United States General Accounting Office

GAO Testimony

Before the Subcommittee on Financial

Management and Accountability

Committee on Governmental Affairs

United States Senate

For Release on Delivery

Expected at

10:00 a.m. EDT

Wednesday

September 25, 1996

REGULATORY REFORM

Implementation of the

Regulatory Review

Executive Order

Statement of

L. Nye Stevens

Director, Federal Management and Workforce Issues

General Government Division

G O A

years

1921 - 1996

GAO/T-GGD-96-185

Summary 

Regulatory Reform: Implementation of the

Regulatory Review Executive Order

Executive Order 12866 was intended to improve regulatory planning and

coordination and is administered by OMB’s Office of Information and

Regulatory Affairs (OIRA). At the Committee’s request, GAO examined three

issues: (1) implementation of the order’s cost-benefit analysis

requirements, (2) OIRA changes to agencies’ proposed regulations, and

(3) agencies’ efforts to eliminate and revise regulations. GAO did not

attempt to assess the quality of the cost-benefit analyses or their effect on

rules, the quality of the regulatory reviews OIRA conducted, or the ultimate

value of the administration’s regulatory reform effort.

The executive order states that agencies should submit detailed

cost-benefit analyses to OIRA for all economically significant regulatory

actions, and GAO found such analyses at OIRA for 28 of the 29 such final

rules issued in 1995. OIRA said the other such rule did not need a full

cost-benefit analysis because it was implementing a statutory requirement.

The order also states that all regulatory actions that are significant for

noneconomic reasons should have an “assessment of costs and benefits.”

GAO found that 14 of the 23 significant rules that it examined did not have

such an assessment, and OIRA said these rules did not need an assessment

because of particular circumstances in each case.

Although aggregate statistics indicate that the proportion of regulations

that changed while under OIRA review has increased, the source of those

changes is not clear. GAO examined OIRA and agency files for the

Environmental Protection Agency (EPA) and Department of Transportation

(DOT) regulations that the aggregate data indicated had changed. It

appeared that most of these rules were changed at least in part because of

suggestions or recommendations by OIRA, and most of the changes

appeared significant. However, in about a third of the cases it was unclear

whether any OIRA-recommended changes had been made. In contrast to the

executive order’s requirement, only a few of the files clearly indicated

what changes had been made to the rules because of OIRA.

GAO found that EPA and DOT reports on the number of pages of regulations

they had eliminated were generally accurate. However, because new

regulations are being added at the same time that regulations are being

eliminated, the total number of pages of regulations may actually increase

in some agencies. Page eliminations are often being done because the

rules are obsolete or duplicative; revisions are often intended to clarify or

update rules. GAO’s analysis indicated that many of the page eliminations

did not appear to reduce regulatory burden, but GAO could not determine

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Summary 

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Regulatory Review Executive Order

whether burden was likely to be reduced as a result of most of the

revisions.

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Statement 

Regulatory Reform: Implementation of the

Regulatory Review Executive Order

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss the implementation of

Executive Order 12866, “Regulatory Planning and Review.” Issued on

September 30, 1993, the order was designed to, among other things,

“enhance planning and coordination with respect to both new and existing

regulations.” It outlines the administration’s regulatory philosophy and

principles, describes the organization of the federal regulatory system, and

initiated a process to review and revise or eliminate certain existing

regulations. That review process ultimately became part of the

administration’s overall regulatory reform effort.1

 The order also allocates

responsibilities to both federal agencies and the Office of Management and

Budget (OMB) in a centralized regulatory review process, and recognizes

OMB’s Office of Information and Regulatory Affairs (OIRA) as the repository

of expertise on regulatory issues.2

As the Chairman and Ranking Member of this Subcommittee requested,

we focused our review on three issues: (1) the extent to which agencies

are adhering to and OIRA is applying the executive order’s cost-benefit

analysis requirements; (2) whether OIRA is significantly changing agencies’

proposed regulations during its review process; and (3) whether agencies

are eliminating regulations and, if so, whether the elimination and revision

of regulations are reducing regulatory burden. The methodology we used

concerning each issue will be discussed in detail later, but in general we

met with OIRA and agency officials and reviewed OIRA and agency files

regarding specific regulations.

It is also important that I also describe what we did not do. We did not

reach any overall conclusions regarding the quality of the regulatory

reviews OIRA conducted or the ultimate value of the administration’s

regulatory reform effort. Neither did we attempt to assess the quality of

the cost-benefit analyses that agencies conducted or how those analyses

affected agencies’ decisionmaking. However, another GAO review currently

underway is examining qualitative aspects of selected cost-benefit

analyses prepared by the Environmental Protection Agency (EPA),

including the extent to which common assumptions are used in preparing

1

Regulatory reform is one element of the administration’s “reinventing government” initiative. For a

discussion of the reform proposals, see Regulatory Reform: How Can Congress Assess the

Administration’s Initiatives? (GAO/T-GGD-95-206, July 18, 1995).

2

OIRA was created by the Paperwork Reduction Act of 1980. It oversees agency activity in three areas:

regulation, collection of information, and information resources management. Regulation and

information collection review staff currently include a deputy administrator, 3 branch chiefs, 3

administrative support assistants, and 20 analysts.

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such analyses, regulatory alternatives are being evaluated, and potential

benefits are monetized. Our review focused on the three issues I

mentioned, and as I will describe later, data limitations prevented us from

fully addressing some of those issues.

Cost-Benefit Analysis

Requirements

Agencies’ responsibilities in the executive order to assess the costs and

benefits of their proposed regulations vary depending on whether the

regulatory action involved is “significant” or “economically significant.”3

 A

significant regulatory action is defined in the order as any 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.”

