FOREWORD 

Economic freedom is the foundation for individual success and prosperity. This freedom 

is evident in the entrepreneurial small business sector, which creates most of the new jobs 

and a large share of the innovations in the American economy. When government takes 

small businesses into consideration in developing regulations, it saves time and money 

and supports the growth of the nation’s most productive sector. 

President Obama’s Executive Order 13563, Improving Regulation and Regulatory 

Review, his regulatory memoranda, and several laws passed since 2002 have 

strengthened the RFA and underscored the importance of considering small entity effects 

early in the regulatory process. Executive Order 13272, signed August 13, 2002, among 

other provisions, directs the Small Business Administration’s (SBA) Office of Advocacy 

to provide agencies with training and information on how to comply with the Regulatory 

Flexibility Act (RFA). 

The Office of Advocacy continues to provide training to agency personnel in RFA 

compliance and welcomes additional opportunities to assist in new phases of training. 

This compliance guide, prepared with input from regulatory agencies, is designed to be 

used by agency rule writers and policy analysts as a step-by-step manual for complying 

with the RFA. A careful review of the requirements is recommended before policy 

analysts begin to draft regulations, and then again at each stage of the process. 

Thanks to all who contributed by reviewing and commenting on this guide. Further 

suggestions for improvements are welcome. For more information about the RFA, E.O. 

13272, and subsequent developments, visit the Advocacy website at 

www.sba.gov/advocacy, or call us at (202) 205-6533. 

To those charged to carry out the nation’s regulatory flexibility requirements, the Office 

of Advocacy offers its strong support and encouragement. You have a crucial role in 

keeping the nation on track for economic growth by ensuring the strength of the resilient 

small business sector.

Winslow Sargeant, Ph.D. 

Chief Counsel for Advocacy
ii

ACKNOWLEDGMENTS

The Office of Advocacy’s deep appreciation is extended to all reviewers of this guide, 

including those representing the Department of Labor, the Environmental Protection 

Agency, the Food and Drug Administration’s Center for Food Safety and Applied 

Nutrition, the Office of Management and Budget’s Office of Information and Regulatory 

Affairs, the House Committee on Small Business, and Advocacy staff. 

As a tool for effective implementation of the Regulatory Flexibility Act, the guide helps 

create fairer and more effective regulation for all small entities, especially small 

businesses.
iii

CONTENTS

Foreword .............................................................................................................................. i

Contents ............................................................................................................................. iii

Introduction: The RFA and related law .............................................................................. 1

Chapter 1 Where do we begin? First steps of RFA analysis............................................. 7

The RFA decision process .............................................................................................. 8

Does the RFA apply? ...................................................................................................... 9

RFA exemptions ......................................................................................................... 9

RFA now applies to certain IRS interpretative rules ................................................ 10

The RFA threshold analysis: Can we certify? .............................................................. 11

Organizing the threshold report ................................................................................ 12

“Factual basis” requirement for certification ............................................................ 13

What is the definition of a small entity? ................................................................... 14

Changing a size standard .......................................................................................... 15

Assessing the impact on small entities...................................................................... 15

Which segment of the economy or industry will be regulated?................................ 16

How to categorize small entity sectors ..................................................................... 18

Determination of “significant impact” ...................................................................... 18

Determination of “substantial number” .................................................................... 21

Direct versus indirect impact .................................................................................... 22

Adverse versus beneficial impact ............................................................................. 23

What adequate and inadequate certifications look like ................................................. 24

An example of an adequate certification .................................................................. 25

Examples of inadequate certifications ...................................................................... 25

Certification checklist ................................................................................................... 29

Chapter 2 Preparing a proposed rule: The initial regulatory flexibility analysis ............. 31

The RFA decision process ............................................................................................ 31

Issues to be addressed in the analysis ........................................................................... 32

Elements of an IRFA .................................................................................................... 34

Reasons action is being considered........................................................................... 35

Objectives of the proposed rule ................................................................................ 35

Description and estimate of the number of small entities ......................................... 36

Estimating compliance requirements ........................................................................ 36

Significant alternatives considered ........................................................................... 37

Duplicative, overlapping, and conflicting rules ........................................................ 40

Using other analyses to satisfy the IRFA requirements ................................................ 41

When an IRFA may be waived or delayed ................................................................... 41

What an IRFA should look like: A real-life example ................................................... 42

Chapter 3 Preparing a final rule: The final regulatory flexibility analysis ...................... 43

The RFA decision process ............................................................................................ 43
iv

Issues to be addressed in the analysis ........................................................................... 44

Additional questions to be addressed in a FRFA .......................................................... 46

Have all significant issues been assessed? ................................................................ 46

Has the number of small entities been estimated? .................................................... 46

Has the adverse economic impact on small entities been minimized? ..................... 47

Have all significant alternatives been reviewed? ...................................................... 48

Permissible delays in publication; provision for lapse of final rule .............................. 48

What a FRFA should look like: A real-life example .................................................... 49

Chapter 4 SBREFA panels............................................................................................... 51

Who must hold SBREFA panels? ................................................................................. 51

How is the decision to hold a SBREFA panel made? ................................................... 52

How does a SBREFA panel work? ............................................................................... 52

Suggested SBREFA panel timeline .............................................................................. 53

Chapter 5 RFA litigation: What the courts have said ...................................................... 55

Where do we begin? First steps of RFA rule analysis .................................................. 55

Does the RFA apply? ................................................................................................ 55

What qualifies as a rulemaking under the APA? ...................................................... 56

Exemptions under the APA ...................................................................................... 56

The certification statement ............................................................................................ 58

The decision process ................................................................................................. 58

Size standards............................................................................................................ 61

The agency must conduct an adequate analysis before certifying ............................ 62

Direct versus indirect impact on small entities ......................................................... 64

The initial regulatory flexibility analysis ...................................................................... 68

The final regulatory flexibility analysis ........................................................................ 69

General content ......................................................................................................... 69

Is a FRFA always required? ...................................................................................... 70

Considering alternatives to the final rule .................................................................. 71

Analysis of the economic impact .............................................................................. 74

Public comments ....................................................................................................... 76

Judicial review .............................................................................................................. 77

Chapter 6 Section 610 review of existing rules ............................................................... 79

RFA section 610 review................................................................................................ 80

Review of rules that were originally certified ........................................................... 80

Scope of the review ................................................................................................... 81

Timing of the review ................................................................................................. 82

Outreach to regulated small entities .......................................................................... 83

Using other agency reviews to satisfy section 610 ................................................... 84

Examples of successful retrospective rule reviews ....................................................... 84

Section 610 assistance from the Office of Advocacy ................................................... 85

Chapter 7 Additional RFA and SBREFA requirements .................................................. 87

Semi-annual regulatory agenda..................................................................................... 87
v 

Small entity compliance guides .................................................................................... 88

Informal compliance assistance .................................................................................... 89

Regulatory enforcement fairness .................................................................................. 90

Penalty reduction policies ............................................................................................. 90

Congressional review .................................................................................................... 91

Conclusion ........................................................................................................................ 92

Appendix A The Regulatory Flexibility Act ................................................................... 93

Appendix B RFA recent developments ......................................................................... 102

Appendix C Small business by the numbers.................................................................. 106

Appendix D Small business statistics for regulatory analysis ....................................... 109

Appendix E Executive Order 12866 .............................................................................. 112

Appendix F Executive Order 13272 .............................................................................. 125

Appendix G Executive Order 13563 and Memoranda .................................................. 127

Appendix H Memorandum on cumulative impacts ....................................................... 135

Appendix I Executive Order 13579 .............................................................................. 137

Appendix J Example of a successful IRFA .................................................................. 139

Appendix K Example of a successful FRFA ................................................................. 171

Appendix L Abbreviations used in this guide................................................................ 200

Appendix M Office of Advocacy staff .......................................................................... 202

Index ............................................................................................................................... 203
Introduction: The RFA and related law 

INTRODUCTION: THE RFA AND RELATED LAW

In June 1976, Congress created the Office of Advocacy, headed by a Chief Counsel 

appointed by the President from the private sector and confirmed by the Senate. Congress 

concluded that small businesses needed a voice in the councils of government—a voice 

that was both independent and credible. Congress specifically required the Office of 

Advocacy to measure the costs and impacts of regulation on small business. The Chief 

Counsel’s mandate, therefore, is to be an independent voice for small business in policy 

deliberations—a unique mission in the federal government. 

The Regulatory Flexibility Act (RFA),1

 enacted in September 1980, requires agencies to 

consider the impact of their regulatory proposals on small entities, analyze effective 

alternatives that minimize small entity impacts, and make their analyses available for 

public comment. The RFA applies to a wide range of small entities, including small 

businesses, not-for-profit organizations, and small governmental jurisdictions. 

The RFA does not seek preferential treatment for small entities, require agencies to adopt 

regulations that impose the least burden on small entities, or mandate exemptions for 

small entities. Rather, it requires agencies to examine public policy issues using an 

analytical process that identifies, among other things, barriers to small business 

competitiveness and seeks a level playing field for small entities, not an unfair advantage.

The size of the business, government unit, or not-for-profit organization being regulated 

has a bearing on its ability to comply with federal regulations. For example, the costs of 

complying with a particular regulation—measured in staff time, recordkeeping, outside 

expertise, and other direct compliance costs—might be roughly the same for a company 

with sales of $10 million as for a company with sales of $1 million. In a larger business, 

however, the costs of compliance can be spread over a larger volume of production. For 

small entities, a burdensome regulation could affect the ability to set competitive prices, 

to devise innovations, or even to make a profit.2 In some cases, a small business may be 

unable to stay in business because of the cost of a regulation. Simply stated, fixed costs 

have a greater impact on small entities because small entities have fewer options for 

recovering them. Without the necessary facts, it is possible for an agency to cause serious 

unintended or unforeseen adverse impacts on small businesses. 

In essence, the RFA asks agencies to be aware of the economic structure of the entities 

they regulate and the effect their regulations may have on small entities. To this end, the 

RFA requires agencies to analyze the economic impact of proposed regulations when 

there is likely to be a significant economic impact on a substantial number of small 

entities, and to consider regulatory alternatives that will achieve the agency’s goal while 

minimizing the burden on small entities. The concept underlying this analytical 

 

1 Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164 (codified at 5 U.S.C. § 601). 2 See Todd A. Morrison, Economies of Scale in Regulatory Compliance: Evidence of the Differential 

Impacts of Regulation by Firm Size, report no. PB85-178861, prepared by Jack Faucett Associates, Inc., for 

the U.S. Small Business Administration, Office of Advocacy (Springfield, Va.: National Technical 

Information Service, 1985).
2 RFA guide for government agencies

requirement is that agencies will revise their decisionmaking processes to take account of 

small entity concerns in the same manner that agency decisionmaking processes were 

modified subsequent to the enactment of the National Environmental Policy Act 

(NEPA).3 The RFA then acts as a statutorily mandated analytical tool to further assist 

agencies in meeting the rational rulemaking standard set forth in the Administrative 

Procedure Act (APA), just as NEPA was intended to rationalize decisions concerning 

major federal actions that would affect the environment. 

The Small Business Regulatory Enforcement Fairness Act (SBREFA), enacted in March 

1996,4 amended the RFA and provided additional tools to aid small business in the fight 

for regulatory fairness. The amendments made by SBREFA include: 

• Judicial review of agency compliance with some of the RFA’s provisions. 

• Requirements for more detailed and substantive regulatory flexibility analyses.

• Expanded participation by small entities in the development of rules by the 

Occupational Safety and Health Administration (OSHA) and the Environmental 

Protection Agency (EPA). 

• Requirements that agencies prepare and publish guides to assist small entities in 

complying with final rules. 

Subsequently, several laws have been passed amending and strengthening SBREFA and 

the RFA:

• The Small Business and Work Opportunity Act of 2007 amended SBREFA to 

strengthen the requirement that agencies prepare compliance guides for any rule 

for which they must prepare a final regulatory flexibility analysis. Agencies are 

required to publish the guides not later than the effective date of the requirements, 

post them to websites, distribute them to industry contacts, and report annually to 

Congress.5

• The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

established the Consumer Financial Protection Bureau (CFPB) and required the 

CFPB to comply with the RFA Section 609 panel process, making it the third 

such agency, along with the Environmental Protection Agency and the 

Occupational Safety and Health Administration.6

 In addition to the regular 

requirements of the initial regulatory flexibility analysis (IRFA) found in 5 USC 

603, a CFPB IRFA must include “a description of (A) any projected increase in 

the cost of credit for small entities; (B) any significant alternatives to the proposed 

rule which accomplish the stated objectives of applicable statutes and which 

minimize any increase in the cost of credit for small entities; and (C) advice and 

 

3 See Associated Fisheries of Maine v. Daley, 127 F.3d 104, 114 (1st Cir. 1997) noting parallels between 

NEPA and the RFA.

4 Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. No. 104-121, 110 Stat. 857 

(codified at 5 U.S.C. § 601 et seq.).

5 Pub. Law 110-28 (May 27, 2007), Title 6, subtitle B, § 7005. 6

 Pub. Law 111-203 (July 21, 2010).
Introduction: The RFA and related law 3 

recommendations of representatives of small entities relating to issues described 

in subparagraphs (A) and (B) and subsection (b).”7

 When the CFPB produces a 

final regulatory flexibility analysis, it must include “a description of the steps the 

agency has taken to minimize any additional cost of credit for small entities.”

• The Small Business Jobs Act of 2010 amended several requirements in the final 

regulatory flexibility analysis (FRFA) section of the RFA.8

 (1) It struck the word 

“succinct” from the requirement for “a succinct statement of the need for, and 

objectives of, the rule.”9 (2) It replaced the word “summary” with the word 

“statement” twice in the requirement for “a summary of the significant issues 

raised by the public comments..., a summary of the assessment of the agency of 

such issues...,”10 and (3) it codified a requirement of Executive Order 1327211 by 

adding a paragraph requiring the FRFA to include “the response of the agency to 

any comments filed by the Chief Counsel for Advocacy of the Small Business 

Administration in response to the proposed rule, and a detailed statement of any 

change made to the proposed rule in the final rule as a result of the comments.”12

In addition to legislation strengthening the RFA, presidents have issued a number of 

executive orders laying out additional requirements. 

• Executive Order 13272, “Proper Consideration of Small Entities in Agency 

Rulemaking,” was signed August 13, 2002, and requires federal agencies to 

publish how they will comply with the statutory mandates of the RFA.13 The 

purpose of E.O. 13272 is to ensure that agencies work closely with Advocacy to 

address small business issues as early as possible in the regulatory process, 

particularly as they relate to disproportionate regulatory burden. The order sets 

out a series of responsibilities for both regulating agencies and the Office of 

Advocacy. 

 Agencies will establish policies on how to measure their impact on small 

entities and will work with Advocacy to establish those procedures. 

 The Office of Advocacy is instructed to train agencies on how to properly 

account for small entity impact when agencies draft regulations and to 

continue to work with agencies. 

 Agencies are to submit proposed rules with significant small entity effects to 

the Office of Advocacy prior to publication and are required to consider the 

Office of Advocacy’s comments on the rule.14 

 

7 Title X, § 1100G(b) of the Dodd-Frank Act amending 5 U.S.C. § 603(d)(1)-(2), §604(a)(6) and § 

609(d)(2). See Appendix A. 8 Pub. Law 111-240 (September 27, 2010). 9 Id., § 1601(1), amending 5 U.S.C. § 604(a)(1). 10 Id., § 1601(2), amending 5 U.S.C. § 604(a)(2). 11 See the full executive order in Appendix F. 12 Id., § 1601(3), amending 5 U.S.C. § 604(a)(3). 13 Exec. Order No. 13,272, 67 Fed. Reg. 53,461 (Aug. 13, 2002). 14 The Small Business Jobs Act, P.L.111-240, codified this requirement of E.O. 13272 in 5 U.S.C. § 

604(a)(3). See earlier discussion in the Introduction to this guide.
4 RFA guide for government agencies

 The Office of Advocacy is required to report annually to the Office of 

Management and Budget (OMB) on whether agencies are complying with this 

executive order.

• Executive Orders 13563 and 12866 lay out additional analytical requirements 

for agencies when promulgating rules pursuant to delegations from Congress and 

the overarching mandate of the APA.15 Both of these executive orders establish 

regulatory goals that can help agencies to which the executive orders apply16

understand the importance of conducting regulatory flexibility analyses. As 

Executive Order 13563 states: 

(b) This order is supplemental to and reaffirms the principles, structures, 

and definitions governing contemporary regulatory review that were 

established in Executive Order 1286617 of September 30, 1993. As stated 

in that Executive Order and to the extent permitted by law, each agency 

must, among other things: (1) propose or adopt a regulation only upon a 

reasoned determination that its benefits justify its costs (recognizing that 

some benefits and costs are difficult to quantify); (2) tailor its regulations 

to impose the least burden on society, consistent with obtaining regulatory 

objectives, taking into account, among other things, and to the extent 

practicable, the costs of cumulative regulations; (3) select, in choosing 

among alternative regulatory approaches, those approaches that maximize 

net benefits (including potential economic, environmental, public health 

and safety, and other advantages; distributive impacts; and equity); (4) to 

the extent feasible, specify performance objectives, rather than specifying 

the behavior or manner of compliance that regulated entities must adopt; 

and (5) identify and assess available alternatives to direct regulation, 

including providing economic incentives to encourage the desired 

behavior, such as user fees or marketable permits, or providing 

information upon which choices can be made by the public.18

 

In addition, Executive Order 12866 specifies 12 principles agencies should use 

when developing regulations. Of the 12, number 11 has particular relevance to the 

analysis of small business regulatory alternatives under the RFA: 

Concurrent with the issuance of E.O. 13563, President Obama also issued a 

memorandum titled “Regulatory Flexibility, Small Business, and Job Creation” 

on January 18, 2011. In the memorandum, the president reaffirmed E.O. 12866 

and reiterated the RFA’s provisions for providing regulatory flexibility. The 

 

15 Exec. Order No. 13,563 of January 18, 2011, reaffirms Exec. Order No. 12,866. Two other executive 

orders, 13,258 and 13,422, that had previously amended Exec. Order No. 12,866, were revoked by Exec. 

Order No. 13,497 of January 30, 2009.

16 Exec. Order No. 12,866 does not apply to independent regulatory commissions such as the Federal 

Election Commission, the Federal Communications Commission, and the Securities and Exchange 

Commission.

17 Exec. Order No. 12,866, 58 Fed. Reg. 51,735 (Sept. 30, 1993). 18 Exec. Order No. 13,563, 76 Fed. Reg. 3821 (January 21, 2011).
Introduction: The RFA and related law 5 

memorandum directs that “whenever an executive agency chooses, for reasons 

other than legal limitations, not to provide such flexibility in a proposed or final 

rule that is likely to have a significant economic impact on a substantial number 

of small entities, it should explicitly justify its decision not to do so in the 

explanation that accompanies that proposed or final rule.”19

 

• Executive Order 13579, “Regulation and Independent Regulatory Agencies,” 

signed by President Obama on July 11, 2011, reaffirms the directives of Executive 

Order 13563 and says that “to the extent permitted by law, independent agencies 

should comply with these provisions as well.”20 

All of these executive orders reinforce executive intent that agencies give serious 

attention to impacts on small entities and develop a comprehensive set of regulatory 

alternatives to reduce the regulatory burden on small entities.

The Office of Advocacy’s compliance guide should be utilized by regulatory agencies as 

a tool for following the requirements of the Regulatory Flexibility Act and related law 

and executive orders. This revised guide is the product of Advocacy’s decades of 

experience with the RFA and reflects the spirit of interagency cooperation, as well as the 

vital importance of small business to the economy. Advocacy hopes the guide will be a 

useful tool and welcomes comments on ways to improve its usefulness to regulatory 

agencies.

The guide includes how-to information on determining when the RFA applies to a 

proposed regulation, performing initial and final regulatory flexibility analyses, and 

meeting other RFA requirements, including periodic review of existing rules and small 

business compliance guides. Also included are a section on litigation so that agencies 

may learn how courts have ruled on RFA compliance and examples of actual agency

regulatory analyses. For more assistance, contact the Office of Advocacy at (202) 205-

6533, or one of the Advocacy contacts listed in Appendix M. 

 

19 This language mirrors the RFA language at 5 U.S.C. § 604 (a)(6) for final rules. 20 Exec. Order No. 13,579 § 1(c).
 Chapter 1: The first steps of RFA analysis 7

CHAPTER 1 WHERE DO WE BEGIN? FIRST STEPS OF RFA

ANALYSIS

We begin by briefly examining the general purpose of the Regulatory Flexibility Act and 

its overall requirements. The Regulatory Flexibility Act requires agencies to consider the 

impact of their rules on small entities.21 When the proposed regulation will impose a 

significant economic impact on a substantial number of small entities, the agency must 

evaluate alternatives that would accomplish the objectives of the rule without unduly 

burdening small entities. Inherent in the RFA is a desire to remove barriers to 

competition and encourage agencies to consider ways of tailoring regulations to the size 

of the regulated entities.22 

The RFA, like the National Environmental Policy Act, imposes analytical requirements 

on federal agencies. Both statutes require disclosure of effects and mechanisms to reduce 

adverse consequences and improve beneficial consequences.23 The RFA does not require 

that agencies necessarily minimize a rule’s impact on small entities if there are significant 

legal, policy, factual, or other reasons for not minimizing the impact. The RFA requires 

only that agencies determine, to the extent practicable, the rule’s economic impact on 

small entities and explore regulatory alternatives for reducing any significant economic 

impact on a substantial number of such entities. Once that process is finished, agencies 

must explain the reasons for their ultimate regulatory choices.

The goal of Congress in creating the RFA was to change the regulatory culture in 

agencies and mandate that they consider regulatory alternatives that still achieve statutory 

purposes, while minimizing the impacts on small entities. Regulatory flexibility analyses 

built into the regulatory development process at the earliest stages will help agency 

decisionmakers achieve regulatory goals with realistic, cost-effective, and less 

burdensome regulations. 

The following chart shows an overall picture of the RFA decisionmaking process. This 

chapter focuses on the first steps, highlighted in the chart. 

 

21 See this chapter’s section titled “What is the definition of a small entity?” 22 See generally, FINDINGS AND PURPOSES, SEC. 2(a)–(b). 23 Nothing in the RFA states that an economic impact must be adverse prior to performing an analysis.
8 RFA guide for government agencies

The RFA decision process

 

NO

YES

DEFINE THE PROBLEM 

AND DESCRIBE THE 

REGULATED ENTITIES 

BY SIZE AND NUMBER

ESTIMATE ECONOMIC 

IMPACTS BY SIZE 

CATEGORY

DETERMINE WHICH SIZE 

CATEGORIES INCUR

SIGNIFICANT IMPACTS

DO A SUBSTANTIAL NUMBER OF 

ENTITIES IN ANY SIZE 

CATEGORY INCUR SIGNIFICANT 

IMPACTS? 

CHAPTER 2—BEGIN 

INITIAL REGULATORY 

FLEXIBILITY 

ANALYSIS 

CERTIFY RULE AS 

REQUIRING NO FURTHER 

RFA ANALYSIS

DECISIONMAKERS OR 

REG. NEGOTIATING 

PANELS

DISCUSS

REG. ALTERNATIVES DISTRIBUTE A DRAFT 

INITIAL REGULATORY 

FLEXIBILITY ANALYSIS 

SELECTION OF A 

REGULATORY 

PROPOSAL

COMPLETE INITIAL 

REGULATORY

FLEXIBILITY ANALYSIS

PUBLISH PROPOSAL IN 

THE FEDERAL 

REGISTER

EXAMINE PUBLIC 

COMMENTS

CHAPTER 3—PREPARE 

FINAL REGULATORY

FLEXIBILITY ANALYSIS

MAKE FINAL RULE 

DECISIONS

PUBLISH FINAL RULE 

IN THE FEDERAL 

REGISTER
 Chapter 1: The first steps of RFA analysis 9

Does the RFA apply?

One of the first decisions to make is whether the Regulatory Flexibility Act applies to the 

particular regulation. The RFA applies to any rule subject to notice and comment 

rulemaking under section 553(b) of the Administrative Procedure Act (APA)24 or any 

other law. This includes any rule of general applicability governing federal grants to state 

and local governments, for which agency procedures provide opportunity for notice and 

comment. For instance, some agencies, such as the Rural Utilities Service, have their own 

administrative rules that require notice and comment even though the agency’s rules may 

be exempt from the APA notice and comment requirement.25 

RFA exemptions

Rules that are exempt from APA notice and comment requirements are also exempt from 

the RFA requirements when any of the following is involved: (1) a military or foreign 

affairs function of the United States, or (2) a matter relating to agency management or 

personnel or to public property, loans, grants, benefits, or contracts.26 In addition, except 

where notice or hearing is required by statute, the APA does not apply (1) to 

interpretative rules,27 general statements of policy, or rules of agency organization, 

procedure or practice; or (2) when the agency for good cause finds (and incorporates the 

finding and a brief statement of reasons therefor in the rules issued) that notice and public 

procedure thereon are impracticable, unnecessary, or contrary to the public interest.28

Under any of the circumstances described above, the RFA would not apply. 

Interpretative rules generally interpret the intent expressed by Congress. The easiest type 

of interpretative rule to recognize is one in which an agency does not insert its own 

judgments in implementing a rule, and simply regurgitates statutory language. One legal 

treatise on the subject says that interpretative rules are any rules that an agency issues 

without exercising delegated legislative power to make law through rules.29 The treatise 

goes on to state that the difference between legislative and interpretative rulemaking is 

the weight courts give the agency decisions on review.30 

In the case of legislative rules, agencies are given the authority to establish requirements 

not specifically mentioned in the authorizing statute that may be the basis for a rule. An 

example of this would be setting an ambient air quality standard or regulating in the 

public interest as set out in the Communications Act of 1934. See Whitman v. American 

 

24 5 U.S.C § 553(b); see also § 601(2). 25 The “other law” requirement includes situations where the agency binds itself by rule to act through 

rulemaking rather than by a procedure that does not require notice and comment. 26 Id .at § 553(a). There are statutes, such as the Competition in Contracting Act, the Federal Acquisition 

Streamlining Act, and the Federal Acquisition Reform Act, that mandate that changes to contracting rules 

be issued pursuant to notice and comment. 

27 The exception is certain Internal Revenue Service interpretative rules. See the discussion below. 28 Id. at § 553(b)(A). 29 K. Davis, Administrative Law Treatise, § 7:8 (1958). 30 Davis at §§ 7:8-7:13. 
10 RFA guide for government agencies

Trucking Associations for a discussion of what constitutes a standard governing 

delegation of legislative authority by Congress to the executive branch.31

The RFA presents its own exemptions as well. Section 601(2) states that the RFA does 

not apply to rules of particular applicability relating to rates, wages, corporate or 

financial structures, or reorganizations thereof, prices, facilities, appliances, services or 

allowances therefor, or to valuations, costs or accounting, or practices relating to such 

rates, wages, structures, appliances, services, or allowances.

32 The RFA’s definition of a 

rule is less inclusive than the definition of a rule under the Administrative Procedure Act, 

which defines a “rule” as “an agency statement of general or particular applicability.” 

The original draft of the APA limited the definition of rules to “statements of general 

applicability” or “having a general application to members of a broadly identifiable 

class.”33 This is contrasted with statements of “particular applicability” or applying “only 

to specific individuals or situations” or “named parties.”34 Therefore, the RFA applies to 

rules affecting the general public, as opposed to those that affect specific individuals.

RFA now applies to certain IRS interpretative rules

The Small Business Regulatory Enforcement Fairness Act amended the RFA to bring 

certain interpretative rulemakings of the Internal Revenue Service (IRS) within the scope 

of the RFA. The law now applies to those IRS rules published in the Federal Register 

(that would normally be exempt from the RFA as interpretative rules) that impose a 

“collection of information” requirement on small entities.35 Congress took care to define 

the term “collection of information” to be identical to the term used in the Paperwork 

Reduction Act, which means that a collection of information includes any reporting or 

recordkeeping requirement for more than nine people.36

 31 American Trucking Ass’ns v. EPA, 175 F.3d 1027, 1044 (D.C. Cir. 1999); Whitman v. American 

Trucking Ass’ns, 531 I/S/ 457 (2001). 32 5 U.S.C. § 601(2). 33 Bernard Schwartz, Administrative Law: A Casebook, at 255-262 (2d ed. 1984). 34 Id. 35 Id. at § 603(a). 36 Id. at § 601(7). 

(7) The term “collection of information”

(A) means the obtaining, causing to be obtained, soliciting, or requiring the disclosure to third 

parties or the public, of facts or opinions by or for an agency, regardless of form or format, calling 

for either—

(i) answers to identical questions posed to, or identical reporting or recordkeeping 

requirements imposed on, 10 or more persons, other than agencies, instrumentalities, or 

employees of the United States; or

(ii) answers to questions posed to agencies, instrumentalities, or employees of the United 

States which are to be used for general statistical purposes; and 

(B) shall not include a collection of information described under section 3518(c)(1) of title 44, 

United States Code. (8) The term "record-keeping requirement" means a requirement imposed by 

an agency on persons to maintain specified records.
 Chapter 1: The first steps of RFA analysis 11

The RFA threshold analysis: Can we certify?

After an agency begins regulatory development and determines that the RFA applies, it 

must decide whether to conduct a full regulatory flexibility analysis or to certify that the 

proposed rule will not “have a significant economic impact on a substantial number of 

small entities.”37 The record an agency builds to support a decision to certify is subject to 

judicial review.38

In order to certify a rule under the RFA, an agency should be able to answer the 

following types of questions:

• Which small entities will be affected?

• Have adequate economic data been obtained?

• What are the economic implications/impacts of the proposal or do the data reveal 

a significant economic impact on a substantial number of small entities?

If, after conducting an analysis for a proposed or final rule, an agency determines that a 

rule will not have a significant economic impact on a substantial number of small entities, 

section 605(b) provides that the head of the agency may so certify. The certification must 

include a statement providing the factual basis for this determination, and the 

certification shall be published in the Federal Register at the time the proposed or final 

rule is published for public comment. The agency is also required to provide such 

certification and statement to the SBA’s Chief Counsel for Advocacy.

39 A certification 

must include, at a minimum, a description of the affected entities and the impacts that 

clearly justify the “no impact” certification. The agency’s reasoning and assumptions 

underlying its certification should be explicit in order to obtain meaningful public 

comment and thus receive information that would be used to re-evaluate the certification. 

Clearly, an agency should identify the scope of the problem and the impact of the 

solution on affected entities before moving forward with a regulatory proposal. At times, 

despite a good-faith effort on the part of an agency to obtain data, an agency may still be 

uncertain about whether to certify. In those instances, an advance notice of proposed 

rulemaking (ANPRM) may be necessary to solicit data. As a final recourse, the agency 

should err on the side of caution and perform an initial regulatory flexibility analysis 

(IRFA) with the available data and information, and solicit comments from small entities 

regarding impact.40 Then, if appropriate, the agency can certify the final rule. If an 

 37 5 U.S.C. § 605(b). The decision to certify a rule parallels the finding of no significant impact under 

NEPA. As with a NEPA determination, the decision to certify, because it is subject to judicial review, 

should be based on a sound threshold analysis similar to the environmental assessment mandated in 

Council on Environmental Quality regulations to support a finding of no significant impact or laying the 

groundwork for a full environmental impact statement. 

38 Id. at § 611(a). 

39 There are circumstances where it may be appropriate to publish an IRFA for the proposed rule, and based 

on comments received, publish a certification for the first time in the final rule. See Chapter 3 of this guide 

for a detailed discussion of final regulatory flexibility analyses.

40 5 U.S.C. § 605(b). The Office of Advocacy would expect this situation to be rare because agency efforts 

to develop the rule should include a reasonable effort to explore all the effects of the rule, including the 
12 RFA guide for government agencies

agency lacks sufficient information to make a certification decision, the agency should 

engage in reasonable outreach efforts.41

Organizing the threshold report

Certification analysis discussed in this chapter does not require the depth of analysis 

necessary in an initial regulatory flexibility analysis,42 as discussed in Chapter 2 of this 

guide. Nevertheless, this “threshold” analysis can offer important insights into the nature 

of regulatory impacts. Although a study of alternatives is not required at this stage, it 

often leads to the skeleton of regulatory alternatives that can reduce or eliminate any 

disproportionate impacts on small entities. For this reason, Advocacy encourages 

certification analysis as early in the rule development process as possible.

Agency certifications of final rules are subject to judicial review43 and courts evaluate 

them by determining whether the statement of basis and purpose accompanying the rule 

identifies a “factual basis” to support the certification.44 A helpful threshold report will 

directly support the elements that must appear in the Federal Register Notice of Proposed 

Rulemaking preamble. The Office of Advocacy believes the threshold analysis should 

discuss the following items:45

1) Description of small entities affected

 A brief economic and technical statement on the regulated community, 

describing some of the following types of information:46

a) The diversity in size of regulated entities 

b) Revenues in each size grouping 

c) Profitability in each size grouping

2) Economic impacts on small entities

 A fair, first estimate of expected cost impacts, or a reasonable basis for 

assuming costs would be de minimis or insignificant within all economic or 

size groupings of the “small” regulated community 

 The rationale for the certification decision, based on the analysis presented

3) Significant economic impact criteria 

 The criteria used to examine whether first-estimate costs are significant

4) Substantial number criteria

 

effects on small entities. For more information on preparing an initial regulatory flexibility analysis, see 

Chapter 2.

41 Id. at § 609. Outreach is important to obtain information required by the RFA, to obtain relevant input 

from affected small entities. See Chapters 4 and 7 for a discussion of agency outreach to small entities. 42 An initial regulatory flexibility analysis (IRFA) is a document containing the agency’s data and analysis 

regarding the potential impact of the proposed rule. A detailed description of the requirements of an IRFA 

can be found in Chapter 2 of this guide. 43 5 U.S.C. § 611. 44 Id. at § 605(b). 45 For additional detail, see the certification checklist at the end of this chapter. 46 When an agency does not have quantitative data to support its certification, the agency should explain 

why such data are not available and request comments.
 Chapter 1: The first steps of RFA analysis 13

 The criteria used to examine whether the entities experiencing significant 

impacts constitute a substantial number of entities in any of the regulated size 

groupings 

5) Description of assumptions and uncertainties

 The sources of data used in the economic and technical analysis47

 The degree of uncertainty in the cost estimates, when uncertainty is large

6) Certification statement

“Factual basis” requirement for certification

What is a “factual basis”? The Office of Advocacy interprets the “factual basis” 

requirement to mean that, at a minimum, a certification should contain a description of 

the number of affected entities and the size of the economic impacts and why either the 

number of entities or the size of the impacts justifies the certification.

The agency’s reasoning and assumptions underlying its certification should be explicit in 

order to elicit public comment. Certifications of “no significant economic impact on a 

substantial number of small entities” have major legal implications for agencies. 

Consequently, certifications that simply state that the agency has found that the proposed 

or final rule will not have a significant economic impact on a substantial number of small 

entities are not sufficient under section 605(b).

The “more than just a few” standard for determining if a rule will have a significant

economic impact on a “substantial number of small entities” is a rigorous test for 

agencies to follow. However, the Office of Advocacy encourages a conservative 

approach.48 In other words, if an agency has set its standard for determining “substantial 

number” too high, the certification may give rise to court challenges that could have been 

avoidable.

49

Prior to the enactment of the SBREFA amendments in 1996, the RFA required only that a 

certification be supported by a “succinct statement explaining the reasons for the 

 47 Section 607 of the RFA directs agencies to provide a “quantifiable or numerical description of the effects 

of the proposed rule or alternatives to the proposed rule” and allows a qualitative approach if 

“quantification is not practical or reliable.” Thus, agencies are expected to make reasonable efforts to 

acquire quantitative or other information to support analysis of the rules under sections 603 and 604 of the 

RFA. Such a standard is not required for section 605 certifications, but some agencies use section 607 as a 

model for preparing certifications. With regard to certification analyses, EPA advises its rulewriters that 

“where the information necessary to conduct a quantitative analysis is not reasonably available, it may be 

appropriate to certify the rule based on the qualitative assessment alone.” Regulatory Management 

Division, EPA Office of Policy, EPA’s Action Development Process: Final Guidance for EPA Rulewriters: 

Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act

(November 2006), p. 20. 48 Five small firms in an industry with more than 1,000 small firms is not likely to be interpreted as a 

“substantial number”; on the other hand, the same five small firms in an industry with only 20 firms would 

be a substantial number. See the discussion of the definitions of “significant” and “substantial” later in this 

chapter.

49 See Chapter 5 of this guide for information on what the courts have held in these types of cases.
14 RFA guide for government agencies

certification,”50 and since such statements were not subject to judicial review, even as 

part of the record on review, agencies could avoid substantive explanations by using 

boilerplate certifications. The amended version of the RFA now requires that 

certifications be supported by a “statement of factual basis.” In amending the RFA, 

Congress intended that agencies should do more than provide boilerplate and 

unsubstantiated statements to support their RFA certifications. Courts will overturn an 

agency’s final certification if it is not adequate.51

What is the definition of a small entity?

The definition of “small entity” is important because it is the starting point for 

determining the degree of impact a regulation will have on small entities. Three types of 

small entities are defined in the RFA: 52

Small business. Section 601(3) of the RFA defines a “small business” as having the 

same meaning as “small business concern” under section 3 of the Small Business Act. 

This includes any firm that is “independently owned and operated” and is “not dominant 

in its field of operation.”53 The Small Business Administration (SBA) has developed size 

standards to carry out the purposes of the Small Business Act and those size standards 

can be found in 13 C.F.R., section 121.201. The Small Business Act prohibits an agency 

from adopting a different definition of small business when promulgating regulations to 

carry out a delegation of authority from Congress unless the agency follows the 

procedures set forth in SBA’s regulations.54 In addition, an agency may feel that the 

classification used by the Administrator for a particular sector is inappropriate in doing 

the analysis required by the RFA. The agency is then authorized to use a different 

definition, solely for purposes of complying with the RFA, after consultation with the 

Chief Counsel. That consultation does not obviate the need for the agency to comply with 

section 3 of the Small Business Act should the agency be interested in promulgating a 

regulation that utilizes a different definition of small business than that developed by the 

Administrator.55

Small organization. Section 601(4) defines a small organization as any not-for-profit 

enterprise that is independently owned and operated and not dominant in its field (for 

example, private hospitals and educational institutions). Agencies may develop one or 

more alternative definitions of “small organization” for purposes of this chapter, provided 

that they: (1) give an opportunity for public comment and (2) publish the final definition 

in the Federal Register. However, an agency that decides a different definition is 

appropriate for purposes of complying with the RFA is required to follow the procedures 

set forth in section 601(4).

 50 See Lehigh Valley Farmers, Inc., v. Block, 640 F. Supp. (E.D. Pa. 1986), aff’d on other grounds, 828 

F.2d.

51 See North Carolina Fisheries Association v. Daley, 27 F. Supp. 2d 650 (E.D. Va. 1998). 52 Appendix D lists data sources that may be helpful in drawing distinctions between large and small 

entities.

53 15 U.S.C. § 632. 54 13 C.F.R. § 121.902(b). 55 Northwest Mining Ass’n v. Babbitt, 5 F. Supp. 2d 9 (D.D.C. 1998).
 Chapter 1: The first steps of RFA analysis 15

Small governmental jurisdiction. Section 601(5) defines small governmental 

jurisdictions as governments of cities, counties, towns, townships, villages, school 

districts, or special districts with a population of less than 50,000. Agencies may develop 

one or more alternative definitions for this term provided that they: (1) give opportunity 

for public comment, (2) base definitions on factors such as low population density and 

limited revenues, and (3) publish final definitions in the Federal Register. The alternative 

definition developed under this section applies only to the agency’s compliance with the 

RFA. The agency may develop different size standards for small governmental 

jurisdictions in the development of its regulations. Any agency size standard 

determination that differs from the SBA’s size standard is subject to judicial review.56

Changing a size standard

It is important to draw a distinction when it comes to determining appropriate size 

standards. If an agency chooses to change a size standard after a determination that 

SBA’s size standard is inadequate, the agency must either consult with the Office of 

Advocacy or seek approval of SBA’s Administrator, depending on the circumstances. 

For RFA analysis purposes, if an agency wants to use a different size standard, the 

agency can do so only after consultation with the Office of Advocacy and after an 

opportunity for public comment. In addition, that new size standard must be published in 

the Federal Register.

On the other hand, if an agency seeks to change the definition of a small business for 

rulemaking purposes, that is, for purposes of determining how to apply a regulation to a 

business of a certain size, the agency must seek approval from the SBA’s 

Administrator.57

Assessing the impact on small entities 

Determining a rule’s impact on small entities is an important part of the rulemaking 

process. The RFA requires agencies to conduct sufficient analyses to measure and 

consider the regulatory impacts of the rule to determine whether there will be a 

significant economic impact on a substantial number of small entities. No single 

definition can apply to all rules, given the dynamics of the economy and changes that are 

constantly occurring in the structure of small-entity sectors.

Every rule is different. The level, scope, and complexity of analysis may vary 

significantly depending on the characteristics and composition of the industry or small-

 56 5 U.S.C. § 611(a); see also Chapter 5 of this guide for a discussion of how the courts have handled this 

issue.

57 Section 3(a)(2)(C)(i)-(ii) of the Small Business Act and SBA’s regulations found in 13 CFR 121.902(b)

essentially outline the information an agency needs to submit in order for SBA’s Administrator to approve 

a new size standard, as well as when in the rulemaking process an agency needs to obtain that approval. 
16 RFA guide for government agencies

entity sectors to be regulated. This is why it is important that agencies make every effort 

to conduct a sufficient and meaningful analysis when promulgating rules. The preparation 

of the required analysis calls for due diligence, knowledge of the regulated small entity 

community, sound economic and technical analysis, and good professional judgment.58

One of the first steps in the analytical process includes understanding the nature and 

economics of the industry/entities being regulated, and identifying how much each sector 

is contributing to the problem the agency is trying to address and mitigate. A goal of the 

entire APA/RFA process is to give the public a complete understanding of what the 

agency is doing. Small businesses cannot provide informed comments if the agency fails 

to identify the rule as one that will have a significant impact on a substantial number of 

small businesses. In turn, informed comments provide useful tools for the agency to 

construct the least burdensome, most effective regulations. 

