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98–596 2016

OVERSIGHT OF THE OFFICE OF ADVOCACY AND 

THE OFFICE OF THE NATIONAL OMBUDSMAN 

AT THE SBA 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT 

AND REGULATIONS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

FEBRUARY 10, 2016 

Small Business Committee Document Number 114–042 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 

KEVIN FITZPATRICK, Staff Director 

EMILY MURPHY, Deputy Staff Director for Policy 

JAN OLIVER, Deputy Staff Director for Operation 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Cresent Hardy ................................................................................................. 1 

Hon. Alma Adams .................................................................................................... 2 

WITNESSES 

Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United States Small 

Business Administration, Washington, DC ....................................................... 3 

Rear Admiral Earl L. Gay, USN (Ret.), Small Business and Agriculture 

Regulatory Enforcement Ombudsman, United States Small Business Administration, Washington, DC ............................................................................ 5 

APPENDIX 

Prepared Statements: 

Hon. Darryl L. DePriest, Chief Counsel for Advocacy, United States 

Small Business Administration, Washington, DC ..................................... 14 

Rear Admiral Earl L. Gay, USN (Ret.), Small Business and Agriculture 

Regulatory Enforcement Ombudsman, United States Small Business 

Administration, Washington, DC ................................................................ 20 

Questions and Answers for the Record: 

Questions and Answers from Hon. Steve Chabot to Hon. Darryl L. 

DePriest ......................................................................................................... 27 

Questions and Answers from Hon. Steve Chabot to Rear Admiral Earl 

L. Gay ............................................................................................................ 37 

Additional Material for the Record: 

None. 

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(1) 

OVERSIGHT OF THE OFFICE OF ADVOCACY 

AND THE OFFICE OF THE NATIONAL 

OMBUDSMAN AT THE SBA 

WEDNESDAY, FEBRUARY 10, 2016 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON INVESTIGATIONS, 

OVERSIGHT AND REGULATIONS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building, Hon. Cresent Hardy [chairman of the Subcommittee] presiding. 

Present: Representatives Hardy, Vela ́zquez, and Adams. 

Chairman HARDY. Good afternoon. I would like to call this hearing to order. Too often small businesses tell us that the federal government ignores their concerns about the new regulation and 

threats, treats them unfairly. At a hearing in my district this past 

November, I heard that the red tape is making it more difficult and 

small firms, especially those in rural areas, harder to operate. 

Small businesses are even more worried about the flood of new 

mandates that are gushing out of Washington, D.C. And the final 

year of the Obama administration gives them grave concern. 

Last year, the administration finalized rules totaling $99 billion 

in costs, and many of those rules, like the EPA’s waters of the U.S. 

rule, inflict significant burdens upon small businesses. This year, 

it could even be worse, as the federal agencies plan to finalize the 

rules, like the Department of Labor’s overtime rule, and impose 

major costs on small businesses and will hurt their employees. 

Two offices, the Office of Advocacy and the Office of the National 

Ombudsman at the Small Business Administration, were created 

by Congress to help small businesses with their very regulatory 

concerns that I have mentioned. The Office of Advocacy independently represents the views and the interests of small businesses as 

regulations are developed. It also monitors agencies’ compliance 

with the Regulatory Flexibility Act. The Office of the National Ombudsman provides a way for small businesses to anonymously comment on excessive and unfair regulatory enforcement actions. 

Today, the Subcommittee will hear from the leaders of both offices on how they are carrying on their statutory duties. Given that 

the regulations continue to be a significant challenge for small 

businesses, it is critical that these offices work efficiently to reduce 

excessive regulatory burdens and ensure that small businesses are 

treated fairly. 

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2 

I would like to thank the witnesses here today, and I look forward to hearing your testimony. And I will yield now to the ranking member, Ms. Adams, for her opening remarks. 

Ms. ADAMS. Thank you, Mr. Chairman. 

And I want to thank the gentlemen for being here. At nearly 30 

million strong, small businesses are central to the U.S. economy. 