Any regulatory action that meets the first of these criteria is considered

“economically significant.” If the action does not meet the first criterion

but meets any of the other three criteria, it is considered “significant for

noneconomic reasons.”

OIRA’s Interpretation of

the Order’s Cost-Benefit

Requirements

For each significant regulatory action, the executive order requires the

issuing agency to provide OIRA with “an assessment of the potential costs

and benefits of the regulatory action.”4 OIRA officials told us that the degree

to which agencies should assess regulatory cost and benefits varies

depending on the nature of the regulatory action at issue. However, they

3

According to the executive order, a “regulatory action” is any substantive action by an agency,

normally published in the Federal Register, that promulgates or is expected to lead to the

promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed

rulemaking, and notices of proposed rulemaking.

4

The executive order permits the OIRA Administrator to waive review of any significant regulatory

action, in which case the agency need not comply with the order’s cost-benefit requirements.

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said that agencies should, at a minimum, include a statement in the

preamble to proposed significant regulations indicating that they

considered the potential costs and benefits of the regulations during their

development.

For economically significant actions, the order requires agencies to

provide to OIRA

“(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 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.”

OIRA officials told us that these provisions mean that agencies should

provide OIRA with a copy of a cost-benefit analysis when economically

significant proposed regulations are submitted to OIRA for review.

However, they also said that, in practice, agencies do not do cost-benefit

analyses for all economically significant proposed rules. For example, they

said that it would not be worth the time and effort required for an agency

to do a cost-benefit analysis for economically significant crop price

support regulations based on legislated formula.

As interpreted and administered by OIRA, the cost-benefit requirements in

Executive Order 12866 are similar to the requirements in the order it

replaced. Executive Order 12291, issued by President Reagan in 1981,

required agencies to submit a “regulatory impact analysis” with every

“major rule.” A major rule was defined as one that was likely to result in

(1) an annual effect on the economy of $100 million or more; (2) a major

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increase in costs or prices for consumers, individual industries, federal,

state, or local government agencies, or geographic regions; or

(3) significant adverse effects on competition, employment, investment,

productivity, innovation, or the international competitiveness of U.S.

enterprises—criteria similar to those used to describe “economically

significant” rules in Executive Order 12866. Like the cost-benefit

requirements in the Clinton executive order, the Reagan order said

regulatory impact analyses should contain descriptions of the potential

costs and benefits of the rule and of the costs and benefits of alternative

approaches.

Implementation of

Cost-Benefit Requirements

for Economically

Significant Rules

To determine the extent to which agencies provide a copy of a cost-benefit

analysis for each economically significant rule, we asked the Regulatory

Information Service Center (RISC) to provide us with a listing of all such

rules that were published in the Federal Register as final rules during

calendar year 1995.5 RISC provided us with a listing of 39 rules that it said

met those criteria.6

 However, we discovered that 10 of these 39 rules were

not economically significant and/or were not final rules, and therefore

should not have been part of our analysis.7

Of the remaining 29 rules, the largest number were from the Department

of Agriculture (13 rules), followed by the Department of Transportation

(DOT) (5 rules), and EPA (4 rules). The subject matter of the rules ranged

widely, including

• agricultural regulations (e.g., rice acreage reduction; wheat, feed grain,

and oilseed programs; and crop sugarcane and sugar beet price support

loan rates);

• standards for the use of double hull tankers carrying oil in bulk;

• migratory bird hunting regulations;

• National Emission Standards for Hazardous Air Pollutants for petroleum

refineries; and

5

RISC works closely with OMB to provide information to the president, Congress, and the public about

federal regulatory policies. Its primary role is to coordinate the development of the Unified Agenda of

Federal Regulatory and Deregulatory Actions, a comprehensive listing of proposed and final

regulations.

6

In this review, we did not attempt to determine whether other rules should have been classified as

“economically significant” or “significant.”

7

OIRA staff told us that 8 of the 10 rules were not economically significant, and the text of some of the

rules also indicated that they were not economically significant. One rule was a proposed rule, not a

final rule, and another rule was neither economically significant nor final. None of the files for these 10

rules contained a cost-benefit analysis.

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• regulations on the payment of covered outpatient drugs under rebate

agreements with manufacturers.

We reviewed OIRA’s files for each of these rules to see if they contained a

cost-benefit analysis. If we could not locate the analysis in OIRA’s files, we

asked OIRA staff for a copy of the analysis. For 28 of the 29 economically

significant rules, a cost-benefit analysis document was either in OIRA’s files

or was provided by OIRA staff. Although we did not attempt to assess the

quality of the analyses conducted, the analyses for 26 of the 28 rules

appeared to have all three of the elements the executive order

requires—assessments of costs, benefits, and the costs and benefits of

alternative approaches. One analysis covering two rules (the early- and

late-season migratory bird hunting rules) appeared to lack a discussion of

the costs and benefits of alternative approaches.

The one economically significant final rule for which we could not find a

cost-benefit analysis was issued by the Department of Veterans Affairs

(VA) in response to a Supreme Court decision interpreting a statutory

requirement that VA provide compensation for disability or death resulting

from VA hospitalization, medical or surgical treatment, or examination. The

file for the rule did contain a discussion of the rule’s “costs and budgetary

impact” that centered on how to calculate the overall cost of the

payments. OIRA officials said that the file contained no discussion of the

benefits of the payments or alternative approaches because the payments

were statutorily required, and therefore the cost discussion alone met the

requirements of the executive order.