Because almost every industrial category will have more small than large businesses,59

determining the impact on small businesses plays a key role in compliance with the RFA. 

In turn, to the extent that the costs of compliance are sufficiently significant that some 

entities will be unable to comply, the agency’s selected regulatory solution probably will 

not achieve its statutory goal. Thus the analytical requirements, including the decision to 

certify, play a key role in the agency meeting its overall requirement of rational 

rulemaking, i.e., that the solution selected by the agency will achieve the agency’s

objectives.

As discussed in the previous section defining a small entity, it is important that agencies 

also examine the impact of their proposed regulations on small governmental 

jurisdictions. There are tens of thousands of these small jurisdictions throughout the 

United States that fall under the RFA’s threshold of a population of less than 50,000. The 

growing demand for government services has far exceeded the financial capacities of 

many local governments, particularly the smallest ones, to provide those services while 

maintaining long-term fiscal viability. Costly federal regulations, both new and existing, 

often exacerbate an already difficult situation for many small communities. Like small 

businesses, small communities face economic challenges, lack the economies of scale,

and in most cases have fewer technical and financial options available to them. All of 

these factors increase a small jurisdiction’s cost to undertake and complete mandated 

regulatory initiatives. 

Which segment of the economy or industry will be regulated?

To know whether a regulatory proposal affects a substantial number of small entities, the 

regulator must first know how many regulated entities exist and which are small. In 

examining this, the analyst best serves the process by identifying each group of regulated 

entities with similar economic and industrial characteristics. Each group constitutes its 

 58 See OMB’s government-wide information guidelines, 67 Fed. Reg. 8452 (Feb. 22, 2002). These 

guidelines were issued under authority contained in the Information Quality Act, Pub. L. 106-554.

59 This does not mean that small businesses dominate that sector of the market; for example, in 

telecommunications, although there are many small businesses, a handful of large regional telephone 

companies still dominate the market.
 Chapter 1: The first steps of RFA analysis 17

own universe of regulated small entities that the proposal may influence significantly. If 

the regulated community is segmented properly, the members of each group will have 

similar economic characteristics, and an examination of a typical entity or use of the 

group’s mean characteristics will normally allow very rapid economic analysis for the 

group. This approach allows identification of those groups covered by the RFA.

Congress enacted the Small Business Regulatory Enforcement Fairness Act to achieve 

“fundamental changes . . . needed in the regulatory and enforcement culture of Federal 

agencies to make agencies more responsive to small business . . . without compromising 

the statutory missions of the agencies.”60 Thus, to meet the basic SBREFA goal, analysts 

will routinely want to economically segment industrial sectors into several appropriate 

size categories smaller than the Small Business Act section 3 definition. Only by so doing 

will the analyst accurately identify and analyze those entities covered by the RFA where 

there is a large disparity in economic and industrial characteristics within the single 

category of small entities.

61 Consider the following example of how the SBA definition 

of a small business may not adequately address the nuances that exist within the universe 

of affected small entities: 

SBA established a size standard for the drinking water supply industry at $5 

million in revenues, equating approximately to a city serving 30,000 people. EPA 

has proposed an alternative definition—a small water supply would serve no more 

than 10,000 people. Such a system generates somewhat less than a million dollars 

in annual revenue. However, EPA does not stop by looking only at the supply 

serving 10,000 people. It also examines sub-populations of the water supply 

industry serving fewer than 100 people, 101-500 people, 501-3,300 and 3,300-

10,000. Water supplies in the smallest size category generate revenues less than 

one-tenth that of those in the 10,000-25,000 size category. More significantly, 90 

percent of regulated water supplies serve fewer than 500 people, and on average, 

water supplies in those two size categories have net losses, costs being spread to 

other municipal revenue streams. EPA typically examines each of these small 

water supply size categories and, in keeping with the Regulatory Flexibility Act, 

has proposed different “available treatment technologies” for each water supply 

size, reflecting the wide range in economic viability within the industry. Each of 

the size categories below the “small water supply” size cut-off stands as its own 

universe of economically similar regulated entities. EPA recognized the 

regulatory significance of this and incorporated it into its analysis.62

Agencies should identify and examine various economically similar small regulated 

entities so that they will have a baseline from which to determine whether a significant 

regulatory cost will have an impact on a substantial number of small entities. An 

 60 SBREFA § 202(3). 61 Conversely, if all small entities are equally affected by the proposed regulation, subcategorization is not 

required.

62 For a full discussion of this issue, see EPA’s National Primary Drinking Water Regulations; Arsenic 

Clarifications to Compliance and New Source Contaminants Monitoring, 66 Fed. Reg. 6976, 6987 (Jan. 22, 

2001).
18 RFA guide for government agencies

understanding of the differences in economic impacts across the various regulated 

communities often generates different regulatory alternatives. A sound analysis requires

that agencies examine the various subsectors of the regulated community, the differences 

among them, and additional appropriate regulatory alternatives that can achieve the 

statutory mission while mitigating unnecessary economic impacts on small entities.

How to categorize small entity sectors

The agency’s first step in a threshold analysis consists of identifying the industry, 

governmental and nonprofit sectors they intend to regulate. Using the North American 

Industry Classification System (NAICS) classifications, SBA defines small businesses in 

terms of firm revenues or employees.63 Different criteria may be helpful to agencies in 

assessing the composition of a small entity sector. The IRS categorizes firm (corporation 

and partnership) size by assets. Industry associations apply some or all of these three 

criteria (revenues, employment, and/or assets) and often add to or replace them with their 

own technical criteria. In addition to SBA definitions, federal regulators may use any one 

or multiple criteria to identify their universes of small regulated entities.64

Determination of “significant impact”

The agency’s second step in a threshold analysis is to determine whether there is a 

significant economic impact on a substantial number of small entities. The RFA does not 

define “significant” or “substantial.” In the absence of statutory specificity, what is 

“significant” will vary depending on the economics of the industry or sector to be 

regulated. The agency is in the best position to gauge the small entity impacts of its 

regulations. 

Significance should not be viewed in absolute terms, but should be seen as relative to the 

size of the business, the size of the competitor’s business, and the impact the regulation 

has on larger competitors. For example, a regulation may be significant solely because 

the disparity in impact on small entities may make it more difficult for them to compete 

in a particular sector of the economy than large businesses. This may relate to their ability 

to pass costs through to customers or to reduce the marginal cost of such a regulation to 

an insignificant element of their production functions. 

One measure for determining economic impact is the percentage of revenue or percentage 

of gross revenues affected. For example, if the cost of implementing a particular rule 

represents 3 percent of the profits in a particular sector of the economy and the profit 

margin in that industry is 2 percent of gross revenues (an economic structure that occurs 

in the food marketing industry, where profits are often less than 2 percent), the 

 63 Effective January 1, 1997, the federal government, for statistical purposes, replaced the Standard 

Industrial Classification (SIC) system with NAICS. For purposes of small business size standards, SBA 

adopted the NAICS definitions for all industries effective October 1, 2000. NAICS made changes to the 

descriptions of many industry structures.

64 The SBA definitions here are found in § 3(a)(2) of the Small Business Act and are not the RFA 

definitions referenced above. See http://www.sba.gov/category/navigationstructure/contracting/contracting-officials/eligibility-size-standards.
 Chapter 1: The first steps of RFA analysis 19

implementation of the proposal would drive many businesses out of business (all except 

the ones that beat a 3 percent profit margin). That would be a significant economic 

impact. 

However, the economic impact does not have to completely erase profit margins to be 

significant. For example, the implementation of a rule might reduce the ability of the firm 

to make future capital investment, thereby severely harming its competitive ability, 

particularly against larger firms. This scenario may occur in the telecommunications 

industry, where a regulatory regime that harms the ability of small companies to invest in 

needed capital will not put them out of business immediately, but over time may make it 

impossible for them to compete against companies with significantly larger 

capitalizations. The impact of that rule would then be significant for smaller 

telecommunications companies.

Other measures may be used; to illustrate, the impact could be significant if the cost of 

the proposed regulation (a) eliminates more than 10 percent of the businesses’ profits; (b) 

exceeds 1 percent of the gross revenues of the entities in a particular sector or (c) exceeds 

5 percent of the labor costs of the entities in the sector. 

Some agencies have already developed criteria for determining whether a particular 

economic impact is significant. Standards must be flexible enough to work for the 

individual agency. The following examples are meant to be illustrative of different types 

of criteria that may be used. They are not meant to imply a standard, acceptable formula. 

Advocacy welcomes input from other agencies on their standards. 

• The Department of Health and Human Services (HHS) has determined that a rule 

is significant if it would reduce revenues or raise costs of any class of affected 

entities by more than 3 to 5 percent within five years. This approach may work 

well for an agency, depending upon the circumstances. It becomes complex, 

however, in the attempt to apply a simple rule fairly to varied industries and 

regulatory schemes. A 2 percent reduction in revenues in one industrial category 

would be significant if the industry’s profits are only 3 percent of revenues. More 

than 60 percent of small businesses do not claim a profit and do not pay taxes; 

therefore, an agency would not be able to apply a profit-based criterion to these 

firms.

• The EPA has prepared extensive guidance for its rulewriters concerning 

“significant economic impact” and “substantial number.” With respect to small 

businesses, the agency advises that the offices compare the annualized costs as a 

percentage of sales (“sales test”) to examine significant economic effect. For the 

same purpose, it also discusses alternative uses of a cash flow test and a profits 

test.65

 65 U.S. Environmental Protection Agency, Office of Policy, Regulatory Management Division, EPA’s 

Action Development Process: Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended 

by the Small Business Regulatory Enforcement Fairness Act (November 2006), section 2.6.2, available at 

http://www.epa.gov/rfa/documents/Guidance-RegFlexAct.pdf.
20 RFA guide for government agencies

Legislative history of “significant economic impact.” The absence of a particularized 

definition of either “significant” or “substantial” does not mean that Congress left the 

terms completely ambiguous or open to unreasonable interpretations. Thus, the Office of 

Advocacy relies on legislative history for general guidance in defining these terms.66

With regard to the term “significant economic impact,” Congress said:

The term ‘significant economic impact’ is, of necessity, not an exact standard. 

Because of the diversity of both the community of small entities and of rules 

themselves, any more precise definition is virtually impossible and may be 

counterproductive. Any more specific definition would require preliminary work 

to determine whether the regulatory analysis must be prepared.67

Congress also stated that,

Agencies should not give a narrow reading to what constitutes a “significant 

economic impact”...a determination of significant economic effect is not limited 

to easily quantifiable costs.68

Congress has identified several examples of “significant impact”: a rule that provides a 

strong disincentive to seek capital;69 175 staff hours per year for recordkeeping;70

impacts greater than the $500 fine (in 1980 dollars) imposed for noncompliance;71 new 

capital requirements beyond the reach of the entity;72 and any impact less cost-efficient 

than another reasonable regulatory alternative.73 Note that even below these thresholds, 

impacts may be significant. Other, more specific examples are contained in the House of 

Representatives Report on the RFA.74

 66 Admittedly, throughout this guide, references are made to “adverse” impacts and efforts to “mitigate” 

impacts. This, after all, is the primary concern of the law. Legislative history, however, makes it clear that 

Congress intended that regulatory flexibility analyses also address “beneficial” impacts. Therefore, an 

agency cannot certify a proposed rule if the economic impact will be significant but positive. If an agency 

so finds, it should conduct a regulatory flexibility analysis to determine if alternatives can enhance the 

economic benefits flowing to small entities. See discussion in this chapter on adverse versus beneficial 

impacts.

67 126 Cong. Rec. S10,942 (Aug. 6, 1980). 68 Id. at S10,940. 69 Id. at S10,938. 70 Id. 71 126 Cong. Rec. H24,578 (Sept. 8, 1980). 72 Id. at H24,593. 73 Id. at H24,595. 74 “A gas station owner spent 600 hours last year filling out just his federal reporting forms. An Idaho 

businessman paid a $500 fine [in 1980 dollars] rather than fill out a federal form which was 63 feet long. A 

New Hampshire radio station paid $26.23 in postage to mail its license renewal back to Washington. A 

dairy plant licensed by 250 local governments, 3 states, and 20 agencies had 47 inspections in one month. 

A butcher had one Federal agency tell him to put a grated floor in his shop one month and then the next 

month was told by another federal agency he could not have a grated floor. A company was forced out of 

the toy business because one of its main products was inadvertently placed on a federal ban list. An Oregon 

company with three small shops received Federal forms weighing 45 pounds.” 126 Cong. Rec. H8,467 

(Sept. 8, 1980).
 Chapter 1: The first steps of RFA analysis 21

Determination of “substantial number”

The next step is to determine whether it is a substantial number of small entities for 

whom the rule has a significant economic impact. In this instance, the number may be a 

ratio or it may be a whole number. In some instances, a very small number of small

businesses who would experience a significant economic impact can represent the entire 

universe of affected small businesses. However, if a very small number of small 

businesses represents a small fraction of the universe of affected small businesses, the

agency can conclude that the number is not substantial.

For example, suppose a rule is expected to affect 20 small entities in a given category. 

The agency must determine, as best it can, how extensive the economic impact will be on 

those small entities. Suppose further that the agency can conclude that for five of these 

small entities, the impact will be significant. Is five a “substantial number” of the small 

entities affected? When a rule will have a significant economic impact on 25 percent of 

the small entities affected, this would be considered a substantial number.

Legislative history of “substantial number.” Legislative history also says that the term 

“substantial” is intended to mean a substantial number of entities within a particular 

economic or other activity. 75 The intent of the RFA, therefore, was not to require that 

agencies find that a large number of the entire universe of small entities would be 

affected by a rule. Quantification of “substantial” may be industry- or rule-specific. 

However, it is very important that agencies use the broadest category, “more than just a 

few,” when initially reviewing a regulation before making the decision to certify or do an 

initial regulatory flexibility analysis. The goal at this stage of the process is to ensure that 

the broadest possible impacts are fully considered. 

“Substantial number” depends on the number of regulated entities and the size of the 

regulated industry. The interpretation of the term “substantial number” is not likely to be 

five small firms in an industry with more than 1,000 small firms. On the other hand, it is 

important to recognize that five small firms in an industry with only 20 small firms would 

be a substantial number. Depending on the rule, the substantiality of the number of small 

businesses affected should be determined on an industry-specific basis and/or on the 

number of small businesses overall. For example, the Internal Revenue Service, when 

changing the tax deposit rules, would examine the entire universe of small businesses to 

see how many would be affected. On the other hand, a change by the Food and Drug 

Administration in the regulation of meat irradiators might affect only 15 firms, but that 

would be the entire industry.

As EPA explains in its guidance, “analysts should examine both the total number and 

percentage of regulated small entities experiencing significant economic impacts when 

determining whether a ‘substantial number’ of small entities may be significantly 

affected.” 76 In its guidance, EPA provides a matrix of different combinations of 

“significant economic impact” in terms of annual costs/sales and “substantial number”

 75 126 Cong. Rec. S10,938 (Aug. 8, 1980) (Section-by-Section Analysis of the Regulatory Flexibility Act). 76 2006 EPA Final Guidance, section 2.7.2.
22 RFA guide for government agencies

for its certification decision. The larger the economic impacts, the smaller the substantial 

number that would eliminate the basis for a certification of no impact.77 For example, for 

a group of 100-999 affected small entities, EPA presumes no significant effect on a 

substantial number, where the costs/sales are 1 percent or greater for one or more of the 

affected small entities and the percent of small entities experiencing a given impact is less 

than 20 percent of all regulated small entities. However, if the costs/sales were 3 percent

or greater, the presumption would no longer apply where the percentage was less than 20

percent of all regulated entities, for the same number of regulated entities.

In calculating the percentage of small entities significantly regulated within a regulated 

industry for the purpose of making the certification determination, the agency should be 

careful to count in the denominator only the firms that are regulated by the rule. For 

example, a regulation of firms with concentrated animal feeding operations (CAFOs) 

should count only the farms with CAFO operations, and not all farms, when calculating 

the percentage of CAFOs with a given economic impact. If all farms are included in the 

denominator rather than all CAFOs, heavy regulation of a segment of the CAFOs would 

be much less likely to exceed a 1 percent or 3 percent cost/sales ratio. Thus the impact 

would be underestimated. This is a common mistake by agencies using percentage tests.

EPA further explains that analysts should aggregate the impacts of entities of the same 

type (such as small businesses or small governments) in making this determination. In 

addition, EPA explains where the rule applies to more than one type of small entity, the 

impacts should be analyzed separately for each type of entity, using an economic measure 

appropriate to each type of entity.78

Direct versus indirect impact 

The courts have held that the RFA requires an agency to perform a regulatory flexibility 

analysis of small entity impacts only when a rule directly regulates small entities. 

The primary case on the issue of direct versus indirect impacts for RFA purposes is MidTex Electric Cooperative, Inc., v. FERC (Mid-Tex).79 In Mid-Tex, the Federal Energy 

Regulatory Commission (FERC) was proposing regulations affecting how generating 

utilities included construction work in progress in their rates. Generating utilities were 

large businesses, but their customers included numerous small entities, such as electric 

cooperatives. FERC authorized large electric utilities to pass these costs through to their 

transmitting and retail utility customers. This increased the cost to the transmitting 

utilities, which may or may not have been able (because of regulation by their rates 

commissions) to pass the costs on to their residential and business customers. These 

smaller utilities challenged the rule, asserting that the impact on them should have been 

considered. The court concluded that an agency may certify the rule pursuant to section

605(b) when it determines that the rule will not have a direct impact on small entities.80

 77 2006 EPA Final Guidance, section 2.7.1, table 2. 78 2006 EPA Final Guidance, section 2.7.3.2. 79 Mid-Tex Elec. Coop v. FERC, 773 F.2d 327 (D.C. Cir. 1985). 80 Id. at 342.
 Chapter 1: The first steps of RFA analysis 23

The U.S. Court of Appeals for the District of Columbia applied the holding of the MidTex case in American Trucking Associations, Inc., v. EPA81 (hereafter ATA). In the ATA

case, EPA established a primary national ambient air quality standard (NAAQS) for 

ozone. The basis of the EPA’s certification was that the NAAQS regulated small entities 

indirectly through state implementation plans. The plans impose requirements on the 

small entities, whereas states are required to take action to attain compliance with the 

NAAQS standards. The court found that since the states, not EPA, had the direct 

authority to impose the burden on small entities, EPA’s regulation did not have a direct 

impact on small entities. 

Although it is not required by the RFA, the Office of Advocacy believes that it is good 

public policy for the agency to perform a regulatory flexibility analysis even when the 

impacts of its regulation are indirect. An agency should examine the reasonably 

foreseeable effects on small entities that purchase products or services from, sell products 

or services to, or otherwise conduct business with entities directly regulated by the rule. 

In the case of the NAAQS standard at issue in ATA, EPA had to estimate the impacts of 

the proposed rules on small entities in order to comply with the mandate of E.O. 12866. 

Therefore, the agency could have examined alternatives that would have been less 

burdensome on small entities (and is required to under the E.O. 12866). If an agency can 

accomplish its statutory mission in a more cost-effective manner, the Office of Advocacy 

believes that it is good public policy to do so. The only way an agency can determine this 

is if it does not certify regulations that it knows will have a significant impact on small 

entities, even if the small entities are regulated by a delegation of authority from the 

federal agency to some other governing body.82

Adverse versus beneficial impact

Congress considered the term “significant” to be neutral with respect to whether the 

impact is beneficial or harmful to small businesses. Therefore, agencies need to consider 

both beneficial and adverse impacts in an analysis. The RFA legislative history has 

explicit insights into congressional intent with respect to beneficial impacts:

Agencies may undertake initiatives which would directly benefit such small 

entities. Thus, the term ‘significant economic impact’ is neutral with respect to 

whether such impact is beneficial or adverse. The statute is designed not only to 

avoid harm to small entities but also to promote the growth and well-being of 

such entities.83

Moreover, early drafts of the RFA used the term “significant adverse” impact, but the 

final bill used only the term “significant impact.”84

 81American Trucking Ass’ns v. EPA, 175 F.3d 1027, 1044 (D.C. Cir. 1999), aff’d in part and rev’d in part 

on other grounds, Whitman v. American Trucking Ass’ns, 531 I/S/ 457 (2001). 82 See Chapter 5 of this guide for a more detailed discussion of the direct versus indirect impact issue. 83 126 Cong. Rec. H8,468 (daily ed. Sept. 8, 1980). 84 See an early draft of the RFA, S2147, 1st Sess. (1979).
24 RFA guide for government agencies

Courts have applied definitions for “significant impact” in cases involving other statutes. 

For example, in a case involving the National Environmental Policy Act (NEPA), 

Friends of Fiery Gizzard v. Farmers Home Administration,85 the court held that a full 

environmental impact statement (EIS) does not need to be prepared if the only impact of 

the project will be beneficial. However, the court acknowledged that when both negative 

and beneficial effects are present, an EIS must be prepared even if the agency feels that 

the beneficial effects outweigh the negative ones.86 (This case does not say that beneficial 

impacts should not be considered for the preliminary assessment, nor does it say that 

beneficial impacts are never a factor.) Earlier cases interpreting NEPA held that 

beneficial impacts should be a consideration in the rulemaking process.87

Several agencies have taken issue with the Office of Advocacy’s interpretation of 

significant economic impact. However, the Office of Advocacy believes that its 

interpretation is consistent with the legislative history and overall purposes of the RFA. 

The Office of Advocacy does not dispute that the RFA intends for agencies to “minimize 

the significant economic impact.”88 However, the Office of Advocacy’s interpretation 

does not necessarily mean that agencies should minimize beneficial impacts—that 

certainly would be contrary to the purposes of the RFA. Instead, Advocacy believes that 

it is often possible to analyze beneficial impacts with minimal effort and without 

necessarily triggering the need for an IRFA. Moreover, analyzing beneficial impacts 

lends credibility to the alternatives selected by the agency. 

Once the certification decision is made, the agency must notify the Office of Advocacy 

and publish its certification in the Federal Register. It is good regulatory practice to get 

the notice to Advocacy as soon as possible. It has been useful to the agency to share a 

draft certification statement with Advocacy for confidential feedback on the adequacy of 

the statement. At a minimum, the notification should come at the same time as 

publication. Publication of a proposal alone can work for most certified regulations, but 

there will always be those proposals for which solid community comments in advance 

can be vitally important (e.g., through an advance notice of proposed rulemaking). 

What adequate and inadequate certifications look like 

Refer to the certification checklist at the end of this chapter for a review of the elements 

of a certification that meets all requirements.

 85 Friends of Fiery Gizzard v. Farmers Home Admin., 61 F.3d 501, 505 (6th Cir. 1995). 86 Id. at 505. 87 See Hiram Clarke Civic Club v. Lynn, 476 F.2d 421, 426-27 (5th Cir. 1973), (Considering only negative 

impacts “raises serious questions about the adequacy of the investigatory basis underlying the HUD 

decision not to file an EIS.”); Environmental Defense Fund v. Marsh, 651 F.2d 983, 993 (5th Cir. 1981), 

stating “[A] beneficial impact must nevertheless be discussed in an EIS, so long as it’s significant. NEPA is 

concerned with all significant environmental effects, not merely adverse ones.” 88 5 U.S.C. Chapter 6, Congressional Findings and Declaration of Purpose.
 Chapter 1: The first steps of RFA analysis 25

An example of an adequate certification

The following example of an adequate certification by the U.S. Small Business 

Administration is from the proposed rule on small business investment companies. 

When an agency issues a rulemaking proposal, the Regulatory Flexibility Act 

(RFA) requires the agency to “prepare and make available for public comment an 

initial regulatory flexibility analysis” which will “describe the impact of the 

proposed rule on small entities.” (5 U.S.C. §. 603(a)). Section 605 of the RFA 

allows an agency to certify a rule, in lieu of preparing an analysis, if the proposed

rulemaking is not expected to have a significant economic impact on a substantial 

number of small entities.

This proposed rule directly affects all SBICs, of which there are currently 432. 

SBA estimates that approximately 75 percent of these SBICs are small entities. 

Therefore, SBA has determined that this proposed rule will have an impact on a 

substantial number of small entities.

However, SBA has determined that the impact on entities affected by the 

proposed rule will not be significant. The effect of the proposed rule will be to 

allow SBICs the flexibility to choose the optimal structure for their investments 

without having to notify or seek approval from SBA. SBA expects the impact of 

the proposed rule will be a reduction in the paperwork burden for SBICs. SBA 

asserts that the economic impact of the reduction in paperwork, if any, will be 

minimal and entirely beneficial to small SBICs. Accordingly, the Administrator of 

the SBA hereby certifies that this rule will not have a significant economic impact 

on a substantial number of small entities. SBA invites comment from members of 

the public who believe there will be a significant impact either on SBICs, or on 

companies that receive funding from SBICs.89

Examples of inadequate certifications

Following are examples of inadequate certifications that were effectively challenged and 

refuted through formal comments to the agency or through the courts.90

Shark Protection. Southern Offshore Fishing Association v. Daley91 offers a landmark 

legal decision recognizing the failure of an agency to adequately examine the market to 

determine whether there was a significant impact on a substantial number of small 

entities. On December 20, 1996, the National Marine Fisheries Service (NMFS), National 

Oceanic and Atmospheric Administration (NOAA) published the proposed rule for the 

 89 67 Fed. Reg. 35,055, at 35,056 (May 17, 2002). Note that although this certification addressed beneficial 

impacts, the agency acknowledged that even those impacts would be minimal and therefore correctly 

certified the rule.

90 For another example of an improper certification, see Chapter 5 under the discussion of North Carolina 

Fisheries v. Daley.

91 Southern Offshore Fishing Ass’n v. Daley, 995 F. Supp. 1411 (M.S. Fla. 1998). 
26 RFA guide for government agencies

Atlantic Shark Fisheries: Quotas, Bag Limits, Prohibitions, and Requirements.92 The 

proposed rule, among other things, reduced the commercial quotas for sharks by 50 

percent. NMFS prepared a certification in lieu of an IRFA for the proposal. As the basis 

for the certification NMFS stated, in part:

Reducing the commercial quota is not expected to have a significant impact on a 

substantial number of small entities primarily because of the large degree of 

diversification in fishing operations that exist in the fleet and the already short 

shark fishing season, as outlined in the Regulatory Impact Review.

Advocacy submitted comments asserting that the certification was inappropriate. In its 

comments, Advocacy pointed out that under NMFS’s own criteria for assessing 

regulatory impact, the proposal would have a significant economic impact on a 

substantial number of small entities.93 NMFS’s regulatory impact review stated that the 

majority of the participants in the fishing industry are small businesses and that there 

were 326 fisherman, 134 of which qualified for direct permits in the shark fishery. 

Approximately 41 percent of the shark fishery consisted of fishermen who only fished for 

sharks. The remaining fishermen were pelagic longline fishermen who also primarily 

fished for tuna and swordfish. Advocacy, therefore, concluded that the rule would have 

an impact on a substantial number of small entities. 

In terms of significant economic impact, the Office of Advocacy argued that it was 

logical to infer that a 50 percent reduction in catch would result in a loss in revenue of at 

least 5 percent. The Office of Advocacy supported its inference with information 

obtained from fishery associations. For example, the Directed Shark Fishery Association 

asserted that the majority of the 134 directed shark vessels would lose more than 20 

percent of their income. Some were expected to lose as much as 50 percent of their 

income. Similarly, the North Carolina Fisheries Association contended that more than 20 

percent of their full-time shark fishermen would go out of business as a result the 

proposed rulemaking. Accordingly, Advocacy concluded that by the criteria set forth by 

NMFS, the impact of the proposed rulemaking would be significant. 

Advocacy also presented information that indicated that NMFS’s assumption that the 

affected industries would diversify was not realistic. Advocacy asserted that the cost of 

converting to another fishery could range from $3,000 to $25,000 per boat, depending on 

the vessel. At that time, Advocacy’s statistics indicated that the average gross revenue of 

a sole fisherman was $139,000 per year. Obtaining the equipment necessary to diversify 

 92 61 Fed. Reg. 67,295.

93 At that time, NMFS criteria provided that a rule had a significant impact on a substantial number of small 

entities if 20 percent of those engaged in the fishery had either a reduction in gross revenues by more than 5 

percent, an increase in total costs of production by more than 5 percent, or a 10 percent increase in 

compliance costs; or if 2 percent of small business entities were forced to cease business operations. NMFS 

no longer uses these criteria. Advocacy was pleased with NMFS’s decision to abandon these criteria and 

institute new guidelines for determining economic impact on the fishing industry. 
 Chapter 1: The first steps of RFA analysis 27

could amount to approximately 18 percent of the business's gross revenues, which would 

also be a significant economic impact.94

The members of the fishing industry successfully challenged NMFS’s RFA compliance 

in Southern Offshore Fishing Association v. Daley.

95 The court found that the agency 

certified without making a “reasonable, good-faith effort,” prior to issuance of the final 

rule, to inform the public about the potential adverse effects of its proposals and about 

less harmful alternatives.

Telecommunications System Construction and Specifications. In another case, the 

Rural Utilities Service (RUS) certified that the final rule did not have a significant 

economic impact on a substantial number of small entities because small entities were not 

subject to any requirements that were not applied equally to large entities. While the rule 

did subject all entities to the same regulation, this justification ignored the 

disproportionate impact regulations often have on small businesses. In addition, RUS was 

depriving itself of the opportunity to learn about the rule’s impact on small businesses.

The Office of Advocacy filed the following comment with the RUS:

Congress knew about the tendency of agencies to impose “one-size-fits-all” 

regulations and specifically rejected it. As Congress states, one-size-fits-all 

regulations are unnecessary and disproportionately burdensome to small 

businesses.... Because of the disparity of the impact of governmental regulations, 

the agency cannot certify a rule on the basis that all entities have the same 

regulatory obligations.96

Offshore Oil and Gas Well Operations. One of the responsibilities of the Minerals 

Management Service (MMS) of the Department of the Interior is to ensure safety in 

offshore oil and gas well operations. In February 1998, MMS proposed a rule to update 

and clarify MMS regulations on postlease operations. MMS prepared a certification in 

lieu of an IRFA for the proposal. As a basis for the certification, MMS stated:

In general, a company needs large technical and financial resources and 

experience to safely conduct offshore activities. However, many of the leases and 

operators have less than 500 employees and are small businesses. It is likely that a 

State lessee applying for a right-of-use and easement on the OCS may be a small 

business. The costs associated with obtaining the benefit (right of use and 

easement) would be minimal. The application fee is estimated to be $2,350 per 

application and the rental is estimated to be $5,000. 

 94 U.S. Small Business Administration, Office of Advocacy comment letter to NMFS and NOAA dated 

February 6, 1997. See http://archive.sba.gov/advo/laws/comments/noaa2-6.html. 95 Southern Offshore Fishing. This case is also discussed in Chapter 5 of this guide. 96 See http://archive.sba.gov/advo/laws/comments/rus02_0308.pdf.
28 RFA guide for government agencies

Advocacy submitted comments97 asserting that the certification was based on 

generalizations and unsubstantiated assumptions. In its comments, Advocacy identified 

databases and a means for a threshold analysis to help determine whether the agency 

should have certified, finding that the MMS had not provided sufficient information to 

document a rational basis for its decision to certify the rule. Advocacy stated:

For the purposes of its analysis, the Office of Advocacy referred to SIC 1381, 

Drilling Oil and Gas Wells. While Advocacy acknowledges that SIC 1381 may 

include more than drilling on the outer Continental Shelf, Advocacy submits the 

numbers for the sake of argument in an effort to point out the inherent weaknesses 

in MMS's certification. 

According to this SIC data, there are a total of 1,380 firms that drill oil and gas 

wells. Of that 1,380 firms, 1,341 or 97% qualify as small firms in that they have 

fewer than 500 employees; 654 firms have 1-4 employees. The 654 firms 

constitute 47 percent of all firms large and small. Needless to say, 47 percent of 

an industry represents a substantial number of firms and suggests that certification 

of this rulemaking may be improper. 

In the 1-4 employee sector, the estimated receipts for a firm are $46,774, with an 

annual payroll of $32,187. The estimated cost of the proposed rule is $7,350 

($2,350 per application and $5,000 for the rental) per year. The $7,350 amounts to 

approximately 16 percent of the annual receipts for that sector. Although there are 

no hard rules for defining significant economic impact on a substantial number of 

small entities, a proposal that will impose on 47 percent of an industry an 

additional cost of 16 percent of annual receipts should at least raise a warning sign 

for a regulatory agency that the proposal could interfere with profits and company 

survival. It should also indicate to the agency that certification may be improper 

under the RFA.

 97 It should be noted that in the comments, Advocacy also commended MMS for the improvement that it 

made in its certification process. Instead of an unsupported allegation of no significant economic impact on 

a substantial number of small entities, MMS did provide a basis for the certification. MMS has continued to 

work with Advocacy to improve its RFA compliance.
 Chapter 1: The first steps of RFA analysis 29

Certification checklist

1. Request for comment on 

proposed rules

Look for:

√ A request for comment on the certification; and,

√ A request for comment on the threshold economic 

analysis and its underlying assumptions.

2. Description and estimate 

of number of small entities 

to which the rule applies

Look for:

√ The North American Industry Classification System 

(NAICS codes) categories for those entities subject to the 

regulation;

√ A breakdown of each industry by several entity sizes, 

which should include the SBA size standard for each 

industry;

√ Any alternative operational size definition used to tier 

requirements under the rule;

√ For each size category in each industry, information on 

revenues, profit or other measures of economic 

sustainability.

3. Estimate of economic 

impacts on small entities

Look for:

√ A set of tables, charts and discussion for a typical entity 

in each size category in each industry:

√ Estimates of the cost impacts of the proposal;

√ Estimates of the beneficial impacts of the proposal.

4. Criteria for “significant 

economic impacts”

The best analyses will not use a preset criterion, but instead 

will examine one or more of the following:

√ Long-term insolvency, measured as regulatory costs 

significantly reducing typical profits for the size category;

√ Short-term insolvency, measured as increased operating 

expenses or new debt larger than cash reserves and cash 

flow can support, causing nonmarginal firms to close;

√ Disproportionality, based on whether regulations place 

small entities at a significant competitive disadvantage; 

√ Inefficiency based on whether the social costs imposed 

on small entities outweigh the social benefits of regulating 

them. 

Look for a cogent explanation underlying any 

conclusionary statements about preset “criteria.”

5. Criteria for substantial

 number

Look for:

√ The North American Industry Classification System 

(NAICS codes) of those regulated;

√ A stratification of each industry by size, which should 

include the SBA size standard for each industry;

√ Any alternative operational size definition used to tier 

requirements under the rule;
30 RFA guide for government agencies

√ Description of size categories demonstrating all entities 

within the category share similar economic characteristics;

√ Whether a ‘percentage of entities significantly affected’ 

approach is used;

√ Whether a ‘minimum number’ approach is used. (This is 

usually arbitrary and probably capricious);

√ Justification of whatever criterion is used.

Typically, if an industry is properly segmented, analysis of 

a typical entity within the segment will indicate whether 

most or few will be significantly affected, as all within the 

segment should have similar economic characteristics.

6. Examination of industry 

segments with significant 

economic impacts

Look for:

√ An estimate of how many segments within an industry 

will experience significant impacts: if even one significant 

segment will, an IRFA is needed;

√ An estimate of entities experiencing significant impacts. 

Other entities with similar economic characteristics should 

also be experiencing adverse impacts, and finding any with 

such adversely impacts tends to imply there is a segment 

that deserves special attention. The resulting IRFA should 

materially address the problems in that segment, 

recognizing the rest have few, if any impacts.

7 Disclosure of 

assumptions

Look for:

√ A discussion on how sensitive underlying assumptions 

are to conclusions on whether there is no significant 

economic impact on a substantial number of small entities;

√ A discussion on the uncertainty associated with the most 

significant underlying assumptions;

√ A presentation on the range of potential findings, as 

reflects the underlying uncertainty in assumptions.

8. Certification statement 

by the head of the agency

Look for:

√ A finding under 5 U.S.C. § 605, the Regulatory 

Flexibility Act, that “the proposed rule, if promulgated, 

will not have a significant economic impact on a 

substantial number of small entities.”
Chapter 2: The initial regulatory flexibility analysis 31 

CHAPTER 2 PREPARING A PROPOSED RULE: THE INITIAL 

REGULATORY FLEXIBILITY ANALYSIS

The RFA decision process

 

NO

YES

DEFINE THE PROBLEM 

AND 

DESCRIBE THE 

REGULATED ENTITIES 

ESTIMATE ECONOMIC 

IMPACTS BY SIZE 

CATEGORY

DETERMINE WHICH SIZE 

CATEGORIES INCUR 

SIGNIFICANT IMPACTS

CHAPTER 1 – DO A 

SUBSTANTIAL NUMBER OF 

ENTITIES IN ANY SIZE CATEGORY 

INCUR SIGNIFICANT IMPACTS? 

CHAPTER 2—BEGIN 

INITIAL 

REGULATORY 

FLEXIBILITY 

ANALYSIS 

CERTIFY RULE AS REQUIRING 

NO FURTHER RFA ANALYSIS

DECISIONMAKERS OR 

REG. NEGOTIATING 

PANELS

DISCUSS

REG. ALTERNATIVES 

DISTRIBUTE A DRAFT 

INITIAL REGULATORY 

FLEXIBILITY ANALYSIS 

SELECTION OF A 

REGULATORY 

PROPOSAL

COMPLETE INITIAL 

REGULATORY

FLEXIBILITY ANALYSIS 

PUBLISH PROPOSAL IN 

THE FEDERAL 

REGISTER

EXAMINE PUBLIC 

COMMENTS

CHAPTER 3—PREPARE 

FINAL REGULATORY

FLEXIBILITY ANALYSIS

MAKE FINAL RULE 

DECISIONS

PUBLISH FINAL RULE 

IN THE FEDERAL 

REGISTER

 

 
32 RFA guide for government agencies

During the preparation of a proposed rule, an agency must prepare an initial regulatory 

flexibility analysis (IRFA) if it determines that a proposal may impose a significant 

economic impact on a substantial number of small entities.98 (If the agency determines 

that the proposed rule does not have such an impact, it should certify the rule as discussed 

in Chapter 1 of this guide.) 

The RFA requires agencies to publish the IRFA, or a summary thereof, in the Federal 

Register at the same time it publishes the proposed rulemaking.99 The IRFA must include 

a discussion of each element required by section 603 of the RFA, and the agency must 

also send a copy of the IRFA to the Chief Counsel for Advocacy.100 Agencies are 

required to notify Advocacy when they submit a draft proposed or final rule to the Office 

of Information and Regulatory Affairs (OIRA) under Executive Order 12866, or at a 

reasonable time prior to publication of the rule by the agency.101 Moreover, the earlier a 

copy of the IRFA is provided to Advocacy, the more opportunity exists for constructive 

involvement and feedback to the agency. If an agency is preparing a series of closely 

related rules, it may, to avoid duplicative action, consider them one rule for the purposes 

of complying with the IRFA requirement.102

Issues to be addressed in the analysis

Section 603 of the RFA requires agencies to perform a detailed analysis of the potential 

impact of the proposed rule on small entities.103 In order to perform this analysis, an 

agency must enumerate the objectives and goals of the rule, as well any additional 

reasons the agency is pursuing the rule. 

The agency then must examine the costs and other economic implications for the industry 

sectors targeted by the rule. When such data are unavailable, the agency should state why 

and request comments. Impacts include costs of compliance and economic implications 

that derive from additional compliance costs such as economic viability (including 

closure), competitiveness, productivity, and employment. The analysis should identify 

cost burdens for the industry sector and for the individual small entities affected. Costs 

might include engineering and hardware acquisition, maintenance and operation, 

employee skill and training, administrative practices (including recordkeeping and 

reporting), productivity, and promotion. The agency must also consider alternatives to the 

proposed regulation that would accomplish the agency's goals while not 

disproportionately burdening small businesses. As part of the discussion of the 

alternatives under section 603(c), it is recommended that the agency address, the costs, 

benefits, and other economic implications. 

 

 

98 For a full discussion of "significant economic impact on a substantial number of small entities," and the 

requirements of a proper certification statement, see Chapter 1 of this guide. 99 5 U.S.C. § 603(a). 100 Id. 101 Exec. Order No. 13,272, § 3(b). 102 5 U.S.C. § 605(c). 103 Id. at § 603(b)-(c).
Chapter 2: The initial regulatory flexibility analysis 33

Some of the important questions the agency should address in preparing an IRFA are:

• Should the agency redefine “small entity” for purposes of the IRFA?

• Which small entities are affected the most? Are all small entities in an industry 

affected equally or do some experience disparate impacts such that aggregation of 

the industry would dilute the magnitude of the economic effect on specific 

subgroups?104

• Are all the required elements of an IRFA present, including a clear explanation of 

the need for and objectives of the rule?105

• Has the agency identified and analyzed all major cost factors?

• Has the agency identified all significant alternatives that would allow the agency 

to accomplish its regulatory objectives while minimizing the adverse impact or 

maximizing the benefits to small entities?

• Can the agency use other statutorily required analyses to supplement or satisfy the 

IRFA requirements of the RFA?

• Are there circumstances under which preparation of an IRFA may be waived or 

delayed?

• What portion of the problem is attributable to small businesses (i.e., is regulation 

of small businesses needed to satisfy the statutory objectives)?

• Does the proposed solution meet the statutory objectives in a more cost-effective

or cost-beneficial manner than any of the alternatives considered?

The results of the analysis should allow interested parties to compare the impacts of 

regulatory alternatives on the differing sizes and types of entities affected by the rule. It 

will enable direct comparison of small and large entities to determine the degree to which 

the alternatives chosen disproportionately affect small entities or a specific subset of 

small entities. Further, the analysis will examine whether the alternatives are effectively 

designed to achieve the statutory objectives.