Responsible for two-thirds of net new jobs, they are the engine that 

drives the job creation. The State of North Carolina alone is home 

to more than 800,000 small businesses. Essential to their success 

is ensuring that their voice can be heard when it comes to Federal 

policy and regulation. This means not only reviewing regulations 

from a small-business perspective but also giving entrepreneurs a 

point of access to address their concerns. 

And this is where the Office of Advocacy and the National Ombudsman play a critical role. During today’s hearing, we will hear 

from both of these offices on how they are meeting their mandates 

and providing small businesses with a voice in the Federal Government. At its core, the Office of Advocacy works to reduce the burden of Federal regulation on small businesses through its implementation of the Regulatory Flexibility Act. In 2014, Advocacy 

achieved nearly $5 billion in annual savings for small businesses. 

By right-sizing regulations, small businesses are better able to 

focus on their core mission. 

In addition to its regulatory work, Advocacy conducts research on 

small businesses. During 2014, it published 23 research and data 

products, exceeding its annual goal of 20 reports. I am interested 

in how it sets its research agenda and in what ways it is 

prioritizing research related to minority-owned businesses, which 

make up 15 percent of U.S. businesses and are growing rapidly. 

The Ombudsman plays a complementary role to Advocacy, providing small firms with the ability to directly resolve complaints 

about the Federal Government. Such a mechanism is critical as 

small businesses lack the resources that larger corporations have 

to address such problems. And I am eager to understand how the 

Ombudsman is able to effectively handle its caseload, which 

reached a 6-year high last year. In addition, the Ombudsman is responsible for Regional Regulatory Fairness Boards, which provide 

small businesses with an avenue to raise concerns about Federal 

policies. Ensuring that these boards are filled can be a challenge, 

and I am hoping to hear an update on such progress, as well as 

efforts to increase diversity on these boards. 

During the hearing, I am hopeful to hear what is working and 

what is not. Ensuring that these offices function effectively and efficiently is essential to leveling the playing field for small businesses. So I want to thank both of the witnesses for being here 

today, and I look forward to your testimony. 

I yield back, Mr. Chairman. 

Chairman HARDY. Thank you. If Committee members have 

opening statements prepared, I would like to ask them that they 

submit them for the record. 

I would like to take a moment and explain how things work 

around here, the timing lights. You will each have 5 minutes to deliver your testimony. The light will start out green. When you have 

1 minute remaining, the light will turn yellow. And when it turns 

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3 

red, you are out of time. So I ask you try to stay within those limits. But we are here to hear from you also. 

I guess we will do an introduction first. Our first witness is Mr. 

Darryl DePriest. Mr. DePriest was appointed by President Obama 

and confirmed by the United States Senate as the seventh Chief 

Counsel of Advocacy this past December. He leads the Office of Advocacy, which is housed in the Small Business Administration, but 

it is independent from the agency. The office advocates for small 

businesses as new regulations are developed by the federal agencies. 

And, first, I would like to thank Mr. DePriest for coming to my 

office and introducing himself yesterday. Thank you very much. 

Our second witness is Admiral Earl Gay, a Small Business and 

Agriculture Regulatory Enforcement Ombudsman—I have a hard 

time saying that word, so I don’t want to say it too many times too 

fast—at the Small Business Administration. Admiral Gay leads the 

Office of the National Ombudsman, which assists small businesses 

that believe they have been subject to an excessive and unfair regulatory enforcement action. He has had a distinguished career as 

a naval officer and aviator. 

And, Admiral Gay, we appreciate your service. 

Mr. DePriest, we will begin with you. 

STATEMENTS OF THE HONORABLE DARRYL L. DEPRIEST, 

CHIEF COUNSEL FOR ADVOCACY, UNITED STATES SMALL 

BUSINESS ADMINISTRATION, WASHINGTON, D.C.; AND REAR 

ADMIRAL EARL L. GAY, USN (RET.), SMALL BUSINESS AND 

AGRICULTURE REGULATORY ENFORCEMENT OMBUDSMAN, 

UNITED STATES SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C. 