Implementation of

Cost-Benefit Requirements

for Rules Significant for

Noneconomic Reasons

We also asked RISC to provide us with a list of all final rules issued in 1995

that were significant for noneconomic reasons. RISC provided a list of 259

such rules, from which we randomly selected a 10 percent sample (26

rules). Although the size of this sample prevents us from generalizing our

findings to all 259 rules, the sample can demonstrate the kinds of

cost-benefit “assessments” OIRA said satisfied the executive order’s

requirement.

We determined that three of the 26 significant rules were proposed, not

final, rules and therefore should not have been part of our review.8

 Of the

remaining 23 rules, 4 had a separate cost-benefit analysis document in the

OIRA files, and 5 other rules contained language discussing the costs and

8

All three of the proposed rules had either cost-benefit analyses or language discussing the costs and

benefits of the regulatory action.

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benefits of the regulatory action. The remaining 14 rules contained neither

a cost-benefit analysis nor language in the rule discussing the rules’ costs

or benefits.

OIRA officials said a cost-benefit assessment was not prepared for these 14

rules because of particular circumstances in each case. They said that

some of the rules were simply implementing a detailed statutory or

procedural requirement, some were essentially administrative in nature

(e.g., harmonizing two existing programs in different agencies), one

eliminated an outdated requirement, and one was significant only because

of its relation to a larger rule. In such cases, OIRA officials said they do not

recommend that agencies conduct a cost-benefit assessment because it

would not contribute substantially to decisionmaking. In essence, they

said, a blanket requirement that agencies conduct a cost-benefit

assessment would not pass a cost-benefit test.

OIRA Changes to

Regulations

The second major issue we were asked to address was whether OIRA is

significantly changing agencies’ proposed regulations during the review

process. Although we found evidence of some OIRA involvement in all of

the regulations we investigated, the data available did not provide

sufficient evidence to conclusively determine whether OIRA-recommended

changes were made to all of the regulations. Aggregate data compiled by

RISC indicate that the proportion of regulations that were changed during

the time period they were under OIRA review increased substantially

between 1981 and 1996, but the data do not reveal the source of those

changes. OIRA and agency files and interviews with OIRA staff indicated that

most of the rules that the aggregate data indicated had changed while at

OIRA were changed at least in part because of suggestions or

recommendations by OIRA, and most of those changes appeared significant.

However, in many other cases it was unclear what changes had been made

to the rules during the review process or whether OIRA had recommended

those changes. Despite this lack of documentation, OIRA and agency

officials said OIRA does affect the development of regulations through

discussions that occur before and during the rulemaking process or simply

by its presence in that process.

OIRA Regulatory Review

Process

OIRA has been responsible for reviewing proposed rules since its creation

in 1981. Under Executive Order 12291, OIRA reviewed both major and

nonmajor rules (on average, about 2,300 regulatory actions at proposed

and final rulemaking per year) from all federal agencies except

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independent regulatory agencies. The order authorized OMB to review any

preliminary or final regulatory impact analysis, notice of proposed

rulemaking, or final rule “based on the requirements of this Order.”9 OIRA’s

reviews under this executive order were highly controversial, with critics

contending that OIRA exerted too much control over the development of

rules and that decisions were being made without appropriate public

scrutiny.

Executive Order 12866 requires the OIRA Administrator to “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.” As was the case under Executive

Order 12291, the current order does not authorize OIRA to review rules

from independent agencies. However, instead of reviewing both major and

nonmajor regulations, OIRA’s reviews are currently limited to significant

regulatory actions (about 800 per year at proposed and final rulemaking).

OIRA conducts those reviews before the publication of the rule in the

Federal Register as a notice of proposed rulemaking and before its

publication as a final rule. OIRA also sometimes reviews rules prior to the

proposed rulemaking stage. In general, OIRA must complete its review with

an agency within 90 days of receiving the rule.

One of the stated objectives of Executive Order 12866 is “to make the

process more accessible and open to the public.” In conjunction with that

objective, the order requires agencies to “[i]dentify for the public those

changes in the regulatory action that were made at the suggestion or

recommendation of OIRA” after the action has been published in the

Federal Register. The OIRA Administrator pointed out that requirement in

guidance that was sent to the heads of departments and agencies in

October 1993.

Another objective of the executive order is to “reaffirm the primacy of

federal agencies in the regulatory decisionmaking process.” In a May 1994

report to the President on the first 6 months of the executive order, the

OIRA Administrator said the relationship between OIRA and the agencies had

“vastly improved” and that “rule writers and rule reviewers were learning

to work together as partners rather than as adversaries.” Agency officials

we spoke with at both EPA and DOT confirmed this perception. OIRA officials

told us that, during this administration, they work with the agencies before

9

For a description of and statistics relating to OIRA’s review process under Executive Order 12291, see

Regulatory Review: Information on OMB’s Review Process (GAO/GGD-89-101FS, July 14, 1989).

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the formal submission of the rules. Because of the often informal nature of

this process, the OIRA Administrator suggested in her May 1994 report to

the President that the order’s requirement that agencies document OIRA

changes “may warrant further consideration” because “changes that result

from regulatory review are the product of collegial discussions” often

involving multiple agencies. She said that after such an extended process,

“it is not clear that identifying changes made at the suggestion of OIRA is

accurate...or meaningful.”

EPA and DOT officials told us that regulations are frequently developed and

changed as a result of meetings and telephone calls between agency and

OIRA staff at various stages of the rulemaking process. They also said that

OIRA frequently affects the development of rules in ways that may not be

reflected in their or OIRA’s files. For example, DOT officials said that they

will not even propose certain regulatory provisions because they know

that OIRA will not find them acceptable.