The agency must balance the thoroughness of an analysis and practical limits of an 

agency's capacity to carry out the analysis with the significance of the rule and the 

expected economic impacts. Agencies should consult available information on how to 

conduct an economic analysis, such as the guidelines in OMB’s Economic Analysis of 

Federal Regulations under Executive Order 12866 and should review small business 

data, including data referenced in Appendices C and D.

If economic data are available, an agency should utilize the data in preparing an IRFA.

When data are not readily available, the agency should consult with industry sources or 

other third parties to collect data. If the data collection is inadequate, then agencies 

should solicit the data as part of the proposed rulemaking.

 104 See discussion of this issue in Chapter 1. 105 An agency may want to avoid repeating relevant text by cross-referencing the needs and objectives of 

the rule in its IRFA. 
34 RFA guide for government agencies

Elements of an IRFA

The preparation of an IRFA should be coordinated with the development of the data and 

analysis the agency will use in preparing the proposed rule under the requirements of the 

Administrative Procedure Act. In doing so, the agency should be mindful of the 

requirements of the RFA and collect data based on size. The development of a rational 

rule will require the acquisition of data that describe the scope of the problem, the entities 

affected, and the extent of those effects on the entities and the problem being addressed. 

Without such information, the agency will be unable to develop a rational rule.106

Under section 603(b) of the RFA, an IRFA must describe the impact of the proposed rule 

on small entities and contain the following information:

1. A description of the reasons why the action by the agency is being considered.

2. A succinct statement of the objectives of, and legal basis for, the proposed rule.

3. A description—and, where feasible, an estimate of the number—of small entities 

to which the proposed rule will apply.

4. A description of the projected reporting, recordkeeping, and other compliance 

requirements of the proposed rule, including an estimate of the classes of small 

entities that will be subject to the requirement and the types of professional skills 

necessary for preparation of the report or record.

5. An identification, to the extent practicable, of all relevant federal rules that may 

duplicate, overlap, or conflict with the proposed rule.

Section 603(c) is the key provision of the IRFA. It requires an agency to include a 

description of any significant alternatives to the proposed rule that minimize significant 

economic impacts on small entities while accomplishing the agency’s objectives. The 

approach an agency takes while developing an IRFA depends on such factors as the 

quality and quantity of available information and the anticipated severity of a rule's 

impacts on small entities subject to the rule and the benefits yielded by each significant 

alternative. Section 607 of the RFA requires agencies to develop a quantitative analysis 

of the effects of a rule and its alternatives using available data. If quantification is not 

practicable or reliable, agencies may provide general descriptive statements regarding the 

rule’s effects.107 This second option is a last resort when it is not practicable for the 

agency to complete a significant quantitative analysis.

The new Section 603(d) of the RFA requires the CFPB to include a description of any 

projected increase in the cost of credit for small entities, as well as a description of 

significant alternatives which, while accomplishing the stated objectives, minimize any 

such increase, and the advice and recommendations of small entities with respect to these 

 106 Bowen v. AHA, 476 U.S. 610, 643 (186); National Ass’n of Home Health Agencies v. Schweiker, 690 

F.2d 932, 949 (D.C. Cir. 1982); Chocolate Mfrs. Ass’n v. Block, 755 F.2d 1098, 1103 (4th Cir. 1985). 107 5 U.S.C. § 607.
Chapter 2: The initial regulatory flexibility analysis 35

cost-of-credit issues.108 The CFPB is required to identify small entity representatives in 

consultation with the Office of Advocacy and collect advice and recommendations about 

these cost-of-credit issues in addition to the issues raised by the proposed regulation. 

The principal issues an agency should address in an IRFA are the impact of a proposed 

rule on small entities and the comparative effectiveness (benefits) and costs of alternative 

regulatory options. Each of the specific elements of the IRFA is discussed in turn below.

Reasons action is being considered

For the first element of the IRFA, the agency must discuss the reasons it is considering 

the proposed rule.109 The agency should list any issue to be addressed in the rulemaking

and should be thorough in listing its reasons, as this section provides insight into the need 

for the rule.

Generally, the agency addresses this topic in the preamble to the proposed rule. The 

agency can summarize its discussion in the rulemaking, if the rulemaking addresses all 

the reasons the agency is considering the action. The discussion of the reasons leads 

directly into the objectives of the rule, the next element of the IRFA.

Objectives of the proposed rule 

For the second element of the IRFA, the agency must list the objectives of the proposed 

rule.110 Again, the agency should be thorough when discussing its objectives, as this 

discussion conveys to the public the goals of the rulemaking and why the agency is 

taking specific actions contained within the proposed rule. This section provides the 

justification for the agency’s actions, balancing the burden of the compliance 

requirements against the need for the rule. Such a discussion should include how the rule 

is achieving the statutory objectives. Compliance with this requirement should not be 

difficult since agencies are required to explain their proposed actions and the reasons 

underlying those proposed actions in order to elicit comment from the public as required 

by section 553 of the APA.111

As with the reasons for the proposed rule, the agency is likely to have addressed this 

topic in the rulemaking. The agency can draw from the language of the rulemaking to 

satisfy this section of the IRFA, as long as it lists all the objectives of the proposed rule 

that would entail compliance requirements with a significant economic impact on a 

substantial number of small entities.

 108 5 U.S.C. § 603(d), added to the RFA by the Dodd-Frank Wall Street Reform and Consumer Protection 

Act of 2010, Pub. Law 111-203 § 1100G(d)(1). This law also added the CFPB to the list of covered 

agencies—previously EPA and OSHA—that are required to hold small business review panels.

109 Id. at § 603(b)(1). 110 Id. at § 603(b)(2). 111 See Spartan Radiocasting v. FCC, 619 F.2d 314, 321 (4th Cir. 1980).
36 RFA guide for government agencies

Description and estimate of the number of small entities

The third element of the IRFA requires the agency to identify the classes of small entities 

affected by the proposed rule and provide an estimate of the number of small entities in 

each of those classes.112 In particular, the agency should pay special attention to small 

entities expected to face disproportionate impacts relative to other entities in the industry, 

whether those entities are large or small. Classification requires the development of a 

profile for the affected industry or industries and categorization by various size classes

within each affected industry. It is crucial that the agency list all industry classes affected 

by the rule. Specifically, if the agency imposes a compliance requirement on a class of 

small entities, it must identify that class of small entities in this section of the IRFA.

As a default, section 601 of the RFA requires agencies to use size standards set by the 

SBA in determining whether businesses are small businesses. SBA’s Office of Size 

Standards set these standards using NAICS.113 Agencies must identify each of the 

affected classes according to their NAICS code. Once the agency has identified all the 

affected industries by code, it can use the NAICS code in combination with the U.S. 

Census data114 to gain an estimate of the number of entities in each class. To help 

agencies with this element of the IRFA, the Office of Advocacy provides a listing of 

NAICS codes along with links to the U.S. Census data for each class on its web page.115

If the agency determines that the existing SBA size standards for small businesses are not 

appropriate for RFA analysis purposes, the RFA permits the agency, after notice and 

comment, to establish one or more alternative definitions of a small entity that are 

appropriate for the rule.116 The RFA requires an agency to consult with the Office of 

Advocacy when performing an RFA analysis using a different small business size 

standard than that provided by the SBA.117

Estimating compliance requirements

For the fourth element of the IRFA, the agency must describe and estimate the 

compliance requirements of the proposed rule.118 This is one of the two most important 

elements in the IRFA, because the alternatives the agency examines in the IRFA will be 

designed to minimize these compliance burdens. Provision of a list in the IRFA enables 

small entities to more easily identify potential burdens and tailor their comments in the 

rulemaking process to those burdens that most affect them without wading through many 

Federal Register pages.

As stated by the RFA, some of the costs the agency must describe in the IRFA include

the costs of any recordkeeping; professional expertise, such as lawyer, accountant, or 

engineering, needed to comply with recordkeeping; and reporting requirements. Section 

 112 5 U.S.C. § 603(b)(3). 113 See http://www.sba.gov/size/. 114 See http://www.census.gov/. 115 Office of Advocacy, Research and Statistics,, http://www.sba.gov/advocacy. 116 See the size standard discussion in Chapter 1. 117 5 U.S.C. § 601(3). 118 Id.at § 603(b)(4).
Chapter 2: The initial regulatory flexibility analysis 37

603 also requires that the agencies examine other compliance requirements, which may 

include, for example, the following: (a) capital costs for equipment needed to meet the 

regulatory requirements; (b) costs of modifying existing processes and procedures to 

comply with the proposed rule; (c) lost sales and profits resulting from the proposed rule; 

(d) changes in market competition as a result of the proposed rule and its impact on small 

entities or specific submarkets of small entities; (e) extra costs associated with the 

payment of taxes or fees associated with the proposed rule; and (f) hiring employees 

dedicated to compliance with regulatory requirements.

Since all rules are different and impose different compliance requirements, the RFA 

contemplates that agencies will prepare analyses to determine all significant long- and 

short-term compliance costs. Agencies should list the compliance requirements separately

to provide greater transparency.

The IRFA should also, to the extent practicable, compare the costs of compliance for 

small and large entities to determine whether the proposed rule affects small entities 

disproportionately, to analyze the ability of small entities to pass on these costs in the 

form of price increases or user fees, and to assess the effects on firms’ profitability or 

their ability to provide services. This should be done in conjunction with an estimation of 

the costs of compliance relative to changes in market structure and the competitive status 

of various subclasses of small entities as well as the competitive positions of small 

entities in comparison with larger entities.

119

Significant alternatives considered

The keystone of the IRFA is the description of any significant alternatives to the 

proposed rule that accomplish the stated objectives of applicable statutes and that 

minimize the rule’s economic impact on small entities.120 The development and adoption 

of these alternatives provide regulatory relief to small entities.

Analyzing alternatives establishes a process for the agency to evaluate proposals that 

achieve the regulatory goals efficiently and effectively without unduly burdening small 

entities, erecting barriers to competition, or stifling innovation. This process provides an 

 119 Competitive status is not relevant when the small entities regulated by the proposed rule are not-forprofit organizations or governmental jurisdictions. In regulations that are limited to nonprofits or 

governmental jurisdictions, changes in regulatory costs should not affect the competitive status of the 

entities. However, there are certain nonprofit and governmental jurisdictions that do compete with forprofit enterprises, such as electric cooperatives. In preparing an IRFA, the agency must be mindful of the 

type of small entity regulated and tailor its analytical requirements to those entities.

120 5 U.S.C. § 603(c). Since the RFA is an economically neutral statute, the IRFA should examine 

alternatives to ensure that the proposed rule is maximizing any beneficial impact on small entities. In the 

case of a rule that has a significant beneficial effect, the failure to consider alternatives that enhance the 

beneficial effect means that the agency has not examined alternatives that “minimize” the economic impact 

of the proposed rule. For example, if a rule increases revenue to a small entity by $100 and an alternative 

exists that meets the statutory objective of the agency and increases revenue by $200, then the agency has 

not complied with the RFA if it did not examine the second alternative. The failure to provide the small 

entity with a potential extra $100 in revenue in essence does not minimize the economic impact on small 

entities.
38 RFA guide for government agencies

additional filter by which the agency conducts rational rulemaking mandated by the APA.

Rather than focus on the overall costs and benefits of a particular regulation (as might be 

required by statute, such as the best achievable control technology, or by the regulatory 

analysis requirements of E.O. 12866), the RFA requires the agency to undertake an 

analysis in order to discover less costly methods of attaining the statutory objectives of 

the rulemaking agency. Instead of analyzing the impacts of its regulatory actions on all 

relevant sectors of the economy, the IRFA narrows the scope of the particular review to 

small entities. The premise underpinning the IRFA is that, everything else being equal, 

the most rational alternative is often the one that achieves the objective of the agency at 

the lowest cost. Since small entities typically constitute the vast majority of entities in a 

particular industry under the SBA size standards, it often makes the most economic sense 

to adopt the regulatory strategy that imposes the least cost on small entities because that 

generally would represent the most cost-effective strategy meeting the agency’s statutory 

objectives.

The kinds of alternatives that are possible will vary based on the particular regulatory 

objective and the characteristics of the regulated industry. However, section 603(c) of the 

RFA gives agencies some alternatives that they must consider at a minimum:

1. Establishment of different compliance or reporting requirements for small entities 

or timetables that take into account the resources available to small entities.

2. Clarification, consolidation, or simplification of compliance and reporting 

requirements for small entities.

3. Use of performance rather than design standards.

4. Exemption for certain or all small entities from coverage of the rule, in whole or 

in part.

Additional alternatives include adopting different standards for the size of businesses or 

modifying the types of equipment that are required for large and small entities. In short, 

the agency should consider a variety of mechanisms to reach the regulatory objective 

without regard to whether that mechanism is statutorily permitted. In some cases, the 

identification of regulatory alternatives that would be beneficial to the economy but 

cannot be implemented because of a statutory directive provides Congress with a clear 

legislative path. It is critical to remember that the IRFA is designed to explore less 

burdensome alternatives and not simply those alternatives it is legally permitted to 

implement. Returning to the analogy between RFA and NEPA, Council on

Environmental Quality regulations providing guidance on NEPA compliance expect the 

agency to examine a “no-action” alternative even if such alternative would violate the 

statutory mandate, such as the need to protect a threatened and endangered species 

pursuant to the Endangered Species Act. Similarly, an agency might examine an 

exemption of small businesses even if the statute does not permit it because that informs 

Congress, the public, and the courts that it understands the implications of its regulatory 

action and is taking a less desirable course of action than it wishes. Such an assessment 

follows the parallels between the RFA and NEPA while providing information to the 

regulated community and decisionmakers in other branches of the federal government.
Chapter 2: The initial regulatory flexibility analysis 39

Agencies are not limited to alternatives that minimize burdens only for small entities. As 

EPA’s 1992 RFA guidance recognized, cost-effective alternatives for small entities often 

are cost-effective for all entities.121 Agencies should identify regulatory alternatives at the 

earliest stage of rulemaking and not wait until after the proposed rule is finished to 

develop alternatives. This is crucial because otherwise the agency may have already 

bought into one particular regulatory solution without considering alternatives. Such 

predeterminations by the agency violate the basic tenet of rational rulemaking under the 

APA by making the notice and comment process irrelevant. Interpretations of the notice 

and comment provisions of the APA contemplate a dialogue between the agency and the 

regulated community.122 An agency already predisposed to only one way of thinking 

undermines the notice and comment procedure, thereby leaving itself open to a finding by 

a court that the agency action was arbitrary, capricious, or otherwise not in accordance 

with the law under section 706 of the APA.123 Thus, the development of alternatives in 

the RFA demonstrates to the court that an agency did not in the proposed rule have a 

predisposition to rule in a manner that eviscerates the notice and comment process. If an

agency is unable to analyze small business alternatives separately, then alternatives that 

reduce the impact for businesses of all sizes must be considered.

In the memorandum on regulatory flexibility that accompanied President Obama’s E.O. 

13563, the president expanded the existing requirement for an agency to document the 

decision to reject an alternative that may reduce regulatory burdens on small entities. The 

RFA had required agencies to explain in the final regulatory flexibility analysis 

accompanying final rules why significant alternatives were not selected.124 President 

Obama directed that a similar explanation be provided for proposed rules.125

Consistent with an agency’s obligations under section 609 of the RFA, agencies should 

perform outreach to interested groups to help develop regulatory solutions. In doing so, 

agency personnel should recognize that different sectors of an industry may have very 

different perspectives on a particular regulatory approach. The agency, before adopting 

one approach, should ensure that it contacts small entities and their representatives as 

well as large entities and their representatives. This type of communication is not 

prohibited by the APA and will help the agency focus on potential benefits and costs of 

various approaches to small businesses. In practice, the best proposed rules have been 

developed through a robust pre-proposal exchange of specific rulemaking concepts with 

the stakeholders including small businesses.126

 121 See Revised Interim Guidance for EPA Rulewriters, p. 18. 122 See Chocolate Mfrs. Ass’n v. Block, 755 f.2d 1098, 1103 (4th Cir. 1985). 123 See McLouth Steel Prods. v. EPA, 838 F.2d 1317, 1324 (D.C. Cir. 1988); Levesque v. Block,723 F.2d 

175, 187 (1st Cir. 1983); United States Steel Corp. v. EPA, 595 F.2d 207, 214 (5th Cir. 1979). 124 5 U.S.C. § 604(a)(6). 125 Memorandum for the Heads of Executive Departments and Agencies, “Regulatory Flexibility, Small 

Business, and Job Creation” (76 Fed. Reg. 3827, January 21, 2011).

126 Executive Order 13,563 restates the value of pre-proposal input from affected firms. Section 2(c) states: 

“Before issuing a notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek 

the views of those who are likely to be affected, including those who are likely to benefit from and those 

who are potentially subject to such rulemaking.”
40 RFA guide for government agencies

In essence, this outreach is an informal approach to the advance notice of proposed 

rulemaking that agencies often undertake to flesh out the parameters of a particular rule. 

Except in cases of emergencies or statutory deadlines, the Office of Advocacy strongly 

recommends that agencies consider using advance notices of proposed rulemaking for the 

most significant rules to identify potentially interested small entities and obtain estimates 

of the costs and benefits to small entities of various regulatory options. In particular, 

advance notices of proposed rulemaking will be extremely useful in developing 

information on the economic and structural characteristics of the industry, the small 

entities within that industry, and alternatives that would minimize costs and maximize 

benefits. Where the agency does not use an advance notice of proposed rulemaking, it 

should consider requesting information in the proposal regarding the economic and 

structural characteristics of the industry, including such items as the typical firm size, 

typical profits and losses, and the marginal costs of production, and should solicit 

suggestions for cost-effective regulatory approaches.

Duplicative, overlapping, and conflicting rules

The sixth element of the IRFA is to identify any duplicative, overlapping, and conflicting 

federal rules.127 Rules are duplicative or overlapping if they are based on the same or 

similar reasons for the regulation, the same or similar regulatory goals, and if they

regulate the same classes of industry. Rules are conflicting when they impose two 

conflicting regulatory requirements on the same classes of industry.128

This section of the IRFA requires the agency to examine the potential conflicting and 

duplicative rules that can unnecessarily add cumulative regulatory burdens on small 

entities without any gain in regulatory benefits. By identifying overlapping, duplicative, 

or inconsistent regulations, the agency might be able to avoid adding an additional 

regulatory burden (even one as simple as an additional report that is already filed 

elsewhere).129

Because of the breadth and volume of federal regulations, a review of all existing rules on 

a particular industry group can be an onerous task for a federal agency. Nevertheless, it is 

important that the agency try to identify potential conflicting, duplicative, and 

overlapping regulations. The IRFA should include a request for comments identifying 

such rules. At the very least, the agency should review its own rules and identify any 

rules that cover the same subject matter and affect the same classes of industry. In fact, 

the law already requires such a review under section 610 of the RFA.130

 127 5 U.S.C. § 603(b)(5). 128 For example, under the repealed ergonomics rule, OSHA would have forced skilled nursing facilities to 

acquire mechanical lifts to move patients. On the other hand, regulations promulgated by the Centers for 

Medicare and Medicaid Services (CMS) mandated that patients have a right not to be moved using 

mechanical lifts. Thus, the OSHA and CMS regulations would have been at cross purposes with respect to 

providing ergonomic protection for employees. 129 In 1999, EPA relieved hundreds of thousands of facilities—facilities that were already filing federal 

underground storage tank forms for gasoline and diesel fuel with local authorities—from filing very similar 

reports for the same fuels under the federal community right-to-know law. 130 See Chapter 6 for more information on compliance with Section 610 of the RFA.
Chapter 2: The initial regulatory flexibility analysis 41

Using other analyses to satisfy the IRFA requirements

The RFA permits agencies to prepare IRFAs in conjunction with, or as a part of, other 

analyses required by law as long as the RFA’s requirements are satisfied.131 Agencies 

need to exercise caution when relying on other analyses to satisfy the RFA, as they may 

not necessarily be a complete substitute for a regulatory flexibility analysis. In fact, these 

other analyses will prove far more useful as sources for data to be used in the IRFA than 

as substitutes for an IRFA. For major rules that require the preparation of a regulatory 

impact analysis (RIA) under Executive Orders 12866 and 13563, agencies may prepare 

the RIA and the regulatory flexibility analyses together. Nevertheless, the agency must 

keep in mind that the RIA is a much broader analysis of benefits and costs and does not 

necessarily focus on the cost effectiveness of regulatory compliance for small entities. 

Thus, the focus of the RIA under the executive orders is not a substitute for the IRFA.

Agencies can coordinate their preparation of regulatory flexibility analyses with any 

other analyses accompanying a rule.132 In doing so, however, agencies should ensure that 

such analyses describe explicitly how the requirements of the Regulatory Flexibility Act 

are satisfied. Similarly, agencies can develop evaluations of administrative burdens 

associated with reporting and recordkeeping requirements in concert with the paperwork 

burden analysis prepared under the Paperwork Reduction Act. However, Paperwork 

Reduction Act analysis is not a substitute for RFA compliance analysis.

When an IRFA may be waived or delayed

Section 608 of the RFA provides that an agency may waive or delay the completion of 

some or all the requirements of section 603 regarding preparation of IRFAs if the agency 

is promulgating the rule in response to an emergency that makes compliance with the 

RFA impracticable.133 Promulgating agencies must publish the waiver or delay in the 

Federal Register no later than the date of publication of the final rule. If a true emergency 

exists, the agency must explain clearly why the circumstances constitute an emergency.

The RFA does not specifically allow certifications of proposed (or final) rules issued 

pursuant to section 605(b) to be waived or delayed. Certifications must be published at 

the time of the proposed or final rule. As discussed in Chapter 1, federal agencies must 

make a threshold assessment regarding the impact of proposed rules on small entities. 

This assessment, if it results in a certification, is judicially reviewable.

 131 5 U.S.C. § 605(a). 132 Many requirements of Exec. Order No. 12,866 parallel those in the RFA. See a discussion in the 

Introduction. Executive Order 12,866 directs agencies to “assess both the costs and the benefits of the 

intended regulation....[and] propose or adopt a regulation only upon a reasoned determination that the 

benefits...justify the costs.” Further, E.O. 12,866 requires agencies to develop and analyze regulatory 

alternatives, including, where appropriate, small business alternatives that achieve statutory objectives. 

Thus, it is often most effective to coordinate or combine analytic products used to satisfy both the E.O. and 

the RFA.

133 5 U.S.C. § 608(a).
42 RFA guide for government agencies

What an IRFA should look like: A real-life example

In Appendix J, a satisfactory IRFA by the Environmental Protection Agency contains the 

elements required by the RFA and a thorough analysis of the regulation’s potential 

impact on small entities when insufficient data are available on cost or impact.134

 134 For an example of a satisfactory IRFA when cost/impact data are available, see the CMS proposed rule 

on Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule for Calendar 2003,

67 Fed. Reg. 43,846 (June 28, 2002), 43,865 ff. For another example, see U.S. Department of 

Transportation (DOT) proposed rule on Regulatory Assessment for Changes in Vessel and Facility 

Response Plans: 2003 Response Requirements, 67 Fed. Reg. 63,331, where DOT properly analyzed 

alternatives to the rule.
Chapter 3: The final regulatory flexibility analysis 43 

CHAPTER 3 PREPARING A FINAL RULE: THE FINAL REGULATORY 

FLEXIBILITY ANALYSIS 

The RFA decision process

 

NO

YES

DEFINE THE PROBLEM 

AND DESCRIBE THE 

REGULATED ENTITIES 

BY SIZE AND NUMBER

ESTIMATE ECONOMIC 

IMPACTS BY SIZE 

CATEGORY

DETERMINE WHICH SIZE 

CATEGORIES INCUR 

SIGNIFICANT IMPACTS

DO A 

SUBSTANTIAL NUMBER OF 

ENTITIES IN ANY SIZE CATEGORY 

INCUR SIGNIFICANT IMPACTS? 

CHAPTER 2—BEGIN 

INITIAL REGULATORY 

FLEXIBILITY 

ANALYSIS 

CERTIFY RULE AS REQUIRING 

NO FURTHER RFA ANALYSIS

DECISIONMAKERS OR 

REG. NEGOTIATING 

PANELS

DISCUSS

REG. ALTERNATIVES 

DISTRIBUTE A DRAFT 

INITIAL REGULATORY 

FLEXIBILITY ANALYSIS

SELECTION OF A 

REGULATORY 

PROPOSAL

COMPLETE INITIAL 

REGULATORY

FLEXIBILITY ANALYSIS 

PUBLISH PROPOSAL IN 

THE FEDERAL 

REGISTER

EXAMINE PUBLIC 

COMMENTS

CHAPTER 3—PREPARE 

FINAL REGULATORY 

FLEXIBILITY ANALYSIS

MAKE FINAL RULE 

DECISIONS

PUBLISH FINAL RULE 

IN THE FEDERAL 

REGISTER
44 RFA guide for government agencies

When promulgating a final rule, agencies must prepare a final regulatory flexibility 

analysis (FRFA) unless the agency finds that the final rule will not have a significant 

economic impact on a substantial number of small entities or the final rule is issued under 

the APA provision allowing for good cause to forego notice and comment rulemaking.

135

When the agency publishes its final rule, it must also publish the FRFA, or a summary of 

the FRFA, in the Federal Register.

136 Draft final rules that are not certified must be 

submitted to Advocacy before publication in the Federal Register.137 The FRFA must

include the agency’s response to any comments filed by the Chief Counsel for Advocacy, 

including a detailed statement of any changes made to the proposed rule in the final rule 

as a result of such comments.138 The agency must also make copies of the FRFA 

available to the public. These published FRFAs are then subject to judicial review.139

The RFA mandates that agencies revise their initial regulatory flexibility analysis based 

on the public comments received. Agencies routinely create a summary of the public’s 

comments to be published along with the final rules. In developing this summary, the 

agency should specifically summarize comments from small entities even if the 

comments of the small entities do not relate to the RFA. This will help the agency 

prepare a more accurate FRFA or demonstrate support for a certification. Once the 

agency determines that it cannot certify the final rule under section 605(b), the agency 

must prepare a FRFA. If the agency determines that the rulemaking will not result in a 

significant economic impact on a substantial number of small entities, the head of the 

agency may so certify under section 605(b) of the RFA, and provide a copy of the 

certification to the Chief Counsel for Advocacy.

140

Issues to be addressed in the analysis

Section 604(a) of the RFA outlines the central issues the agency must address in the 

FRFA. In short, agencies must evaluate the impact of a rule on small entities and describe 

their efforts to minimize the adverse impact. To the extent that the final regulation has 

significant beneficial economic impacts, the agency should describe efforts to ensure that 

the benefits of the final rule maximize benefits to small businesses and minimize adverse 

economic impacts.

 135 5 U.S.C. § 604 and 605(b). The APA provision is found in 5 U.S.C. § 553 (b)(B). 136 Id. at § 604(b). Since the actual FRFA usually more accurately informs the public of the agency’s efforts 

to analyze costs and alternatives, it is good practice to include the actual FRFA in the final rule preamble as 

published in the Federal Register. 137 Exec. Order No. 13,272, 67 Fed. Reg. 53,462 (Aug. 16, 2002). 138 5 U.S.C. § 604(3).

139 5 U.S.C. § 611. 140 As indicated earlier in the discussion concerning certifications, RFA § 605(b) requires that the 

certification appear in either the proposed or final rule. Although it is fairly clear that the certification must 

appear in the final rule if there is no certification in the proposed rule, it is not clear whether the 

certification must be duplicated in the final rule if it already appears in the proposed rule. The Office of 

Advocacy believes that, given the emphasis in the law on public notice, the certification should also appear 

in the final rule even though there may have already been a certification in the proposed rule. Doing so will 

help demonstrate the continued validity of the certification after receipt of public comments. In addition, 

significant changes between the proposed and final rule could warrant a change in the agency’s certification 

evaluation for the final rule. For a more detailed discussion of certifications, see Chapter 1 of this guide.
Chapter 3: The final regulatory flexibility analysis 45

The requirements for a FRFA are somewhat different from those for an IRFA. The 

requirements for the FRFA are very similar to the requirements that the courts impose on 

the development of a statement of basis and purpose for a final rule under section 553 of 

the APA.141 The only additional requirements are those that relate to ensuring the items 

in the FRFA are easily identifiable to small entities without having to search the entire 

Federal Register notice. The agency should coordinate the preparation of the FRFA with 

development of the basis and purpose statement in the preamble. The preparation of a 

basis and purpose statement is not a substitute for a FRFA or for robust consideration of 

significant alternatives that are more cost-effective to small entities but still achieve the 

objectives of the agency. The requirements, outlined in seven provisions in section

604(a)(1)–(6), are highlighted in italics below: 

1) A statement of the need for, and objectives of, the rule. The agency can crossreference to a similar statement in the supplementary information if the cross 

reference enables small entities to easily identify the need for and objectives of 

the rule.

2) A statement of the significant issues raised by the public comments in response 

to the IRFA, a statement of the assessment of the agency of such issues, and a 

statement of any changes made in the proposed rule as a result of such comments.

Under the APA, agencies are required to respond to comments addressing 

relevant statutory considerations.142 Since the RFA constitutes a relevant statutory 

consideration, the agency is obligated under the APA to respond to comments on 

the RFA and relate how it changed the proposal, if at all, in response to the 

comments.

3) The response of the agency to any comments filed by the Chief Counsel for 

Advocacy of the Small Business Administration in response to the proposed rule, 

and a detailed statement of any change made to the proposed rule in the final rule 

as a result of the comments.

143

4) A description of and an estimate of the number of small entities to which the 

rule will apply or an explanation of why no such estimate is available.

5) A description of the projected reporting, recordkeeping, and other compliance 

requirements of the rule, including an estimate of the classes of small entities 

which will be subject to the requirement and the type of professional skills 

necessary for preparation of the report or record.

 141 E.g., Troy Corp. v. Browner, 120 F.3d 277, 289 (D.C. Cir. 1997); Lloyd Noland Hosp. v. Heckler, 762 

F.2d 1561, 1566-67 (11th Cir. 1985); United States v. Nova Scotia Foods, 568 F.2d 240, 252 (2d Cir. 1977); 

Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 393 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 

(1974); Automotive Parts & Accessories Ass’n v. Boyd, 407 F.2d 330, 338 (D.C. Cir. 1968). 142 Id. 143 The Small Business Jobs Act of 2010, Pub. Law 111-240 added this provision. 
46 RFA guide for government agencies

6) A description of the steps the agency has taken to minimize the significant 

economic impact on small entities consistent with the stated objectives of 

applicable statutes, including a statement of the factual, policy, and legal reasons 

for selecting the alternative adopted in the final rule and why each of the other 

significant alternatives to the rule considered by the agency which affect the 

impact on small entities was rejected. Again this requirement already is mandated 

by the rational rulemaking requirements of the APA.144

6) For a covered agency, as defined in section 609(d)(2), a description of the 

steps the agency has taken to minimize any additional cost of credit for small 

entities.145

As noted in the third provision above, section 1601 of the Small Business Jobs Act146

further amended the final regulatory flexibility analysis (FRFA) section of the RFA by 

requiring agencies to respond to any comments filed by the Chief Counsel for Advocacy 

in response to a proposed rule and a detailed statement of any changes made in response 

to the comments. 

Additional questions to be addressed in a FRFA

A number of important questions will assist the agency in preparing a FRFA:

Have all significant issues been assessed?

Have all significant issues raised in the public comments regarding the IRFA been 

summarized and assessed, and have any changes been made since the publication of the 

proposed rule as a result of those comments? The RFA does not require agencies to 

address every issue raised during the public comment period—only the significant ones.

The RFA does require agencies to assess (and not just present) the significant issues 

raised by interested stakeholders. Agencies are also required to publish in the final rule 

the specific changes that were made to the proposed rule in response to the public 

comments, as well as comments from the SBA’s Chief Counsel for Advocacy. Although 

there is no requirement to do so, some agencies include in their FRFAs the number of 

times a particular comment was raised.

Has the number of small entities been estimated?

Is it possible to estimate the number of small entities to which the rule will apply? If not, 

why not? The RFA requires that during its IRFA preparation, the agency must estimate 

the number of small entities affected. An additional FRFA requirement is that if no 

estimates of the number of affected small entities are available, agencies must explain 

why. An agency must have a strong argument that it cannot estimate the number of small 

 144 See American Textile Mfrs. Inst. v. Donovan, 452 U.S. 490, 539-41 (1981). 145 The numbering is as shown—two paragraphs (6) were enacted. The Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010, Pub. Law 111-203, added this provision. 146 Public Law 111-240.
Chapter 3: The final regulatory flexibility analysis 47

entities, as in the case of a regulation affecting an emerging industry about which little is 

known. 

If an agency is uncertain about how to proceed in the absence of firm data, Advocacy 

advises agencies to construct public records that reflect aggressive and meaningful public 

outreach. Agencies should compile economic data on the industries/organizational sectors 

to be regulated and the economic impacts on small entities within those sectors. If such 

efforts produce inconclusive data or fail entirely, the agency may demonstrate its efforts 

to comply with the requirements of the RFA and explain why such data were not 

available. Moreover, this will demonstrate to the courts that the agency was conducting 

rational rulemaking by determining the universe of affected entities. 

Has the adverse economic impact on small entities been minimized?

Agencies must consider, and may adopt, one or more significant alternatives to minimize 

the rule’s burden on small entities.147 Some of the traditional alternatives may include 

lengthening the time for compliance; tiering the compliance requirements based on the 

size of the business or degree to which small entities contribute to the problem; providing 

for exemptions for parts of the rule or the entire rule for small entities; timing compliance 

to correspond with other statutory deadlines with related requirements; allowing for 

increased flexibility in the methods used for achieving the agency’s objectives (for 

example, using a performance standard instead of requiring a specific technology); 

making requirements less prescriptive; etc. Such alternatives also include providing 

regulatory relief to all regulated entities, such as lowering the overall stringency of a 

standard or changing the regulatory threshold. In the first instance, it remains the 

obligation of the agency to develop significant alternatives pursuant to the RFA. 

Otherwise the agency is transferring its statutory RFA mandate to those entities that can 

least afford or have the least expertise in rulemaking processes to craft alternatives—

small entities. Even after the agency has crafted alternatives, it should, as a matter of 

course, in the proposed rule and IRFA, specifically request whether any other alternatives 

exist that the agency has not considered. Small entities may be able to provide additional 

alternatives based on the analysis already performed by the agency, i.e., the analysis may 

spark ideas that small entities may not have thought of absent such analysis. Adoption of 

this procedure will ensure that agencies have met their obligation to consider alternatives 

to the final regulatory solution as mandated by the RFA.

 147 The outcome of a rulemaking would be superior if the agency adopted a standard that achieves its 

objectives but reduces burdens or increases benefits to small entities. Development of regulations that have 

small entity orientation will be beneficial in the long run to the agency. Since most regulated entities are 

small, rules that have a small entity orientation will likely garner greater support from that community, 

increased compliance, reduced penalties, and quicker achievement of the agency’s statutory objective. A 

regulation that does not have such small entity orientation will face resistance from the regulated 

community, force the agency to increase enforcement, and delay accomplishment of whatever goal the 

agency was attempting to reach. For example, if the OSHA ergonomics rule had gone into effect in 2001, it 

is unlikely that many small entities could have complied. The Department of Labor would have expended 

scarce resources to obtain compliance without accomplishing the goal of increasing worker safety. 
48 RFA guide for government agencies

Have all significant alternatives been reviewed?

Has the statement of factual, policy, and legal reasons for selecting the alternative 

adopted in the final rule, and the reasons for rejecting other significant alternatives, been 

included or appropriately cross-referenced for easy identification by small entities? The 

Small Business Regulatory Enforcement Fairness Act (SBREFA)148 made significant 

changes to this section of the RFA with respect to compliance requirements. Prior to 

1996, an agency needed only state the alternatives and the reason (or reasons) for 

rejecting a particular alternative. As a result of the amendments, an agency must now 

include a statement of the factual, policy, and legal reasons for selecting the alternative 

adopted in the final rule. This explanation already is required under the APA, and the 

FRFA will help the agency demonstrate compliance with the APA’s rulemaking 

procedures through the clarification of the reasons for selecting or rejecting particular 

alternatives. In addition to educating the courts, the rationales might spur action by 

Congress to correct a flaw that the agency identified. Thus, the FRFA, if done correctly, 

can play a key role in the development of public policy. The agency must also detail for 

the public record why each of the other significant alternatives was rejected; again, this is 

a requirement of APA rulemaking requiring the agency to explain how it considered all 

relevant statutory criteria including those mandated by the RFA. The changes indicate 

that agencies were not providing specific explanations of their final actions. There should 

be significant articulable and supportable reasons for rejecting alternatives. President 

Obama reaffirmed the principle of documenting a decision to reject an alternative that 

may reduce regulatory burden for small entities.149 The development and consideration of 

alternatives is subject to judicial review.150

Permissible delays in publication; provision for lapse of final 

rule

Section 608(b) of the RFA provides that an agency may delay, but not waive, the 

completion of a FRFA if the rule is being promulgated in response to an emergency that 

makes compliance with the RFA impracticable. Under this provision, the agency must 

publish its reasons for the delay upon publication in the Federal Register. The delay may 

not exceed 180 days after the final rule is published; otherwise the rule lapses and has no 

effect. The rule cannot be re-promulgated until a FRFA has been completed. This section 

is also subject to judicial review.

 148 5 U.S.C. § 604(a)(6).

149 Memorandum for the Heads of Executive Departments and Agencies, “Regulatory Flexibility, Small 

Business, and Job Creation” (76 Fed. Reg. 3827, January 21, 2011). 150 See National Ass’n of Psychiatric Health Sys. v. Shalala, 120 F. Supp. 2d 33 (D.D.C. 2000), in which 

the court ordered HHS to complete a FRFA that discussed less burdensome alternatives considered and 

rejected in order to comply with the RFA.
Chapter 3: The final regulatory flexibility analysis 49

What a FRFA should look like: A real-life example

In Appendix K is an example of a satisfactory FRFA released by the Environmental

Protection Agency. This FRFA contains each of the elements required by the RFA and 

presents a thorough analysis of the regulation’s impact on small entities.151

 151 For an additional example of a satisfactory FRFA, see the Environmental Protection Agency final rule 

for Effluent Guidelines and Standards for the Organic Chemicals, Plastics, and Synthetic Fibers Industry, 

58 Fed. Reg. 36,872 (July 9, 1993).
Chapter 4: Small business advocacy review panels 51

CHAPTER 4 SBREFA PANELS

In 1996, SBREFA amended the RFA to include a number of important provisions. One of 

those was section 609, which requires, among other things, that certain agencies conduct 

special outreach efforts to ensure that small entity views are carefully considered prior to 

the issuance of a proposed rule. This outreach is accomplished through the work of small 

business advocacy review panels, sometimes referred to as SBREFA or SBAR (small 

business advocacy review) panels.

In July 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Act).152 Section 1011 of the act establishes the Consumer 

Financial Protection Bureau to supervise certain activities of financial institutions. 

Section 1100G, titled “Small Business Fairness and Regulatory Transparency,” amends 5 

U.S.C. § 609(d), to require the CFPB to comply with the SBREFA panel process, making 

it the third agency with this responsibility, along with the Environmental Protection 

Agency and the Occupational Safety and Health Administration. 

In addition to the regular requirements of the initial regulatory flexibility analysis (IRFA) 

found in 5 U.S.C. § 603, a CFPB IRFA must include “a description of (A) any projected 

increase in the cost of credit for small entities; (B) any significant alternatives to the 

proposed rule which accomplish the stated objectives of applicable statutes and which 

minimize any increase in the cost of credit for small entities; and (C) advice and 

recommendations of representatives of small entities relating to issues described in 

subparagraphs (A) and (B) and subsection (b).” When the Bureau produces a final 

regulatory flexibility analysis, it must include “a description of the steps the agency has 

taken to minimize any additional cost of credit for small entities.”

Who must hold SBREFA panels?

The statute requires that EPA, CFPB, and OSHA evaluate their regulatory proposals to 

determine whether SBREFA panels should be convened. 153 The requirement for 

SBREFA panels may appear to impose additional steps for these agencies in their 

rulemaking processes. However, the panel process only formalizes the outreach 

requirements and analyses that the Administrative Procedure Act and the RFA already 

mandate for all new rules that affect small businesses. Any additional work that may be 

needed in this special early outreach effort should be offset by time saved at the other end 

of the regulatory process. When problems are resolved before a proposed rule is 

published, objections from the public are reduced. Experience has shown that the panel 

process results in better rules, better compliance, and reduced litigation. In at least two

instances, EPA withdrew a regulatory proposal based on work performed in connection 

with the panel process.154

 152 Public Law 111-203. 153 5 U.S.C. § 609(d)(2). 154 See EPA’s Effluent Limitations Guidelines for Industrial Laundries; 64 Fed. Reg. 45071 (Dec. 12, 

1997), withdrawn by EPA on August 18, 1999, Effluent Limitations Guidelines for Construction and 

Development, 67 Fed. Reg. 42644 (June 24, 2002), withdrawn April 26, 2004. 
52 RFA guide for government agencies

How is the decision to hold a SBREFA panel made?

For each proposed rule, the RFA requires that an agency either certify that the proposal 

has no significant economic impact on a substantial number of small entities, or prepare 

an IRFA on the proposal.155 Whenever EPA, CFPB, or OSHA determines that a 

regulatory proposal may have a significant economic impact on a substantial number of 

small entities, the law further requires that the agency convene a review panel. SBREFA 

panels are required for all EPA, CFPB, and OSHA rules for which an IRFA is required. 

Panel outreach must take place before the publication of the proposed rule. However, the 

Chief Counsel for Advocacy may waive the panel requirement upon the request of EPA, 

CFPB, or OSHA under certain conditions. To waive the panel requirement, the Chief 

Counsel must find that convening a panel would not advance the effective participation 

of small entities in the rulemaking process. Section 609(e) of the RFA lays out several 

factors in making this determination, including consideration of whether small entities 

have already been consulted in the rulemaking process and whether special circumstances 

warrant the prompt issuance of a rule.

How does a SBREFA panel work?

A SBREFA panel consists of a representative or representatives from the rulemaking 

agency, the Office of Management and Budget’s Office of Information and Regulatory 

Affairs (OIRA) and the Chief Counsel for Advocacy.