STATEMENT OF THE HONORABLE DARRYL L. DEPRIEST 

Mr. DEPRIEST. Chairman Hardy, Ranking Member Adams, and 

members of the Committee, good afternoon. As the Chief Counsel 

for Advocacy, I would like to thank you for this opportunity to appear before the Committee today to discuss the office and its accomplishments during fiscal year 2015, which I think is responsive 

to some of the issues that you raised in your opening statements. 

I have provided my complete testimony, and I ask that it be entered into the record. It includes all of Advocacy’s recent activity, 

which I will just summarize in these brief remarks. 

When the Office of Advocacy was first created in 1976, it was 

charged with providing small businesses with an independent and 

credible voice in the Federal rulemaking process. Too often, small 

businesses were unduly burdened by one-size-fits-all regulations 

from Federal agencies. During the past 40 years, the Office of Advocacy has facilitated greater consideration of small-business impacts through economic research, regulatory flexibility trainings, 

comment letters, roundtables, publications, and collaboration with 

Federal officials throughout government. As a result, Federal agencies treat Advocacy as a partner in the rulemaking process in an 

effort to reduce the regulatory burden on small business. 

As the seventh Senate-confirmed Chief Counsel, I will ensure 

that the office continues to work with Federal agencies to mitigate 

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4 

the potential costs of regulation on small entities. To further describe our dedication to this cause, I would like to update you on 

Advocacy’s efforts and accomplishments on behalf of small business 

during fiscal year 2015. During this time, Advocacy hosted 21 

roundtables to highlight the concerns of small businesses on a wide 

range of topics, from OSHA standards to FAA regulations. In addition, Advocacy submitted 28 comment letters to 15 different agencies on a variety of issues. Specifically, the majority of these comment letters addressed either, one, the need for flexible alternatives supporting small business; two, inadequate analysis of the 

impact on small entities; three, improper certification of the rule; 

or, four, requests for greater outreach to small entities. The office 

achieved more than $1.6 billion of first-year cost savings as a result 

of its efforts on behalf of small business. Generally, these savings 

come from the difference in costs between the proposed rule and 

the final rule. 

Advocacy’s efforts have also produced positive outcomes that are 

not quantifiable and are not captured in these cost-savings projections. Advocacy’s work with Federal agencies and engagement with 

small businesses often helped facilitate greater consideration of 

small-business concerns and Federal rulemakings in Federal initiatives. For example, Advocacy’s engagement with officials from the 

Food and Drug Administration produced more flexible regulations 

on animal food controls. Similarly, our work with the Federal Communications Commission improved competitive bidding rules. 

Advocacy’s approach to Federal agencies has also included facilitating greater compliance with the Regulatory Flexibility Act 

throughout the government. Since 2002, Advocacy has conducted 

formal trainings on RFA compliance for Federal agencies and other 

stakeholders. In fiscal year 2015 alone, Advocacy conducted 

trainings for 126 Federal officials from a variety of different agencies, exceeding our annual goal by more than 25 percent. In addition to these formal trainings, Advocacy offers Federal agencies 

technical assistance regarding RFA compliance. Since its creation, 

Advocacy has provided timely and policy-relevant information on 

important issues affecting small businesses. During fiscal year 

2015, we released 26 research publications on several topics relevant to today’s economy. 

Finally, the 10 regional advocates who are part of the office play 

a vital role in maintaining an open dialogue with the vast majority 

of small entities that operate outside the beltway. They interact directly with small-business owners, small-business trade associations, and State officials to educate them about the benefits of regulatory flexibility. This past fiscal year, Advocacy’s regional advocates participated in more than 500 outreach efforts, exceeding 

their annual goal of 360. 

In closing, I would like to thank the Committee and its staff for 

its continued support of the Office of Advocacy. As chief counsel, I 

look forward to working closely with you on the important issues 

of affecting small entities across this country. Now, if there are any 

questions, I would be pleased to answer them. 

Chairman HARDY. Thank you, Mr. DePriest. 

Admiral Gay, you have your 5 minutes. 

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5 

STATEMENT OF REAR ADMIRAL EARL L. GAY, US N (RET.) 

Admiral GAY. Thank you, Chairman Hardy and Ranking Member Adams for providing me this opportunity to comment on how 

the Office of the National Ombudsman can and does help improve 

the regulatory environment for America’s small businesses. I look 

forward to working with this Committee to improve the regulatory 

enforcement environment for our Nation’s 28 million small businesses. 