Aggregate Statistics

Indicate Rules Change

While at OIRA, but Source

of Changes Is Unclear

At the conclusion of each stage of the review process, OIRA staff complete

a regulatory review worksheet that indicates whether the proposed rule

was (1) “consistent (with the executive order) without change,”

(2) “consistent with change,” (3) “withdrawn” by the agency,

(4) “returned” by OIRA for further consideration, (5) required to be issued

under a statutory or judicial deadline (thereby attenuating OIRA’s review),

or (6) whether some other action was taken.10 OIRA does not have the

authority under the executive order to disapprove regulatory actions.

At our request, RISC provided data on the disposition of all rules submitted

to OIRA from 1981 through June 1996.11 During this period, an average of

92 percent of the regulatory actions were coded as either “consistent with

change” or “consistent without change.” Relatively few actions were

withdrawn by the agencies (an average of less than 3 percent per year),

and even fewer were returned or fell into some other status category. The

proportion of rules returned by OIRA for further consideration appears

somewhat less under Executive Order 12866 than under Executive Order

12291. Between 1981 and September 30, 1993, OIRA returned an average of

about 1.3 percent of the rules it reviewed. Between October 1, 1993, and

10The proportion of regulatory actions with mandated deadlines has increased between 1985 and 1992.

See Regulatory Reform: Information on Costs, Cost-Effectiveness, and Mandated Deadlines for

Regulations (GAO/PEMD-95-18BR, Mar. 8, 1995).

11Up to October 1, 1993, OIRA reviews were done under Executive Order 12291. Subsequently, the

reviews were done under Executive Order 12866.

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June 30, 1996, OIRA returned 0.2 percent (5 out of 2,366) of the rules it

reviewed.

The percentage of actions that fell into the “consistent with change” or

“without change” categories has varied dramatically over time. For

example, in 1981, 87 percent of the regulatory actions were coded

“consistent without change,” and only 5 percent were coded as having

been changed. However, by the first half of 1996, a greater percentage of

regulatory actions were “changed” (48 percent) than were described as

“consistent without change” (45 percent). Some of the difference in the

degree to which rules were changed was probably due to the change in the

number and type of rules that OIRA reviewed. Under Executive Order

12291, OIRA reviewed about 2,300 major and nonmajor rules per year;

under Executive Order 12866, OIRA has reviewed fewer than 800 significant

rules per year.

However, these data do not necessarily mean that OIRA is more likely to

recommend changes to proposed rules than it did in the past. OIRA staff

told us that they code regulatory actions as “consistent with change” if any

changes are made to the actions while under review at OIRA, regardless of

their source. They said that a regulatory action could be coded as

“consistent with change” even if the changes were solely at the initiative of

the agency promulgating the rule. Therefore, it is unclear whether the

increased rate of “changes” over time means that OIRA is increasingly

asking for changes in agencies’ rules or whether agencies are more likely

to submit rules as “works in progress,” making further changes to the rules

while they are under review at OIRA.

OIRA and Selected

Agencies’ Files Often Did

Not Clearly Indicate OIRA’s

Effect

To better understand the nature of the changes being made to these rules,

we asked RISC to provide a list of all rules that were initially submitted to

OIRA for review during calendar year 1994.12 RISC provided a list of 319 such

rules and the action taken with respect to each rule (e.g., “consistent with

change” or “consistent without change”) at each stage of the rulemaking

process (prerule, notice of proposed rulemaking, and final rulemaking)

between their submission to OIRA in 1994 and the time we began our

review in July 1996.

The RISC data indicated that, at some point in the rulemaking process,

nearly 55 percent of the rules had changed while at OIRA. About 38 percent

12We focused on 1994 rules to allow time for OIRA to review the rules at both the proposed and final

rule stages.

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of the rules were coded “consistent without change” throughout the

process, and about 7 percent had some other type of disposition (e.g.,

judicial deadline, withdrawn, or returned). Major differences existed in the

number of rules that changed across the agencies. For example, 40 of the

54 EPA rules submitted to OIRA in 1994 (about 74 percent) were coded

“consistent with change” in at least one stage of the rulemaking process.13

In contrast, only 9 (30 percent) of the 30 DOT rules were coded “consistent

with change” at some stage of the rulemaking process.14 OIRA officials said

that some of the differences in the number of changes made to rules are

attributable to the level of centralized review at the agencies. They said

that well-developed review processes in agencies reduce the need for

OIRA-suggested changes to rules.

Of the 84 combined EPA and DOT rules, the RISC data indicated that 49 had

changed while at OIRA, 21 were “consistent with no change,” and 14 had

some other disposition. We then focused our review on the 49 rules that

the aggregate data indicated had changed. We first reviewed OIRA files and

interviewed OIRA staff regarding each of the rules to determine the nature

of the changes made and whether the changes were made at the

suggestion or recommendation of OIRA. We also reviewed EPA and DOT files

for these rules to determine whether agencies had identified for the public

the changes that were made at the suggestion or recommendation of OIRA.

OIRA or agency files indicated that OIRA suggested changes that were made

to 29 of the 49 combined EPA and DOT rules, and OIRA staff said that they

had suggested changes that were made to 3 other rules. The file for one

rule indicated OIRA had no suggested changes. For the remaining 16 rules,

though, it was unclear whether OIRA had recommended any changes that

were made to the rules.

The OIRA and DOT files frequently did not indicate what changes were made

to the rules or, if they did, whether the changes were made at the

suggestion or recommendation of OIRA. The EPA files were usually more

complete and often indicated substantial discussions between agency and

OIRA representatives. They also sometimes contained copies of drafts of

the rules indicating the changes that had been made during the review

process. However, some of the EPA files did not have this type of

documentation, and even those that did frequently did not clearly indicate

13Only 1 rule was “consistent without change” throughout the process, and the remaining 13 rules were

deadline cases, withdrawn, or returned or had one of those codes in conjunction with a “consistent

with change” or “consistent without change” code.