The panel solicits information and advice from small entity representatives (SERs), who 

are individuals that represent small entities affected by the proposal. SERs help the panel 

better understand the ramifications of the proposed rule. Invariably, the participation of 

SERs provides extremely valuable information on the real-world impacts and compliance 

costs of agency proposals.

The law requires that a SBREFA panel be convened and complete its report with 

recommendations within a 60-day period. The formal panel process begins with the 

convening of the panel by the rulemaking agency. The date is normally fixed after 

consultation with both Advocacy and OIRA. Before convening, the three agencies work 

together to discuss regulatory alternatives and their advantages and disadvantages. The 

agencies also discuss what data, information, and regulatory alternatives will be 

presented to the SERs so that they can provide informed advice. As EPA advises in its 

SBREFA panel guidance, the agency “need(s) to describe in sufficient detail, including 

some analysis of the impact on small entities and environmental benefits, each significant 

regulatory alternative you have identified that accomplishes the statutory mandate.”156

With this information, the small entity representatives will be able to provide informed 

advice to the panel. The rulemaking agency usually has preliminary discussions with 

small entities about its draft proposal before the panel is formally convened. These 

 155 See Chapter 1 for a detailed discussion of how to certify a proposed rule and Chapter 2 on how to 

prepare an initial regulatory flexibility analysis. 156 2006 EPA Final Guidance, section 5.8.2. See section 5.8.2 for more guidance on what information 

should be provided to the panel and the small entity representatives.
Chapter 4: Small business advocacy review panels 53

preparations ensure that the panel process can be completed during the statutorily

specified 60-day period.

The product of a SBREFA panel’s work is its panel report on the regulatory proposal 

under review. The panel completes its final report, including its recommendations, early 

in a rule’s developmental stages, so that the agency has the benefit of the report’s 

findings prior to publication of a proposed rule. The panel report also becomes part of the 

official docket for the proposed rule.

The purpose of the panel process is threefold. First, the panel process ensures that small 

entities that would be affected by a regulatory proposal are consulted about the pending 

action and offered an opportunity to provide information on its potential effects. Second, 

a panel can develop, consider, and recommend less burdensome alternatives to a 

regulatory proposal when warranted. Finally, the rulemaking agency has the benefit of 

input from both real-world small entities and the panel’s report and analysis prior to 

publication.157

Suggested SBREFA panel timeline 

The RFA provides that the formal panel process must be concluded within 60 days from

the formal convening of the panel to the completion of its report. Experience has shown 

that the panel process works best if agencies and panel members accomplish as much 

preliminary work as possible before the formal convening of the panel. A suggested 

timeline follows, although panel members have flexibility to adjust their pre-panel work 

schedules to ensure the best outcome for each individual rule.

The EPA procedure is to hold two meetings with the SERs, one preceding and one 

following the formal convening of the panel. There are two opportunities for oral 

exchanges with the panel members, followed by two opportunities for written comments 

15 days after the meetings. The two sessions facilitate a robust discussion of the issues, 

and give the agency the ability to further refine its draft regulatory alternatives in light of 

the initial round of written SER comments. The timeline on the next page is based on the 

OSHA practice of a single SER meeting after convening; however, the OSHA practice is 

to start with a fully developed draft propped rule and preamble.

 1572006 EPA Final Guidance, Chapter 5, is a good source for effective panel procedures implementation, 

http://www.epa.gov/rfa/documents/Guidance-RegFlexAct.pdf. 
54 RFA guide for government agencies Suggested panel timeline1
Chapter 5: What the courts have said about the RFA 55

CHAPTER 5 RFA LITIGATION: WHAT THE COURTS HAVE SAID

This chapter examines litigation regarding the Regulatory Flexibility Act and is 

organized in sections corresponding to those of the compliance guide overall. The section 

does not reflect the Office of Advocacy’s opinion of the cases; rather, it is intended to 

provide the reader with information on specific case law and what the courts have held 

regarding agency compliance with the RFA. 

Where do we begin? First steps of RFA rule analysis

Does the RFA apply?

An agency must first consider whether the RFA applies to the regulatory proposal at 

issue. An appropriate consideration begins with an examination of the Administrative 

Procedure Act (APA) as it relates to the RFA. 

If, under the APA or any rule of general applicability governing federal grants to state 

and local governments, the agency is required to publish a general notice of proposed 

rulemaking (NPRM), the RFA must be considered.158 Significantly, some agencies, such 

as the Rural Utilities Service, have their own administrative rules that require notice and 

comment even though the agency’s rules may be exempt from the APA. If an NPRM is 

not required, the RFA does not apply.159 Pursuant to RFA section 601(2), the term “rule” 

does not include a rule of particular applicability to rates, wages, corporate or financial 

structures or reorganization thereof, prices, facilities, appliances, services, or allowances.

 158 5 U.S.C. § 604(a). See also National Association of Home Builders v. Army Corps of Engineers, 417 

F.3d 1272 (D.C. Cir. 2005) where the plaintiffs challenged nationwide permits issued under the Clean 

Water Act by the Corps as violating, inter alia, the RFA, because the Corps did not conduct a flexibility 

analysis as required by the RFA. The Army Corps of Engineers argued that its permitting action did not 

constitute a “rule.” It was an “order” because “order” included a “licensing” disposition and a “license” 

included a “permit.” The court considered the argument an “elaborate statutory construction” and rejected it 

for a more straightforward one. The court found that the permitting action fit within the APA’s definition of 

“rule” because each permit was a legal prescription of general and prospective applicability which the 

Corps issued to implement permitting authority that Congress entrusted to it pursuant to the Clean Water 

Act. As such, the action constituted a rule because it was an agency statement of general or particular 

applicability and future effect designed to implement, interpret, or prescribe law or policy. In addition, the 

court found that the Army Corps of Engineers action was a legislative rule because the permits authorized 

the discharge of certain materials, granted rights, imposed obligations, produced other significant effects on 

private interests. Accordingly, it was subject to the notice and comment requirements of the APA and to the 

requirements of the RFA.

159In Roche v. Evans, 249 F. Supp. 2d 47 (D. Mass. 2003), the New England Fishery Management Council 

(Council) adopted an adjustment to the existing Northeast Multispecies Fisheries Management Plan (FMP) 

mandating that certain fishing areas would be closed to fishing for varying lengths of time. The court stated 

that the RFA does not apply to the adoption of such a framework adjustment to an FMP because, under the

abbreviated framework adjustment procedure permitted under 50 C.F.R. § 648.90, there is no requirement 

that the Council “publish a general notice of proposed rulemaking.” The court noted, “the whole purpose of 

the framework adjustment procedure is to dispense with that requirement.” 249 F.Supp.2d at 57. With the 

trigger of notice and comment lacking, the court granted summary judgment in favor of the agency. 
56 RFA guide for government agencies

Further, only actions that qualify as rulemaking under the APA that affect small entities 

or small entity concerns trigger the protections of the RFA.160 Small entities whose 

concerns must be accounted for include small businesses, small not-for-profit 

organizations, and small governmental jurisdictions—cities, counties, towns, townships, 

villages, school districts, or special districts, with a population of less than 50,000.161

What qualifies as a rulemaking under the APA?

Rules are exempt from APA requirements, and therefore from the RFA requirements, 

when any of the following is involved:

1. Military or foreign affairs functions of the United States.162

2. Matters relating to agency management or personnel or to public property, loans, 

grants, benefits, or contracts. 163

Also exempt from the APA requirement for notice and comment rulemaking are 

interpretative rules.164 Interpretative rules generally require no judgments and little by the 

agency on implementation, but rather interpret the language or intent expressed by 

Congress. Legislative rules require judgments and great discretion; an example is setting 

a clean air standard for the nation. 

Exemptions under the APA

The D.C. District Court has addressed exemptions under the APA in determining whether 

the action qualifies as a rulemaking requiring notice and comment. In the following cases 

the courts held that the RFA did not apply because the APA requirements for notice and 

comment are inapplicable:

 160 Atlantic Fish Spotters Association v. Evans, 206 F. Supp. 2F.d 81, 93 (D. Mass. 2002). 161 5 U.S.C. § 601(3)-(5). See also Chapter 1 of this guide for a discussion of what qualifies as a small 

entity. State v. Centers for Medicare & Medicaid Services. 2010 WL 1268090 (M.D. Ala. 2010) 

(memorandum and order) where the court held that the State of Alabama did not have standing as a small 

entity; La Gloria Oil & Gas Co. v. United States, 56 Fed. Cl. 211 (2003), the court declined to address the 

plaintiff’s arguments concerning alleged violation of the RFA because plaintiff was not a small business; 

Williams Alaska Petroleum v. United States, 57 Fed. Cl. 789 (2003), the plaintiff was precluded from 

asserting a claim under the RFA because the plaintiff was not a small entity; Navajo Refining Co. v. United 

States, 58 Fed. Cl. 200 (2003), the court declined to address the plaintiffs’ arguments concerning the 

defendant’s alleged violation of the RFA because they were not small businesses and lacked standing to 

challenge the defendant’s compliance with the RFA. 

162 APA § 553(a)(1) exempts from notice and comment rulemaking those rules involving “a military or 

foreign affairs function of the United States.” The legislative history of § 553(a)(1) indicates the exception 

should be construed narrowly to include only those “ ‘affairs' which so affect relations with other 

governments that, for example, public rulemaking provisions would clearly provoke definitely undesirable 

international consequences.” S.Rep. No. 752, 79th Cong., 1st Sess. 13 (1945). Jean v. Nelson, 711 F.2d 

1455 (11th Circuit 1983). 163 5 U.S.C. § 553(a). 164 SBREFA amended the RFA to bring certain interpretative rulemakings of the Internal Revenue Service 

within coverage of the RFA. The law now applies to those IRS rules published in the Federal Register that 

would normally be exempt from the RFA as interpretative rules, but that impose a “collection of 

information” requirement on small entities. For a more detailed discussion, see Chapter 1.
Chapter 5: What the courts have said about the RFA 57

Military or foreign affairs functions of the United States. In reviewing the early RFA 

case, In re Sealed Case,165 the D.C. District Court held that regulations such as those 

delineating the products subject to the ban on importation into the United States of 

uranium ore, uranium oxide, textiles, and coal from South Africa, fell under the foreign 

affairs function of the United States; thus, the provisions of the Administrative Procedure 

Act, 5 U.S.C. 553, requiring notice of proposed rulemaking and opportunity for public 

participation were inapplicable. Because a notice of proposed rulemaking is not required 

for this rule, the Regulatory Flexibility Act, 5 U.S.C. §601 et seq., did not apply.166

Interpretative rules. In National Association for Home Care v. Shalala,167 the plaintiffs 

argued that the Department of Health and Human Services failed to consider alternatives 

to the proposed rule as required by the RFA. The agency, however, asserted that the 

Balanced Budget Act (BBA) did not grant the Secretary any discretion in implementing 

the Interim Payment System (IPS). The court agreed, holding that the BBA was an 

interpretative rather than substantive rule, given its high degree of specificity regarding 

the implementation of the IPS. As an interpretative rule, the BBA need not comply with 

the RFA. The court stated generally that the RFA does not apply to interpretative rules 

which merely clarify or explain existing laws or regulations.168

Publications not subject to the APA and rate exemptions. In American Moving and 

Storage Association, Inc., v. DOD, 169 the D.C. District Court examined a notice 

published in the Federal Register by the Department of Defense announcing a significant 

change in procurement policy regarding its source for distance calculations for payments 

and audits in its transportation programs from a previously used official mileage table to 

a new computer software program. The plaintiffs asserted that the change would have a 

significant economic impact on small carriers, requiring RFA compliance. DOD asserted 

that the policy change was not a “rule” as defined by the RFA, and therefore it did not 

have to comply with the RFA. The court agreed with the agency and held that the 

procurement policy change was not a “rule” for RFA purposes. The court further found 

that even if the RFA definition of a rule included some procurement policy changes, the 

calculations for payments and audits were exempt from the definition by the APA 

exception relating to rates.170 As a result, the RFA did not apply.171

Good Cause. In Oregon Trollers Association v. Gutierrez,

172 the Ninth Circuit upheld 

the lower court’s decision regarding NMFS’s invocation of the good cause exception to 

the APA’s notice and comment provisions in an action involving the management of the 

Chinook salmon season. The plaintiffs argued that NMFS failed to prepare the economic 

analyses required by the RFA. The RFA applies to any rule requiring notice and 

 165 In re Sealed Case, 666 F. Supp. 231, 236 (D.D.C. 1987). 166 Id. See also Jean V. Nelson, 711 F.2d 1455. 167 National Association for Home Care v. Shalala, 135 F. Supp. 2d 161, 165 (D.D.C. 2001). 168 Id. See also, Cent. Tex. Tel. Coop. v. F.C.C., 402 F.3d 205 (D.C. Cir. 2005); Broadgate, Inc. v. United 

States Citizenship & Immigration Services, 730 F. Supp. 2d 240 (D.D.C. 2010). 

169 American Moving and Storage Association v. DOD, 91 F. Supp. 2d 132, 136 (D.D.C. 2000). 170 5 U.S.C. § 553(b) (1996). 171 Id. at 136. 172 Oregon Trollers Association v. Gutierrez, 452 F.3d 1104 (9th Cir. 2006).
58 RFA guide for government agencies

comment under section 553(b) of the APA. The court held that NMFS’s invocation of the 

“good cause” exception to the RFA requirement was valid because the NMFS gave 

season-specific reasons for the exception. NMFS explained that management measures 

are based on data from the prior season, which are not available until January. Because 

the new season opens on May 1, the 60-day comment period is infeasible. The court 

added that as long as the NMFS provides fresh reasoning related to the season in which 

the exception applies, repeated invocation of the exception is not a problem.

The certification statement

The decision process

An agency may certify that no regulatory flexibility analysis is necessary when it 

determines that the rule will not have a significant economic impact on a substantial 

number of small entities that are subject to the requirements of the rule. However, an 

agency must provide a factual basis for the certification. A mere statement that there will 

be no effect is not sufficient. The agency must conduct an analysis demonstrating that it 

has considered the potential effects of the regulation.173

Cases in which the certification violated the RFA. In a number of cases, the 

certification was found to have violated the RFA.

In Northwest Mining Association v. Babbitt,

174 the Bureau of Land Management (BLM) 

published a final rule in February 1997 that would impose a bonding requirement on 

hardrock mining. The rule was originally proposed in 1991. While the original proposal 

would have set a limit on bonding requirements, the final rule contained burdensome 

provisions not included in the proposal—provisions on which the public, therefore, had 

no opportunity to comment. The BLM certified that the rule would not have a significant 

economic impact on a substantial number of small entities. However, the agency failed to 

substantiate its conclusions. In remanding the rule, the court stated that the final rule’s 

certification violated the RFA because the factual basis for the certification that the 

agency provided failed to incorporate the correct definition of small entity.175

In North Carolina Fisheries Association v. Daley,176 the District Court for the Eastern 

District of Virginia found that NMFS violated the RFA when it certified that there would 

not be a significant economic impact on a substantial number of small entities, because 

the fishing quota would remain unchanged. The court remanded the matter to NMFS with 

instructions to perform a proper analysis because even though the quota was the same, 

the agency provided no data to show that the quota was still valid.177

 173 North Carolina Fisheries Association v. Daley, 16 F. Supp. 2d 647, 652 (E.D. Va. 1997). 174 Northwest Mining Association v. Babbitt, 5 F. Supp. 2d 9, 14 (D.D.C. 1998). 175 Id. at 652. 176 North Carolina Fisheries Association v. Daley, 16 F. Supp. 2d 647 (E.D. Va. 1997). 177 See additional discussion of this case later in this chapter.
Chapter 5: What the courts have said about the RFA 59

In Harlan Land Co. v. United States Department of Agriculture,

178 the District Court for 

the Eastern District of California found the certification analysis performed by the 

Animal and Plant Health Inspection Services (APHIS) of the U.S. Department of 

Agriculture (USDA) was inadequate. APHIS had published a final rule allowing the 

importation of lemons, grapefruit, and oranges from various areas in Argentina. APHIS 

prepared an economic analysis of the rule and determined that the rule would not have a 

significant economic impact on a substantial number of small entities. Based on that 

determination, APHIS did not prepare an RFA analysis.179 Citrus growers brought suit 

against the USDA and APHIS, arguing that the agency violated both the APA and the 

RFA in issuing the rule. The economic analysis in the final rule focused on the impact 

that the Argentine imports would have on the supply and prices of citrus fruit in the 

United States and the resulting costs and benefits to domestic growers, etc. The analysis 

failed to consider what the costs would be if Argentine plant pests were introduced into 

U.S. citrus orchards. The court found that APHIS’s determination of a lack of significant 

economic impact on a substantial number of small entities was based on its conclusion 

that there was a negligible risk of pest introduction. The court considered the risk 

assessment to be flawed and thus remanded the final rule to the defendants for 

consideration of the economic impact that the importation of Argentine citrus will have 

on small businesses.

In American Federation of Labor v. Chertoff,

180 the Department of Homeland Security 

(DHS) promulgated a final rule titled Safe-Harbor Procedures for Employers Who 

Receive a No-Match Letter. Under the rule, an employer who received a “no-match 

letter” (indicating that an employee’s name and social security number did not match) 

could take certain actions to avoid liability. The plaintiffs (union and business 

representatives) sought a preliminary injunction to bar enforcement of the rule, asserting 

that it was arbitrary and capricious in violation of the APA, and that promulgation of the 

rule violated the RFA. In promulgating the rule, DHS certified that the rule would not 

have a significant impact on small entities. However, in briefing, DHS claimed that an 

RFA analysis was unnecessary because the rule was voluntary, and that the RFA does not 

apply to interpretative rules. The court did not consider the post-rule rationalization that 

the rule was interpretive, focusing instead on DHS’s first argument, which was that there 

was no impact on small entities because the rule was voluntary. The court was persuaded 

by the plaintiff’s declarations that the rule could have significant costs, noting the 

potential costs of hiring human resources staff to track and solve mismatches, hiring legal

services help, and training staff. The court decided that there were “serious questions 

[about] whether DHS violated the RFA,” and granted the plaintiff’s motion for 

preliminary injunction.

181

Where the court found that certification was appropriate. In other cases, courts found 

that agencies properly certified rules.

 178 Harlan Land Co. v. United States Dept. of Agriculture., 186 F. Supp. 2d 1076 (E.D. Cal. 2001).

179 Id. at 1097. 180 American Federation of Labor v. Chertoff, 552 F.Supp.2d 999, ( N.D.Cal., 2007). 181 Id. at 1013.
60 RFA guide for government agencies

In Associated Builders and Contractors, Inc., v. Herman, the Department of Labor 

suspended a revised class of employees called “helpers” on federal construction sites in 

1993 and reinstated former helper regulations pursuant to a congressional mandate.182

Regarding the RFA, the Department of Labor certified that the rule would not have a 

significant economic impact on a substantial number of small entities. The court upheld 

the certification, because the rule preserved the status quo, and DOL estimated few firms 

would have taken advantage of the helper classifications during the interim period 

pending final rulemaking.

183

In Environmental Defense Center. v. E.P.A,

184 EPA issued a rule, pursuant to the Clean 

Water Act, to control pollutants introduced into the nation’s waters by storm sewers. The 

rule mandated that discharges from small municipal storm sewers and construction sites 

sized 1-5 acres be subject to the permitting requirements of the National Pollutant 

Discharge Elimination System (NPDES). The EPA certified that the rule would not yield 

“significant impacts.” The plaintiffs argued that the EPA’s certification was erroneous 

because the EPA mislabeled significant costs as “not significant,” failed to account for 

the costs of all affected small entities, and failed to account for all significant costs to 

small entities. The Ninth Circuit agreed with the Natural Resources Defense Council’s 

view that “plain language of § 605(b) sets out a three-component test indicating that EPA 

need not perform a regulatory flexibility analysis if it finds that the proposed rule will not 

have: (1) “a significant economic impact” on (2) “a substantial number” of (3) “small 

entities.”185 The Ninth Circuit determined that the EPA complied with the RFA and 

reasonably certified that the rule would not have a significant economic impact, but did 

not explain clearly its reasoning, beyond stating the legal test described above.

The court also noted that any procedural defect was harmless error because the EPA had

already conducted the economic analyses the petitioners sought when they convened a 

small business advocacy review panel before publishing notice of the proposed rule. The 

EPA had followed the advice and recommendations of the panel and included provisions 

designed to minimize impacts on such entities, such as alternative compliance and 

reporting mechanisms responsive to the resources of small entities, simplified procedures, 

performance rather than design standards, and waivers. The court noted that “...the 

analyses required by RFA are essentially procedural hurdles; after considering the 

relevant impacts and alternatives, an administrative agency remains free to regulate as it 

sees fit.” 186

In Cactus Corner v. U.S.D.A.,187 USDA promulgated a rule allowing and setting 

conditions for resumption of the importation of Spanish clementines, following a ban 

after the discovery of live Mediterranean fruit fly (Medfly) larvae. Domestic fruit 

growers and packers sought declaratory and injunctive relief to set aside and hold the rule 

 182 Associated Builders and Contractors, Inc., v. Herman, 976 F. Supp. 1 (D.D.C. 1997). 183 Id. 184 Environmental Defense Center. v. E.P.A, 344 F.3d 832 (9th Cir. 2003). 185 Id. at 879-880. 186 344 F.3d at 879. 187 Cactus Corner v. U.S.D.A., 346 F. Supp. 2d 1075 (E.D. Cal. 2004).
Chapter 5: What the courts have said about the RFA 61

unlawful, claiming, inter alia, that the rule violated the RFA because the agency had 

failed to prepare an initial or final regulatory flexibility analysis. It also sought to enjoin 

the defendant from implementing the rule or otherwise allowing the importation of 

clementines from Spain, and an award of costs, disbursements, and reasonable attorneys’

fees. USDA conducted a regulatory impact analysis (RIA), which concluded that the 

regulatory benefits outweighed the regulatory costs associated with the implementation of 

the rule. Based on the RIA, the agency determined that the proposed rule would not have 

a significant economic impact on a substantial number of small entities. The court stated 

that, because the agency certified that the rule would “likely not have a significant 

economic impact on a substantial number of small Medfly host crop producers in the 

United States,” initial and final regulatory flexibility analyses were not needed. 188 It

further stated that the certification was supported by an analytical statement including 

factors such as the relatively low percentage of income derived by small wholesalers 

from clementine sales, and that small importers and wholesalers would likely be “better 

off” under the proposed regulations when compared with their status under the current 

ban on the importation of clementines as well as compared with the less strict conditions 

imposed before the ban.189The court stated that the agency relied on other analyses 

supporting its overall conclusion that the rule itself will result in a sufficiently high 

probability that Medfly infestation will not occur to conclude that any impact the new 

rule will have on small entities will be positive rather than negative, negating the need for 

a regulatory flexibility analysis.190

Size standards

It is important that an agency use the size standard contained in the Small Business 

Administration’s small business size standard regulations,191 promulgated by the SBA 

under the Small Business Act, or follow the consultation procedures outlined in section 

601(3) of the RFA. 

Incorrect size standard. In Northwest Mining Association v. Babbitt, discussed above, 

the court held that BLM violated the RFA because the agency failed to use the 

appropriate size standard as defined by the Small Business Administration (SBA). The 

court noted that “the RFA requires agencies to use the Small Business Administration's 

definition of small entity.”192 Continuing, the court stated that “section 601 of the RFA 

sets forth, in relevant part, ‘[f]or the purposes of this chapter ... the term 'small entity' 

shall have the same meaning as the term 'small business' ....’”193 The term “small 

business” has the same meaning as the term “small business concern” under section 3 of 

the Small Business Act.194 The SBA publishes these small business definitions in 13 

C.F.R. § 121.201. Division B of section 121.201 provides, in pertinent part, that mining 

 188 Id. at 1087. 189 Id. at 1115

190 Id. at 1116.

191 13 C.F.R. § 121.201 (1996).

192 Northwest Mining Association, 5 F. Supp. 2d at 15. See Chapter 1 for detail on exceptions to using SBA 

size standards.

193 5 U.S.C. § 601(6).

194 15 U.S.C. § 632; 5 U.S.C. § 601(3). 
62 RFA guide for government agencies

concerns must have 500 or fewer employees to be considered “small.”195 Therefore, the 

standard for “small miner” which the BLM must use when performing an initial or final 

regulatory flexibility analysis or when certifying “no significant impact” is a 500 or fewer 

employee standard. By using a definition other than the SBA's, the BLM violated the 

procedure of law mandated by the statute. The court found that the definitions section of 

the RFA uses phrases such as “ 'small entity' shall have the same meaning ...” and “'small 

business' has the same meaning ...” 196 (emphasis added). The court concluded that words 

such as those do not leave room for alternate interpretations by the agency. The rule was 

remanded to the agency.

Use of Incorrect Size Standard Cured. In Small Business in Telecommunications v. the 

Federal Communications Commission (FCC), 197 the FCC adopted its own definition of 

“small business” regarding its Lower Channel Report and Order concerning a regulatory 

scheme for specialized mobile radio (SMR) service in the 800 to 900 MHz range. The 

Court of Appeals for the District of Columbia Circuit held that although the FCC failed to 

seek approval from the SBA for its definition, the omission did not nullify the entire 

rulemaking, since SBA did ultimately approve the definition prior to commencement of 

the lower channel auction.198 If the agency modifies a small business size standard in the 

implementation of a rule, it must seek approval from the SBA Administrator.199

The agency must conduct an adequate analysis before certifying

The landmark legal decision recognizing an agency’s failure to adequately examine the 

impact on affected entities before certification is the 1998 case, Southern Offshore 

Fishing Association v. Daley.200 In that matter, the National Marine Fisheries Service 

(NMFS) published a proposed rulemaking to institute a 50 percent reduction in the shark 

fishing industry. NMFS certified that the rule would not have a significant economic 

impact on a substantial number of small entities. Although the agency published a FRFA 

at the time it finalized the rule, the court found that the agency certified without making a 

“reasonable, good-faith effort,” prior to issuance of the final rule, to inform the public 

about the potential adverse effects of its proposals and about less harmful alternatives. 

The agency continued to deny that its proposal would likely have a significant impact on 

a substantial number of small entities after receiving public comments challenging the 

certification. The court concluded that the preparing of a FRFA constituted “an attempt to 

agreeably decorate a stubborn conclusion” that there was no significant impact on a 

substantial number of small entities. The court remanded the agency’s certification 

determination, requiring it to “undertake a rational consideration of the economic effects 

and potential [regulatory] alternatives.”201

 195 Id.

196 5 U.S.C. § 601. 197Small Businesses in Telecomm. v. FCC, 251 F.3d 1015, 1025 (D.C. Cir. 2001).

198Id.

199 Id. at 1025. 200 Southern Offshore Fishing, 995 F. Supp. at 1437. 201 Id.
Chapter 5: What the courts have said about the RFA 63

North Carolina Fisheries. The North Carolina Fisheries cases provide further guidance 

on what constitutes adequate analysis prior to certification that there will be no 

significant economic impact on a substantial number of small entities. 

The first case arose in 1997.202 There, the National Marine Fisheries Service (NMFS) set 

the 1997 quota for flounder fishing by continuing the quota from the previous year. In

doing so, NMFS did not perform a regulatory flexibility analysis. Instead, the agency 

certified that the rule would not have a significant impact on a substantial number of 

small businesses because the quota remained the same from 1996 to 1997. There was no 

record showing that the agency did any comparison between conditions in 1996 and 

1997. The court stated that “a simple conclusory statement that, because the quota was 

the same in 1997 as it was in 1996, there would be no significant economic impact, is not 

an analysis.”203 The court remanded the issue to the agency with orders to “undertake 

enough analysis to determine whether the quota had a significant economic impact on the 

North Carolina Fishery.”204 The court further ordered the department to “include in [the] 

analysis whether the adjusted quota will have a significant economic impact on small 

entities in North Carolina.”205

The issue returned to the court in 1998.206 The issue before the court on remand was 

whether the Secretary of Commerce had discharged his responsibilities under the RFA 

and under National Standard 8 of the Magnuson Act to perform an economic analysis.207

After review, the court concluded that “the Secretary of Commerce acted arbitrarily and 

capriciously in failing to give any meaningful consideration to the economic impact of 

the 1997 quota regulations on North Carolina fishing communities. Instead, the Secretary 

has produced a so-called economic report that obviously is designed to justify a prior 

determination.”208 The court further stated that as part of an adequate analysis before 

certification, the agency must consider alternatives less burdensome to small entities.209

The court concluded that “Congress has not intended for administrative agencies to 

circumvent the fundamental purposes of the RFA by invocation of the certification 

provision.” The court felt that Secretary Daley’s certification in this instance amounted to 

an effort to avoid the requirements of the RFA, specifically the requirement to consider 

alternative ways to minimize economic impacts. Because the court found that the 

Secretary and the agency did not uphold their responsibilities under the law, it set aside 

the 1997 summer flounder quota and imposed a penalty against the NMFS. 

Court cases have held that the agency must account for the public comments it received 

challenging the initial determination that no significant economic impact was likely.210 In 

 202 North Carolina Fisheries, 16 F. Supp. 2d at 647. 203 Id at 653. 204 Id. 205 Id. 206 North Carolina Fisheries Association v. Daley, 27 F. Supp. 2d 650 (E.D. Va. 1998). 207 Id. at 660. 208 Id. at 668.

209 Id. at 660. 210 See generally, National Truck Equip. Association v. NHTSA, 919 F.2d 1148 (6th Cir. 1990); Northwest 

Mining Association v. Babbitt, 5 F. Supp. 2d 9 (D.D.C. 1998).
64 RFA guide for government agencies

Northwest Mining Association v. Babbitt,

211 the court addressed the Bureau of Land 

Management (BLM) claims that the Northwest Mining Association (NWMA) did not 

have standing to object to its final rule under either the APA or the RFA because it did 

not submit comments during the notice and comment period. The NWMA asserted that it 

did not need to submit comments during the notice and comment period because the 

BLM's original rule proposal did not properly inform it that its interests were at stake. 

The court agreed with the NWMA, holding that because there was no way the NWMA 

could have submitted comments regarding issues on which it was not informed were at 

stake, the agency must consider even comments not submitted during the formal notice 

and comment period.212

Bare Certification Not Sufficient. In Theiss v. Principi,

213the Veteran’s Administration 

promulgated an amendment to define “educational institution,” excluding home schools. 

The court determined that this was a substantive, legislative rule and was invalid for 

failure to comply with notice-and-comment procedures under the APA. The court warned 

that any future amendment should comply with the APA as well as with the provisions of 

the RFA and that a “bare certification” like the one in this case would likely be 

insufficient because it was not accompanied by a “statement providing the factual basis 

for such certification.”214

Direct versus indirect impact on small entities

Must the agency consider the indirect effects of the proposed regulation? It was first 

held in Mid-Tex Electric Cooperative, Inc., v. Federal Energy Regulatory Commission 

(FERC) that a regulatory flexibility analysis is required when an agency determines that 

the rule will have a significant economic impact on a substantial number of small entities 

that are subject to the requirements of the rule.215 In that case, FERC proposed a rule that 

allowed electric utilities to include in their rate bases amounts equal to 50 percent of their 

investments in construction work in progress. In response to an argument that FERC 

“should have considered the impact of the proposed rule on wholesale and retail 

customers of the jurisdictional entities subject to rate regulation by the Commission,” 

FERC stated that “the RFA does not require the Commission to consider the effect of this 

rule, a federal rate standard, on nonjurisdictional entities whose rates are not subject to 

the rule.”216

The court agreed, reasoning that “Congress did not intend to require that every agency 

consider every indirect effect that any regulation might have on small businesses in any 

stratum of the national economy.”217 The court concluded that “an agency may properly 

certify that no regulatory flexibility analysis is necessary when it determines that the rule 

 211 Northwest Mining Association, 5 F. Supp. 2d 9. 212 Id at 13. 213 Theiss v. Principi, 18 Vet. App. 204 (2004). 214 Id. at 214. 215 Mid-Tex Elec. Coop v. FERC, 773 F.2d 327, 342 (D.C. Cir. 1985). 216 Id. at 341. 217 Id.
Chapter 5: What the courts have said about the RFA 65

will not have a significant economic impact on a substantial number of small entities that 

are subject to the requirements of the rule.”218

In viewing this decision, the same court later held in United Distribution Companies. v. 

FERC219 that an agency is under no obligation to conduct a small entity impact analysis 

of effects on entities it does not regulate. Because in this case FERC had no jurisdiction 

to regulate the local distribution of natural gas, it could not be required to conduct a 

regulatory flexibility analysis for those entities engaged in the local distribution of the 

gas.220

Although Mid-Tex occurred prior to the passage of the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 1996, post-SBREFA courts have upheld its 

reasoning. For example, in Motor and Equipment Manufacturers Association v. 

Nichols,221 the court found that because the deemed-to-comply rule did not subject any 

aftermarket businesses to regulation, EPA was not required to conduct a regulatory 

flexibility analysis as to small aftermarket businesses. It was only obliged to consider the 

impact of the rule on small automobile manufacturers subject to the rule, and it met that 

obligation. A number of other cases have held similarly.222

Likewise in American Trucking Associations v. EPA,223 EPA established a primary 

national ambient air quality standard (NAAQS) for ozone and particulate matter. At the 

time of the rulemaking, EPA certified the rule pursuant to 5 U.S.C. § 605(b). The basis of 

the certification was that EPA had concluded that small entities were not subject to the 

rule because the NAAQS only regulated small entities indirectly through the state 

implementation plans.224 Although the court remanded the rule to the agency for nonRFA reasons, the court found that EPA had complied with the requirements of the RFA. 

Similarly, in Michigan v. EPA,

225 EPA certified that its revised NAAQS would not have 

a significant economic impact within the meaning of the RFA. According to the EPA, the 

NAAQS itself imposed no regulations upon small entities. Instead, several states regulate 

small entities through the state implementation plans they are required by the Clean Air 

Act to develop. Because the NAAQS regulated small entities only indirectly—that is, 

insofar as it affected the planning decisions of the states—the EPA concluded that small 

entities were not “subject to the proposed regulation.” The court agreed, stating that states 

have broad discretion in determining the manner in which they will achieve compliance 

with the NAAQS. In conclusion, the court stated that “a State may, if it chooses, avoid 

 218 Id. at 343.

219 United Dist. Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996). 220 Id. 221 Motor and Equip. Mfrs. Association v. Nichols, 142 F.3d 449, 467 (D.C. Cir. 1998). 222 See American Trucking Associations. v. EPA, 175 F.3d at 1044; Michigan v. EPA, 213 F.3d 663, 689 

(D.C. Cir. 2000); Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 868 (D.C. Cir. 2001).

223 American Trucking, 175 F.3d at 1027. 224 Id. 225 Michigan v. EPA, 213 F.3d at 689.
66 RFA guide for government agencies

imposing upon small entities any of the burdens of complying with a revised 

NAAQS.”226

The court in Cement Kiln Recycling Coalition v. EPA227 further bolstered the notion that 

indirect impacts should be disregarded by noting that the RFA is not intended to apply to 

every entity that may be targeted by the proposed regulation. The fact that the rule will 

have economic impacts in many sectors of the economy does not change this. The court 

reasoned that “requiring an agency to assess the impact on all of the nation's small 

businesses possibly affected by a rule would be to convert every rulemaking process into 

a massive exercise in economic modeling, an approach we have already rejected.”228

An entity can otherwise experience indirect impacts through its dealings with the entity 

that experiences direct impacts, such as through increased after-market prices or newly 

required modifications to necessary equipment. Some courts have stated that this impact 

would likewise not require a regulatory flexibility analysis.229

In White Eagle Cooperative Association v. Conner,

230 the plaintiffs, a cooperative of milk 

producers, brought action challenging USDA’s amendment of a regional milk marketing 

order. The United States District Court for the Northern District of Indiana entered 

summary judgment in government's favor, and the association appealed. Among other 

things, plaintiffs asserted that in adopting the amendments to the marketing order, USDA 

violated the RFA by failing to undertake an analysis and by employing the certification 

option without sufficient factual support. USDA asserted that plaintiffs could not 

challenge the agency’s RFA compliance because the order regulates handlers—not 

producers. Since the plaintiffs are an association of producers, not handlers, USDA 

argued that plaintiffs lacked standing to challenge the agency’s compliance. The court 

held that the association did not have standing to raise a challenge under the RFA 

because the impact was indirect.

Where an Agency Argued Indirect Impact Unsuccessfully. In Aeronautical Repair 

Station Association v. F.A.A.

231, the plaintiff challenged a final rule of the Federal 

Aviation Administration (FAA) which amended its drug and alcohol testing regulations 

to expressly mandate that air carriers require drug and alcohol tests of all employees of its 

contractors, including employees of subcontractors at any tier, who perform safetyrelated functions such as aircraft maintenance. The plaintiff challenged the rule on the 

 226 Id.; see also, Nat’l Women, Infants, & Children Grocers Association v. Food & Nutr. Serv., 416 F. 

Supp. 2d 92 (D.D.C. 2006) where the court granted summary judgment to the defendant and denied the 

plaintiffs’ motion for summary judgment, holding the FNS certification proper because the interim rule 

regulated state agencies—the impact on small businesses was indirect. Furthermore, the court bolstered its 

reasoning by citing the fact that FNS stated in the Federal Register that it planned to use data collected 

from the interim rule to strengthen its ultimate FRFA.

227 Cement Kiln, 255 F.3d at 868. 228 Id.

229 See, e.g., Nichols, 142 F.3d at 467; Cement Kiln, 255 F.3d at 868. 230 White Eagle Cooperative Association, et al., v. Charles F. Conner, Acting Secretary, United States 

Department of Agriculture, 553 F.3d 467 (7th Cir. 2009). 231 Aero. Repair Station Association v. F.A.A. 494 F.3d 161 (D.C. Cir. 2007).
Chapter 5: What the courts have said about the RFA 67

grounds that it impermissibly expanded the scope of employees tested in violation of the 

unambiguous statutory language of § 45102(a)(1), the Administrative Procedure Act, 5 

U.S.C. §§ 701-06, and the Fourth and Fifth Amendments to the United States 

Constitution. In addition, it challenged the FAA's conclusion that it was not required to 

conduct a regulatory flexibility analysis. The court upheld the substance of the rule but 

rejected the FAA's RFA determination.

In the NPRM, the FAA performed a tentative RFA analysis and counted among RFA 

small entities both air carriers and Part 145 repair stations because it could not determine 

how many of the 2,412 Part 145 repair stations are considered small entities. In the 

second NPRM, the FAA determined that the small entity group is considered to be Part 

145 repair stations, but it still could not determine how many of the Part 145 repair 

stations and their subcontractors were considered small entities. The FAA concluded that 

most, if not all of the noncertificated maintenance contractors would be considered small 

entities. Based on its calculation of annualized costs of less than 1 percent of annual 

median revenue, the FAA certified that the proposed action would not have a significant 

economic impact on a substantial number of small entities.

Although commentators raised RFA issues, in the final rule FAA disagreed and asserted 

that contractors were not among entities regulated under the testing regulations for the 

purpose of the RFA. The FAA noted that the directly regulated employers were air 

carriers operating under 14 CFR Parts 121 and 135, § 135.1(c) operators, and air traffic 

control facilities not operated by the FAA or under contract to the U.S. military, who 

must conduct drug and alcohol testing under the FAA regulations. For drug and alcohol 

testing purposes, certificated repair stations were contractors, and contractors were not 

regulated employers. Accordingly, the FAA concluded it was not required to conduct an 

RFA analysis, including considering significant alternatives, because contractors 

(including subcontractors at any tier) were indirectly regulated entities.

In making its determination, the FAA relied on the Mid-Tex case and other cases that held 

that under the RFA the regulating agency need consider only the economic impact on

businesses directly affected and regulated by the subject regulations. The plaintiffs 

asserted that the FAA's determination was incorrect. The court found that, unlike the 

parties claiming economic injury in the cited cases, the contractors and subcontractors 

were directly affected and therefore regulated by the challenged regulations. Although the 

regulations immediately addressed the employer air carriers which were in fact the parties 

certified to operate aircraft, the regulations expressly required that the employees of 

contractors and subcontractors be tested. Thus, the contractors and subcontractors (at 

whatever tier) were entities subject to the proposed regulation.

The FAA also asserted that it had substantially complied with the RFA because it 

conducted initial evaluations and a final economic evaluation of the effects on the 

industry, responding to comments following the proposal. The court found that the final 

evaluation was not a FRFA because the FAA determined that contractors and 

subcontractors are not regulated entities for the purpose of the RFA. In addition, the FAA 

did not consider alternatives as required by the RFA. The court upheld the substance of 
68 RFA guide for government agencies

the FAA's 2006 final fule and remanded for the limited purpose of conducting the 

analysis required under the RFA, treating the contractors and subcontractors as regulated 

entities.

The initial regulatory flexibility analysis 

Because an agency’s initial regulatory flexibility analysis cannot be the subject of 

litigation,232 case law provides a detailed discussion only for the final regulatory 

flexibility analysis. It is important to note that although the IRFA is not judicially 

reviewable, a proper IRFA is necessary to provide the foundation for a good FRFA. An 

agency cannot develop an adequate FRFA if the IRFA did not lay the proper foundation 

for eliciting public comments and seeking additional economic data and information on 

the regulated industry’s profile and regulatory impacts. Further, without an adequate 

IRFA, small entities cannot provide informed comments on regulatory alternatives that 

are not adequately addressed in the IRFA.233

In Allied Local and Regional Manufacturers Caucus v. EPA, paint manufacturers and 

associations of manufacturers and distributors of architectural coatings petitioned for 

review of EPA’s regulations limiting the content of volatile organic compounds (VOCs) 

in consumer and commercial products such as architectural coatings, including paints.234

Plaintiffs alleged that EPA failed to comply with the RFA by failing to discuss the 

economic impact of “stigmatic harm” arising from the agency’s suggestion that it may 

impose more stringent VOCs in the future, and of asset devaluation, in that the coatings 

rule allegedly will render existing product formulas valueless. The court ruled that 

section 603 of the RFA, which discusses IRFAs, was not subject to judicial review 

pursuant to section 611(c). However, the court did have the jurisdiction to determine 

whether the agency had met the overall requirement that the decisionmaking not be 

arbitrary and capricious. The court found that the EPA examined alternatives to product 

reformulation when creating regulations limiting content of VOCs in consumer and 

commercial products, and that its decisions were neither arbitrary nor capricious. The 

court, therefore, found that EPA had met its obligations under the RFA.