I am also excited that Darryl L. DePriest is now on board as the 

Chief Counsel for Advocacy. I meet with Mr. DePriest weekly to 

discuss synergies our offices execute to ensure a fair regulatory environment. We both agree that a strong working relationship with 

frequent communication and collaboration is critical to the SBA’s 

mission of counseling and protecting America’s small businesses 

against unnecessary regulatory burdens. Now, while the Office of 

Advocacy is responsible for ensuring fairness in implementation 

stages of Federal regulations, the Office of the National Ombudsman, or ONO, works to ensure regulations are being fairly enforced 

once they are enacted. Pursuant to the Small Business Regulatory 

Enforcement and Fairness Act, or SBREFA Act of 1996, this office 

was created to serve as a powerful voice for America’s small businesses. In fulfilling this role, we conduct public hearings, outreach 

events, and roundtables in each of SBA’s 10 regions, where we provide small businesses with forums where they can voice their concerns and comments about regulatory enforcement actions without 

fear of retaliation. We work with and encourage regulators to address entrepreneurs’ comments and concerns promptly and, wherever possible, to opt for compliance assistance and education rather 

than moving directly to levying fines and penalties. 

Additionally, we rate Federal agencies on the timeliness and the 

quality of their responses in our annual report to Congress. Our office also facilitates Regulatory Fairness Boards, as you talked 

about earlier, ma’am, or RegFair Boards in each of the SBA regions. Each board consists of five small-business owners who serve 

as the eyes and ears for small businesses in their communities, 

States, and regions. They work with local business and regional 

business offices, addressing any concerns with regulatory enforcement issues. Now, those reg boards are very vital assets, and they 

continue to be advocates for our efforts. In addition to receiving 

comments regarding regulatory fairness, our ONO office also receives comments in other issues, such as contracting, access to capital, loan policy and business training, counseling, and other support. During fiscal year 2015, our staff conducted more than 80 outreach events and four regional regulatory fairness hearings. 

Through the aggressive efforts of our district and regional offices, 

these roundtables and hearings continue to be very well attended. 

In my brief 3 months onboard, this office has held one regulatory 

enforcement fairness hearing, three small-business roundtables, 

one in Nevada recently and Florida, and several outreach events 

with small-business owners and entrepreneurs. I have met and established personal relationships with senior leaders at 12 Federal 

agencies, discussing ways we can better work together to reduce 

regulatory burdens against small businesses. 

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6 

During the next 6 months, we plan on conducting several 

roundtables and hearings, and also hosting our annual meeting 

with members of the 10 Regional Fairness Boards. It is important 

to note that all of our hearings, meetings, and partnership programs with small-business stakeholders have been in close collaboration with other Federal agencies. We truly value their critical 

presence and participation. I provided you a schedule of our activities for fiscal year 2015, as well as the planned events for the first 

two quarters of fiscal year 2016. 

In closing, I would like to state that on behalf of Administrator 

Contreras-Sweet and the great staff in the Office of the National 

Ombudsman, we look forward to working with all of our teammates 

and the Members of Congress to eliminate unnecessary regulatory 

burdens on small businesses as they continue to fuel America’s economic prosperity. I thank you again for the opportunity to appear 

here today and will be happy to answer any questions. Thank you. 

Chairman HARDY. Thank you, Admiral Gay. 

I appreciate both your testimonies. Thank you for being here 

again. 

I would like to start with Mr. DePriest. Small-business owners 

are feeling like they are drowning in a sea of red tape. You know, 

82,000 pages last year of new regulations written. Can you tell us 

a little bit about what your office is doing to prepare for this upcoming flood of new red tape that is coming to be able to make sure 

that we protect those small businesses? 

Mr. DEPRIEST. Certainly. I am blessed with having a terrific 

staff that has been through this process repeatedly, especially as 

we move toward the end of this administration, to make sure that 

every regulation that is proposed goes through the Regulatory 

Flexibility Act analysis and is analyzed for its effect on small businesses. 