14Twenty of the 30 DOT rules were “consistent without change” throughout the process, and 1 rule was

withdrawn.

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whether OIRA had recommended those changes. For example, the EPA file

for one of the 16 rules for which we could not determine OIRA changes

contained more than two dozen faxes, letters, memos, or other forms of

communication between the EPA and OIRA officials. Many of those

documents referred to changes that had been made to the rule, but it was

not clear whether the changes had been suggested by OIRA.

For those 29 files that we determined resulted in OIRA-suggested changes,

we sometimes made those determinations by accumulating evidence from

different sources or by reading notes written in the margins of documents.

None of the DOT files and only a few of the EPA files contained a memo

clearly documenting for the public that changes were made to the rules at

the suggestion or recommendation of OIRA. Therefore, we do not believe

that either EPA or DOT has closely adhered to the executive order’s

requirement to document changes made at the suggestion or

recommendation of OIRA. As a result, the public would frequently find it

difficult to determine what changes were made to regulatory actions

because of OIRA.

Most OIRA Changes

Appeared Substantive

In 21 of the 32 rules for which evidence existed of OIRA-suggested changes,

the changes made to the rules appeared to be substantive in nature. For

example:

• One EPA file indicated that EPA decided to make four “significant changes”

to the rule’s compliance criteria because of OMB’s comments. The changes

included limiting the technical and scientific information the rule required

to be submitted and reducing the list of conditions that must be monitored

from seven to three.

• Another EPA file indicated that OMB’s comments resulted in the elimination

of recordkeeping requirements from the rule and that language was added

to the rule allowing waiver of certain requirements to avoid conflicts with

requirements from another agency.

• An OIRA file indicated that DOT redrafted a rule’s implementation schedule

in response to an OMB request, allowing a more gradual implementation of

the rule for certain elements of the regulated community.

In the other 11 rules, the changes appeared relatively minor. For example,

one of the EPA files stated that the only changes made during the OMB

review were “minor deletions of preamble language” and that “[n]o

substantive changes to the proposal were suggested or recommended by

OMB.”

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The lack of documentation of OIRA changes to the rules or documentation

that reflects only a relatively minor change does not necessarily mean that

OIRA did not play a significant role in the development of the rules in

question. As I mentioned earlier, OIRA officials told us that during this

administration they work with the agencies before rules are formally

submitted. These kinds of discussions may not be reflected in documents

at either the agencies or OIRA.

Elimination and

Revision of

Regulations

The third major issue we were asked to address was whether agencies

were eliminating the regulations that the administration claimed were

being eliminated, and whether the eliminations and revisions of rules were

reducing regulatory burden. We found that EPA and DOT reports on the

number of pages of regulations they had eliminated were generally

accurate. However, because new regulations are being added at the same

time that regulations are being eliminated and revised, the total number of

pages of regulations may actually increase in some agencies. Available

data indicate a variety of reasons why the regulations are being eliminated

(e.g., because rules are outdated or are duplicative of other requirements)

and revised (e.g., to clarify or update rules or to establish new

procedures). Most of the page eliminations did not appear to reduce

regulatory burden, but it was often unclear whether the regulatory

revisions would do so.

Order’s Requirement for

Review Leads to Page

Elimination and Revision

Goals

Section 5 of Executive Order 12866 required each agency to submit a

program to OIRA by December 31, 1993, under which it would periodically

review its existing significant regulations to determine whether any should

be modified or eliminated. According to the order, the purpose of the

review was to make the agency’s regulatory program more effective, less

burdensome, or better aligned with the President’s priorities and the

principles in the order.

There had been several previous requirements that federal agencies review

their existing regulations. For example, Executive Order 12044

(“Improving Government Regulations”), issued by President Carter in

1979, required agencies to review their existing rules “periodically.” The

Regulatory Flexibility Act of 1980 required agencies to publish in the

Federal Register a plan for the periodic review of rules that “have or will

have a significant economic impact upon a substantial number of small

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entities.”15 In 1992, President Bush sent a memorandum to all federal

departments and agencies calling for a 90-day moratorium on new

proposed or final rules during which agencies were “to evaluate existing

regulations and programs and to identify and accelerate action on

initiatives that will eliminate any unnecessary regulatory burden or

otherwise promote economic growth.”

In an October 1993 memo to the heads of federal departments and

agencies, the Administrator of OIRA noted that previous administrations

had undertaken similar review efforts but said that some of those efforts

had been “so broad in scope that necessary analytic focus has been

diffused, or needed followup has not occurred.” She said the effort under

the new executive order should be more productive because, among other

things, “it focuses only on significant regulations and the legislation that

mandates them.” In its report on the first year of implementation of the

order, OIRA further clarified the intent of this effort.

“It is important to emphasize what the lookback effort is and is not. It is not directed at a

simple elimination or expunging of specific regulations from the Code of Federal

Regulations. Nor does it envision tinkering with regulatory provisions to consolidate or

update provisions. Most of this type of change has already been accomplished, and the

additional dividends are unlikely to be significant. Rather, the lookback provided for in the

Executive Order speaks to a fundamental reengineering of entire regulatory systems....”

On March 4, 1995, the President sent a memorandum to the heads of

departments and agencies describing plans for changing the federal

regulatory system because “not all agencies have taken the steps

necessary to implement regulatory reform.” Among other things, the

President directed each agency to conduct a page-by-page review of all its

regulations in force and eliminate or revise those that were outdated or in

need of reform. In June 1995, 28 agencies provided reports to the President

describing the status of their regulatory reform efforts, often noting the

number of pages of federal regulations that would be eliminated or

revised. On June 12, 1995, the President told participants at the White

House Conference on Small Business that the page-by-page review effort

had resulted in commitments to eliminate 16,000 pages of regulations from

the 140,000 page Code of Federal Regulations (CFR), and another 31,000

pages would be modified either through administrative or legislative

means.