Similarly, in U.S. Cellular Corp. v. FCC, 235 the court noted that an IRFA is not subject to 

judicial review. There, the FCC adopted an order requiring wireless carriers to bear 

financial responsibility for enhanced 911 implementation, rather than having local 

government guarantee costs. Plaintiffs argued that the FCC failed to issue an IRFA and 

that the FRFA did not contain a description of the steps the agency took to minimize the 

impact on small businesses, as required by the RFA. The court held that the RFA 

 232 Because § 611 of the RFA does not mention § 603, the IRFA requirement, a court would consider a prepromulgation challenge unripe. 

233 Southern Offshore Fishing, 995 F. Supp. at 1434 and 1436 (“the agency could not possibly have 

complied with § 604 by summarizing and considering comments on an IRFA that NMFS never prepared”).

234 Allied Local and Reg’l Mfrs. Caucus v. EPA, 215 F.3d 61 (D.C. Cir. 2000). 235 U.S. Cellular Corp. v. FCC, 254 F.3d 78, 89 (D.C. Cir. 2001). 
Chapter 5: What the courts have said about the RFA 69

expressly prohibits courts from considering claims of noncompliance with RFA section 

603’s requirement to issue an IRFA.236

The final regulatory flexibility analysis 

General content

Section 604 of the RFA prescribes the content of the FRFA. Courts have found that an 

agency can satisfy the requirements of section 604 “as long as it compiles a meaningful, 

easily understood analysis that covers each requisite component dictated by the statute 

and makes the end product readily available to the public.”237 For example, in Associated 

Fisheries of Maine, Inc., v. Daley, the court stated that the Secretary of Commerce had 

complied with FRFA requirements because the Secretary explicitly considered numerous 

alternatives, exhibited a fair degree of sensitivity concerning the need to alleviate the 

regulatory burden on small entities within the fishing industry, adopted some salutary 

measures designed to ease that burden, and satisfactorily explained reasons for adopting 

others. Similarly, in Alenco Communications v. FCC,

238 the court held that the regulatory 

analysis was compliant with the terms of the RFA where the agency provides a lengthy 

analysis of the economic impact of the proposed rule on small businesses and responds to 

comments submitted by the Office of Advocacy and other commenters.239

The court addressed the issue in National Association of Mortgage Brokers v. Board of 

Governors of the Federal Reserve System.

240 In that case, the National Association of 

Independent Housing Professionals, Inc. (NAIHP) and the National Association of 

Mortgage Brokers (NAMB) “requested the Court to issue a temporary restraining order 

and preliminary injunction to enjoin the Board of Governors of the Federal Reserve 

System [Board] from implementing a Final Rule . . . that restricts certain compensation 

practices of loan originators relating to mortgage loans.” Among other claims, the 

Plaintiffs argued that the Board failed to comply with the RFA because they “[1] failed to 

provide a statement of need for or objectives of the rule; [2] failed to meaningfully 

analyze the Rule’s impact on small businesses; [3] failed to respond to public comments; 

and [4] failed to analyze alternatives to the proposed regulation.” The court disagreed, 

finding that the FRFA stated that the rule addressed problems that have been observed in 

the mortgage market in order to prohibit unfair and deceptive acts and practices in 

connection with mortgage loans, and recognized that the rule would have a “‘significant 

economic impact on a substantial number of small entities but the precise compliance 

costs were difficult to ascertain. The FRFA also discussed and rejected alternatives from 

 236 Id. 237 Associated Fisheries of Maine, Inc., v. Daley, 127 F.3d 104, 115 (1st Cir. 1997); Grand Canyon Air 

Tour Coalition v. FAA, 154 F.3d 455, 470 (D.C. Cir. 1998); National Propane Gas Association v. DOT, 43 

F. Supp. 2d 665, 681 (N.D. Tex. 1999); Associated Builders and Contractors, Inc., v. Herman, 976 F. Supp. 

1 (D.D.C. 1997). 

238 Alenco Communications v. FCC, 201 F.3d 608 (5th Cir. 2000).

239 Id. at 625. 240 National Association of Mortgage Brokers v. Board. Of Governors of the Federal Reserve System, 773 

F. Supp. 2d 151 (D.D.C. 2011).
70 RFA guide for government agencies

public comments. The court stated that the Board did not need to address each portion of 

the rule challenged in the comments because it “addressed the effects of all of the Rule’s 

prohibitions regarding loan originator compensation collectively, and this satisfies the 

Board’s obligations under 5 U.S.C. § 604(a).” In making its ruling the court reiterated 

that the RFA’s requirements are purely procedural and although it directs agents to state, 

summarize, and describe, the RFA in and of itself imposes no substantive constraints on 

agency decisionmaking. Moreover, the agency does not need to present its FRFA in any 

particular mode of presentation, as long as the FRFA compiles a meaningful, easily 

understood analysis that covers each requisite component dictated by the statute and 

makes the end product readily available to the public. Finally, the court noted that failure 

to comply with the RFA may be, but does not have to be, grounds for overturning a rule. 

Additionally, while making a section 604 challenge, parties may raise the related but 

distinct claim that an agency did not reasonably address the rule’s impact on small 

businesses and such challenges are evaluated under the arbitrary and capricious standard 

of review.241

Is a FRFA always required?

A FRFA is required in every instance where an agency finalizes a rule after being 

required to publish a general notice of proposed rulemaking under section 553 of the 

APA or any other law. The exception is when the agency certifies the rule will not have a 

significant economic impact on the affected entities, as discussed above. 

However, in the event that the publication of an NPRM is impossible due to the 

emergency nature of the rule, the requirements of the RFA may be satisfied by publishing 

a FRFA subsequent to the rulemaking.242 In National Propane Gas Association v. 

DOT,243 the Department of Transportation's Research and Special Programs 

Administration (RSPA) instituted an emergency interim final rule to address concerns 

about the transportation of compressed gas on highways. RSPA later modified and 

adopted the interim final rule as the emergency discharge control regulation for loading 

or unloading of cargo tank motor vehicles. The regulation required vehicle operators to 

shut down immediately if they learned of a gas leakage.

Gas companies brought suit alleging various violations of the APA and RFA. Plaintiffs 

challenged the rule on the grounds that defendants failed to prepare a FRFA, as required 

by the RFA. RSPA argued that the rule was not subject to the RFA because the RFA

applies only to the rules for which an agency is required to publish a notice of proposed 

rulemaking pursuant to section 553 of the APA. RSPA asserted that the APA did not 

require a notice of proposed rulemaking here because of the emergency nature of the rule. 

Nevertheless, RSPA claimed that in preparing preliminary and final regulatory 

evaluations under Executive Order 12866, the agency did analyze the impact of the 

interim final rule and the final rule on all affected parties, including small businesses. The 

court agreed, and found that although the agency did not prepare a FRFA, all of the 

 241 Id. at 178. 242 National Propane Gas Association, 43 F. Supp. 2d at 681. 243 Id.
Chapter 5: What the courts have said about the RFA 71

elements of a FRFA were available throughout their summary of such analysis published 

in the Federal Register. The court thus found that RSPA complied with each of the 

requirements found in the RFA, including responding to comments and consideration of 

alternatives. The court asserted that a preliminary regulatory evaluation was available in 

the docket for the public to provide comment, and it also found that to require an 

additional analysis by the agency would be duplicative.

Considering alternatives to the final rule

Section 604 of the RFA requires the agency to consider alternatives that would achieve 

the statutory objectives while lessening the regulatory burden on affected small entities. 

This involves making a “reasonable, good-faith effort to canvass major options and 

weigh their probable effects.”244

In AML International, Inc., v. Daley, 245 the National Marine Fisheries Service

implemented a management plan for the spiny dogfish industry that imposed quotas that 

effectively shut down the industry for the next five years. The plaintiffs asserted that 

NMFS failed to comply with the RFA because the NMFS failed to consider alternatives. 

The court found that NMFS’s consideration of alternatives was sufficient. NMFS 

considered and rejected alternatives because they did not meet the mandate of the 

Magnuson-Stevens Act or provide long-term economic benefits greater than those of the 

proposed action.246

Similarly, in Ace Lobster Co. v. Evans,

247 the Department of Commerce imposed 

limitations on the number of lobster traps that could be used in a particular area. Lobster 

fisherman and business owners alleged that the Department of Commerce implemented 

the regulations in violation of the APA, the Magnuson-Stevens Act, and the RFA. The 

basis for the assertion was that during the comment period, numerous commenters 

submitted information about an alternative plan for the lobster fishery, which was 

approved by the Lobster Conservation and Management Team and submitted for 

consideration as an alternative. The agency rejected the alternative because it would 

likely increase the number of lobster traps in offshore waters and increase the lobster 

mortality rate. Plaintiffs alleged that the defendant did not adequately analyze the 

selected alternative or consider the alternative that would mitigate the negative economic 

impacts on offshore fishing fleets, and that the agency’s concern for verification of prior 

fishing fleets was unfounded.248 The court stated that under the standard for judicial 

review of compliance with the RFA, the court reviews only whether the agency 

conducted a complete IRFA and FRFA in which it described steps to minimize the 

economic impact of its regulations on small entities and discussed alternatives, providing 

a reasonable explanation for rejections. The RFA permits the agency to select an 

alternative that is more economically burdensome if there is evidence that other 

 244 National Association of Psychiatric Health Sys. v. Shalala, 120 F. Supp. 2d 33, 42 (D. D.C. 2000). 245 AML Int’l v. Daley, 107 F. Supp. 2d 90 (D. Mass. 2000). 246 Id. at 105. 247 Ace Lobster Co. v. Evans, 165 F. Supp. 2d 148 (D. R.I. 2001). 248 Id. at 185.
72 RFA guide for government agencies

alternatives would not accomplish the objectives of the statute. Because the agency 

examined the alternative and decided that, while less onerous, it did not achieve the 

conservation goals, it met its obligations under the RFA. The court further found that 

there was sufficient analysis and explanation of the other rejected alternatives.249

What kinds of alternatives must the agency consider? In Associated Fisheries of 

Maine, the court first held that section 604 does not require that a FRFA address every 

alternative, only significant ones.250 The RFA does permit the agency to select an 

alternative that is more economically burdensome if there is evidence that other 

alternatives would not accomplish the stated objectives of the applicable statutes.251

What is a significant alternative? This question was clarified by the court in Little Bay 

Lobster Co. v. Evans.

252 There, the court stated that “significant alternatives” are those 

with potentially lesser impacts on small entities (versus large-scale entities) as a whole, 

and not those that may lessen the regulatory burden on some particular small entity. 

Further, the agency is not obligated under the RFA to address alternatives that might have 

had lesser impacts on some small entities vis-à-vis other similarly affected small 

entities.253

In Hall v. Evans, 254 the Department of Commerce determined that the monkfish fishery 

was overfished. To address the problem, the agency implemented a fishery management 

plan to prescribe landing limits for vessels holding limited access monkfish permits. The 

limits allowed categories A and C vessels using trawl gear to land up to 1,500 pounds of 

monkfish tailweight per day at sea, while vessels using any gear other than trawl or 

“mobile” gear may land up to 300 pounds of monkfish tailweight per day at sea. The 

plaintiffs filed suit asserting that the regulations violated the Magnuson Act and the RFA. 

The plaintiffs asserted that the defendant’s RFA analysis: (1) failed to recognize the costs 

of forcing closures of the directed monkfishing industry within 4 years, supposedly to 

allow the industry to receive positive revenue benefits after 20 years; (2) forced 

particularly harsh consequences on small businesses; and (3) failed to conduct an 

assessment of meaningful and more gradual restrictions in order to avoid severe costs to 

small businesses. Plaintiffs asserted that neither the IRFA nor the FRFA provided an 

assessment of the real economic impact on small entities in that the IRFA failed to assess 

the number and quality of vessels affected by the regulations and failed to address the 

disparity in landing allocations between different gear types. Although the regulations 

were set aside for violation of the Magnuson Act, the court found no violation of the 

RFA. With respect to the RFA allegations, the court found that there was enough 

evidence in the IRFA to show that the defendants considered both the economic effect of 

the fishery plan as a whole upon small entities and less onerous alternatives.255

 249 Id. 250 Associated Fisheries of Maine, 127 F.3d at 115; See also Grand Canyon Air Tour Coalition, 154 F.3d at

470 and Blue Water Fishermen’s Association v. Mineta, 122 F. Supp. 2d 150, 178 (D. D.C. 2000). 251 Associated Fisheries of Maine, 127 F.3d at 114. 252 Little Bay Lobster Co v. Evans, 2002 WL 1005105, Slip. Op. (D. N.H. May 16, 2002). 253 Id. at 25. 254 Hall v. Evans, 165 F. Supp. 2d 114 (D.R.I. 2001). 255 Id. at 147.
Chapter 5: What the courts have said about the RFA 73

What kind of description of the alternatives considered must the agency include in 

the FRFA? The RFA requires a statement of the factual, policy, and legal reasons for 

selecting the alternative adopted by the final rule and why each one of the other 

significant alternatives to the rule considered by the agency that affect the impact on 

small entities was rejected.

In Ashley County Medical Center v. Thompson,

256 the Department of Health and Human 

Services imposed upper payment limit (UPL) regulations that would reduce the upper 

limit on what states could reimburse locally owned public hospitals for services to 

Medicaid beneficiaries. The plaintiffs alleged that the FRFA failed to describe the steps 

the agency had taken to minimize the significant economic impact on hospitals, and 

failed to discuss any affirmative steps the agency had taken or intended to take to 

mitigate the injury that the 2002 UPL rule would cause to public hospitals. The court, 

noting that the RFA requires only that the agency describe steps taken and not that the 

agency take any particular steps, stated that if there were no steps that could have been 

taken to minimize the impact on small businesses, then the statutory requirement would 

have been met simply by reporting that information. The court noted that the agency had 

provided a description of the alternatives considered and rejected in the Federal Register, 

and thus all the requirements of the RFA were clearly satisfied.257

Conversely, in Nat’l Assoc. of Psychiatric Health Sys. v. Shalala,

258 the plaintiffs 

challenged an interim final rule promulgated by the Department of Health and Human 

Services (HHS) that required a face-to-face evaluation of patients within one hour after 

the patient has been placed in restraints or seclusion. The plaintiffs argued that the 

Secretary failed to conduct an adequate analysis before adopting the one-hour provision. 

The court agreed with the plaintiffs, stating that it could not find that the Secretary made 

a good-faith effort to canvass major alternatives and weigh their probable effects.259

Specifically, the Secretary did not obtain data or analyze available data on the impact of 

the final rule on small entities, nor did she properly assess the impact the final rule would 

have on small entities. The court stated that by these omissions the Secretary totally 

failed to comply with section 5 of section 604(a) of the RFA.260 The court thus remanded 

the matter to HHS for completion of a compliant FRFA.261

However, in Southern Offshore Fishing Ass’n v. Daley,

262 the court stated that the 

agency’s consideration of alternatives was inadequate. Particularly troublesome to the 

 256 Ashley County Med. Ctr. v. Thompson, 205 F. Supp. 2d 1026 (E.D. Ark. May 13, 2002). 257 Id. See also Nat’l Coal. for Marine Conservation v. Evans, 231 F. Supp. 2d 119 (D.D.C. 2002) where 

plaintiffs argued that the Florida Closure violated the RFA, alleging that the DOC’s analysis of the 

economic, social, and environmental effects of the closure as well as alternatives to minimize harm impacts 

Florida’s fishing communities was flawed or superficial. The court held that the DOC considered 

alternatives, and granted the DOC’s motion for summary judgment.

258 National Association of Psychiatric Health Sys. v. Shalala, 120 F. Supp. 2d 33 (D.D.C. 2000).

259 Id. at 44. 260 Id. Note that because of renumbering resulting from an added provision in the RFA, section 5 is now 

section 6.

261 Id. at 42. 262 Southern Offshore Fishing Association v. Daley, 995 F. Supp. 1411 (M.D. Fla. 1998).
74 RFA guide for government agencies

court was the “agency’s apparently superficial analysis of less restrictive alternatives to 

the quota reduction. After extensive discussion and summary of its statistical modeling, 

[the agency’s] report devotes only four of fifty pages to considering potential 

alternatives.”263

Exceptions to the requirement of considering alternatives:

• Where uniform requirements are mandated by statute, a statement to that effect by 

the implementing agency obviates the need to solicit or consider proposals which 

include differing compliance standards.264

• Where the Secretary is not granted the authority to examine alternatives in 

implementing the regulation.265

Analysis of the economic impact

What type of analysis must the agency conduct? It is now well established that the 

RFA does not require an economic modeling, per se.266 Rather, the RFA mandates only 

that the agency describe the steps it took “to minimize the economic impact on small 

entities consistent with the stated objectives of applicable statutes.”267 Neither costbenefit analysis nor economic modeling is specifically required,268 as long as the agency 

compiles a meaningful, easily understood analysis that covers each requisite component 

dictated by the statute and makes the end product—whatever form it reasonably may 

take—readily available to the public.269 However, such an examination may be required 

by the underlying statute or E.O. 12866, working in concert with the RFA.

An agency can satisfy the requirements of an economic impact analysis by providing 

either a quantifiable or numerical description of the effects of a proposed rule or 

alternatives to the proposed rule, or more general descriptive statements if quantification 

is not practicable or reliable.270 Courts have stated that sufficient analysis and 

 263 Southern Offshore Fishing Association. at 1437. 264 Greater Dallas Home Care Alliance v. United States, 10 F. Supp. 2d 638, 648 (N.D. Tex. 1998). 265 Greater Dallas Home Care Alliance v. United States, 36 F. Supp. 2d 765, 769 (N.D. Tex. 1999). 266 Alenco Communications, 201 F.3d at 625; see also Ashley County Med. Ctr 205 F. Supp. 2d at 1026; 

and Ace Lobster, 165 F. Supp. 2d at 184. 267 Alenco Communications, 201 F.3d at 625. 268 See National Telephone Cooperative Association v. Federal Communications Commission and United 

States of America, 563 F.3d 536, 385 U.S. App. D.C. 327, 47 Communications Reg. (P&F) 985 (C.A. D.C. 

2009) , where the court reiterated its previous finding that the RFA’s requirements are “purely procedural.” 

Though it directs the agencies to state, summarize, and describe, the act in and of itself imposes no 

substantive constraint on agency decisionmaking. The RFA requires agencies to publish analyses that 

address certain legally delineated topics. Because the analysis at issue addressed all of the legally mandated 

subject areas, it complied with the RFA. See also Association of American Physicians & Surgeons v. 

H.H.S., 224 F. Supp 2d 1115 (S.D. Tex. 2002). 

269 National Association of Mortgage Brokers at 178. 270 Alenco Communications, 201 F.3d at 625.
Chapter 5: What the courts have said about the RFA 75

explanations for the rejection of alternatives are all that is necessary to satisfy this 

requirement.271

Where the majority of businesses likely to experience impacts are deemed small, it 

follows that any attempt to reduce the adverse economic impacts of a regulation aimed at 

them is necessarily an attempt to minimize the negative effects of the regulation on small 

business.272

What is the relevant economic impact that agencies should consider? For the purpose 

of flexibility analysis, the relevant economic “impact” is the impact of compliance.273

The RFA requires only that the agency consider the economic effect on the entity, and 

not the effect on specific revenue earned.274 This means that the agency need not consider 

how one particular element of the affected entity’s business is affected. Rather, the 

agency should evaluate the regulation’s entire effect.

What type of information should the agency consider? The agency should consider 

economic data and information regarding the regulated industry’s profile and the 

anticipated regulatory impacts. The agency needs to consider the scope of the problem 

and the small business contribution to that problem. If necessary, the agency should seek 

additional information of this type through public comments, outside research, 

stakeholder meetings, etc.

It is important that the agency appropriately consider all relevant information. It has been 

held that although an agency has considerable discretion to act on the basis of less than 

perfect information when performing the analysis of the rule’s economic impact on small 

entities, it is not permissible to omit known information in order to skew the results.275

In North Carolina Fisheries Ass’n v. Daley,

276 the court examined the agency’s economic 

analysis. In performing the analysis, the Secretary of Commerce utilized criteria 

employed internally by the National Marine Fisheries Service (NMFS) in evaluating the 

economic impacts of regulations under the RFA. Thus, the Secretary considered the 

following criteria:277

Criterion 1: Does the action result in revenue loss of more than 5 percent for 20 

percent or more of the participants? 

Criterion 2: Does the action result in 2 percent of the entities ceasing operations?

 271 Ace Lobster, 165 F. Supp. 2d at 185. 272 Associated Fisheries of Maine, 127 F.3d at 115. 273 Mid-Tex, 773 F.2d at 342. 274 Washington v. Daley, 173 F.3d 1158, 1170 (9th Cir. 1999). 275 North Carolina Fisheries, 27 F. Supp. 2d at 660. 276 Id. 277 It should be noted that NMFS no longer uses these criteria for its RFA analyses.
76 RFA guide for government agencies

Based on the NMFS's internal guidelines, the Secretary found that there would be no 

significant economic impact on a substantial number of small businesses arising from the 

1997 summer flounder quota. In making this determination, the economic analysis used 

the total number of vessels to be issued moratorium permits as “the universe for the 

evaluation of impacts.” The small entities or communities studied constituted the whole 

state of North Carolina. Examining the unadjusted 1997 quota first, the economic 

analysis stated that it was “possible” that criterion 1 would be triggered by reducing the 

income of more than 20 percent of the entire North Carolina fleet by more than 5 percent. 

The economic analysis next considered the NMFS's criterion under the initial 1997 quota 

adjustment. Under the adjustment, the economic analysis determined that 57 percent of 

the vessels with home ports in North Carolina are projected to have revenue reductions of 

greater than 5 percent. The economic analysis further maintained that an additional 43 

percent of North Carolina's flounder fleet may have reduced revenues by 25 percent or 

more. Despite this assessment, the economic analysis concluded that there were no 

significant economic impacts and asserted that any adverse effects arising from the initial 

1997 quota adjustment were offset by previous revenues the fishermen had earned from 

overfishing.278 The court concluded that the Secretary prepared an economic analysis 

utterly lacking in compliance with the requirements of the RFA. In the first place, the 

Secretary did not consider a community any smaller than the entire state of North 

Carolina. In the second place, the Secretary completely ignored readily available data that 

would have shown the number of fishing vessels likely to experience the impacts of the 

agency's regulatory actions. The agency’s economic analysis indicating that there would 

be no significant economic impact on a substantial number of small entities was the result 

of impermissibly considering too large a community and ignoring readily available 

data.279

Public comments

Ordinarily, an agency must seek public comments regarding each proposal and the basis 

for the agency’s decision in each case. The agency must be responsive to the comments it 

receives, accounting for the dismissal of significant alternatives proposed in the IRFA or 

by the commenters. Failure to seek public comments or to be responsive frustrates 

important public participation and will result in a breach of the RFA. An agency might 

consider eliciting information such as additional economic data, or information regarding 

the regulated industry’s profile and regulatory impacts through public comments.

Must an agency always seek public comment? An agency need not seek comment on 

information that is supplementary to the decision. That is to say, an agency is entitled to 

rely on information not exposed to comment only as long as it is not substantially related 

to the agency’s rationale.280 Any information relied on in the analytical process at all, 

however, must be included in the IRFA.

 278 North Carolina Fisheries, 27 F. Supp. 2d at 660.

279 Id. 280 National Mining Association v. Chao, 160 F. Supp. 2d 47, 88 (D.D.C. 2001).
Chapter 5: What the courts have said about the RFA 77

Judicial review

The 1996 SBREFA amendment provides, for the first time, for judicial review of agency 

action under the RFA and allows the Chief Counsel for Advocacy to file as amicus curiae

(friend of the court) in regulatory appeals. “In any such action, the Chief Counsel is 

authorized to present his or her views with respect to compliance with this chapter, the 

adequacy of the rulemaking record with respect to small entities, and the effect of the rule 

on small entities.”281 The standard of review is whether the agency acted in a manner that 

was arbitrary and capricious.282

 281 5 U.S.C. § 612(b). 282 National Association of Mortgage Brokers v. Board of Governors at 178.
Chapter 6: Section 610 periodic review of rules 79

CHAPTER 6 SECTION 610 REVIEW OF EXISTING RULES

Section 610 of the Regulatory Flexibility Act283 requires federal agencies to review 

regulations that have a significant economic impact on a substantial number of small 

entities284 within 10 years of their adoption as final rules. In Executive Orders 13563 and 

13579, President Obama reaffirmed the need for agencies to carry out retrospective 

analyses of existing rules.285 For example, Executive Order 13563 says that: 

Within 120 days of the date of this order, each agency shall develop and submit to 

the Office of Information and Regulatory Affairs a preliminary plan, consistent 

with law and its resources and regulatory policies, under which the agency will 

periodically review its existing significant regulations to determine whether any 

such regulations should be modified, streamlined, expanded, or repealed so as to 

make the agency’s regulatory program more effective or less burdensome in 

achieving the regulatory objectives. 286

Executive Order 13579 reiterates the provisions relating to retrospective analyses of 

existing rules, noting that independent agencies should, within 120 days of the date of the 

order, develop and release to the public a plan as described in E.O. 13563.287 President 

Obama issued a memorandum with the executive order, asking the independent agencies 

to reassess their regulations and to follow the principles of E.O. 13563.

These periodic rule reviews are a mechanism for agencies to assess the impact of existing 

rules on small entities and to determine whether the rules should be continued without 

change, or should be amended or rescinded, consistent with the objectives of applicable 

statutes. Agency compliance with section 610’s periodic review requirement has varied 

substantially from agency to agency since 1980.288 While some agencies systematically 

review all of their existing rules, other agencies review few, if any, of their current rules.

Agencies also vary considerably in the amount of public involvement they allow, and the 

amount of information they provide to the public about their reviews.

Statements made during the 1980 debate on the Regulatory Flexibility Act demonstrate 

that Congress intended for section 610 to be a mechanism that requires agencies to 

 283 5 U.S.C. § 610 (2000). 284 “Small entities” include small businesses that meet the Small Business Administration size standard for 

small business concerns at 13 C.F.R. § 121.201, small governmental jurisdictions with a population of less 

than 50,000, and small organizations that are independently owned not-for-profit enterprises and which are 

not dominant in their field. See 5 U.S.C. §§ 601(3)-(5). 285 Exec. Order No. 13,563 § 6 and Exec. Order No. 13,579 § 2. 286 Exec. Order No. 13,563 § 6(b). 287 Exec. Order No. 13,579 § 2(b). 288 See, for example, Government Accountability Office, Reexamining Regulations: Opportunities Exist to 

Improve Effectiveness and Transparency of Retrospective Reviews (GAO-07-791), July 2007; General 

Accounting Office, Regulatory Flexibility Act: Agencies’ Interpretations Vary (GAO/GGD-99-55) April 

1999. See also Michael R. See, Willful Blindness: Federal Agencies’ Failure to Comply with the 

Regulatory Flexibility Act’s Periodic Review Requirement – and Current Proposals to Invigorate the Act, 

33 Fordham Urb. L.J. 1199-1255 (2006).
80 RFA guide for government agencies

periodically re-examine the regulatory burden of their rules vis-à-vis small entities,

considered in the light of changing circumstances.289 This view was also reflected in 

Advocacy’s initial 1982 guidance explaining the then-new RFA, which stated that 

The RFA requires agencies to review all existing regulations to 

determine whether maximum flexibility is being provided to 

accommodate the unique needs of small businesses and small entities.

Because society is not static, changing environments and technology 

may necessitate modifications of existing, anachronistic regulations to 

assure that they do not unnecessarily impede the growth and 

development of small entities.290

RFA section 610 review

The objective of a section 610 review is like the goal of many other retrospective rule 

reviews:291 to determine whether an existing rule is actually working as it was originally 

intended and whether revisions are needed. Has the problem the rule was designed to 

address been solved? Are regulated entities (particularly small entities) able to comply 

with the rule as anticipated by the agency? Are the costs of compliance in line with the 

agency’s initial estimates? Are small businesses voicing continuing concerns about the 

difficulty they have complying with the rule? The section 610 review is an excellent way 

to address these questions.

Review of rules that were originally certified

In some cases, even if an agency was originally able to certify properly under section 

605 of the RFA that a rule would not have a significant economic impact on a 

substantial number of small entities,292 changed conditions may mean that the rule now 

does have a significant impact and therefore should be reviewed under section 610. For 

 289 House Debate on the Regulatory Flexibility Act, 142 Cong. Rec. H24,575, H24,583-585 (daily ed. Sept. 

8, 1980) (“At least once every 10 years, agencies must assess regulations currently on the books, with a 

view toward modification of those which unduly impact on small entities.” (Statement of Rep. McDade)) 

(“[A]gencies must review all regulations currently on the books and determine the continued need for any 

rules which have a substantial impact on small business.” (Statement of Rep. Ireland)). Similarly, the 

section-by-section analysis of the periodic review provision of S. 299, which became the RFA, notes that 

the required factors in a section 610 review mirror the evaluative factors in President Carter’s Executive 

Order 12,044, Improving Government Regulations. Exec. Order 12,044, 43 Fed. Reg. 12,661 (March 24, 

1978). Pursuant to that Executive Order, President Carter issued a Memorandum to the Heads of Executive 

Departments and Agencies in 1979, further instructing federal agencies: “As you review existing regulatory 

and reporting requirements, take particular care to determine where, within statutory limits, it is possible to 

tailor those requirements to fit the size and nature of the businesses and organizations subject to them.”

President Jimmy Carter, Memorandum to the Heads of Executive Departments and Agencies, November 

16, 1979.

290 Office of Advocacy, The Regulatory Flexibility Act (October 1982).

291 Typical agency-initiated retrospective regulatory reviews include post-hoc validation studies, reviews 

conducted pursuant to petitions for rulemaking or reconsideration, paperwork burden reviews, and reviews 

undertaken to advance agency policies.

292 See 5 U.S.C. § 605(b). 
Chapter 6: Section 610 periodic review of rules 81

example, many more small businesses may be subject to the rule now than when the 

rule was promulgated. The cost of compliance with a current rule may have increased

sharply because of a required new technology. If there is evidence (such as new cost or 

burden data) that a rule is now having a significant economic impact on a substantial 

number of small entities, including small communities or small nonprofit 

organizations, Advocacy believes that the agency should conduct a section 610 review. 

Advocacy is aware that some agencies interpret section 610 not to require the periodic 

review of rules that were originally certified when they were promulgated as having no 

significant economic impact on a substantial number of small entities. This narrow 

interpretation of the section 610 review requirements discounts several important 

considerations. First, evidence of significant current impacts to small entities from an 

existing rule may call into question the accuracy of the original determination that the 

rule would have no significant impact. Second, as time passes and the agency (along with 

regulated small entities) is better able to measure and understand the impacts of a 

regulation, it benefits the agency to use the periodic review process to update their rules 

and perform regulatory “housekeeping.” Third, limiting section 610 reviews only to rules 

that were found to have a significant economic impact on a substantial number of small 

entities at the time of promulgation would severely undercut the intent of section 610.

EPA and OSHA, for example—which between them determine that at most one or two 

rules each year will have such an impact—will exclude from section 610 review each of 

the hundreds of other rules promulgated annually that may now have a significant impact

on small entities. Given the legislative history of section 610, it is very difficult to believe 

that Congress intended this outcome. Finally, a reading of the plain language of section 

610 supports Advocacy’s interpretation. If Congress meant to limit periodic reviews, it 

would have simply required agencies to review rules that originally had a significant 

impact, rather than rules that now have a significant impact. 

An agency may learn about the current impacts of an existing rule through complaints 

from small entities or petitions for a section 610 or other retrospective review of the rule.

If these complaints and/or petitions are founded on reliable cost and impact data, the 

agency will have a clear indication that the rule is now having an impact on small 

entities.

Scope of the review 

Once an agency has determined that an existing rule has a significant economic impact on 

a substantial number of small entities at the present time, the agency’s section 610 review 

should, at a minimum, address each of the five factors listed in section 610(b)(1)-(5):

• Whether or not there a continuing need for this rule, consistent with the stated 

objectives of the applicable statutes;

• Whether the public has ever submitted comments or complaints about this rule;

• The degree of complexity of this rule; 

• Whether some other federal or state requirement accomplishes the same 

regulatory objective as this rule; and 
82 RFA guide for government agencies

• The length of time since the agency has reviewed this rule, and/or the extent to 

which circumstances have changed which may affect regulated entities. 

Particular attention should be paid to changes in technology, economic circumstances, 

competitive forces, and the cumulative burden faced by regulated entities. Has the 

impact of the rule on small entities remained the same?

Section 610(b) requires an agency to evaluate and minimize “any significant economic 

impact of a rule on a substantial number of small entities in a manner consistent with the 

stated objectives of applicable statutes.” To accomplish this, agencies may want to use an 

economic analysis similar to the initial regulatory flexibility analysis (IRFA) under 

section 603 of the RFA, taking into account the limitations on data availability and 

limited agency resources.293 Agencies have the discretion to place significant weight on 

other relevant factors, in addition to the types of economic data required by an IRFA.

These other factors include an agency’s experience in implementing the rule, as well as 

the views expressed over time by the public, regulated entities, and Congress. With the 

benefit of actual experience with a rule, the agency and other interested parties should be 

in a good position to evaluate potential improvements to the rule. Several factors deserve 

attention here, such as the benefits achieved by the regulation, unintended market effects 

and market distortions, unusually high firm mortality rates in specific industry subsectors, and widespread noncompliance with reporting and other paperwork 

requirements. Thus, a useful review should go beyond obvious measures such as ensuring 

that regulatory requirements are expressed in plain language and that paperwork can be 

filed electronically. The analysis should be aimed at understanding and reducing burdens 

that unnecessarily have a significant impact on small entities. 

As a matter of good practice, the section 610 analysis should be based on relevant data, 

public comments, and agency experience. The agency should make use of available 

information and data supplied by the public, and indicate the sources of the data. To the 

extent that an agency relies on specific data to reach a conclusion about the continuing 

efficacy of a rule, the agency should be able to provide that data. The agency should 

explain its assumptions so that stakeholders can understand its analysis. 

Timing of the review 

The language of section 610 specifies that the review should take place within 10 years 

after the date a rule is promulgated. While agencies need to gain some experience with a 

rule before undertaking a retrospective review, the review may take place prior to the 10-

year mark. If an agency substantially revises a rule after its initial promulgation, it is 

 293 See 5 U.S.C. § 603. The legislative history of S.299, which became the RFA, notes that “[i]n reviewing 

existing rules, agencies should follow the procedures described in sections 602-609 [of the RFA] to the 

extent appropriate.” 142 Cong. Rec. H24,575, H24,583-585 (daily ed. Sept. 8, 1980). In the context of a 

section 610 review, the elements of an IRFA analysis that should be present include: a discussion of the 

number and types of small entities affected by the rule, a description of the compliance requirements of the 

rule and an estimate of their costs, identification of any duplicative or overlapping requirements, and a 

description of possible alternative regulatory approaches.
Chapter 6: Section 610 periodic review of rules 83

arguable whether the 610 review may be delayed to correspond to the revision date.

Advocacy would not likely object to a revision of the date, but agencies should seek input 

from Advocacy on this point.

Section 610 does not specifically set a limit on the amount of time for a rule review.

Some agencies have reported that they spend more than a year on each section 610 

review. It is within an agency’s discretion to determine how much time it needs to spend 

on retrospective rule reviews. Advocacy recognizes that section 610 reviews may take 

more than a year in order to permit adequate time to gather and analyze data, to allow 

public comment, and to consider those comments in the review. Of course, some reviews 

could take less time, based on the complexity of the issues and the nature of the regulated 

industry. 

Agencies may wish to take advantage of the opportunity afforded in section 605(c) of the 

RFA to consider a series of “closely related rules” as one rule for periodic review 

purposes. An agency can accomplish a comprehensive section 610 review of closely 

related rules, satisfying the requirements of the RFA while potentially reducing the 

agency resources required. 

Outreach to regulated small entities

Section 610(c) of the RFA requires agencies to publish in the Federal Register a list of 

the rules they plan to review in the upcoming year. Agencies use the Unified Regulatory 

Agenda for this purpose.294 This listing requirement is intended to give small entities 

early notice of the section 610 reviews so that they will be ready and able to provide the 

agency with comments about the rule under review. As a practical matter, however, 

agencies often give stakeholders no other information about the ongoing status of a 

section 610 review, what factors an agency is considering in conducting the review, how 

comments can be submitted to the agency, or the factual basis on which the agency 

made its section 610 review findings.

Agencies should communicate with interested entities about the status of ongoing section 

610 reviews, as well as those they have completed, to enhance transparency. This 

information may be most efficiently communicated via an agency website or other 

electronic media, and should inform interested parties of their ability to submit 

comments, as well as the agency’s commitment to consider those comments. Several 

agencies already utilize web-based communications as an outreach tool during section 

610 reviews.295

Insights about an existing regulation received from regulated entities and other interested 

parties should be a key component of a retrospective rule review. By making the review 

process transparent and accessible, agencies are more likely to identify improvements 

that will benefit all parties at the conclusion of the review. Advocacy can help agencies 

who wish to communicate with small entity stakeholders by hosting roundtables, working 

 294 The Unified Regulatory Agenda can be accessed at http://www.reginfo.gov. 295 See, e.g., www.osha.gov, www.epa.gov, and www.dot.gov and search for “RFA section 610.”
84 RFA guide for government agencies

through trade groups, and getting a specific message to a targeted audience. Advocacy is 

ready to assist agencies in their outreach efforts. 

Using other agency reviews to satisfy section 610

Agencies that undertake retrospective rule reviews to satisfy other agency objectives may 

also be able to satisfy the periodic review requirement of section 610, as long as the rule 

reviews are functionally equivalent. For example, agencies that evaluated a current 

regulation pursuant to Executive Order 13563296, or earlier, the Office of Management 

and Budget’s 2002 publicly nominated rule reform process297 or OMB’s manufacturing 

rule reform process298 could qualify as section 610 reviews, if they otherwise met the 

criteria for section 610 review. Similarly, agencies that undertook retrospective reviews 

of their regulatory programs because of complaints or petitions from regulated entities 

could qualify as section 610 reviews – as long as the review includes the minimum 

factors required by section 610. The best way for agencies to get “credit” for a section 

610 review in these circumstances is to communicate adequately with stakeholders, and 

with Advocacy. 

Examples of successful retrospective rule reviews 

Federal Railroad Administration’s Section 610 Review of Railroad Workplace 

Safety. On December 1, 2003, the Department of Transportation’s Federal Railroad 

Administration (FRA) completed a section 610 review of its railroad workplace safety 

regulations. After determining that the workplace safety regulations had a significant 

economic impact on a substantial number of small entities, the FRA examined the rules 

in light of section 610’s review factors. Although the FRA did not recommend any 

regulatory change as a result of this review, they provided a good description of its 

analysis of the workplace safety regulations under each review factor and the agency’s 

conclusions.299

EPA’s RCRA Review. As a result of public nominations for reforms to the 

Environmental Protection Agency’s hazardous waste management program under the 

Resource Conservation and Recovery Act (RCRA), EPA evaluated the program and 

identified duplicative requirements, such as forcing filers to submit reports to multiple 

locations when one location is adequate. By reducing or eliminating these procedures 

 296 See, for example, p. 61 of 2011 Report to Congress on the Costs and Benefits of Federal Regulations 

and Unfunded Mandates on State, Local, and Tribal Entities (2011) available at 

http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf. 297 See Table 9, “New Reforms Planned or Underway – Regulations” and Table 10, “New Reforms Planned 

or Underway – Guidance Documents” in Informing Regulatory Decisions: 2003 Report to Congress on the 

Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities 

(September 2003) at 26-34; available at 

http://yosemite.epa.gov/SAB/sabcvpess.nsf/0/5143268e911789ba85256db900562c4b/$FILE/2003_costben_final_rpt.pdf. 298 See Regulatory Reform of the U.S. Manufacturing Sector (2005) at http://georgewbushwhitehouse.archives.gov/omb/inforeg/reports/manufacturing_initiative.pdf. 299See http://www.fra.dot.gov/downloads/safety/railroad_workplace_safety.pdf. 
Chapter 6: Section 610 periodic review of rules 85

after public notice and comment, EPA enabled regulated entities to collectively save up 

to $3 million per year while preserving the protections of the RCRA program. The 

retrospective review was successful because it involved a detailed review of the 

program’s requirements and their costs, based on years of practical experience. The 

agency considered technical changes such as computerization that have made some of the 

older paperwork requirements redundant, and found ways to modernize the program to 

reflect current realities.300

OSHA Excavations Standard. In March 2007, the Occupational Safety and Health 

Administration completed a section 610 review of its rules governing excavations and 

trenches. These standards had been in place since 1989, and were designed to ensure that 

trenches do not collapse on workers and that excavated material does not fall back into a 

trench and bury workers. In the review, OSHA did a good job of seeking public input on 

how and whether the rule should be changed. While the agency ultimately decided that 

no regulatory changes to the standard were warranted, it did determine that additional 

outreach and worker training would help continue the downward trend of fewer deaths 

and injuries from trench and excavation work. OSHA concluded that its current 

excavations standard has reduced deaths from approximately 90 per year to about 70 per 

year.301

FCC Section 610 Review of 1993-1995 Rules. In May 2005, the Federal 

Communications Commission undertook a section 610 review of rules the Commission 

adopted in 1993, 1994, and 1995 which have, or might have, a significant economic 

impact on a substantial number of small entities. The FCC solicited public comment on 

the rules under review, explained the criteria it was using to review the rules, and gave 

instructions on where to file comments. This approach was transparent because the 

agency allowed adequate time for comments (three months) and gave interested parties 

sufficient information to prepare useful comments.302

Section 610 assistance from the Office of Advocacy 

The Office of Advocacy is ready to assist agencies that are planning a retrospective 

review of their regulations, to ensure that the review fully meets the requirements of 

section 610. Discussions with the Office of Advocacy are confidential interagency 

communications, and the Advocacy staff is ready to assist. For more information about 

this guidance, or for other questions about compliance with section 610, contact 

Advocacy at (202) 205-6533. 

