reviews and to better document and inform the public of results. GAO also found agencies often conduct reviews at their own discretion more frequently than the ten-year Section 610 reviews. These discretionary reviews tend to be more valuable to the agency, according to the report.

The first part of the Office of Advocacy program, recommendations for best practices, addresses one of the problems GAO identified in its report — the need for uniform conduct and improved documentation in reviews. However, the best practices guide only discusses practices related to the conduct of Section 610 reviews. It ignores the conduct of discretionary reviews, which are more numerous and more helpful to agencies, as mentioned above.

The second part of the program, soliciting recommendations for rules agencies should review, is inconsistent with GAO's findings. Agencies are able to select rules as they see fit and often do so in order to "address emerging issues." Agencies are not hindered in selecting rules to review but by a lack of resources to conduct reviews for the many federal regulations in effect, according to GAO.

The practice of soliciting recommendations for rules agencies should review is not new. Each year from 2001-2004, the Office of Information and Regulatory Affairs (OIRA), an office within the White House Office of Management and Budget, asked for suggestions from the public on specific regulations that could be rescinded or changed to increase benefits to the public. Industry groups and conservative think tanks made many of the suggestions. OIRA tended to give those suggestions more priority than those made by other interest groups or individual citizens. Subsequently, many dubbed the White House effort an "anti-regulatory hit list."

That program was successful in prompting agency reviews. According to the GAO report, for the rules studied, the OIRA initiative accounted for up to 20 percent of reviews, and up to 74 percent of reviews conducted by the U.S. Environmental Protection Agency.

The White House may have been involved in the development of the new Office of Advocacy Program, and may continue to be involved as it progresses. The Bush White House has encouraged SBA to be aggressive in its regulatory advocacy on behalf of small businesses. In 2002, OIRA and the Office of Advocacy signed a memorandum of understanding under which both offices pledged to work together in order to "achieve a reduction in unnecessary regulatory burden for small entities." Although the memorandum expired in 2005, nothing precludes the offices from continuing to work together.

The Office of Advocacy's Chief Counsel Thomas Sullivan said in a statement, "The Office of Management and Budget has committed to work cooperatively with Advocacy to make R3 a success."

The Office of Advocacy also consistently cites the cost of federal regulations as another need for engaging in regulatory reform. Sullivan claims federal regulations imposed costs of $1.1 trillion on the economy in 2004. The $1.1 trillion claim comes from a study the Office of Advocacy commissioned and released in 2005.

The study, written by anti-regulatory academic W. Mark Crain of Lafayette College in Pennsylvania, is deeply flawed. The study relies on government predictions of what regulations will cost before they take effect, rather than actual realized costs to the economy. John Graham, former OIRA administrator under Bush, has criticized the study and pointed out that it is merely an updated aggregation of other studies, some of which date back to the 1970s. The study also ignores the benefits of regulations. Many of these benefits, such as human lives or environmental preservation, cannot be adequately expressed in monetary terms.