15See 5 U.S.C. 601, 610. In Regulatory Flexibility Act: Status of Agencies’ Compliance

(GAO/GGD-94-105, Apr. 27, 1994), we reported the results of a study by the Small Business

Administration that indicated many agencies had not planned for or conducted a review of their rules.

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Since that time, agencies have periodically reported to OIRA on their

progress in eliminating and revising rules. As of June 30, 1996, the agencies

reported that 11,569 pages of the CFR had been eliminated (72 percent of

the 16,000-page goal) and another 1,421 pages (9 percent) had been

proposed for elimination. The agencies also indicated that 13,216 pages of

the CFR had been “reinvented” (43 percent of the 31,000-page goal), and

another 5,271 pages (17 percent) had been proposed for reinvention.

Page Elimination Totals

Appear Generally

Accurate, but Methodology

Differs

Any analysis of the effect of reductions in the number of pages of

regulatory text must recognize that one sentence of a regulation can

impose more burden than 100 pages of regulations that are administrative

in nature.16 Thus, the number of pages eliminated in the CFR is, at best, an

indirect measure of burden reduction. Nonetheless, it is one of the

measures that the administration is using to gauge its own efforts.

To determine whether agencies were actually eliminating the number of

pages of regulations that they claimed in their reports to OIRA, we obtained

details of two agencies’ page elimination efforts—EPA’s and DOT’s.17

Specifically, the agencies provided us with Federal Register citations for

actions related to the pages that they claimed to have eliminated as of

June 30, 1996. We then reviewed those citations, confirmed that the

actions were final or interim final rules, noted what CFR parts or sections

they eliminated, and then counted the eliminated pages in the CFR that

were designated for removal.

Our analysis indicated that these agencies’ page elimination claims were

generally valid. EPA claimed to have eliminated 1,292 pages from the CFR

(89 percent of the 1,457 pages it had promised in its 1995 report to the

President), and we counted a total of 1,230 pages that had been removed.

DOT claimed to have eliminated 1,247 pages (102 percent of the 1,221 pages

it had promised), and we counted 1,232 pages that had been removed.

OIRA officials said that they had not provided guidance to the agencies in

how to carry out the CFR page elimination and revision exercise. Perhaps

as a consequence, the agencies we visited differed in the manner in which

they counted the pages being eliminated and revised. EPA officials said

16See Regulatory Reform: How Can Congress Assess the Administration’s Initiatives?

(GAO/T-GGD-95-206, July 18, 1995) for a more complete discussion of this issue.

17We selected these agencies because we were already examining the changes made to their

regulations in another part of this review. We did not attempt to verify the number of pages being

revised because of the difficulty involved in making that determination. Elimination of pages seemed

more straightforward and, therefore, verifiable.

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they only counted CFR changes that occurred in 1995 (primarily after their

June report to the President) or 1996. However, DOT officials said they

counted any regulatory elimination or revision since the start of the

Clinton administration in coming up with their tally of CFR pages

eliminated or revised. Officials in both agencies also said there were

differences within each of the agencies in the manner in which CFR pages

were counted. For example, an EPA official said that some units within EPA

simply “eyeballed” the pages being eliminated, whereas other units used

more sophisticated methods of measuring the number of CFR pages being

removed.

Page Elimination Effort

Does Not Count Pages

Added

OIRA officials said that the administration’s goal was to eliminate 16,000

pages from the CFR as it existed at the start of the reinvention effort. They

said the page elimination total does not take into account any pages that

were added to the CFR during that effort, and therefore the CFR may not

have 16,000 fewer pages than at the start of the administration’s effort.

However, they added that many of the pages being added to the CFR are

statutorily mandated regulations, not new rules developed at the initiative

of regulatory agencies.

The effect of pages being added to the CFR at the same time they were

being eliminated can be seen at one of the agencies included in our review.

An EPA official said that the agency had 14,384 pages of regulations in the

CFR as of July 1, 1995. As of July 1, 1996, EPA said it had eliminated 1,292

pages in the CFR, but an EPA official told us in August 1996 that the number

of pages of EPA regulations had expanded to 14,690 pages—a growth of

more than 300 pages. The official said this growth was primarily driven by

statutory requirements to develop new Clean Air Act regulations.

Governmentwide data on changes in the number of regulatory pages are

incomplete, but the data that are available suggest that, despite the

contemporaneous addition of new regulations, the page elimination effort

is having some effect on the size of the CFR. According to the Office of the

Federal Register (OFR), the total number of pages in the CFR increased from

105,935 pages in 1985 to 138,186 in 1995. Data on the number of pages in

the entire CFR for 1996 will not be available until the spring of 1997.

However, an OFR official said that 1996 data for about half of the CFR

volumes (titles 1 through 27) that have been revised indicate that the

number of pages in those sections dropped from 68,282 in 1995 to 64,802 in

1996—a decline of 3,480 pages (about 5 percent). Those titles include

regulations involving such topics as agriculture, banks and banking,

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energy, commerce and foreign trade, employees’ benefits, food and drugs,

highways, and housing and urban development.