 300 71 Fed. Reg. 16,862 (April 4, 2006). 301 72 Fed. Reg. 14,727 (March 29, 2007). 302 70 Fed. Reg. 33,416 (June 8, 2005). 
Chapter 7: Additional RFA requirements 87

CHAPTER 7 ADDITIONAL RFA AND SBREFA REQUIREMENTS

This chapter addresses additional agency responsibilities beyond the rulemaking process.

Under the RFA and SBREFA, agencies have ongoing responsibilities toward small 

entities with respect to (1) providing notice of rulemakings, (2) developing compliance 

guides, (3) establishing penalty reduction policies, and (4) offering compliance 

assistance. In addition, SBREFA created a process for small businesses to report

excessive federal agency enforcement actions.

Semi-annual regulatory agenda

Section 602 of the RFA requires federal agencies to publish a regulatory flexibility 

agenda in the Federal Register during April and October of each year.303 Each agency is 

required to list all rules it expects to propose or promulgate that are likely to have a 

significant economic impact on a substantial number of small entities. To be useful to 

small entities, the regulatory flexibility agenda should include a realistic assessment of 

the regulations under consideration by the agency for development in the coming year.

Agencies generally prepare and publish their regulatory flexibility agenda with the 

unified regulatory agenda required by Executive Order 12866.

304

The regulatory flexibility agenda must contain:

• A brief description of the subject area of any rule the agency expects to propose 

or promulgate that is likely to have a significant economic impact on a substantial 

number of small entities. (See Chapter 1 of this guide for a discussion of how to 

certify a rule.)

• A summary of the nature of each such rule under consideration, the objectives and 

the legal basis for issuing each rule, and an approximate schedule for completing 

action on any rule for which an agency has issued a general notice of proposed 

rulemaking.

• The name and telephone number of an agency official knowledgeable about the 

rule.

The RFA requires agencies to endeavor to provide direct notification of the agenda to 

small entities or their representatives, or to publish the agenda in publications that small 

entities are likely to receive, and to invite comments in the agenda.305

 303 5 U.S.C. § 602(a). 304 Exec. Order 12,866 § 4(b). 305 See § 609 of the RFA regarding the outreach to small entities to obtain needed comment during agency 

rulemaking. An example of a useful outreach tool is the U.S. Department of Transportation’s Docket 

Management System (DMS). DMS offers a service (listserv) to which a small entity can subscribe and 

tailor to receive notification when certain documents reach the DMS. 
88 RFA guide for government agencies

The law also requires each agency to transmit its regulatory flexibility agenda to the 

Chief Counsel for Advocacy for comment, if any. The Office of Advocacy welcomes the 

opportunity to provide an agency with input on a pre-publication draft of the agency’s 

regulatory flexibility agenda. Advocacy will review the draft agenda and may provide 

comment on its completeness and the agency’s assessment as to whether a given rule will 

or will not affect small entities. At a minimum, each agency must provide the Office of 

Advocacy with a copy of the regulatory flexibility agenda upon its publication. If the 

agenda is submitted upon publication, the Office of Advocacy will offer comments; 

however, the agency and the small entities reviewing the agenda will not receive the 

benefit of Advocacy’s pre-publication review.

Small entity compliance guides

For each rule (or related series of rules) requiring a final regulatory flexibility analysis, 

section 212 of SBREFA requires the agency to publish one or more small entity 

compliance guides.306 Agencies are required to publish the guides with publication of the 

final rule, post them to websites, distribute them to industry contacts, and report annually 

to Congress. 307

Agency compliance with this requirement is varied.308 In other words, unless the agency 

is going to certify that the rule will not have a significant economic impact on a 

substantial number of small entities, the agency must issue a small entity compliance 

guide, and designate it as such. As appropriate to the rule, Advocacy urges agencies to 

write the small entity compliance guide in plain and simple language. It should be readily 

understandable from the perspective of small entities subject to the rule. The guide is to 

inform a small entity of its obligations and responsibilities under the rule. It may be 

appropriate to prepare separate guides for different classes or groups of small entities.

The guides may cover federal and state requirements affecting the small entities subject 

to the rule.309

In preparing a small business compliance guide, agencies should look to the small entity 

comments in the rulemaking record as one indicator of the type of questions to answer or 

issues to clarify in the compliance guide. In addition, it would be beneficial for the 

agency to contact small entities subject to the rule (or their trade associations) to solicit 

input on topics to address in the compliance guide. Agencies may engage the assistance 

of outside consultants and/or trade associations in the drafting and dissemination process.

Small entities and their trade associations can also provide recommendations on the best 

venue for distribution of the compliance guides, through the agency website and/or 

through small business associations and organizations.

 306 Small Business Regulatory Enforcement Fairness Act, Pub. Law 104-121 § 212. 307 The Small Business and Work Opportunity Act of 2007 added these additional requirements for agency 

compliance to SBREFA.

308 See generally Regulatory Reform: Compliance Guide Requirement Has Had Little Effect on Agency 

Practices (GAO-02-172, December 2001).

309 See § 215 of the Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. No. 104-121, 

110 Stat. 857 (codified at 5 U.S.C. § 601 et seq.).
Chapter 7: Additional RFA requirements 89

Most important, the agency must issue the compliance guide with the final rule, well 

before the deadline for small entity compliance. To accomplish this, an agency should 

include development of the compliance guide in the rule development timetable and 

planning process. As with the regulatory analyses required under the RFA, the agency 

should anticipate the need to allocate appropriate personnel and resources toward 

developing the compliance guide at the inception of the rule development process. 

Although the compliance guide requirement under SBREFA is not specific in many 

regards as to what agencies are required to do, Advocacy has noted several instances in 

which agencies have failed to meet even the most basic requirements of the statute. For 

instance, the Federal Acquisition Regulation (FAR) Council310 published a list of rules 

for which a FRFA was prepared. This is not a compliance guide.

Compliance guides issued pursuant to section 212 are not subject to judicial review under 

SBREFA; however, the content of the compliance guide may serve as evidence of the 

reasonableness or appropriateness of any proposed fines, penalties, or damages in a civil 

or administrative action against a small business for a violation.311

Informal compliance assistance

Section 213 of SBREFA acknowledges the importance of compliance assistance and 

directs agencies that regulate small entities to establish a practice of answering inquiries 

from small entities. Agencies are to provide information and advice about compliance, 

helping small entities interpret and apply the law to specific facts provided by the small 

entity making the inquiry. As with the content of the compliance guides, guidance given 

by agencies on how the law is to be applied to a specific factual situation provided by the 

small entity may be considered evidence of the reasonableness or appropriateness of 

proposed fines, penalties, or damages imposed on the small entity. Under this section, 

and using existing resources as practicable, agencies are to institute a practice of 

providing informal compliance assistance. Agencies were required to establish a program 

to provide informal compliance assistance within one year of SBREFA’s enactment in 

1996 and to report to Congress on their programs no later than two years after 

enactment.312

 310 The (FAR Council prepares and issues revisions to the uniform policies and procedures for acquisition 

by all executive agencies. The FAR Council does this in conjunction with the Defense Acquisition 

Regulations (DAR) Council and the Civilian Agency Acquisition (CAA) Council. 48 C.F.R § 1 (2000).

311 Sections 231–233 of SBREFA amended the Equal Access to Justice Act (EAJA). These provisions 

expanded the ability of parties in litigation with the government to recover attorney fees under that law. In 

administrative and judicial proceedings, if the government's demand to enforce a party’s compliance with a 

statutory or regulatory requirement is unreasonable when compared with the judgment or decision, the 

party may be entitled to attorney fees and other expenses related to defending against the action. SBREFA 

increased the allowable attorney fees from $75 per hour to $125 per hour.

312 The Committee on Small Business and the Committee on Governmental Affairs of the U.S. Senate and 

the Committee on Small Business and the Committee on the Judiciary of the U.S. House of Representatives 

were to receive agency reports required under sections 213 and 223 of SBREFA. 
90 RFA guide for government agencies

Regulatory enforcement fairness

Section 222 of SBREFA establishes a process for small businesses to register complaints 

about excessive enforcement actions. Pursuant to the law, the Administrator of the U.S. 

Small Business Administration has designated a National Ombudsman and Assistant 

Administrator for Regulatory Enforcement Fairness and established Small Business 

Regulatory Fairness Boards in each of the SBA’s 10 regions.

Each small business regulatory fairness board advises the Ombudsman on small business 

matters relating to agency enforcement activities and assists the Ombudsman with the 

preparation of the annual report to Congress. The fairness boards have the authority to 

hold hearings. Fairness board members are small business owners and operators 

appointed by the SBA Administrator after consultation with the chairperson and ranking 

minority members of the House and Senate Committees on Small Business.

The Ombudsman has established a process to receive comments from small businesses on 

agency enforcement activities and, when appropriate, the Ombudsman passes such 

comments on to the agency for review and response. The Ombudsman is required to 

report annually to Congress on agency enforcement efforts based on comments received 

from small business concerns and from the regulatory fairness boards.

For more information on the Ombudsman, visit http://www.sba.gov/ombudsman/.

Penalty reduction policies

Agencies regulating activities of small entities are required, under section 223 of 

SBREFA, to establish a policy or program to provide for the reduction (and, under 

appropriate circumstances, the waiver) of civil penalties for violations of a statutory or 

regulatory requirement by a small entity. SBREFA grants agencies broad discretion with 

respect to the scope of their penalty reduction and waiver policies.313 Agencies were to 

implement their small entity penalty reduction and waiver programs within one year of 

the enactment of SBREFA in 1996 and to report on their programs to Congress one year 

later.314 Under appropriate circumstances, an agency may consider the ability to pay as a 

factor in determining penalty assessments on small entities.

Policies or programs established by agencies should contain conditions or exclusions that 

may include, but are not limited to:

• Requiring a small entity to correct the violation within a reasonable period of 

time.

 313 See generally Regulatory Reform: Implementation of Selected Agencies’ Civil Penalty Relief Policies for 

Small Entities (GAO-01-280, February 2001). The Office of Advocacy maintains that agencies should 

define small entities in accordance with section 601 of the RFA. 314 Approximately 22 of the 77 agencies that assess penalties submitted a report pursuant to section 223 of 

SBREFA. House of Representatives Report 106-8, Part I, pp. 5-6.
Chapter 7: Additional RFA requirements 91

• Limiting the applicability of the policy to violations discovered through 

participation by a small entity in a compliance assistance or audit program 

operated or supported by the agency or a state.

• Excluding small entities that have been subject to multiple enforcement actions by 

the agency.

• Excluding violations involving willful or criminal conduct.

• Excluding violations that pose serious health, safety, or environmental threats.

• Requiring a good-faith effort to comply with the law.

Congressional review

The Congressional Review Act, Section 251 of the Contract with America Advancement 

Act of 1996 (which also includes SBREFA), requires agencies to provide Congress with 

notice of final agency rulemaking actions and the opportunity to review a “major rule”

before it becomes effective.315 Before a final rule can become effective, the agency 

promulgating the rule must submit a report to the House of Representatives, the Senate, 

and the Comptroller General of the U.S. Government Accountability Office (GAO).316

The report must contain the following information:

• A copy of the rule.

• A concise general statement about the purpose of the rule, including whether it is 

a “major rule.”317

• The proposed effective date of the regulation.

In addition, the agency is required to include with its report to the Comptroller General, 

and make available to both houses of Congress, the following information:

• A copy of the cost-benefit analysis of the rule, if any.

• The agency's actions relevant to sections 603, 604, 605, 607, and 609 of the RFA.

• The agency's actions relevant to sections 202, 203, 204, and 205 of the Unfunded 

Mandates Reform Act of 1995.318

Major rules cannot take effect until the end of a 60-legislative-day period beginning on 

the latter of: (1) the date Congress receives the agency’s report or (2) the date of the 

 315 Codified at Chapter 8 of title 5, United States Code. 316 5 U.S.C. § 801. The GAO’s website, http://www.gao.gov, includes information on major rules, 

including a form for submitting a rule under the Congressional Review Act 

(http://www.gao.gov/decisions/majrule/fedrule2.pdf). 317 A “major rule” is a rule that the Administrator of the Office of Information and Regulatory Affairs 

(OIRA) of the Office of Management and Budget (OMB) finds has resulted or is likely to result in an 

annual impact on the economy of $100 million or more; have a major impact on an industry, government, 

or consumers; or have an effect on competition, productivity, or international trade. 5 U.S.C. § 804(2).

318 2 U.S.C. § 1501.
92 RFA guide for government agencies

rule’s publication in the Federal Register. Congress may disapprove or rescind a rule by 

a joint resolution of disapproval, subject to a presidential veto.319

CONCLUSION

The RFA does not seek preferential treatment for small entities, does not require agencies 

to adopt regulations that impose the least burden on small entities, and does not mandate 

exemptions for small entities. 

Rather, as this guide has illustrated, the RFA establishes an analytical process for 

determining how public policy issues can best be achieved without erecting barriers to 

competition, stifling innovation, or imposing undue burdens on small entities. In so 

doing, it seeks a level playing field for small entities, not an unfair advantage.

This guide is designed to help institutionalize these concepts so that they become part of 

a regulatory agency’s analytical fiber. The SBA’s Office of Advocacy hopes that this 

guide helps to achieve this objective.

 319 This congressional authority was first used in S. J. Res. 6, introduced in accordance with 5 U.S.C. § 802, 

passed the House and Senate, and was signed into law on March 20, 2001 to prevent an ergonomics 

regulation issued by the Occupational Safety and Health Administration from going into effect.
Appendix A: The Regulatory Flexibility Act 93

APPENDIX A THE REGULATORY FLEXIBILITY ACT

The following text of the Regulatory Flexibility Act of 1980, as amended, is taken from 

Title 5 of the United States Code, sections 601–612. The Regulatory Flexibility Act was 

originally passed in 1980 (P.L. 96-354). The act was amended by the Small Business 

Regulatory Enforcement Fairness Act of 1996 (P.L. 104-121), the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (P.L. 111-203), and the Small Business Jobs 

Act of 2010 (P.L. 111-240).

Congressional Findings and Declaration of Purpose

(a) The Congress finds and declares that —

(1) when adopting regulations to protect the health, safety and economic welfare of the 

Nation, Federal agencies should seek to achieve statutory goals as effectively and efficiently as 

possible without imposing unnecessary burdens on the public;

(2) laws and regulations designed for application to large scale entities have been 

applied uniformly to small businesses, small organizations, and small governmental 

jurisdictions even though the problems that gave rise to government action may not have 

been caused by those smaller entities;

(3) uniform Federal regulatory and reporting requirements have in numerous 

instances imposed unnecessary and disproportionately burdensome demands including 

legal, accounting and consulting costs upon small businesses, small organizations, and 

small governmental jurisdictions with limited resources;

(4) the failure to recognize differences in the scale and resources of regulated entities has 

in numerous instances adversely affected competition in the marketplace, discouraged innovation 

and restricted improvements in productivity;

(5) unnecessary regulations create entry barriers in many industries and discourage 

potential entrepreneurs from introducing beneficial products and processes;

(6) the practice of treating all regulated businesses, organizations, and governmental 

jurisdictions as equivalent may lead to inefficient use of regulatory agency resources, 

enforcement problems and, in some cases, to actions inconsistent with the legislative intent of 

health, safety, environmental and economic welfare legislation;

(7) alternative regulatory approaches which do not conflict with the stated objectives of 

applicable statutes may be available which minimize the significant economic impact of rules on 

small businesses, small organizations, and small governmental jurisdictions;

(8) the process by which Federal regulations are developed and adopted should be 

reformed to require agencies to solicit the ideas and comments of small businesses, small 

organizations, and small governmental jurisdictions to examine the impact of proposed and 

existing rules on such entities, and to review the continued need for existing rules.

(b) It is the purpose of this Act [enacting this chapter and provisions set out as notes under this 

section] to establish as a principle of regulatory issuance that agencies shall endeavor, consistent 

with the objectives of the rule and of applicable statutes, to fit regulatory and informational 

requirements to the scale of the businesses, organizations, and governmental jurisdictions subject 

to regulation. To achieve this principle, agencies are required to solicit and consider flexible 

regulatory proposals and to explain the rationale for their actions to assure that such proposals are 

given serious consideration.
94 RFA guide for government agencies

Regulatory Flexibility Act

§ 601 Definitions

§ 602 Regulatory agenda

§ 603 Initial regulatory flexibility analysis

§ 604 Final regulatory flexibility analysis

§ 605 Avoidance of duplicative or unnecessary analyses

§ 606 Effect on other law

§ 607 Preparation of analyses

§ 608 Procedure for waiver or delay of completion

§ 609 Procedures for gathering comments

§ 610 Periodic review of rules

§ 611 Judicial review

§ 612 Reports and intervention rights

§ 601 Definitions

For purposes of this chapter —

(1) the term “agency” means an agency as defined in section 551(1) of this title;

(2) the term “rule” means any rule for which the agency publishes a general notice of proposed 

rulemaking pursuant to section 553(b) of this title, or any other law, including any rule of general 

applicability governing Federal grants to State and local governments for which the agency 

provides an opportunity for notice and public comment, except that the term “rule” does not 

include a rule of particular applicability relating to rates, wages, corporate or financial structures 

or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or to 

valuations, costs or accounting, or practices relating to such rates, wages, structures, prices, 

appliances, services, or allowances;

(3) the term “small business” has the same meaning as the term “small business concern” under 

section 3 of the Small Business Act, unless an agency, after consultation with the Office of 

Advocacy of the Small Business Administration and after opportunity for public comment, 

establishes one or more definitions of such term which are appropriate to the activities of the 

agency and publishes such definition(s) in the Federal Register;

(4) the term “small organization” means any not-for-profit enterprise which is independently 

owned and operated and is not dominant in its field, unless an agency establishes, after 

opportunity for public comment, one or more definitions of such term which are appropriate to 

the activities of the agency and publishes such definition(s) in the Federal Register;

(5) the term “small governmental jurisdiction” means governments of cities, counties, towns, 

townships, villages, school districts, or special districts, with a population of less than fifty 

thousand, unless an agency establishes, after opportunity for public comment, one or more 

definitions of such term which are appropriate to the activities of the agency and which are based 

on such factors as location in rural or sparsely populated areas or limited revenues due to the 

population of such jurisdiction, and publishes such definition(s) in the Federal Register;

(6) the term “small entity” shall have the same meaning as the terms “small business,” “small 

organization” and “small governmental jurisdiction” defined in paragraphs (3), (4) and (5) of this 

section; and

(7) the term “collection of information” —

(A) means the obtaining, causing to be obtained, soliciting, or requiring the disclosure to 

third parties or the public, of facts or opinions by or for an agency, regardless of form or format, 

calling for either —
Appendix A: The Regulatory Flexibility Act 95

(i) answers to identical questions posed to, or identical reporting or 

recordkeeping requirements imposed on, 10 or more persons, other than agencies, 

instrumentalities, or employees of the United States; or

(ii) answers to questions posed to agencies, instrumentalities, or employees of the 

United States which are to be used for general statistical purposes; and

(B) shall not include a collection of information described under section 3518(c)(1) of 

title 44, United States Code.

(8) Recordkeeping requirement — The term “recordkeeping requirement” means a requirement 

imposed by an agency on persons to maintain specified records.

§ 602. Regulatory agenda

(a) During the months of October and April of each year, each agency shall publish in the Federal 

Register a regulatory flexibility agenda which shall contain —

(1) a brief description of the subject area of any rule which the agency expects to propose 

or promulgate which is likely to have a significant economic impact on a substantial number of 

small entities;

(2) a summary of the nature of any such rule under consideration for each subject area 

listed in the agenda pursuant to paragraph (1), the objectives and legal basis for the issuance of 

the rule, and an approximate schedule for completing action on any rule for which the agency has 

issued a general notice of proposed rulemaking, and

(3) the name and telephone number of an agency official knowledgeable concerning the 

items listed in paragraph (1).

(b) Each regulatory flexibility agenda shall be transmitted to the Chief Counsel for Advocacy of 

the Small Business Administration for comment, if any.

(c) Each agency shall endeavor to provide notice of each regulatory flexibility agenda to small 

entities or their representatives through direct notification or publication of the agenda in 

publications likely to be obtained by such small entities and shall invite comments upon each 

subject area on the agenda.

(d) Nothing in this section precludes an agency from considering or acting on any matter not 

included in a regulatory flexibility agenda, or requires an agency to consider or act on any matter 

listed in such agenda.

§ 603. Initial regulatory flexibility analysis

(a) Whenever an agency is required by section 553 of this title, or any other law, to publish 

general notice of proposed rulemaking for any proposed rule, or publishes a notice of proposed 

rulemaking for an interpretative rule involving the internal revenue laws of the United States, the 

agency shall prepare and make available for public comment an initial regulatory flexibility 

analysis. Such analysis shall describe the impact of the proposed rule on small entities. The initial 

regulatory flexibility analysis or a summary shall be published in the Federal Register at the time 

of the publication of general notice of proposed rulemaking for the rule. The agency shall 

transmit a copy of the initial regulatory flexibility analysis to the Chief Counsel for Advocacy of 

the Small Business Administration. In the case of an interpretative rule involving the internal 

revenue laws of the United States, this chapter applies to interpretative rules published in the 

Federal Register for codification in the Code of Federal Regulations, but only to the extent that 

such interpretative rules impose on small entities a collection of information requirement.

(b) Each initial regulatory flexibility analysis required under this section shall contain —

(1) a description of the reasons why action by the agency is being considered;

(2) a succinct statement of the objectives of, and legal basis for, the proposed rule;
96 RFA guide for government agencies

(3) a description of and, where feasible, an estimate of the number of small entities to 

which the proposed rule will apply;

(4) a description of the projected reporting, recordkeeping and other compliance 

requirements of the proposed rule, including an estimate of the classes of small entities which will 

be subject to the requirement and the type of professional skills necessary for preparation of the 

report or record;

(5) an identification, to the extent practicable, of all relevant Federal rules which may 

duplicate, overlap or conflict with the proposed rule.

(c) Each initial regulatory flexibility analysis shall also contain a description of any significant 

alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and 

which minimize any significant economic impact of the proposed rule on small entities. 

Consistent with the stated objectives of applicable statutes, the analysis shall discuss significant 

alternatives such as —

(1) the establishment of differing compliance or reporting requirements or timetables that 

take into account the resources available to small entities;

(2) the clarification, consolidation, or simplification of compliance and reporting 

requirements under the rule for such small entities;

(3) the use of performance rather than design standards; and

(4) an exemption from coverage of the rule, or any part thereof, for such small entities.

(d) (1) For a covered agency, as defined in section 609(d)(2), each initial regulatory 

flexibility analysis shall include a description of—

(A) any projected increase in the cost of credit for small entities;

(B) any significant alternatives to the proposed rule which accomplish the stated 

objectives of applicable statutes and which minimize any increase in the cost 

of credit for small entities; and

(C) advice and recommendations of representatives of small entities relating to 

issues described in subparagraphs (A) and (B) and subsection (b).

(2) A covered agency, as defined in section 609(d)(2), shall, for purposes of complying 

with paragraph (1)(C)—

(A) identify representatives of small entities in consultation with the Chief 

Counsel for Advocacy of the Small Business Administration; and

(B) collect advice and recommendations from the representatives identified under 

subparagraph (A) relating to issues described in subparagraphs (A) and (B) 

of paragraph (1) and subsection (b).

§ 604. Final regulatory flexibility analysis

(a) When an agency promulgates a final rule under section 553 of this title, after being required 

by that section or any other law to publish a general notice of proposed rulemaking, or 

promulgates a final interpretative rule involving the internal revenue laws of the United States as 

described in section 603(a), the agency shall prepare a final regulatory flexibility analysis. Each 

final regulatory flexibility analysis shall contain —

(1) a statement of the need for, and objectives of, the rule;

(2) a statement of the significant issues raised by the public comments in response to the 

initial regulatory flexibility analysis, a statement of the assessment of the agency of such issues, 

and a statement of any changes made in the proposed rule as a result of such comments;

(3) the response of the agency to any comments filed by the Chief Counsel for Advocacy 

of the Small Business Administration in response to the proposed rule, and a detailed statement of 

any change made to the proposed rule in the final rule as a result of the comments;

(4) a description of and an estimate of the number of small entities to which the rule will 

apply or an explanation of why no such estimate is available;
Appendix A: The Regulatory Flexibility Act 97

(5) a description of the projected reporting, recordkeeping and other compliance 

requirements of the rule, including an estimate of the classes of small entities which will be 

subject to the requirement and the type of professional skills necessary for preparation of the 

report or record; 

(6) a description of the steps the agency has taken to minimize the significant economic 

impact on small entities consistent with the stated objectives of applicable statutes, including a 

statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final 

rule and why each one of the other significant alternatives to the rule considered by the agency 

which affect the impact on small entities was rejected;

(6)1 for a covered agency, as defined in section 609(d)(2), a description of the steps the 

agency has taken to minimize any additional cost of credit for small entities.

(b) The agency shall make copies of the final regulatory flexibility analysis available to members 

of the public and shall publish in the Federal Register such analysis or a summary thereof..

1

So in original. Two paragraphs (6) were enacted.

§ 605. Avoidance of duplicative or unnecessary analyses

(a) Any Federal agency may perform the analyses required by sections 602, 603, and 604 of this 

title in conjunction with or as a part of any other agenda or analysis required by any other law if 

such other analysis satisfies the provisions of such sections.

(b) Sections 603 and 604 of this title shall not apply to any proposed or final rule if the head of 

the agency certifies that the rule will not, if promulgated, have a significant economic impact on a 

substantial number of small entities. If the head of the agency makes a certification under the 

preceding sentence, the agency shall publish such certification in the Federal Register at the time 

of publication of general notice of proposed rulemaking for the rule or at the time of publication 

of the final rule, along with a statement providing the factual basis for such certification. The 

agency shall provide such certification and statement to the Chief Counsel for Advocacy of the 

Small Business Administration.

(c) In order to avoid duplicative action, an agency may consider a series of closely related rules as 

one rule for the purposes of sections 602, 603, 604 and 610 of this title.

§ 606. Effect on other law

The requirements of sections 603 and 604 of this title do not alter in any manner standards 

otherwise applicable by law to agency action.

§ 607. Preparation of analyses

In complying with the provisions of sections 603 and 604 of this title, an agency may provide 

either a quantifiable or numerical description of the effects of a proposed rule or alternatives to 

the proposed rule, or more general descriptive statements if quantification is not practicable or 

reliable.

§ 608. Procedure for waiver or delay of completion

(a) An agency head may waive or delay the completion of some or all of the requirements of 

section 603 of this title by publishing in the Federal Register, not later than the date of publication 

of the final rule, a written finding, with reasons therefor, that the final rule is being promulgated 
98 RFA guide for government agencies

in response to an emergency that makes compliance or timely compliance with the provisions of 

section 603 of this title impracticable.

(b) Except as provided in section 605(b), an agency head may not waive the requirements of 

section 604 of this title. An agency head may delay the completion of the requirements of section 

604 of this title for a period of not more than one hundred and eighty days after the date of 

publication in the Federal Register of a final rule by publishing in the Federal Register, not later 

than such date of publication, a written finding, with reasons therefor, that the final rule is being 

promulgated in response to an emergency that makes timely compliance with the provisions of 

section 604 of this title impracticable. If the agency has not prepared a final regulatory analysis 

pursuant to section 604 of this title within one hundred and eighty days from the date of 

publication of the final rule, such rule shall lapse and have no effect. Such rule shall not be 

repromulgated until a final regulatory flexibility analysis has been completed by the agency.

§ 609. Procedures for gathering comments

(a) When any rule is promulgated which will have a significant economic impact on a substantial 

number of small entities, the head of the agency promulgating the rule or the official of the 

agency with statutory responsibility for the promulgation of the rule shall assure that small 

entities have been given an opportunity to participate in the rulemaking for the rule through the 

reasonable use of techniques such as—

(1) the inclusion in an advance notice of proposed rulemaking, if issued, of a statement 

that the proposed rule may have a significant economic effect on a substantial number of small 

entities;

(2) the publication of general notice of proposed rulemaking in publications likely to be 

obtained by small entities;

(3) the direct notification of interested small entities;

(4) the conduct of open conferences or public hearings concerning the rule for small 

entities including soliciting and receiving comments over computer networks; and

(5) the adoption or modification of agency procedural rules to reduce the cost or 

complexity of participation in the rulemaking by small entities.

(b) Prior to publication of an initial regulatory flexibility analysis which a covered agency is 

required to conduct by this chapter—

(1) a covered agency shall notify the Chief Counsel for Advocacy of the Small Business 

Administration and provide the Chief Counsel with information on the potential impacts of the 

proposed rule on small entities and the type of small entities that might be affected;

(2) not later than 15 days after the date of receipt of the materials described in paragraph 

(1), the Chief Counsel shall identify individuals representative of affected small entities for the 

purpose of obtaining advice and recommendations from those individuals about the potential 

impacts of the proposed rule;

(3) the agency shall convene a review panel for such rule consisting wholly of full time 

Federal employees of the office within the agency responsible for carrying out the proposed rule, 

the Office of Information and Regulatory Affairs within the Office of Management and Budget, 

and the Chief Counsel;

(4) the panel shall review any material the agency has prepared in connection with this 

chapter, including any draft proposed rule, collect advice and recommendations of each 

individual small entity representative identified by the agency after consultation with the Chief 

Counsel, on issues related to subsections 603(b), paragraphs (3), (4) and (5) and 603(c);

(5) not later than 60 days after the date a covered agency convenes a review panel 

pursuant to paragraph (3), the review panel shall report on the comments of the small entity 

representatives and its findings as to issues related to subsections 603(b), paragraphs (3), (4) and 
Appendix A: The Regulatory Flexibility Act 99

(5) and 603(c), provided that such report shall be made public as part of the rulemaking record; 

and

(6) where appropriate, the agency shall modify the proposed rule, the initial regulatory 

flexibility analysis or the decision on whether an initial regulatory flexibility analysis is required.

(c) An agency may in its discretion apply subsection (b) to rules that the agency intends to certify 

under subsection 605(b), but the agency believes may have a greater than de minimis impact on a 

substantial number of small entities.

(d) For purposes of this section, the term “covered agency” means 

(1) the Environmental Protection Agency, 

(2) the Consumer Financial Protection Bureau of the Federal Reserve System; and 

(3) the Occupational Safety and Health Administration of the Department of Labor. 

(e) The Chief Counsel for Advocacy, in consultation with the individuals identified in subsection 

(b)(2), and with the Administrator of the Office of Information and Regulatory Affairs within the 

Office of Management and Budget, may waive the requirements of subsections (b)(3), (b)(4), and 

(b)(5) by including in the rulemaking record a written finding, with reasons therefor, that those 

requirements would not advance the effective participation of small entities in the rulemaking 

process. For purposes of this subsection, the factors to be considered in making such a finding are 

as follows:

(1) In developing a proposed rule, the extent to which the covered agency consulted with 

individuals representative of affected small entities with respect to the potential impacts of the 

rule and took such concerns into consideration.

(2) Special circumstances requiring prompt issuance of the rule.

(3) Whether the requirements of subsection (b) would provide the individuals identified 

in subsection (b)(2) with a competitive advantage relative to other small entities.

§ 610. Periodic review of rules

(a) Within one hundred and eighty days after the effective date of this chapter, each agency shall 

publish in the Federal Register a plan for the periodic review of the rules issued by the agency 

which have or will have a significant economic impact upon a substantial number of small 

entities. Such plan may be amended by the agency at any time by publishing the revision in the 

Federal Register. The purpose of the review shall be to determine whether such rules should be 

continued without change, or should be amended or rescinded, consistent with the stated 

objectives of applicable statutes, to minimize any significant economic impact of the rules upon a 

substantial number of such small entities. The plan shall provide for the review of all such agency 

rules existing on the effective date of this chapter within ten years of that date and for the review 

of such rules adopted after the effective date of this chapter within ten years of the publication of 

such rules as the final rule. If the head of the agency determines that completion of the review of 

existing rules is not feasible by the established date, he shall so certify in a statement published in 

the Federal Register and may extend the completion date by one year at a time for a total of not 

more than five years.

(b) In reviewing rules to minimize any significant economic impact of the rule on a substantial 

number of small entities in a manner consistent with the stated objectives of applicable statutes, 

the agency shall consider the following factors—

(1) the continued need for the rule;

(2) the nature of complaints or comments received concerning the rule from the public;

(3) the complexity of the rule;

(4) the extent to which the rule overlaps, duplicates or conflicts with other Federal rules, 

and, to the extent feasible, with State and local governmental rules; and

(5) the length of time since the rule has been evaluated or the degree to which 

technology, economic conditions, or other factors have changed in the area affected by the rule.
100 RFA guide for government agencies

(c) Each year, each agency shall publish in the Federal Register a list of the rules which have a 

significant economic impact on a substantial number of small entities, which are to be reviewed 

pursuant to this section during the succeeding twelve months. The list shall include a brief 

description of each rule and the need for and legal basis of such rule and shall invite public 

comment upon the rule.

§ 611. Judicial review

(a) (1) For any rule subject to this chapter, a small entity that is adversely affected or 

aggrieved by final agency action is entitled to judicial review of agency compliance with the 

requirements of sections 601, 604, 605(b), 608(b), and 610 in accordance with chapter 7. Agency 

compliance with sections 607 and 609(a) shall be judicially reviewable in connection with 

judicial review of section 604.

(2) Each court having jurisdiction to review such rule for compliance with section 553, or 

under any other provision of law, shall have jurisdiction to review any claims of noncompliance 

with sections 601, 604, 605(b), 608(b), and 610 in accordance with chapter 7. Agency compliance 

with sections 607 and 609(a) shall be judicially reviewable in connection with judicial review of 

section 604.

(3) (A) A small entity may seek such review during the period beginning on the date 

of final agency action and ending one year later, except that where a provision of law requires 

that an action challenging a final agency action be commenced before the expiration of one year, 

such lesser period shall apply to an action for judicial review under this section.

(B) In the case where an agency delays the issuance of a final regulatory 

flexibility analysis pursuant to section 608(b) of this chapter, an action for judicial review under 

this section shall be filed not later than—

(i) one year after the date the analysis is made available to the public, or

(ii) where a provision of law requires that an action challenging a final 

agency regulation be commenced before the expiration of the 1-year period, the number of days 

specified in such provision of law that is after the date the analysis is made available to the 

public.

(4) In granting any relief in an action under this section, the court shall order the agency 

to take corrective action consistent with this chapter and chapter 7, including, but not limited to 

—

(A) remanding the rule to the agency, and

(B) deferring the enforcement of the rule against small entities unless the court 

finds that continued enforcement of the rule is in the public interest.

(5) Nothing in this subsection shall be construed to limit the authority of any court to stay 

the effective date of any rule or provision thereof under any other provision of law or to grant any 

other relief in addition to the requirements of this section.

(b) In an action for the judicial review of a rule, the regulatory flexibility analysis for such rule, 

including an analysis prepared or corrected pursuant to paragraph (a)(4), shall constitute part of 

the entire record of agency action in connection with such review.

(c) Compliance or noncompliance by an agency with the provisions of this chapter shall be 

subject to judicial review only in accordance with this section.

(d) Nothing in this section bars judicial review of any other impact statement or similar analysis 

required by any other law if judicial review of such statement or analysis is otherwise permitted 

by law.
Appendix A: The Regulatory Flexibility Act 101

§ 612. Reports and intervention rights

(a) The Chief Counsel for Advocacy of the Small Business Administration shall monitor 

agency compliance with this chapter and shall report at least annually thereon to the 

President and to the Committees on the Judiciary and Small Business of the Senate and 

House of Representatives.

(b) The Chief Counsel for Advocacy of the Small Business Administration is authorized 

to appear as amicus curiae in any action brought in a court of the United States to review 

a rule. In any such action, the Chief Counsel is authorized to present his or her views with 

respect to compliance with this chapter, the adequacy of the rulemaking record with 

respect to small entities and the effect of the rule on small entities.

(c) A court of the United States shall grant the application of the Chief Counsel for 

Advocacy of the Small Business Administration to appear in any such action for the 

purposes described in subsection (b).
102 RFA guide for government agencies

APPENDIX B RFA RECENT DEVELOPMENTS

January 31, 2011

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES 

FROM: Winslow Sargeant, Ph.D 

Chief Counsel for Advocacy, U.S. Small Business Administration 

SUBJECT: Regulatory Flexibility Act: Recent Developments 

As required by Executive Order 132721

, I am writing to advise you of recent activity related to the 

Regulatory Flexibility Act (RFA) and provide additional guidance related to these changes. 

Since 2007, several amendments to the RFA have become law, and this memorandum describes these 

changes. President Obama has also recently expressed his renewed commitment to regulatory review and 

regulatory relief. On January 18, 2011, President Obama issued Executive Order 13563, “Improving 

Regulation and Regulatory Review,”2 and a Memorandum on Regulatory Flexibility, Small Business, and 

Job Creation.3

The Office of Advocacy strongly endorses these principles and policies and is ready to assist you and your 

agencies in compliance with the RFA, Executive Order 13563, and the President‟ s memorandum. 

The Office of Advocacy provides RFA training to agencies as required by Executive Order 13272. 

Requests for training should be directed to Claudia Rodgers, Deputy Chief Counsel for Advocacy, 

Claudia.Rodgers@sba.gov. 

The Small Business and Work Opportunity Act of 2007 requires timely publication of small entity 

compliance guides. 

Congress enacted additional requirements for agency compliance guides in 2007, as part of the U.S. 

Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007.4

This statute requires an agency to: 

• Publish one or more „small entity compliance guides‟ for any rule for which it must prepare a 

Final Regulatory Flexibility Analysis;5

___________________________

1 Executive Order 13272, signed August 13, 2002 (67 Fed. Reg. 53,461 (August 16, 2002). Section 2(a) requires the 

Chief Counsel for Advocacy to ““notify agency heads from time to time of the requirements of the [Regulatory 

Flexibility] Act.” 

2 76 Fed. Reg. 3821 (January 21, 2011). 

3 Memorandum for the Heads of Executive Departments and Agencies, “Regulatory Flexibility, Small Business, and 

Job Creation” (76 Fed. Reg. 3827 (January 21, 2011)). 

4 Pub. Law 110-28 (May 27, 2007). See Title VI, Subtitle B, sec. 7005. 

5 See 5 U.S.C. 604 for the requirements for a Final Regulatory Flexibility Analysis. 
Appendix B: RFA recent developments 103

Page 2 

• Publish these guides with publication of the final rule, if possible, but before the effective date of 

the rule; 

• Post these guides to its website and distribute to known industry contacts; and 

• Report annually to Congress. 

The statute also describes generally what should be included in a compliance assistance guide. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires Small Business 

Advocacy Panels for CFPB rulemakings. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act,6 passed July 2010, establishes the 

Consumer Financial Protection Bureau (CFPB) to supervise certain activities of financial institutions. This 

Act requires the CFPB to comply with the RFA section 609 panel process, making it the third agency with 

this responsibility, joining EPA and OSHA.7 The Office of Advocacy looks forward to working with this 

new agency. 

The Small Business Jobs Act of 2010 requires Final Regulatory Flexibility Analyses to be more 

detailed and to respond to Advocacy comments. 

On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010.8 This act 

amended the RFA by making the following three changes to the requirements for Final Regulatory 

Flexibility Analyses. 

• It struck the word “succinct” from the requirement for “a succinct statement of the need for, and 

objectives of, the rule.”9

• It replaced the word “summary” with the word “statement” in the requirement for “a summary 

statement of the significant issues raised by the public comments in response to the initial 

regulatory flexibility analysis, a summary statement of the assessment of the agency of such 

issues, and a statement of any changes made in the proposed rule as a result of such comments.”10

• It added a new paragraph to require “the response of the agency to any comments filed by the 

Chief Counsel for Advocacy of the Small Business Administration in response to the proposed 

rule, and a detailed statement of any change made to the proposed rule in the final rule as a result 

of the comments.”11

__________________________________

6 Pub. Law 111-203 (July 21, 2010). 

7 Id., Sec. 1100G. See 5 U.S.C. § 609(d). 

8 Pub. Law 111-240 (September 27, 2010). 

9 Id., Sec. 1601(1), amending 5 U.S.C. § 604(a)(1). 

10 Id., Sec. 1601(2), amending 5 U.S.C. § 604(a)(2). 

11 Id., Sec. 1601(3), inserting 5 U.S.C. § 604(a)(3). This codifies the requirement from E.O. 13272, Sec. 3(c) without an 

exemption for a public interest. 

Page 3 
104 RFA guide for government agencies

Executive Order 13563 requires consultation with affected entities and reviews of existing 

regulations. 

Executive Order 13563, Improving Regulation and Regulatory Review,12 reaffirms the principles of 

Executive Order 12866, including the consideration of alternatives, cost-benefit analysis, and the 

consideration of distributional and cumulative economic impacts. These principles reinforce the agencies‟

obligations under the RFA. 

This new Executive Order instructs agencies to seek the views of affected entities prior to proposed 

rulemaking.13 The Office of Advocacy strongly urges agencies to ensure their consultations include small 

entities. We are available to assist you in arranging these consultations or identifying appropriate small 

entities with which to consult. 

The Executive Order also calls on agencies to engage in periodic reviews of existing regulations.14 

Agencies already have an existing obligation to periodically review regulations under the RFA.15 In your 

development of plans for reviews of existing regulations, I strongly encourage you to consider your 

obligations under the RFA and integrate the two efforts. The Office of Advocacy is available to consult 

with you on your agency’s plans. 

The President’s Memorandum on Regulatory Flexibility, Small Business, and Job 

Creation reaffirms the purposes of the RFA. 