We will continue to do the things we do, such as the roundtables, 

coordinating the panels, doing the analysis, having our economists 

look at it, everything that we can do to make sure that while an 

agency is able to achieve its regulatory goal, at the same time, we 

are looking for ways to minimize the effect that any proposed regulation would have on small businesses. 

Chairman HARDY. Thank you. 

Over the last couple years, the Office of Advocacy has filed public 

comment letters with federal agencies raising significant concerns 

about the RFA compliance. For example, the Office of Advocacy 

wrote the EPA and the Corps a comment letter on the waters of 

the United States rule and asked the agencies to withdraw the rule 

and comply with the RFA. The agencies ignored the Advocacy letter and finalized the rule without conducting a SBAR panel and assessing the impacts of the rule on small businesses. While the 

small business community was pleased that the Office of Advocacy 

stood up for them, some view it as a failure of the office also. What 

legal authority do you have for the chief counsel of Advocacy? And 

is there anything that you need us to do to help you ensure that 

you have the ability to make sure that agencies comply? 

Mr. DEPRIEST. Thank you. The office has, under the amendments to the Regulatory Flexibility Act, particularly the Small 

Business Regulatory Enforcement Fairness Act, has the ability to 

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file amicus briefs in court if there is a legal challenge to a regulation. The comment letters that we write, such as the one that you 

referenced, can also be used as evidence in court to see whether the 

agency has complied with the Regulatory Flexibility Act. Now, insofar as whether there is more that we need, in talking with the 

staff, we found that the vast majority of agencies comply with the 

Regulatory Flexibility Act. Our mantra is better information, better 

rules. So we try to put small businesses together with the agencies 

so that they get the input from small businesses. For example, in 

the waters of the United States, we did conduct roundtables with 

representatives of small business, with the EPA, and with the 

Corps. So they heard the concerns of small business. And we will 

just have to see, as we go forward, as we monitor the situation, you 

know, what effect it has. Now, I understand that that particular 

rule has been enjoined by the courts. But we will continue to monitor it. 

Chairman HARDY. Thank you. Admiral Gay, your office’s annual 

report indicates the office is spending a lot of time helping small 

businesses resolve federal procurement disputes. This appears to 

be duplicative work of other offices within the SBA and the Federal 

Government. Can you explain what your office does when it receives the comments from the small business regarding the Federal 

procurement? 

Admiral GAY. Yes, sir. Thank you for that question. As in all 

cases, we receive the comments. And in the comment forms, we ask 

that the small business state what their issues are, what they want 

to come out of it, and the impact that that regulation has on their 

ability to operate. But most importantly, we require them to provide supporting documentation, so we have ample evidence to support their issues. 

Once that happens, it comes to my office, and I have two outstanding case management specialists. Our office is four now. We 

were seven. We are down to four now. And we are working hard 

to replace those two. But at any rate, once the case management 

specialist looks over the case, I prepare a letter, signed by myself, 

to the corresponding entity, stating the issues that were in the 

comment. 

The agency has 30 days or less to provide me a timely and quality response. So when that happens, I in turn review the letter that 

they have returned back to me, and I usually phone call to the 

commenter to state what is happening. And then we send that letter back to the commenter. 

Chairman HARDY. Thank you. 

My time has expired. I will turn the time over to Ms. Adams. 

Ms. ADAMS. Thank you, Mr. Chair. 

And thank you, gentlemen. In 2014, Advocacy published 23 research reports. One of my priorities is to increase research into minority-owned small businesses as a means of understanding the 

challenges that they face. Mr. DePriest, how do you determine 

these research priorities? And what type of research are you planning on for minority businesses for this year? 

Mr. DEPRIEST. Thank you. We solicit, insofar as our economic 

research is concerned, we solicit ideas from the small-business community, from Members of Congress, from members of this ComSBREP-219 with DISTILLER

8 

mittee, from the mother SBA of what they might want us to research. And in that process, we try to pull together what our research agenda is going to be for the year. Now, insofar as minorities, that is a special focus of the office. When the office was created, the statute creating it specified that we are supposed to do 

research on issues involving minorities. As a matter of fact, we are 

doing some research right now on minorities in the technology 

area, minorities and immigrants and what their effect is in the 

technology area. As a matter of fact, in a couple weeks, I am going 

out to San Francisco and Silicon Valley to talk with individuals 

who are involved in the effort of increasing minority entrepreneurship. And at that time, we are also going to present our research 

on what is going on and things that can be helpful. So we are 

mindful of our requirements to do so, and we actively do it and do 

it as best we can. 