Reasons for CFR Page

Eliminations and Revisions

We also attempted to assess the reasons why the page eliminations and

revisions were undertaken and whether those actions appeared to reduce

substantive regulatory burden. To do so, we analyzed the Unified Agenda

of Federal Regulatory and Deregulatory Actions, which provides uniform

reporting of data on regulatory activities under development throughout

the federal government.18 The October 1995 and April 1996 editions of the

Unified Agenda contained a “reinventing government” data element that

indicated whether the regulatory action was part of the administration’s

reinventing government effort and, if so, whether the result would be

elimination of CFR text or revision of CFR text. In those entries, brief

abstracts were usually included describing the action or proposed action.

We discovered during our review that at least one agency (EPA) did not list

all of its page elimination and revision efforts in the Unified Agenda.

Nevertheless, the Unified Agenda is the most complete governmentwide

compendium of those activities available.

Of the 5,354 separate entries in the October 1995 and April 1996 editions of

the Unified Agenda, a total of 1,562 entries had a “reinventing government”

data element. Of these, 211 entries indicated that the action involved the

elimination of text in the CFR, and 1,351 entries said that the action would

revise text. The agencies with the most reinvention entries were DOT (212

entries), the Department of the Interior (171 entries), and the Department

of Health and Human Services (165 entries). Of the 211 rule elimination

entries in the Unified Agenda, only 1 was considered economically

significant, and 22 were classified as significant for noneconomic reasons.

Forty-three of the 1,351 revisions were considered economically

significant, and 386 were considered significant for noneconomic reasons.

Twenty-nine of the 211 page elimination entries did not contain an abstract

describing the elimination effort. In about half of the remaining 182

entries, the abstracts indicated that the pages were being eliminated

because the regulations were obsolete. In some cases, the agencies

18The Regulatory Flexibility Act (5 U.S.C. 601-612) requires that agencies publish semiannual

regulatory agendas describing regulatory actions that they are developing. Executive Order 12866 and

OMB memorandums implementing section 4 of the order establish minimum standards for agencies’

agendas. The Office of Federal Procurement Policy Act Amendments of 1988 (41 U.S.C. 421[g]) require

the development and semiannual publication of a report on procurement regulations. The Unified

Agenda helps agencies fulfill all of these requirements.

Page 18 GAO/T-GGD-96-185
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indicated that the regulations had not been enforced for some time. For

example:

• VA said it was eliminating a regulation providing lump-sum payments to

veterans involved in an incident in Texas in 1906.

• The Department of Energy said it was removing regulations “related to

defunct programs of financial assistance for electric and hybrid vehicle

research and methane transportation research.”

• A proposed Department of Agriculture rule would eliminate the import

licensing system for sugar exempted from an import licensing fee, which

the Department said had been suspended in 1985 and eliminated on

January 1, 1995.

• Another Department of Agriculture action removed its regulation

pertaining to the Special Agricultural Workers program because “the

program expired on December 1, 1988.”

• FDA said it was proposing to eliminate certain regulations “that refer to

substances no longer used in product formulations or to products that are

no longer marketed.”

The abstracts also frequently indicated that CFR text was being eliminated

because the requirements were duplicative of other requirements that

remained in the CFR (about 28 percent of the rule elimination abstracts).

The remaining 1,351 “Reinventing Government” entries indicated they

would revise text in the CFR “to reduce burden or duplication, or

streamline requirements.” Of these, 287 did not contain an abstract

describing the nature of the reinvention effort. Of the 1,064 entries that did

have an abstract, the most common reason given for the action being

taken was to clarify a regulatory requirement (about 28 percent of the

entries). For example:

• The Department of the Interior said it was rewriting its civil penalty

procedures “in plain English.”

• The Occupational Safety and Health Administration said it was proposing

to revise its regulations on confined spaces “to state more clearly the

employer’s duty to ensure effective rescue capability.”

• The Department of the Treasury said revisions to one of its rules would

“provide greater clarity by defining previously undefined terms.”

• The Department of Justice proposed an amendment to “clarify the

requirement for installation of curb ramps at existing pedestrian

walkways” in response to “public concerns about the unique and

significant capital expense” of such ramps.

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• The Department of Labor said it was giving guidance to employers on the

information they must keep to determine compliance with the Fair Labor

Standards Act “to ensure that applicable standards are easily

understandable and reasonable.”

Other commonly cited reasons for the revisions were to update

requirements to reflect current statutes, science, or conditions (about

26 percent); to establish new regulatory procedures or standards (about

18 percent); and to change a regulation found to be overly burdensome to

industry, state or local governments, or federal agencies (about

14 percent).19 In 110 of the entries (about 10 percent), the changes

appeared to be implementing statutory requirements. For example, one of

the Department of the Treasury entries indicated that its Office of Thrift

Supervision had issued an interim final rule that revised its risk-based

capital standards “as required by Sections 208 and 350 of the Riegle

Community Development and Regulatory Improvement Act of 1994.” In

these and other cases, the revisions appeared less like “reinventions” than

part of the standard rulemaking process.

Page Eliminations Appear

Unlikely to Reduce

Burden, but Effect of

Revisions Is Unclear

We also examined the Unified Agenda abstracts to determine whether the

actions being announced appeared to reduce substantive regulatory

burden. We defined the term “regulatory burden” broadly to include the

cost of compliance, any lack of flexibility allowed by the rule, and related

paperwork requirements. We also said the regulatory burden could be on

industry, state or local governments, or the federal government. Although

we attempted to determine as objectively as possible whether the actions

described in the abstracts were likely to decrease regulatory burden, our

results should be viewed as informed opinions rather than the result of

rigorous analysis because (1) no commonly agreed-upon way to measure

regulatory burden exists, (2) the determination of whether burden is

increased or decreased by a related action is an inherently subjective

process, and (3) the abstracts in the Unified Agenda sometimes provided

only cursory information about the regulatory action at issue.