On January 18, 2011, President Obama signed a memorandum16 to you in which he stated: 

My Administration is firmly committed to eliminating excessive and unjustified burdens on small 

businesses, and to ensuring that regulations are designed with careful consideration of their 

effects, including their cumulative effects, on small businesses. 

He emphasized the importance of compliance with the RFA and its purposes. The President also expanded 

the existing requirement for an agency to document its decision to reject an alternative that may reduce 

regulatory burdens on small entities. The RFA currently requires agencies to explain in the Final 

Regulatory Flexibility Analysis accompanying final rules why significant alternatives were not selected.17

The President has directed that a similar explanation be provided for proposed rules as well.18 

_____________________________

12 76 Fed. Reg. 3821 (January 21, 2011). 

13 E.O. 13563, Sec. 2(c). 

14 Id., Sec. 6. 

15 See 5 U.S.C. § 610. 

16 Memorandum for the Heads of Executive Departments and Agencies, “Regulatory Flexibility, Small Business, and 

Job Creation” (76 Fed. Reg. 3827 (January 21, 2011)). 

17 See 5 U.S.C. § 604(a)(5) (“. . . a statement of the factual, policy, and legal reasons for selecting the alternative 

adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency 

which affect the impact on small entities was rejected.”) 

18 See 76 Fed. Reg. 3827 (“I further direct that whenever an executive agency chooses, for reasons other than legal 

limitations, not to provide such flexibility in a proposed or final rule that is likely to have a significant economic 
Appendix B: RFA recent developments 105

Page 4 

I remind you that alternatives include, but are not limited to, the flexible approaches described in section 4 

of E.O. 13563, and the alternatives enumerated in the RFA19 and the President‟ s memorandum. 

Alternatives under the RFA may include reasonable regulatory alternatives that relieve burden on all 

affected entities, not just small entities. I encourage agencies to consider all reasonable regulatory 

alternatives that impact small entities in their RFA analyses. 

Regulatory Flexibility Analyses should be readily available to and easily identified by the public. 

In light of the President‟ s renewed commitment to the principles of Executive Order 12866 and the RFA, 

and in the spirit of transparency in decisionmaking, I want to remind you that Regulatory Flexibility 

Analyses must be available to the public at the same time as the proposed or final rule.20 While Advocacy 

generally encourages agencies to publish Regulatory Flexibility Analyses or summaries in a separate RFA 

section within the rule preamble for transparency purposes, your agency is not required to prepare a wholly 

separate analysis to comply with the RFA.21 However, your agency should make sure that those sections 

of the preamble or other supporting documents intended to demonstrate compliance with the RFA are 

labeled as such. For example, in responding to public comments filed by the Chief Counsel for Advocacy, I 

recommend you separately identify Advocacy comments and label your response as being presented in 

compliance with the RFA. 

If you have any questions about this memorandum or your agency‟ s compliance with the RFA, please 

contact Charles Maresca, Director of Interagency Affairs, SBA Office of Advocacy, at (202) 205-6978 or 

Charles.Maresca@sba.gov. 

cc: Cass R. Sunstein, Administrator 

Office of Information and Regulatory Affairs

Office of Management and Budget

________________________

impact on a substantial number of small entities, it should explicitly justify its decision not to do so in the explanation 

that accompanies that proposed or final rule.”) 

19 See § 603(c). 

20 See 5 U.S.C. § 603(a) and § 604(c). 

21 See 5 U.S.C. § 605(a). 
106 RFA guide for government agencies

APPENDIX C SMALL BUSINESS BY THE NUMBERS

Frequently Asked Questions About Small Business

What is a small business?

The Office of Advocacy defines a small business as an in- dependent business having fewer than 500 

employees. (The definition of “small business” used in government programs and contracting varies by 

industry; see http://www.sba.gov/size.)

How important are small businesses to the U.S. economy?

Small firms:

• Represent 99.7 percent of all employer firms.

• Employ about half of all private sector employees.

• Pay 43 percent of total U.S. private payroll.

• Have generated 65 percent of net new jobs over the past 17 years.

• Create more than half of the nonfarm private GDP.

• Hire 43 percent of high tech workers (scientists, engineers, computer programmers, and others).

• Are 52 percent home-based and 2 percent franchises.

• Made up 97.5 percent of all identified exporters and produced 31 percent of export value in FY 2008.

• Produce 16.5 times more patents per employee than large patenting firms.

Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, 2007 

(http://archive.sba.gov/advo/research/rs299tot.pdf) and CHI Research, 2003 (http://archive.sba.gov/advo/research/rs225tot.pdf); U.S. 

Dept. of Labor, Bureau of Labor Statistics.

How many small businesses are there?

In 2009, there were 27.5 million businesses in the United States, according to Office of Advocacy 

estimates. The latest available Census data show that there were 5.9 million firms with employees in 2008 

and 21.4 million without employees in 2008. Small firms with fewer than 500 employees represent 99.9 

percent of the total (employers and nonemployers), as the most recent data show there were 18,469 large 

businesses in 2008.

Source: Office of Advocacy estimates based on data from the U.S. Dept. of Commerce, Census Bureau, and trends from the U.S. 

Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics.

What is small firms’ share of employment?

Small businesses employ about half of U.S. workers. Of the 120.9 million nonfarm private sector 

workers in 2008, small firms employed 59.7 million and large firms employed 61.2 million. About half of 

small firm employment is in second-stage companies (10-99 employees), and half is in firms that are 15 

years or older. Small firms’share of employment in rural areas is slightly higher than in urban areas; their 

share of part-time workers (22 percent) is similar to large firms’ share (19 percent). Small firms’

employment share remains steady since some small firms grow into large firms over time.

Source: U.S. Dept. of Commerce, Census Bureau: Statistics of U.S. Businesses, Current Population Survey, and Business Dynamics 

Statistics; and the Edward Lowe Foundation (http://youreconomy.org).

What share of net new jobs do small businesses create?

Small firms accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created 

between 1993 and 2009. Much of the job growth is from fast-growing high-impact firms, which 

represent about 5–6 percent of all firms and are on average 25 years old.

Source: U.S. Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics; Advocacy-funded research by Zoltan

Acs, William Parsons and Spencer Tracy, 2008 (http://archive.sba.gov/advo/research/rs328tot.pdf).
Appendix D: Small business statistics for regulatory analysis 107

How many businesses open and close each year?

An estimated 552,600 new employer firms opened for business in 2009, and 660,900 firms closed. This

amounts to an annual turnover of about 10 percent. Nonemployer firms have turnover rates three times as

high, mostly because it is much easier for them to go into business and cease operations.

Starts and Closures of Employer Firms, 2005–2009

Category 2005 2006 2007 2008 2009

Births 644,122 670,058 668,395 626,400e 552,600e

Closures 565,745 599,333 592,410 663,900e 660,900e

Bankruptcies 39,201 19,695 28,322 43,546 60,837

Notes: e = Advocacy estimate. Bankruptcies include nonemployer firms. 

Source: U.S. Dept. of Commerce, Census Bureau; Administrative Office of the 

U.S. Courts; U.S. Dept. of Labor, Business Employment Dynamics (BED).

Estimates based on Census data and BED trends.

What is the survival rate for new firms?

Seven out of 10 new employer firmssurvive at least 2 years, half at least 5 years, a third at least 

10 years, and a quarter stay in business 15 years or more. Census data report that 69 percent of new 

employer establishments born to new firmsin 2000 survived at least 2 years, and 51 percent survived 5 

or more years. Survival rates were similar across states and major industries. Bureau of Labor Statistics 

data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent 

survive 10 years or more; and 26 percent survive 15 years or more.

Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, 

BED.

How are credit conditions for small firms?

Credit conditions are improving. In mid-2010, commercial banks began to ease the tight lending 

conditions on small businesses that had begun in early 2007. And credit has continued to flow, as loans 

under $1 million totaled $695 billion in FY 2009. Also, after declining over the past few years, venture 

capital investment dollars increased in mid-2010.

Source: Federal Reserve Board, Senior Loan Officer Opinion Survey and Call Report data; National

Venture Capital Association.

How are small businesses financed?

Small businesses rely heavily upon owner investment and bank credit, averaging about $80,000 a 

year for young firms. Startups rely about equally on the owners’ cash injections into the business and bank 

credit; young firmsreceive about three-quarters of their funds from banks via loans, credit cards, and lines 

of credit. One-tenth of startups and about a third of young firms do not use capital injections.

Source: Kauffman Foundation, An Overview of the Kauffman Firm Survey: Results from the 2004–2008 Data, (Alicia Robb, E.J. 

Reedy, Janice Ballou, David DesRoches, Frank Potter, Zhanyun Zhao), May 2010.

Whom do I contact about regulations?

To learn about pending regulation, visit Advocacy’s Regulatory Alerts webpage, 

http://www.sba.gov/advocacy/815; to comment on pending regulations, email advocacy@sba.gov. To 

report unfair regulatory enforcement, contact SBA’s National Ombudsman at ombudsman@sba.gov

What is the role of women, minority, and veteran entrepreneurs?

Of the 27.1 million nonfarm businesses in 2007, women owned 7.8 million businesses, which generated 

$1.2 trillion in revenues, employed 7.6 million workers, and paid $218 billion in payroll. Another 4.6 

million firms were 50 percent women owned. Minorities owned 5.8 million firms, which generated $1 

trillion in revenues and employed 5.9 million people. Hispanic Americans owned 8.3 percent of all U.S. 

businesses; African Americans, 7.1 percent; Asian Americans, 5.7 percent; American Indians and Alaska 

Natives,0.9 percent; and Native Hawaiian or other Pacific Islanders, 0.1 percent. Veterans owned 2.4 
108 RFA guide for government agencies

million businesses in 2007, generating $1.2 trillion in receipts; another 1.2 million firms were 50 percent 

veteran owned. About 7 percent of veteran business owners had service-connected disabilities in 2002.

In 2008, the overall rate of self-employment (unincorporated and incorporated) was 9.8 percent, and 

the rate was 7.1 percent for women, 7.2 percent for Hispanic Americans, 4.7 percent for African

Americans, 9.7 percent for Asian Americans and Native Americans, and 13.6 percent for veterans. 

Service-disabled veterans had lower self-employment rates than non-service-disabled veterans.

Source: U.S. Dept. of Commerce, Census Bureau, Survey of Business Owners; Advocacy-funded research by Open Blue Solutions, 

2007 (http://archive.sba.gov/advo/research/rs291tot.pdf), and Office of Advocacy: The Small Business Economy

(http://www.sba.gov/advocacy/849).

At what rates are the self-employed taxed?

Of the 15.5 million individuals whose primary occupation was self-employment (incorporated and 

unincorporated), the median personal marginal federal tax rate was 10 percent in 2008. Only 4.1 percent 

of the self-employed were in the marginal tax bracket of 33 percent or more.

Source: U.S. Dept. of Commerce, Census Bureau, Current Population Survey, March Supplement (special tabulation).

What research exists on the cost and availability of health 

insurance?

A Kaiser Family Foundation study confirmed the connection between firm size and offering health

insurance. The survey shows that almost 60 percent of businesses with 3–9 workers offer health benefits

to their employees. The ratio grows to more than three-fourths for firms with 10–24 employees, to

92 percent for firms with 25–49 employees, and to 99 percent for firms with 200 employees or more.

Almost two-thirds of workers take health insurance coverage when offered. Overall in 2009, small firm

employees were almost twice as likely as large firm employees to be uninsured (27.2 percent vs. 14.7 

percent, respectively).

Source: Kaiser Family Foundation and the Health Research and Educational Trust, Employer Health Benefits 2010 Annual Survey; 

Employee Benefit Research Institute, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 

2010 Current Population Survey.

How can I get more information?

For more information, visit Advocacy’s website: http://www.sba.gov/advocacy. Specific points of interest 

include:

• Economic research: http://www.sba.gov/advocacy/847.

• Firm size data: http://www.sba.gov/advocacy/849.

• Lending: http://www.sba.gov/advocacy/852.

• Small firm data resources: http://www.sba.gov/sites/default/files/Small_Business_Data_Resources.pdf

• Small business profiles by state and territory: http://www.sba.gov/advocacy/848.

• The Small Business Advocate newsletter: http://www.sba.gov/advocacy/810.

For email delivery of Advocacy’s newsletter, press, regulatory news, and research, visit

http://web.sba.gov/list. Direct questions to (202) 205-6533 or advocacy@sba.gov. 

The SBA’s Office of Advocacy was created by Congress in 1976 to protect, strengthen, and effectively represent the 

nation’s small businesses within the federal government. As part of this mandate, the office conducts policy studies and 

economic research on issues of concern to small business and publishes data on small business characteristics and 

contributions. For small business resources, statistics, and research, visit the Office of Advocacy’s home page at 

http://www.sba.gov/advocacy

Is there a PDF version of the FAQ?

Yes. The pdf version is located at: http://www.sba.gov/sites/default/files/files/sbfaq.pdf.

Updated January 2011
Appendix D: Small business statistics for regulatory analysis 109

APPENDIX D SMALL BUSINESS STATISTICS FOR REGULATORY 

ANALYSIS

One of the key tasks in preparing an analysis for the Regulatory Flexibility Act is 

locating statistics on small business. The information in this appendix should help federal 

agencies identify data sources appropriate for regulatory analyses.

Ideally, the data used to analyze the costs and benefits of government regulation should 

be longitudinal micro-data for individual firms — that is, data that can be used to trace 

the performance of a collection of firms over several years. Unfortunately, virtually all 

publicly available data on individual firms are subject to confidentiality restrictions. 

Individual names and addresses not only cannot be disclosed, but data must also be 

presented so that individual firm performance cannot be identified or intuited, even by 

statistical manipulation. Therefore, most government agencies release summary 

information, grouping data by industry, size, and/or location. It is worthwhile noting that 

there also is a problem associated with using grouped data through time: the firms that 

make up the group change. Some firms start up while others go out of business. Some 

firms expand into a higher size cohort, while others decline into a smaller size category. 

It is difficult, if not impossible, to clearly separate changes to firms that remain in the 

group from changes in the composition of the group.

The data sources listed here generally cover statistics on industry employment, payroll, 

and receipts. Most databases available from government sources do not provide financial 

data—the balance sheet and income statement information needed for analyses of the cost 

of regulations. This is the most sensitive type of information and is rarely available even 

in aggregate form. Profit information also is usually unavailable. While data such as that 

reported by the Census Bureau will always lag by two to three years, new data on firm 

dynamics —especially on firm births and deaths—are now becoming more available 

from both public and private sources.

Definitions

Various terms are used in data collection. It is important for those who use the data to 

understand the variations and their subtle distinctions.

Establishment: an establishment is the smallest unit in which business activity is 

conducted and on which statistical information is collected. The establishment concept 

does not refer to either ownership or taxpaying status. Establishments may be branches of 

larger firms and may therefore differ in purchasing power, advertising coverage, 

management and control systems, technical resources, and access to capital and credit 

from separately owned and operated businesses of similar size. (Most very small 

businesses are single establishments.)

Enterprise: the enterprise or firm concept refers to all establishments owned by a 

“parent” company. For instance, an enterprise may own subsidiaries, branches, and 

unrelated establishments. In most instances, it is necessary to use the enterprise concept 
110 RFA guide for government agencies

to study the characteristics of small firms since the ownership issue is critical for 

assessing the impact of a given policy. 

Advocacy Economic Research on Small Businesses

Over its history, the SBA’s Office of Advocacy has both conducted and contracted for 

research on a variety of small business topics. The scope and breadth of the research 

conducted under the auspices of the Office of Advocacy can be found at

http://www.sba.gov/advocacy.

Census-Based Small Business Database

Beginning in late 1991, the SBA’s Office of Advocacy contracted with the Economic 

Surveys Division of the Bureau of the Census to produce linked longitudinal data files on 

an enterprise basis. (To see these data, go to the Office of Advocacy’s website at 

http://www.sba.gov/advocacy/849.) The Office of Advocacy’s data files generally 

include the number of establishments, firms, payroll per firm, and receipts per firm for 

various size classes based on firm employment size. The data are also broken out by 

location and/or industry.

Data are generally available at the six-digit North American Industry Classification 

System (NAICS) code level of industrial detail. (The NAICS system replaced the 

previous Standard Industrial Classification (SIC). The data can be accessed through the 

Office of Advocacy’s website.

Other Federal Agency Data on Small Firms

Current Population Survey

Each year, the March Current Population Survey of the Bureau of the Census asks a 

series of expanded questions about self-employment as part of its firm-size supplement. 

These questions include the hours and weeks spent working in the business during the 

previous year, the income earned, the demographics of the business owner, whether the 

firm (owner) has or provides benefits, and several related questions about the industry of 

the firm. These data are available from the Population Division of the Bureau of the 

Census at (301) 763-4100.

Data from the Current Population Survey can be used to describe the businesses’ sources 

of capital, their profitability, employment, major industry, and home-based status of 

women and minority business owners. This data source provides some information on 

potential regulatory impacts on very small firms, particularly their ability to absorb the 

burden of federal regulation.
Appendix D: Small business statistics for regulatory analysis 111

Characteristics of Business Owners Survey320

The Minority Business Development Agency of the U.S. Department of Commerce and 

the SBA’s Office of Advocacy have in the past contracted with the Census Bureau to 

produce the Characteristics of Business Owners (CBO) Survey data. The CBO is the only 

nationally representative source of information about many of the subjects covered in the 

survey: demographic characteristics of the owner and economic characteristics of the 

firm such as sales, export status, franchise status, hours and weeks worked by the 

business owner, sources of debt and equity capital, etc.

Statistics of Income

Each quarter, the Statistics of Income (SOI) division of the Internal Revenue Service 

publishes the SOI Bulletin. This publication contains data for both households and 

businesses and is an invaluable source of statistical information. Data on business firms 

are generally classified by receipt size class for proprietorships, partnerships, and 

corporations. Data on business profits from the IRS are elusive. For sole proprietorships 

and partnerships, only data on net income are available.

For small business corporations, more data are available. The IRS Source Book for 

Corporations contains data for corporations by asset size class. Balance sheet and income 

statement information is available for corporations in different asset classes. From these 

detailed data, it is possible to calculate rates of return on assets as well as the profits of 

small business (generally subchapter S) corporations.

 320 U.S. Department of Commerce, Bureau of the Census, Characteristics of Business Owners: 1992, CBO1 (Washington, D.C.: U.S. Government Printing Office, 1997).
112 RFA guide for government agencies

APPENDIX E EXECUTIVE ORDER 12866

Regulatory Planning and Review

Public Papers of the Presidents

September 30, 1993

The American people deserve a regulatory system that works for them, not 

against them: a regulatory system that protects and improves their health, safety, 

environment, and well-being and improves the performance of the economy 

without imposing unacceptable or unreasonable costs on society; regulatory 

policies that recognize that the private sector and private markets are the best 

engine for economic growth; regulatory approaches that respect the role of State, 

local, and tribal governments; and regulations that are effective, consistent, 

sensible, and understandable. We do not have such a regulatory system today. 

With this Executive order, the Federal Government begins a program to reform 

and make more efficient the regulatory process. The objectives of this Executive 

order are to enhance planning and coordination with respect to both new and 

existing regulations; to reaffirm the primacy of Federal agencies in the regulatory 

decision-making process; to restore the integrity and legitimacy of regulatory 

review and oversight; and to make the process more accessible and open to the 

public. In pursuing these objectives, the regulatory process shall be conducted so 

as to meet applicable statutory requirements and with due regard to the discretion 

that has been entrusted to the Federal agencies.

Accordingly, by the authority vested in me as President by the Constitution and 

the laws of the United States of America, it is hereby ordered as follows:

Section 1. Statement of Regulatory Philosophy and Principles. (a) The Regulatory 

Philosophy. Federal agencies should promulgate only such regulations as are 

required by law, are necessary to interpret the law, or are made necessary by 

compelling public need, such as material failures of private markets to protect or 

improve the health and safety of the public, the environment, or the well-being of 

the American people. In deciding whether and how to regulate, agencies should 

assess all costs and benefits of available regulatory alternatives, including the 

alternative of not regulating. Costs and benefits shall be understood to include 

both quantifiable measures (to the fullest extent that these can be usefully 

estimated) and qualitative measures of cost and benefits that are difficult to 

quantify, but nevertheless essential to consider. Further, in choosing among 

alternative regulatory approaches, agencies should select those approaches that 

maximize net benefits (including potential economic, environmental, public 

health and safety, and other advantages; distributive impacts; and equity), unless a 

statute requires another regulatory approach.
Appendix E: Executive Order 12866 113

(b) The Principles of Regulation. To ensure that the agencies' regulatory programs 

are consistent with the philosophy set forth above, agencies should adhere to the 

following principles, to the extent permitted by law and where applicable:

(1) Each agency shall identify the problem that it intends to address (including, 

where applicable, the failures of private markets or public institutions that warrant 

new agency action) as well as assess the significance of that problem.

(2) Each agency shall examine whether existing regulations (or other law) have 

created, or contributed to, the problem that a new regulation is intended to correct 

and whether those regulations (or other law) should be modified to achieve the 

intended goal of regulation more effectively.

(3) Each agency shall identify and assess available alternatives to direct 

regulation, including providing economic incentives to encourage the desired 

behavior, such as user fees or marketable permits, or providing information upon 

which choices can be made by the public.

(4) In setting regulatory priorities, each agency shall consider, to the extent 

reasonable, the degree and nature of the risks posed by various substances or 

activities within its jurisdiction.

(5) When an agency determines that a regulation is the best available method of 

achieving the regulatory objective, it shall design its regulations in the most costeffective manner to achieve the regulatory objective. In doing so, each agency 

shall consider incentives for innovation, consistency, predictability, the costs of 

enforcement and compliance (to the government, regulated entitles, and the 

public), flexibility, distributive impacts, and equity.

(6) Each agency shall assess both the costs and the benefits of the intended 

regulation and, recognizing that some costs and benefits are difficult to quantify, 

propose or adopt a regulation only upon a reasoned determination that the benefits 

of the intended regulation justify its costs.

(7) Each agency shall base its decisions on the best reasonably obtainable 

scientific, technical, economic, and other information concerning the need for, 

and consequences of, the intended regulation.

(8) Each agency shall identify and assess alternative forms of regulation and shall, 

to the extent feasible, specify performance objectives, rather than specifying the 

behavior or manner of compliance that regulated entities must adopt.

(9) Wherever feasible, agencies shall seek views of appropriate State, local, and 

tribal officials before imposing regulatory requirements that might significantly or 

uniquely affect those governmental entities. Each agency shall assess the effects 

of Federal regulations on State, local, and tribal governments, including 
114 RFA guide for government agencies

specifically the availability of resources to carry out those mandates, and seek to 

minimize those burdens that uniquely or significantly affect such governmental 

entities, consistent with achieving regulatory objectives. In addition, as 

appropriate, agencies shall seek to harmonize Federal regulatory actions with 

related State, local, and tribal regulatory and other governmental functions.

(10) Each agency shall avoid regulations that are inconsistent, incompatible, or 

duplicative with its other regulations or those of other Federal agencies. 

(11) Each agency shall tailor its regulations to impose the least burden on society, 

including individuals, businesses of differing sizes, and other entities (including 

small communities and government entities), consistent with obtaining the 

regulatory objectives, taking into account, among other things, and to the extent 

practicable, the costs of cumulative regulations.

(12) Each agency shall draft its regulations to be simple and easy to understand, 

with the goal of minimizing the potential for uncertainty and litigation arising 

from such uncertainty.

Sec. 2. Organization. An efficient regulatory planning and review process is vital 

to ensure that the Federal Government's regulatory system best serves the 

American people. (a) The Agencies. Because Federal agencies are the repositories 

of significant substantive expertise and experience, they are responsible for 

developing regulations and assuring that the regulations are consistent with 

applicable law, the President's priorities, and the principles set forth in this 

Executive order.

(b) The Office of Management and Budget. Coordinated review of agency 

rulemaking is necessary to ensure that regulations are consistent with applicable 

law, the President's priorities, and the principles set forth in this Executive order, 

and that decisions made by one agency do not conflict with the policies or actions 

taken or planned by another agency. The Office of Management and Budget 

(OMB) shall carry out that review function. Within OMB, the Office of 

Information and Regulatory Affairs (OIRA) is the repository of expertise 

concerning regulatory issues, including methodologies and procedures that affect 

more than one agency, this Executive order, and the President's regulatory 

policies. To the extent permitted by law, OMB shall provide guidance to agencies 

and assist the President, the Vice President, and other regulatory policy advisors 

to the President in regulatory planning and shall be the entity that reviews 

individual regulations, as provided by the this Executive order.

(c) The Vice President. The Vice President is the principal advisor to the 

President on, and shall coordinate the development and presentation of 

recommendations concerning, regulatory policy, planning, and review, as set forth 

in this Executive order. In fulfilling their responsibilities under this Executive 

order, the President and the Vice President shall be assisted by the regulatory 
Appendix E: Executive Order 12866 115

policy advisors within the Executive Office of the President and by such agency 

officials and personnel as the President and the Vice President may, from time to 

time, consult.

Sec. 3. Definitions. for purposes of this Executive order: (1) "Advisors" refers to 

such regulatory policy advisors to the President as the President and Vice 

President may from time to time consult, including, among the others: (1)the 

Director of OMB; (2) the Chair (or another member) of the Council of Economic 

Advisers; (3) the Assistant to the President for Economic Policy; (4) the 

Assistance to the President for Domestic Policy; (5) the Assistant to the President 

for National Security Affairs; (6) the Assistant to the President for Science and 

Technology; (7) the Assistant to the President for Intergovernmental Affairs; (8) 

the Assistant to the President and Staff Secretary; (9) the Assistant to the 

President and Chief of Staff to the Vice President; (10) the Assistant to the 

President and Counsel to the President; (11) the Deputy Assistant to the President 

and Director of the White House Office of Environmental Policy; and (12) the 

Administrator of OIRA, who also shall coordinate communications relating to this 

Executive order among the agencies, OMB, the other Advisors, and the Office of 

the Vice President.

(b) "Agency," unless otherwise indicated, means any authority of the United 

States that is an "agency" under 44 U.S.C. 3502(1), other than those considered to 

be independent regulatory agencies, as defined in 44 U.S.C. 3502(10).

(c) "Director" means the Director of OMB.

(d) "Regulation" or "rule" means an agency statement of general applicability and 

future effect, which the agency intends to have the force and effect of law, that is 

designed to implement, interpret, or prescribe law or policy or to describe the 

procedure or practice requirements of an agency. It does not, however, include:

(1) Regulations or rules issued in accordance with the formal rulemaking 

provisions of 5 U.S.C. 556, 557;

(2) Regulations or rules that pertain to a military or foreign affairs function of the 

United States, other than procurement regulations and regulations involving the 

import or export of non-defense articles and services; 

(3) Regulations or rules that are limited to agency organization, management, or 

personnel matters; or

(4) Any other category of regulations exempted by the Administrator of OIRA. 

(e) "Regulatory action" means any substantive action by an agency (normally 

published in the Federal Register) that promulgates or is expected to lead to the 
116 RFA guide for government agencies

promulgation of a final rule or regulation, including notices of inquiry, advance 

notices of proposed rulemaking, and notices of proposed rulemaking.

(f) "Significant regulatory action" means any regulatory action that is likely to 

result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely 

affect in a material way the economy, a sector of the economy, productivity, 

competition, jobs, the environment, public health or safety, or State, local, or 

tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or 

planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan 

programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's 

priorities, or the principles set forth in this Executive order.

Sec. 4. Planning Mechanism. In order to have an effective regulatory program, to 

provide for coordination of regulations, to maximize consultation and the 

resolution of potential conflicts at an early stage, to involve the public and its 

State, local, and tribal officials in regulatory planning, and to ensure that new or 

revised regulations promote the President's priorities and the principles set forth in 

this Executive order, these procedures shall be followed, to the extent permitted 

by law:

(a) Agencies' Policy Meeting. Early in each year's planning cycle, the Vice 

President shall convene a meeting of the Advisors and the heads of agencies to 

seek a common understanding of priorities and to coordinate regulatory efforts to 

be accomplished in the upcoming years.

(b) Unified Regulatory Agenda. For purposes of this subsection, the term 

"agency" or "agencies" shall also include those considered to be independent 

regulatory agencies, as defined in 44 U.S.C. 3502(10). Each agency shall prepare 

an agenda of all regulations under development or review, at a time and in a 

manner specified by the Administrator of OIRA. The description of each 

regulatory action shall contain, at a minimum, a regulation identifier number, a 

brief summary of the action, the legal authority for the action, any legal deadline 

for the action, and the name and telephone number of a knowledgeable agency 

official. Agencies may incorporate the information required under 5 U.S.C. 602 

and 41 U.S.C. 402 into these agendas.

(c) The Regulatory Plan. For purposes of this subsection, the term "agency" or 

"agencies" shall also include those considered to be independent regulatory 
Appendix E: Executive Order 12866 117

agencies, as defined in 44 U.S.C. 3502(10). (1) As part of the Unified Regulatory 

Agenda, beginning in 1994, each agency shall prepare a Regulatory Plan (Plan) of 

the most important significant regulatory actions that the agency reasonably 

expects to issue in proposed or final form in that fiscal year or thereafter. The Plan 

shall be approved personally by the agency head and shall contain at a minimum:

(A) A statement of the agency's regulatory objectives and priorities and how they 

relate to the President's priorities;

(B) A summary of each planned significant regulatory action including, to the 

extent possible, alternatives to be considered and preliminary estimates of the 

anticipated costs and benefits;

(C) A summary of the legal basis for each such action, including whether any 

aspect of the action is required by statute or court order;

(D) A statement of the need for each such action and, if applicable, how the action 

will reduce risks to public health, safety, or the environment, as well as how the 

magnitude of the risk addressed by the action relates to other risks within the 

jurisdiction of the agency;

(E) The agency's schedule for action, including a statement of any applicable 

statutory or judicial deadlines; and

(F) The name, address, and telephone number of a person the public may contact 

for additional information about the planned regulatory action.

(2) Each agency shall forward its Plan to OIRA by June 1st of each year.

(3) Within 10 calendar days after OIRA has received an agency's Plan, OIRA 

shall circulate it to other affected agencies, the Advisors, and the Vice President.

(4) An agency head who believes that a planned regulatory action of another 

agency may conflict with its own policy or action taken or planned shall promptly 

notify, in writing, the Administrator of OIRA, who shall forward that 

communication to the issuing agency, the Advisors, and the Vice President.

(5) If the Administrator of OIRA believes that planned regulatory action of an 

agency may be inconsistent with the President's priorities or the principles set 

forth in this Executive order or may be in conflict with any policy or action taken 

or planned by another agency, the Administrator of OIRA shall promptly notify, 

in writing, the effected agencies, the Advisors, and the Vice President.

(6) The Vice President, with the Advisors' assistance, may consult with the heads 

of agencies with respect to their Plans and, in appropriate instances, request 

further consideration or inter-agency coordination.
118 RFA guide for government agencies

(7) The Plans developed by the issuing agency shall be published annually in the 

October publication of the Unified Regulatory Agenda. This publication shall be 

made available to the Congress; State, local, and tribal governments; and the 

public. Any views on any aspect of any agency Plan, including whether any 

planned regulatory action might conflict with any other planned or existing 

regulation, impose any unintended consequences on the public, or confer any 

unclaimed benefits on the public, should be directed to the issuing agency, with a 

copy to OIRA.

(d) Regulatory Working Group. Within 30 days of the date of this Executive 

order, the Administrator of OIRA shall convene a Regulatory Working Group 

("Working Group"), which shall consist of representatives of the heads of each 

agency that the Administrator determines to have significant domestic regulatory 

responsibility, the Advisors, and the Vice President. The Administrator of OIRA 

shall chair the Working Group and shall periodically advise the Vice President on 

the activities of the Working Group. The Working Group shall serve as a forum to 

assist agencies in identifying and analyzing important regulatory issues 

(including, among others (1) the development of innovative regulatory 

techniques, (2) the methods, efficacy, and utility of comparative risk assessment 

in regulatory decision-making, and (3) the development of short forms and other 

streamlined regulatory approaches for small businesses and other entities). The 

Working Group shall meet at least quarterly and may meet as a whole or in 

subgroups of agencies with an interest in particular issues or subject areas. To 

inform its discussions, the Working Group may commission analytical studies and 

reports by OIRA, the Administrative Conference of the United States, or any 

other agency.

(e) Conferences. The Administrator of OIRA shall meet quarterly with 

representatives of State, local, and tribal governments to identify both existing 

and proposed regulations that may uniquely or significantly affect those 

governmental entities. The Administrator of OIRA shall also convene, from time 

to time, conferences with representatives of businesses, nongovernmental 

organizations, and the public to discuss regulatory issues of common concern.

Sec. 5. Existing Regulations. In order to reduce the regulatory burden on the 

American people, their families, their communities, their State, local, and tribal 

governments, and their industries; to determine whether regulations promulgated 

by the executive branch of the Federal Government have become unjustified or 

unnecessary as a result of changed circumstances; to confirm that regulations are 

both compatible with each other and not duplicative or inappropriately 

burdensome in the aggregate; to ensure that all regulations are consistent with the 

President's priorities and the principles set forth in this Executive order, within 

applicable law; and to otherwise improve the effectiveness of existing regulations: 

(1) Within 90 days of the date of this Executive order, each agency shall submit to 

OIRA a program, consistent with its resources and regulatory priorities, under 

which the agency will periodically review its existing significant regulations to 
Appendix E: Executive Order 12866 119

determine whether any such regulations should be modified or eliminated so as to 

make the agency's regulatory program more effective in achieving the regulatory 

objectives, less burdensome, or in greater alignment with the President's priorities 

and the principles set forth in this Executive order. Any significant regulations 

selected for review shall be included in the agency's annual Plan. The agency 

shall also identify any legislative mandates that require the agency to promulgate 

or continue to impose regulations that the agency believes are unnecessary or 

outdated by reason of changed circumstances.

(b) The Administrative of OIRA shall work with the Regulatory Working Group 

and other interested entities to pursue the objectives of this section. State, local, 

and tribal governments are specifically encouraged to assist in the identification 

of regulations that impose significant or unique burdens on those governmental 

entities and that appear to have outlived their justification or be otherwise 

inconsistent with the public interest.

(c) The Vice President, in consultation with the Advisors, may identify for review 

by the appropriate agency or agencies other existing regulations of an agency or 

groups of regulations of more than one agency that affect a particular group, 

industry, or sector of the economy, or may identify legislative mandates that may 

be appropriate for reconsideration by the Congress.

Sec. 6. Centralized Review of Regulations. The guidelines set forth below shall 

apply to all regulatory actions, for both new and existing regulations, by agencies 

other than those agencies specifically exempted by the Administrator of OIRA:

(a) Agency Responsibilities. (1) Each agency shall (consistent with its own rules, 

regulations, or procedures) provide the public with meaningful participation in the 

regulatory process. In particular, before issuing a notice of proposed rulemaking, 

each agency should, where appropriate, seek the involvement of those who are 

intended to benefit from and those expected to be burdened by any regulation 

(including, specifically, State, local, and tribal officials). In addition, each agency 

should afford the public a meaningful opportunity to comment on any proposed 

regulation, which in most cases should include a comment period of not less than 

60 days. Each agency also is directed to explore and, where appropriate, use 

consensual mechanisms for developing regulations, including negotiated 

rulemaking.

(2) Within 60 days of the date of this Executive order, each agency head shall 

designate a Regulatory Policy Officer who shall report to the agency head. The 

Regulatory Policy Officer shall be involved at each stage of the regulatory process 

to foster the development of effective, innovative, and least burdensome 

regulations and to further the principles set forth in this Executive order.

(3) In addition to adhering to its own rules and procedures and to the requirements 

of the Administrative Procedure Act, the Regulatory Flexibility Act, the 
120 RFA guide for government agencies

Paperwork Reduction Act, and other applicable law, each agency shall develop its 

regulatory actions in a timely fashion and adhere to the following procedures with 

respect to a regulatory action:

(A) Each agency shall provide OIRA, at such times and in the manner specified 

by the Administrator of OIRA, with a list of its planned regulatory actions, 

indicating those which the agency believes are significant regulatory actions 

within the meaning of this Executive order. Absent a material change in the 

development of the planned regulatory action, those not designated as significant 

will not be subject to review under this section unless, within 10 working days of 

receipt of the list, the Administrator of OIRA notifies the agency that OIRA has 

determined that a planned regulation is a significant regulatory action within the 

meaning of this Executive order. The Administrator of OIRA may waive review 

of any planned regulatory action designated by the agency as significant, in which 

case the agency need not further comply with subsection (a)(3)(B) or subsection 

(a)(3)(C) of this section.

(B) For each matter identified as, or determined by the Administrator of OIRA to 

be, a significant regulatory action, the issuing agency shall provide to OIRA:

(i) The text of the draft regulatory action, together with a reasonably detailed 

description of the need for the regulatory action and an explanation of how the 

regulatory action will meet that need; and

(ii) An assessment of the potential costs and benefits of the regulatory action, 

including an explanation of the manner in which the regulatory action is 

consistent with a statutory mandate and, to the extent permitted by law, promotes 

the President's priorities and avoids undue interference with State, local, and tribal 

governments in the exercise of their governmental functions.

(C) For those matters identified as, or determined by the Administrator of OIRA 

to be, a significant regulatory action within the scope of section 3(f)(l), the agency 

shall also provide to OIRA the following additional information developed as part 

of the agency's decision-making process (unless prohibited by law):

(i) An assessment, including the underlying analysis, of benefits anticipated from 

the regulatory action (such as, but not limited to, the promotion of the efficient 

functioning of the economy and private markets, the enhancement of health and 

safety, the protection of the natural environment, and the elimination or reduction 

of discrimination or bias) together with, to the extent feasible, a quantification of 

those benefits;

(ii) An assessment, including the underlying analysis, of costs anticipated from 

the regulatory action (such as, but not limited to, the direct cost both to the 

government in administering the regulation and to businesses and others in 

complying with the regulation, and any adverse effects on the efficient 
Appendix E: Executive Order 12866 121

functioning of the economy, private markets (including productivity, 

employment, and competitiveness), health, safety, and the natural environment), 

together with, to the extent feasible, a quantification of those costs; and

(iii) An assessment, including the underlying analysis, of costs and benefits of 

potentially effective and reasonably feasible alternatives to the planned regulation, 

identified by the agencies or the public (including improving the current 

regulation and reasonably viable nonregulatory actions), and an explanation why 

the planned regulatory action is preferable to the identified potential alternatives.

(D) In emergency situations or when an agency is obligated by law to act more 

quickly than normal review procedures allow, the agency shall notify OIRA as 

soon as possible and, to the extent practicable, comply with subsections (a)(3)(B) 

and (C) of this section. For those regulatory actions that are governed by a 

statutory or court-imposed deadline, the agency shall, to the extent practicable, 

schedule rulemaking proceedings so as to permit sufficient time for OIRA to 

conduct its review, as set forth below in subsection (b)(2) through (4) of this 

section.

(E) After the regulatory action has been published in the Federal Register or 

otherwise issued to the public, the agency shall:

(i) Make available to the public the information set forth in subsections (a)(3)(B) 

and (C);

(ii) Identify for the public, in a complete, clear, and simple manner, the 

substantive changes between the draft submitted to OIRA for review and the 

action subsequently announced; and

(iii) Identify for the public those changes in the regulatory action that were made 

at the suggestion or recommendation of OIRA.

(F) All information provided to the public by the agency shall be in plain, 

understandable language.

(b) OIRA Responsibilities. The Administrator of OIRA shall provide meaningful 

guidance and oversight so that each agency's regulatory actions are consistent 

with applicable law, the President's priorities, and the principles set forth in this 

Executive order and do not conflict with the policies or actions of another agency. 

OIRA shall, to the extent permitted by law, adhere to the following guidelines:

(1) OIRA may review only actions identified by the agency or by OIRA as 

significant regulatory actions under subsection (a)(3)(A) of this section.

(2) OIRA shall waive review or notify the agency in writing of the results of its 

review within the following time periods:
122 RFA guide for government agencies

(A) For any notices of inquiry, advance notices of proposed rulemaking, or other 

preliminary regulatory actions prior to a Notice of Proposed Rulemaking, within 

10 working days after the date of submission of the draft action to OIRA;

(B) For all other regulatory actions, within 90 calendar days after the date of 

submission of the information set forth in subsections (a)(3)(B) and (C) of this 

section, unless OIRA has previously reviewed this information and, since that 

review, there has been no material change in the facts and circumstances upon 

which the regulatory action is based, in which case, OIRA shall complete its 

review within 45 days; and

(C) The review process may be extended (1) once by no more than 30 calendar 

days upon the written approval of the Director and (2) at the request of the agency 

head.

(3) For each regulatory action that the Administrator of OIRA returns to an 

agency for further consideration of some or all of its provisions, the Administrator 

of OIRA shall provide the issuing agency a written explanation for such return, 

setting forth the pertinent provision of this Executive order on which OIRA is 

relying. If the agency head disagrees with some or all of the bases for the return, 

the agency head shall so inform the Administrator of OIRA in writing.

(4) Except as otherwise provided by law or required by a Court, in order to ensure 

greater openness, accessibility, and accountability in the regulatory review 

process, OIRA shall be governed by the following disclosure requirements:

(A) Only the Administrator of OIRA (or a particular designee) shall receive oral 

communications initiated by persons not employed by the executive branch of the 

Federal Government regarding the substance of a regulatory action under OIRA 

review;

(B) All substantive communications between OIRA personnel and persons not 

employed by the executive branch of the Federal Government regarding a 

regulatory action under review shall be governed by the following guidelines: (i) 

A representative from the issuing agency shall be invited to any meeting between 

OIRA personnel and such person(s);

(ii) OIRA shall forward to the issuing agency, within 10 working days of receipt 

of the communication(s), all written communications, regardless of format, 

between OIRA personnel and any person who is not employed by the executive 

branch of the Federal Government, and the dates and names of individuals 

involved in all substantive oral communications (including meetings to which an 

agency representative was invited, but did not attend, and telephone conversations 

between OIRA personnel and any such persons); and
Appendix E: Executive Order 12866 123

(iii) OIRA shall publicly disclose relevant information about such 

communication(s), as set forth below in subsection (b)(4)(C) of this section.