Nevertheless, in more than 60 percent of the page elimination entries, it

did not appear that the CFR pages being eliminated would reduce

substantive regulatory burden. As noted previously, most of these actions

were being taken because the regulations being eliminated were obsolete,

and many of these did not appear to have been enforced for some time.

19The most common beneficiary of the burden reduction efforts appeared to be private industry,

followed by state and local governments and then federal agencies.

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Therefore, for these entries there did not appear to be any reduction in

substantive regulatory burden. In some cases, the agencies themselves

indicated that the page eliminations would not alter existing regulatory

requirements, as shown in the following examples:

• The Department of Justice said one of its actions to eliminate obsolete

sections was “editorial and non-substantive in nature and ...[has] no

impact on governmental or nongovernmental entities.”

• The Department of Commerce said that although an entire part within the

CFR was being removed, “(t)his final rule does not make substantive

changes to the existing regulations.”

• The Department of Housing and Urban Development (HUD) said it was

eliminating provisions that were unnecessary because they were

redundant of the Mortgagee Review Board (MRB) statute, and would “not

change the substantive requirements of the MRB regulations.” HUD also said

it was eliminating provisions that were redundant of the Community

Development Block Grant’s regulations without substantively changing the

requirements.

• Another HUD rule removed “nearly identical provisions” in various parts of

the CFR, but again HUD said it did not change the substance of the

provisions.

Officials from both EPA and DOT told us that at least one of the goals of

their rule elimination effort was to remove “dead wood” and that no

substantive regulatory burden was being eliminated in many instances.

One EPA official said that no substantive regulatory burden would be

eliminated by any of EPA’s rule elimination efforts.

In about a quarter of the cases, the Unified Agenda abstracts did not

provide enough information to allow us to determine whether the rule

elimination action would reduce burden. However, 19 of the rule

elimination actions (about 10 percent) appeared to reduce substantive

regulatory burden. For example:

• The Food Safety Inspection Service proposed removal of a requirement

that it approve facilities and equipment before they are used in official

establishments. The agency also proposed amending its prior approval of

most voluntary, plant-operated partial quality control programs.

• The Department of Health and Human Services issued a proposed rule to

“revoke the requirement for increased frequency reports to FDA for

postmarketing adverse experience reporting.”

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• DOT proposed rescinding its standards regarding the location,

identification, and illumination of motor vehicle controls and displays,

relying on market forces instead of regulatory requirements to ensure

proper markings.

We could not clearly determine whether substantive regulatory burden

would be reduced for more than half of the 1,064 CFR revisions for which

there was an abstract. In about 26 percent, the revisions did not appear to

reduce burden, and in about 21 percent, the action did appear to reduce

burden. Actions that did not appear to reduce substantive regulatory

burden include the following:

• A proposal by the Bureau of Alcohol, Tobacco, and Firearms to permit the

use of the word “unaged” as an alternative to “immature” to describe grape

brandy that has not been stored in oak containers.

• A National Park Service proposal to “recognize an official United States

Park Police insignia, provide for its future protection, and prevent the

unauthorized use of the insignia.”

• A VA action to “update various cross-references and authority citations and

to make other nonsubstantive changes.”

• An OSHA action to extend a general industry rule on preventing suffocation

and explosions in confined spaces to the construction industry.

• A DOT action to correct obsolete references in field office addresses and

terminology.

• A DOT plan to remove an appendix to a rule, which was described by the

Department as an administrative action that “has no impact on the marine

industry as it does not change any requirements imposed upon them.”

• A DOT plan to change a regulation on state matching of planning and

administration costs from a regulation to an “agency directive.”

• DOT’s plan to remove a regulation that implemented a statutory provision

for which funds have not been authorized since 1994.

• An EPA action implementing the Asbestos School Hazard Abatement

Reauthorization Act extending training and accreditation requirements

and increasing the number of training hours required, which EPA said “will

increase regulatory costs” for the owners and managers of public and

commercial buildings.

Entries that appeared to reduce substantive regulatory burden include the

following:

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• A proposal by the Department of the Treasury to exempt depository

institutions from currency transaction reporting obligations with respect

to transactions with certain businesses.

• A Department of Justice proposal to waive a requirement for registration

and allow the use of records required to be kept under FDA regulations

instead of maintaining separate records for the Drug Enforcement

Administration.

• A DOT rule permitting official filing of international air carrier rules tariffs

in an electronic format.

• An EPA proposal to exempt certain pesticides from registration

requirements and another proposal to remove isopropyl alcohol from the

list of chemicals for which reporting is required under the Emergency

Planning and Community Right-to-Know Act.

• An EPA proposal to allow the use of a financial test rather than more

expensive mechanisms such as surety bonds or letters of credit to ensure

that adequate funds are available to cover certain closure costs. EPA

estimated this change would save owners and operators of municipal solid

waste landfills about $45 million annually. Another EPA proposal in this

area would reportedly save local governments $138 million annually.

Again, I would like to emphasize that our characterizations of actions that

appear to reduce substantive regulatory burden and those that do not

appear to reduce burden are based on a review of what was, at times, very

limited information. Also, even though an action to eliminate or revise a

regulation may not reduce the substantive regulatory burden imposed by

that regulation, it may result in a reduction in other types of burden by

making the regulation clearer or easier to find. Some of the proposed

changes may also make the regulatory process more effective or results

oriented, even though their effect on regulatory burden may be unclear or

negligible. A final verdict regarding the value of these initiatives will have

to await the reaction of the regulated community.

Mr. Chairman, this completes my prepared statement. We would be

pleased to answer any questions.

(410062) Page 23 GAO/T-GGD-96-185
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