(C) OIRA shall maintain a publicly available log that shall contain, at a minimum, 

the following information pertinent to regulatory actions under review:

(i) The status of all regulatory actions, including if (and if so, when and by whom) 

Vice Presidential and Presidential consideration was requested;

(ii) A notation of all written communications forwarded to an issuing agency 

under subsection (b)(4)(B)(ii) of this section; and

(iii) The dates and names of individuals involved in all substantive oral 

communications, including meetings and telephone conversations, between OIRA 

personnel and any person not employed by the executive branch of the Federal 

Government, and the subject matter discussed during such communications.

(D) After the regulatory action has been published in the Federal Register or 

otherwise issued to the public, or after the agency has announced its decision not 

to publish or issue the regulatory action, OIRA shall make available to the public 

all documents exchanged between OIRA and the agency during the review by 

OIRA under this section.

(5) All information provided to the public by OIRA shall be in plain, 

understandable language.

Sec. 7. Resolution of Conflicts. To the extent permitted by law, disagreements or 

conflicts between or among agency heads or between OMB and any agency that 

cannot be resolved by the Administrator of OIRA shall be resolved by the 

President, or by the Vice President acting at the request of the President, with the 

relevant agency head (and, as appropriate, other interested government officials). 

Vice Presidential and Presidential consideration of such disagreements may be 

initiated only by the Director, by the head of the issuing agency, or by the head of 

an agency that has a significant interest in the regulatory action at issue. Such 

review will not be undertaken at the request of other persons, entities, or their 

agents.

Resolution of such conflicts shall be informed by recommendations developed by 

the Vice President, after consultation with the Advisors (and other executive 

branch officials or personnel whose responsibilities to the President include the 

subject matter at issue). The development of these recommendations shall be 

concluded within 60 days after review has been requested.

During the Vice Presidential and Presidential review period, communications with 

any person not employed by the Federal Government relating to the substance of 

the regulatory action under review and directed to the Advisors or their staffs or to 
124 RFA guide for government agencies

the staff of the Vice President shall be in writing and shall be forwarded by the 

recipient to the affected agency(ies) for inclusion in the public docket(s). When 

the communication is not in writing, such Advisors or staff members shall inform 

the outside party that the matter is under review and that any comments should be 

submitted in writing.

At the end of this review process, the President, or the Vice President acting at the 

request of the President, shall notify the affected agency and the Administrator of 

OIRA of the President's decision with respect to the matter.

Sec. 8. Publication. Except to the extent required by law, an agency shall not 

publish in the Federal Register or otherwise issue to the public any regulatory 

action that is subject to review under section 6 of this Executive order until (1) the 

Administrator of OIRA notifies the agency that OIRA has waived its review of 

the action or has completed its review without any requests for further

consideration, or (2) the applicable time period in section 6(b)(2) expires without 

OIRA having notified the agency that it is returning the regulatory action for 

further consideration under section 6(b)(3), whichever occurs first. If the terms of 

the preceding sentence have not been satisfied and an agency wants to publish or 

otherwise issue a regulatory action, the head of that agency may request 

Presidential consideration through the Vice President, as provided under section 7 

of this order. Upon receipt of this request, the Vice President shall notify OIRA 

and the Advisors. The guidelines and time period set forth in section 7 shall apply 

to the publication of regulatory actions for which Presidential consideration has 

been sought.

Sec. 9. Agency Authority. Nothing in this order shall be construed as displacing 

the agencies' authority or responsibilities, as authorized by law.

Sec. 10. Judicial Review. Nothing in this Executive order shall affect any 

otherwise available judicial review of agency action. This Executive order is 

intended only to improve the internal management of the Federal Government and 

does not create any right or benefit, substantive or procedural, enforceable at law 

or equity by a party against the United States, its agencies or instrumentalities, its 

officers or employees, or any other person.

Sec. 11. Revocations. Executive Orders Nos. 12291 and 12498; all amendments 

to those Executive orders; all guidelines issued under those orders; and any 

exemptions from those orders heretofore granted for any category of rule are 

revoked.

William J. Clinton

The White House, September 30, 1993.

Filed with the Office of the Federal Register, 12:12 pm., October 1, 1993
Appendix F: Executive Order 13272 125

APPENDIX F EXECUTIVE ORDER 13272

Title 3--

The President

Executive Order 13,272 of August 13, 2002

Proper Consideration of Small Entities in Agency Rulemaking

By the authority vested in me as President by the Constitution and the laws of the 

United States of America, it is hereby ordered as follows:

Section 1. General Requirements. Each agency shall establish procedures and policies 

to promote compliance with the Regulatory Flexibility Act, as amended (5 U.S.C. 601 

et seq.) (the ``Act''). Agencies shall thoroughly review draft rules to assess and take 

appropriate account of the potential impact on small businesses, small governmental 

jurisdictions, and small organizations, as provided by the Act. The Chief Counsel for 

Advocacy of the Small Business Administration (Advocacy) shall remain available to 

advise agencies in performing that review consistent with the provisions of the Act.

Sec. 2. Responsibilities of Advocacy. Consistent with the requirements of the Act, 

other applicable law, and Executive Order 12,866 of September 30, 1993, as amended, 

Advocacy:

(a) shall notify agency heads from time to time of the requirements of the Act, 

including by issuing notifications with respect to the basic requirements of the Act 

within 90 days of the date of this order;

(b) shall provide training to agencies on compliance with the Act; and

(c) may provide comment on draft rules to the agency that has proposed or intends to 

propose the rules and to the Office of Information and Regulatory Affairs of the Office 

of Management and Budget (OIRA).

Sec. 3. Responsibilities of Federal Agencies. Consistent with the requirements of the 

Act and applicable law, agencies shall:

(a) Within 180 days of the date of this order, issue written procedures and policies, 

consistent with the Act, to ensure that the potential impacts of agencies' draft rules on 

small businesses, small governmental jurisdictions, and small organizations are 

properly considered during the rulemaking process. Agency heads shall submit, no 

later than 90 days from the date of this order, their written procedures and policies to 

Advocacy for comment. Prior to issuing final procedures and policies, agencies shall 

consider any such comments received within 60 days from the date of the submission 

of the agencies' procedures and policies to Advocacy. Except to the extent otherwise 

specifically provided by statute or Executive Order, agencies shall make the final 

procedures and policies available to the public through the Internet or other easily 

accessible means;

(b) Notify Advocacy of any draft rules that may have a significant economic impact 

on a substantial number of small entities under the Act. Such notifications shall be 

made (i) when the agency submits a draft rule to OIRA under Executive Order 12,866
126 RFA guide for government agencies

if that order requires such submission, or (ii) if no submission to OIRA is so required, 

at a reasonable time prior to publication of the rule by the agency; and

(c) Give every appropriate consideration to any comments provided by Advocacy 

regarding a draft rule. Consistent with applicable law and appropriate protection of 

executive deliberations and legal privileges, an agency shall include, in any 

explanation or discussion accompanying publication in the Federal Register of a final 

rule, the agency's response to any written comments submitted by Advocacy on the 

proposed rule that preceded thefinal rule; provided, however, that inclusion is not 

required if the head of the agency certifies that the public interest is not served thereby.

Agencies and Advocacy may, to the extent permitted by law, engage in an exchange of 

data and research, as appropriate, to foster the purposes of the Act.

Sec. 4. Definitions. Terms defined in section 601 of title 5, United States Code, 

including the term ``agency,'' shall have the same meaning in this order.

Sec. 5. Preservation of Authority. Nothing in this order shall be construed to impair or 

affect the authority of the Administrator of the Small Business Administration to 

supervise the Small Business Administration as provided in the first sentence of 

section 2(b)(1) of Public Law 85-09536 (15 U.S.C. 633(b)(1)).

Sec. 6. Reporting. For the purpose of promoting compliance with this order, Advocacy 

shall submit a report not less than annually to the Director of the Office of 

Management and Budget on the extent of compliance with this order by agencies.

Sec. 7. Confidentiality. Consistent with existing law, Advocacy may publicly disclose 

information that it receives from the agencies in the course of carrying out this order 

only to the extent that such information already has been lawfully and publicly 

disclosed by OIRA or the relevant rulemaking agency.

Sec. 8. Judicial Review. This order is intended only to improve the internal 

management of the Federal Government. This order is not intended to, and does not, 

create any right or benefit, substantive or procedural, enforceable at law or equity, 

against the United States, its departments, agencies, or other entities, its officers or 

employees, or any other person.

THE WHITE HOUSE,

August 13, 2002.
Appendix G: Executive Order 13563 127

APPENDIX G EXECUTIVE ORDER 13563 AND MEMORANDA

Improving Regulation and Regulatory Review 

 By the authority vested in me as President by the Constitution and the laws of the 

United States of America, and in order to improve regulation and regulatory review, it is 

hereby ordered as follows:

 Section 1. General Principles of Regulation. (a) Our regulatory system must protect 

public health, welfare, safety, and our environment while promoting economic growth, 

innovation, competitiveness, and job creation. It must be based on the best available 

science. It must allow for public participation and an open exchange of ideas. It must 

promote predictability and reduce uncertainty. It must identify and use the best, most 

innovative, and least burdensome tools for achieving regulatory ends. It must take into 

account benefits and costs, both quantitative and qualitative. It must ensure that 

regulations are accessible, consistent, written in plain language, and easy to understand.

It must measure, and seek to improve, the actual results of regulatory requirements.

 (b) This order is supplemental to and reaffirms the principles, structures, and 

definitions governing contemporary regulatory review that were established in Executive 

Order 12866 of September 30, 1993. As stated in that Executive Order and to the extent 

permitted by law, each agency must, among other things: (1) propose or adopt a 

regulation only upon a reasoned determination that its benefits justify its costs 

(recognizing that some benefits and costs are difficult to quantify); (2) tailor its 

regulations to impose the least burden on society, consistent with obtaining regulatory 

objectives, taking into account, among other things, and to the extent practicable, the 

costs of cumulative regulations; (3) select, in choosing among alternative regulatory 

approaches, those approaches that maximize net benefits (including potential economic, 

environmental, public health and safety, and other advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify performance objectives, rather than specifying 

the behavior or manner of compliance that regulated entities must adopt; and (5) identify 

and assess available alternatives to direct regulation, including providing economic 

incentives to encourage the desired behavior, such as user fees or marketable permits, or 

providing information upon which choices can be made by the public.

 (c) In applying these principles, each agency is directed to use the best available 

techniques to quantify anticipated present and future benefits and costs as accurately as 

possible. Where appropriate and permitted by law, each agency may consider (and 

discuss qualitatively) values that are difficult or impossible to quantify, including equity, 

human dignity, fairness, and distributive impacts.

 Sec. 2. Public Participation. (a) Regulations shall be adopted through a process that 

involves public participation. To that end, regulations shall be based, to the extent 

feasible and consistent with law, on the open exchange of information and perspectives 

among State, local, and tribal officials, experts in relevant disciplines, affected 

stakeholders in the private sector, and the public as a whole.
128 RFA guide for government agencies

 (b) To promote that open exchange, each agency, consistent with Executive Order 

12866 and other applicable legal requirements, shall endeavor to provide the public with 

an opportunity to participate in the regulatory process. To the extent feasible and 

permitted by law, each agency shall afford the public a meaningful opportunity to 

comment through the Internet on any proposed regulation, with a comment period that 

should generally be at least 60 days. To the extent feasible and permitted by law, each 

agency shall also provide, for both proposed and final rules, timely online access to the 

rulemaking docket on regulations.gov, including relevant scientific and technical 

findings, in an open format that can be easily searched and downloaded. For proposed 

rules, such access shall include, to the extent feasible and permitted by law, an 

opportunity for public comment on all pertinent parts of the rulemaking docket, including 

relevant scientific and technical findings.

 (c) Before issuing a notice of proposed rulemaking, each agency, where feasible and 

appropriate, shall seek the views of those who are likely to be affected, including those 

who are likely to benefit from and those who are potentially subject to such rulemaking.

 Sec. 3. Integration and Innovation. Some sectors and industries face a significant 

number of regulatory requirements, some of which may be redundant, inconsistent, or 

overlapping. Greater coordination across agencies could reduce these requirements, thus 

reducing costs and simplifying and harmonizing rules. In developing regulatory actions 

and identifying appropriate approaches, each agency shall attempt to promote such 

coordination, simplification, and harmonization. Each agency shall also seek to identify, 

as appropriate, means to achieve regulatory goals that are designed to promote 

innovation.

 Sec. 4. Flexible Approaches. Where relevant, feasible, and consistent with regulatory 

objectives, and to the extent permitted by law, each agency shall identify and consider 

regulatory approaches that reduce burdens and maintain flexibility and freedom of choice 

for the public. These approaches include warnings, appropriate default rules, and 

disclosure requirements as well as provision of information to the public in a form that is 

clear and intelligible.

 Sec. 5. Science. Consistent with the President's Memorandum for the Heads of 

Executive Departments and Agencies,

"Scientific Integrity" (March 9, 2009), and its implementing guidance, each agency shall 

ensure the objectivity of any scientific and technological information and processes used 

to support the agency's regulatory actions.

 Sec. 6. Retrospective Analyses of Existing Rules. (a) To facilitate the periodic review 

of existing significant regulations, agencies shall consider how best to promote 

retrospective analysis of rules that may be outmoded, ineffective, insufficient, or 

excessively burdensome, and to modify, streamline, expand, or repeal them in accordance 

with what has been learned. Such retrospective analyses, including supporting data, 

should be released online whenever possible.
Appendix G: Executive Order 13563 129

 (b) Within 120 days of the date of this order, each agency shall develop and submit to 

the Office of Information and Regulatory Affairs a preliminary plan, consistent with law 

and its resources and regulatory priorities, under which the agency will periodically 

review its existing significant regulations to determine whether any such regulations 

should be modified, streamlined, expanded, or repealed so as to make the agency's 

regulatory program more effective or less burdensome in achieving the regulatory 

objectives.

 Sec. 7. General Provisions. (a) For purposes of this order, "agency" shall have the 

meaning set forth in section 3(b) of Executive Order 12866.

 (b) Nothing in this order shall be construed to impair or otherwise affect:

 (i) authority granted by law to a department or agency, or the head thereof; or

 (ii) functions of the Director of the Office of Management and Budget relating to 

budgetary, administrative, or legislative proposals.

 (c) This order shall be implemented consistent with applicable law and subject to the 

availability of appropriations.

 (d) This order is not intended to, and does not, create any right or benefit, substantive 

or procedural, enforceable at law or in equity by any party against the United States, its 

departments, agencies, or entities, its officers, employees, or agents, or any other person.

BARACK OBAMA

THE WHITE HOUSE,

January 18, 2011.
130 RFA guide for government agencies

The White House

Office of the Press Secretary

For Immediate Release 

January 18, 2011 

Presidential Memoranda - Regulatory Flexibility, Small Business, And Job Creation

Memorandum for the Heads of Executive Departments and Agencies

Subject: Regulatory Flexibility, Small Business, and Job Creation

Small businesses play an essential role in the American economy; they help to fuel 

productivity, economic growth, and job creation. More than half of all Americans 

working in the private sector either are employed by a small business or own one.

During a recent 15-year period, small businesses created more than 60 percent of all new 

jobs in the Nation.

Although small businesses and new companies provide the foundations for economic 

growth and job creation, they have faced severe challenges as a result of the recession.

One consequence has been the loss of significant numbers of jobs.

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, establishes a deep national 

commitment to achieving statutory goals without imposing unnecessary burdens on the 

public. The RFA emphasizes the importance of recognizing "differences in the scale and 

resources of regulated entities" and of considering "alternative regulatory approaches . . . 

which minimize the significant economic impact of rules on small businesses, small 

organizations, and small governmental jurisdictions." 5 U.S.C. 601 note.

To promote its central goals, the RFA imposes a series of requirements designed to 

ensure that agencies produce regulatory flexibility analyses that give careful 

consideration to the effects of their regulations on small businesses and explore 

significant alternatives in order to minimize any significant economic impact on small 

businesses. Among other things, the RFA requires that when an agency proposing a rule 

with such impact is required to provide notice of the proposed rule, it must also produce 

an initial regulatory flexibility analysis that includes discussion of significant 

alternatives. Significant alternatives include the use of performance rather than design 

standards; simplification of compliance and reporting requirements for small businesses; 

establishment of different timetables that take into account the resources of small 

businesses; and exemption from coverage for small businesses.

Consistent with the goal of open government, the RFA also encourages public 

participation in and transparency about the rulemaking process. Among other things, the 

statute requires
Appendix G: Executive Order 13563 131

agencies proposing rules with a significant economic impact on small businesses to 

provide an opportunity for public comment on any required initial regulatory flexibility 

analysis, and generally requires agencies promulgating final rules with such significant 

economic impact to respond, in a final regulatory flexibility analysis, to comments filed 

by the Chief Counsel for Advocacy of the Small Business Administration.

My Administration is firmly committed to eliminating excessive and unjustified burdens 

on small businesses, and to ensuring that regulations are designed with careful 

consideration of their effects, including their cumulative effects, on small businesses.

Executive Order 12866 of September 30, 1993, as amended, states, "Each agency shall 

tailor its regulations to impose the least burden on society, including individuals, 

businesses of differing sizes, and other entities (including small communities and 

governmental entities), consistent with obtaining the regulatory objectives, taking into 

account, among other things, and to the extent practicable, the costs of cumulative 

regulations."

In the current economic environment, it is especially important for agencies to design 

regulations in a cost-effective manner consistent with the goals of promoting economic 

growth, innovation, competitiveness, and job creation.

Accordingly, I hereby direct executive departments and agencies and request independent 

agencies, when initiating rulemaking that will have a significant economic impact on a 

substantial number of small entities, to give serious consideration to whether and how it 

is appropriate, consistent with law and regulatory objectives, to reduce regulatory 

burdens on small businesses, through increased flexibility. As the RFA recognizes, such 

flexibility may take many forms, including:

• extended compliance dates that take into account the resources available to small 

entities; 

• performance standards rather than design standards; 

• simplification of reporting and compliance requirements (as, for example, through 

streamlined forms and electronic filing options); 

• different requirements for large and small firms; and 

• partial or total exemptions. 

I further direct that whenever an executive agency chooses, for reasons other than legal 

limitations, not to provide such flexibility in a proposed or final rule that is likely to have 

a significant economic impact on a substantial number of small entities, it should 

explicitly justify its decision not to do so in the explanation that accompanies that 

proposed or final rule.

Adherence to these requirements is designed to ensure that regulatory actions do not 

place unjustified economic burdens on small business owners and other small entities. If 

regulations are preceded by careful analysis, and subjected to public
132 RFA guide for government agencies

comment, they are less likely to be based on intuition and guesswork and more likely to 

be justified in light of a clear understanding of the likely consequences of alternative 

courses of action. With that understanding, agencies will be in a better position to protect 

the public while avoiding excessive costs and paperwork.

This memorandum is not intended to, and does not, create any right or benefit, 

substantive or procedural, enforceable at law or in equity by any party against the United 

States, its departments, agencies, or entities, its officers, employees, or agents, or any 

other person. Nothing in this memorandum shall be construed to impair or otherwise 

affect the functions of the Director of the Office of Management and Budget relating to 

budgetary, administrative, or legislative proposals.

The Director of the Office of Management and Budget is authorized and directed to 

publish this memorandum in the Federal Register.

BARACK OBAMA
Appendix G: Executive Order 13563 133

The White House

Office of the Press Secretary

For Immediate Release 

January 18, 2011 

PRESIDENTIAL MEMORANDA - REGULATORY COMPLIANCE

Memorandum for the Heads of Executive Departments and Agencies

Subject: Regulatory Compliance

My Administration is committed to enhancing effectiveness and efficiency in 

Government. Pursuant to the Memorandum on Transparency and Open Government, 

issued on January 21, 2009, executive departments and agencies (agencies) have been 

working steadily to promote accountability, encourage collaboration, and provide 

information to Americans about their Government's activities.

To that end, much progress has been made toward strengthening our democracy and 

improving how Government operates. In the regulatory area, several agencies, such as 

the Department of Labor and the Environmental Protection Agency, have begun to post 

online (at ogesdw.dol.gov and www.epa-echo.gov), and to make readily accessible to the 

public, information concerning their regulatory compliance and enforcement activities, 

such as information with respect to administrative inspections, examinations, reviews, 

warnings, citations, and revocations (but excluding law enforcement or otherwise 

sensitive information about ongoing enforcement actions).

Greater disclosure of regulatory compliance information fosters fair and consistent 

enforcement of important regulatory obligations. Such disclosure is a critical step in 

encouraging the public to hold the Government and regulated entities accountable.

Sound regulatory enforcement promotes the welfare of Americans in many ways, by 

increasing public safety, improving working conditions, and protecting the air we breathe 

and the water we drink. Consistent regulatory enforcement also levels the playing field 

among regulated entities, ensuring that those that fail to comply with the law do not have 

an unfair advantage over their law-abiding competitors. Greater agency disclosure of 

compliance and enforcement data will provide Americans with information they need to 

make informed decisions. Such disclosure can lead the Government to hold itself more 

accountable, encouraging agencies to identify and address enforcement gaps.

Accordingly, I direct the following:

First, agencies with broad regulatory compliance and administrative enforcement 

responsibilities, within 120 days of this memorandum, to the extent feasible and 

permitted by law, shall develop plans to make public information concerning their 

regulatory compliance and enforcement activities accessible, downloadable, and 
134 RFA guide for government agencies

searchable online. In so doing, agencies should prioritize making accessible information 

that is most useful to the general public and should consider the use of new technologies 

to allow the public to have access to real-time data. The independent agencies are 

encouraged to comply with this directive.

Second, the Federal Chief Information Officer and the Chief Technology Officer shall 

work with appropriate counterparts in each agency to make such data available online in 

searchable form, including on centralized platforms such as data.gov, in a manner that 

facilitates easy access, encourages cross-agency comparisons, and engages the public in 

new and creative ways of using the information.

Third, the Federal Chief Information Officer and the Chief Technology Officer, in 

coordination with the Director of the Office of Management and Budget (OMB) and their 

counterparts in each agency, shall work to explore how best to generate and share 

enforcement and compliance information across the Government, consistent with law.

Such data sharing can assist with agencies' risk-based approaches to enforcement: A lack 

of compliance in one area by a regulated entity may indicate a need for examination and 

closer attention by another agency. Efforts to share data across agencies, where 

appropriate and permitted by law, may help to promote flexible and coordinated 

enforcement regimes.

This memorandum is not intended to, and does not, create any right or benefit, 

substantive or procedural, enforceable at law or in equity by any party against the United 

States, its departments, agencies, or entities, its officers, employees, or agents, or any 

other person. Nothing in this memorandum shall be construed to impair or otherwise 

affect the functions of the Director of the Office of Management and Budget relating to 

budgetary, administrative, or legislative proposals.

The Director of OMB is authorized and directed to publish this memorandum in the 

Federal Register.

BARACK OBAMA
Appendix H: Memorandum on cumulative impacts 135

APPENDIX H MEMORANDUM ON CUMULATIVE IMPACTS

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C. 20503

ADMINISTRATOR

 OFFICE OF 

INFORMATION AND 

 REGULATORY 

 AFFAIRS 

March 20, 2012

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES 

FROM: Cass R. Sunstein 

Administrator 

SUBJECT: Cumulative Effects of Regulations 

On January 18, 2011, the President issued Executive Order 13563, “Improving 

Regulation and Regulatory Review,” which states that to the extent permitted by law, each 

agency must take into account “among other things, and to the extent practicable, the costs of 

cumulative regulations.” Executive Order 13563 emphasizes that some “sectors and industries 

face a significant number of regulatory requirements, some of which may be redundant, 

inconsistent, or overlapping,” and it directs agencies to promote “coordination, simplification, 

and harmonization.” Executive Order 13563 also states that to the extent permitted by law, each 

agency shall “propose or adopt a regulation only upon a reasoned determination that its benefits 

justify its costs.” 

Executive Order 13563 directs that regulations “shall be adopted through a process that 

involves public participation,” including an “open exchange of information and perspectives.” 

Public participation can and should be used to evaluate the cumulative effects of regulations, for 

example through active engagement with affected stakeholders well before the issuance of notices 

of proposed rulemaking. The President’s Council on Jobs and Competitiveness has emphasized 

the need for a smart and efficient regulatory system and has drawn particular attention to the 

cumulative effects of regulation. Cumulative burdens can create special challenges for small 

businesses and startups. 

Consistent with Executive Order 13563, and to the extent permitted by law, agencies 

should take active steps to take account of the cumulative effects of new and existing rules and to 

identify opportunities to harmonize and streamline multiple rules. The goals of this effort should 

be to simplify requirements on the public and private sectors; to ensure against unjustified, 

redundant, or excessive requirements; and ultimately to increase the net benefits of regulations. 

To promote consideration of cumulative effects, and to reduce redundant, overlapping, 

and inconsistent requirements, agencies should carefully consider the following steps, where 

appropriate and feasible, and to the extent permitted by law: 
136 RFA guide for government agencies

 Early consultation with, advance notice to, and close engagement with affected 

stakeholders to discuss potential interactions between rulemakings under consideration 

and existing regulations as well as other anticipated regulatory requirements; 

 Early engagement with state, tribal, and local regulatory agencies to identify 

opportunities for harmonizing regulatory requirements, reducing administrative costs, 

avoiding unnecessary or inconsistent requirements, and otherwise improving regulatory 

outcomes; 

 Use of Requests for Information and Advance Notices of Proposed Rulemaking to 

obtain public input on potentially overlapping rulemakings and on rulemakings that may 

have significant cumulative effects; 

 Specific consideration of the cumulative effects of regulations on small businesses 

and start-ups; 

 Identification of opportunities to increase the net benefits of regulations and to 

reduce administrative and other costs, while meeting policy goals and legal requirements; 

 Careful consideration, in the analysis of costs and benefits, of the relationship 

between new regulations and regulations that are already in effect; 

 Identification of opportunities to integrate and simplify the requirements of new and 

existing rules, so as to eliminate inconsistency and redundancy; 

 Coordination of timing, content, and requirements of multiple rulemakings that are 

contemplated for a particular industry or sector, so as to increase net benefits; and 

 Consideration of the interactive and cumulative effects of multiple regulations 

affecting individual sectors as part of agencies’ retrospective analysis of existing rules, 

consistent with Executive Order 13563. 

Where appropriate and feasible, agencies should consider cumulative effects and 

opportunities for regulatory harmonization as part of their analysis of particular rules, and should 

carefully assess the appropriate content and timing of rules in light of those effects and 

opportunities. Consideration of cumulative effects and of opportunities to reduce burdens and to 

increase net benefits should be part of the assessment of costs and benefits, consistent with the 

requirement of Executive Order 13563 that, to the extent permitted by law, agencies must “select, 

in choosing among alternative regulatory approaches, those approaches that maximize net 

benefits.” Agencies should avoid unintentional burdens that could result from an exclusive focus 

on the most recent regulatory activities. As noted, the cumulative effects on small businesses and 

start-ups deserve particular attention. 

This guidance is effective immediately.
Appendix I: Executive Order 13579 137

APPENDIX I EXECUTIVE ORDER 13579

Regulation and Independent Regulatory Agencies

By the authority vested in me as President by the Constitution and the laws of the United 

States of America, and in order to improve regulation and regulatory review, it is hereby 

ordered as follows:

Section 1. Policy. (a) Wise regulatory decisions depend on public participation and on 

careful analysis of the likely consequences of regulation. Such decisions are informed 

and improved by allowing interested members of the public to have a meaningful 

opportunity to participate in rulemaking. To the extent permitted by law, such decisions 

should be made only after consideration of their costs and benefits (both quantitative and 

qualitative).

(b) Executive Order 13563 of January 18, 2011, "Improving Regulation and Regulatory 

Review," directed to executive agencies, was meant to produce a regulatory system that 

protects "public health, welfare, safety, and our environment while promoting economic 

growth, innovation, competitiveness, and job creation." Independent regulatory agencies, 

no less than executive agencies, should promote that goal.

(c) Executive Order 13563 set out general requirements directed to executive agencies 

concerning public participation, integration and innovation, flexible approaches, and 

science. To the extent permitted by law, independent regulatory agencies should comply 

with these provisions as well.

Sec. 2. Retrospective Analyses of Existing Rules. (a) To facilitate the periodic review 

of existing significant regulations, independent regulatory agencies should consider how 

best to promote retrospective analysis of rules that may be outmoded, ineffective, 

insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal 

them in accordance with what has been learned. Such retrospective analyses, including 

supporting data and evaluations, should be released online whenever possible.

(b) Within 120 days of the date of this order, each independent regulatory agency should 

develop and release to the public a plan, consistent with law and reflecting its resources 

and regulatory priorities and processes, under which the agency will periodically review 

its existing significant regulations to determine whether any such regulations should be 

modified, streamlined, expanded, or repealed so as to make the agency's regulatory 

program more effective or less burdensome in achieving the regulatory objectives.

Sec. 3. General Provisions. (a) For purposes of this order, "executive agency" shall 

have the meaning set forth for the term "agency" in section 3(b) of Executive Order 

12866 of September 30, 1993, and "independent regulatory agency" shall have the 

meaning set forth in 44 U.S.C. 3502(5).

(b) Nothing in this order shall be construed to impair or otherwise affect:
138 RFA guide for government agencies

(i) authority granted by law to a department or agency, or the head thereof; or

(ii) functions of the Director of the Office of Management and Budget relating to 

budgetary, administrative, or legislative proposals.

(c) This order shall be implemented consistent with applicable law and subject to the 

availability of appropriations.

(d) This order is not intended to, and does not, create any right or benefit, substantive or 

procedural, enforceable at law or in equity by any party against the United States, its 

departments, agencies, or entities, its officers, employees, or agents, or any other person.

BARACK OBAMA

THE WHITE HOUSE,

July 11, 2011.

.
Appendix J: Example of a successful IRFA 139

APPENDIX J EXAMPLE OF A SUCCESSFUL IRFA
140 RFA guide for government agencies
Appendix J: Example of a successful IRFA 141
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Appendix J: Example of a successful IRFA 167
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Appendix J: Example of a successful IRFA 169
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Appendix K: Example of a successful FRFA 171

APPENDIX K EXAMPLE OF A SUCCESSFUL FRFA
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Appendix K: Example of a successful FRFA 197
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Appendix K: Example of a successful FRFA 199
200 RFA guide for government agencies

APPENDIX L ABBREVIATIONS USED IN THIS GUIDE

Advocacy Office of Advocacy, U.S. Small Business Administration

AFO animal feeding operation

ANPRM advance notice of proposed rulemaking

APHIS Animal and Plant Health Inspection Service

APA Administrative Procedure Act

ATA American Trucking Association

AU animal unit

BLM Bureau of Land Management

CAFO concentrated animal feeding operation

CFPB Consumer Financial Protection Bureau

C.F.R Code of Federal Regulations

CMS Centers for Medicare and Medicaid Services

DOC Department of Commerce

DOD Department of Defense

DOT Department of Transportation

DHS Department of Homeland Security

E.O. Executive Order

EPA Environmental Protection Agency

EQIP Environmental Quality Assessment Program

ERS Economic Research Service (USDA)

FAA Federal Aviation Administration

FAR Federal Acquisition Regulation

FCC Federal Communications Commission

FERC Federal Energy Regulatory Commission

FR Federal Register

FRA Federal Railroad Administration

FRFA final regulatory flexibility analysis

GAO General Accounting Office, now Government Accountability Office

HHS U.S. Department of Health and Human Services

ICR information collection request

IPS Interim Payment System

IRFA initial regulatory flexibility analysis

IRS Internal Revenue Service

MMS Minerals Management Service

NAAQS national ambient air quality standard

NAICS North American Industry Classification System

NAIHP National Association of Independent Housing Professionals

NAMB National Association of Mortgage Brokers

NEPA National Environmental Policy Act

NMFS National Marine Fisheries Service

NOAA National Oceanic and Atmospheric Administration

NPDES National Pollutant Discharge Elimination System

NPRM notice of proposed rulemaking

NWMA Northwest Mining Association
Appendix L: Abbreviations 201

OIRA Office of Information and Regulatory Affairs

OMB Office of Management and Budget

OSHA Occupational Safety and Health Administration

P.L. Public Law

RCRA Resource Conservation and Recovery Act

RFA Regulatory Flexibility Act

RIA regulatory impact analysis

RSPA Research and Special Programs Administration

RUS Rural Utilities Service

SBA Small Business Administration

SBIC small business investment company

SBJA Small Business Jobs Act

SBREFA Small Business Regulatory Enforcement Fairness Act

SERS small entity representatives

SIC Standard Industrial Classification system

SMR specialized mobile radio

USDA U.S. Department of Agriculture

U.S.C. United States Code

UPL upper payment limit

VOCs volatile organic compounds
202 RFA guide for government agencies

APPENDIX M OFFICE OF ADVOCACY STAFF 

Telephone (202) 205-6533 Fax (202) 205-6928

Office of the Chief Counsel

Winslow Sargeant Chief Counsel for Advocacy 202-205-6533

Claudia Rayford Deputy Chief Counsel 202-205-6804

Michael Landweber Senior Advisor 202 -205-6945

Elizabeth Horowitz Confidential Assistant 202-205-6934

Erik Gulbrandsen Special Assistant 202-205-7990

Office of Interagency Affairs (Legal Staff) 

Charles Maresca Director 202-205-6978

Jamie Belcore Saloom Telecommunications and Energy 202-205-6890

Sarah Bresolin Environment 202 205-6790

Kevin Bromberg Environment 202-205-6964

Major Clark, III Procurement and Small Business 202-205-7150

Kia Dennis Agriculture and Natural Resources 202-205-6936

Bruce Lundegren Safety, Transportation, and Security 202-205-6144

Linwood Rayford Food, Drugs, and Health 202-401-6880

Janis Reyes Labor and Immigration 202-619-0312

David Rostker Environment and Regulatory Reform 202-205-6966 

Jennifer Smith Economic Regulation 202-205-6943

Joe Sobota Veterans 202-205-6952

Dillon Taylor Taxes, Securities, and Pensions 202-401-9787

Office of Economic Research

Joe Johnson Director 202-205-6951

Brian Headd Small Business Dynamics 202-205-6953

Victoria Williams Jackson Finance 202-205-6191

Christine Kymn Regulation, Women, Minorities 202-205-6972

Jules Lichtenstein Labor and Benefits 202-205-6537

Radwan Saade Regulatory Analysis 202-205-6878

Office of Information

Jody Wharton Director 202-205-6933

Kyle Kempf Congressional Affairs 202-205-6888

Robert Kleinsteuber Writer/Editor 202-205-6958

Rebecca Krafft Writer/Editor 202-205-6224

Patrick Morris Public Liaison/Media Manager 202-205-6941

Kathryn Tobias Senior Editor 202-205-6938

Administrative Support Branch

Luciette Wren Director 202-205-7749

Angela Hamilton Program Assistant 202-205-6562

Shelia Myles Administrative Specialist 202-205-6564

Tymillia Robertson Program Assistant 202-619-2310

Natalyn Tart-Jones Administrative Specialist 202-205-6181

Regional Affairs

Michael Landweber Director 202-205-6945

Lynn Bromley Region I 617-565-8418

Teresa Coaxum Region II 212-264-7750

Ngozi Bell Region III 610-382-3093

Mark Berson Region IV 404-331-3081

Henry Sanders Region V 608-441-5264

Caitlin Cain Region VI 504-589-2838

Becky Greenwald Region VII 515-284-4554

John Hart Region VIII 303-844-0503

Yvonne Lee Region IX 415-744-8493

Jennifer Clark Region X 206-553-0390

Updated April 2012
Index 203

INDEX

Ace Lobster Co. v. Evans, 71

Administrative Procedure Act, 9, 10

and RFA litigation, 55ff

adverse v. beneficial impact of regulations, 23

Aeronautical Repair Station Association v. FAA,

 66

Alenco Communications v. FCC, 69

Allied Local and Regional Manufacturers

 Caucus v. EPA, 68

alternatives to regulations, 37

American Federation of Labor v. Chertoff, 59

American Moving and Storage Association, Inc.

 v. DOD, 57

American Trucking Associations v. EPA, 23, 65

AML International, Inc., v. Daley, 71

Ashley County Medical Center v. Thompson, 73

Associated Builders and Contractors, Inc. v.

 Herman, 60

Associated Fisheries of Maine, Inc., v. Daley, 69,

 72

Atlantic Fish Spotters Association v. Evans, 56n

beneficial impact of regulations, 23

Cactus Corner v. U.S.D.A., 60

Cement Kiln Recycling Coalition v. EPA, 66

Certification, 11

adequate vs. inadequate, 24

checklist, 29

factual basis for, 13

litigation regarding, 58

compliance assistance, 89

compliance guides, 88

Congressional Review Act, 91

Consumer Financial Protection Bureau

and Regulatory Flexibility Act, 2

and SBREFA panels, 51

costs of regulatory compliance, 1

cumulative effects of rules, 135

see also Section 610 review

data resources, 106, 109

direct vs. indirect impact of regulations, 22, 64

Dodd-Frank Wall Street Reform and Consumer

Protection Act of 2010, 2, 51, 103

economic impact analysis, 74

economic research on small business, 109

Environmental Defense Center v. E.P.A., 60

Environmental Protection Agency, 

and Regulatory Flexibility Act, 2

and SBREFA panels, 51

Executive Order 12866, 4, 112

Executive Order 13272, 3, 125

Executive Order 13563, 4, 79, 104, 127

Executive Order 13579, 5, 79, 137

exemptions from RFA, 9, 56

existing rules, review of, 79

factual basis for certification, 13

frequently asked questions about small business, 

 106

final regulatory flexibility analysis, 43

adverse economic impact minimized, 47

delays in publication of, 48

example of, 171

issues to address, 44

litigation concerning, 69

small entities estimated, 46

foreign affairs functions exemption from RFA, 

 56, 57

Friends of Fiery Gizzard v. Farmers Home

 Administration, 24

“Good cause” exception, 57

Hall v. Evans, 72

Harlan Land Co. v. United States Department of

Agriculture, 59

indirect impact of regulations, 22

litigation concerning, 64

Industry analysis, 16, 18

initial regulatory flexibility analysis, 31

compliance requirements, 36

duplicative rules considered, 40

elements of, 33

example of, 139

issues to address, 32

litigation concerning, 68

objectives of rule, 35

and other analyses, 41

reasons for rule, 35

significant alternatives, 37

small entities affected, 36

threshold analysis, 11 

waiver of, 41

Internal Revenue Service rules and RFA, 10

interpretative rules, 9, 10, 57

Judicial review provision of RFA, 77

LaGloria Oil & Gas Co. v. United States, 56n 

legislative rules and the RFA, 9
204 RFA guide for government agencies

litigation and the RFA, 55

Little Boy Lobster Co. v. Evans, 72

Michigan v. EPA, 65

Mid-Tex Electric Cooperative, Inc. v. FERC, 22,

64, 65, 67, 75n

military functions exemption, 9, 56, 57

Motor and Equipment Manufacturers

 Association v. Nichols, 65

National Association for Home Care v. Shalala,

57

National Association of Home Builders v. Army

 Corps of Engineers, 55n

National Association of Mortgage Brokers v.

 Board of Governors of the Federal Reserve

System, 69, 77n

National Association of Psychiatric Health

Systems v. Shalala, 73

National Environmental Policy Act, 2, 7

National Mining Association v. Chao, 76n

National Propane Gas Association v. DOT, 70

National Truck Equipment Association v.

 NHTSA, 63n

National Women, Infants & Children Grocers

 Association v. Food and Nutrition Service, 66n

Navajo Refining Co. v. United States, 56n 

North Carolina Fisheries Association v. Daley,

 58, 63, 75, 76n

Northwest Mining Association v. Babbitt, 58, 61,

 63n, 64

Occupational Safety and Health Administration 

and Regulatory Flexibility Act, 2

and SBREFA panels, 51

Oregon Trollers Association v. Gutierrez, 57

penalty reduction policies, 90

rates and the RFA, 10, 57

regulatory agendas, 87

regulatory enforcement fairness, 90

Regulatory Flexibility Act, 93

additional requirements of, 87

adverse v. beneficial impact, 23

analysis under, 16

applicability of, 9

certification of rules under, 11, 29

direct vs. indirect impact, 22

exemptions, 9, 56

final regulatory flexibility analysis, 43

history of, 1

impact assessment under, 15

initial regulatory flexibility analysis, 31

judicial review provision, 77

litigation concerning, 55

purpose of, 7

recent developments concerning, 102

retrospective review, 79

SBREFA panels, 51

Section 610 review, 79

semi-annual regulatory agendas, 87

significant impact determination, 18

substantial number determination, 21

threshold analysis under, 11, 12

Roche v. Evans, 55n

SBREFA panels, 51

timeline for, 54

Section 610 review of existing rules, 79 

see also cumulative effects of rules

semi-annual regulatory agendas, 87

Significant impact, 18

Size standards, 15, 17

litigation concerning, 61

Small Business and Work Opportunity Act of 

 2007, 2,102

Small business definition, 14

Small Business in Telecommunications v. FCC,

 62

Small Business Jobs Act of 2010, 3, 103

Small Business Regulatory Enforcement

 Fairness Act

background and provisions of, 2

and interpretative rules, 10

SBREFA panels, 51

Small entity definition, 14

Small governmental jurisdiction definition, 15

Small organization definition, 14

Southern Offshore Fishing Association v. Daley,

 25, 62, 73

State v. Centers for Medicare & Medicaid

 Services, 56n

Statistics for regulatory analysis, 109

Substantial number, 21

Theiss v. Principi, 64

U.S. Cellular Corporation v. FCC, 68

Unfunded Mandates Act, 91

United Distribution Companies v. FERC, 65

Washington v. Daley, 75n

White Eagle Cooperative Association v. Conner,

 66

Whitman v. American Trucking Association, 9

Williams Alaska Petroleum v. United States, 56n

Updated May 2012