Ms. ADAMS. Thank you. 

Advocacy received over $9 million in the recently enacted omnibus, with staffing making up nearly 90 percent of the office’s budget. Mr. DePriest, do you believe that this funding is sufficient for 

the office to carry out its responsibilities? 

Mr. DEPRIEST. Yes. I believe that it is. In talking with the 

members of the staff since I have been there, I believe that it is 

a sufficient amount of money for us to carry on our activities. 

Ms. ADAMS. Good. Most people want more. Advocacy and Ombudsman play different yet similar roles in supporting small businesses. They both provide a conduit for small businesses to raise 

problems with the Federal Government. 

Admiral Gay, how do you coordinate with each other to ensure 

that your work is not duplicative? It sort of gets back on what 

maybe the chairman—— 

Admiral GAY. Yes, ma’am. As I stated before, I meet with Darryl 

weekly, sometimes biweekly, to discuss the systemic issues that I 

have seen or my case management specialists have seen in dealing 

with the small businesses’ concerns and the comment forms as 

well. We also participate in roundtables together. As a matter of 

fact, the recent one that we had out in Las Vegas with Sara Wagner, sir—we had Yvonne Lee, who works under Darryl’s Advocacy 

department, attend those, as well as fairness hearings. I attended 

a U.S. Air Force contracting summit. And we go toe and toe. We 

usually attend the same forums and business get-togethers, so we 

are not duplicative at all. We try to reduce the duplication. 

Ms. ADAMS. Okay. I was going to ask if you thought Congress 

should consider merging the offices, considering the overlaps. I 

guess your answer is no? 

Admiral GAY. Well, give me 2 more months, ma’am, and I can 

come back and give you my opinion on that. 

Ms. ADAMS. Okay. Then I would also, you know, as a connected 

question, would that result in better service to small businesses 

with better potentially lower costs? 

Admiral GAY. I think right now I think we work together pretty 

closely. Before Darryl and I got here, the people who were in our 

individual offices, they know each other. They worked close together. They have a very nurturing relationship. And our job as 

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9 

leaders is to maintain that and make sure we grow that congeniality. 

Ms. ADAMS. Thank you very much. 

Mr. Chair, I yield back. 

Chairman HARDY. Thank you. I turn the time over to Ms. 

Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. DePriest, President Obama issued two executive orders, 

13563 and 13610, as well as related memoranda to help reduce regulatory burdens on small business. Advocacy has provided counsel 

to the administration on these measures. In your view, have these 

executive orders made any difference in reducing regulatory burdens to small businesses? 

Mr. DEPRIEST. Yes, I believe they have. As I said during my 

opening remarks, we calculate that we saved businesses in the first 

year $1.6 billion. And that is the difference between what the agencies proposed as their initial rule and what they ended up with 

after consultation with us. We think that is a significant savings. 

As I said, there are other savings that are perhaps not as quantifiable, but we think $1.6 billion is significant savings. We are constantly looking for ways to represent the interests of small business. As I said, we do roundtables where we try to put the small 

businesses together with the agencies. We help with the panels. We 

do everything that we can to be the voice of small business and reduce the burden. Now, I think that the executive orders that the 

President has issued, some of which lead to actually looking back 

at regulations and see whether they are still remaining in force, 

you know, we do that. We help the agencies put together an agenda 

for doing that lookback. So I think that we are on the right track 

there. 

Ms. VELA ́ ZQUEZ. Okay. Mr. DePriest, under Dodd-Frank, the 

newly created Consumer Financial Protection Bureau became subject to the Small Business Advocacy Review Panel process. Given 

that the CFPB is a newer agency, can you comment on Advocacy’s 

experience in establishing the panel process there? 

Mr. DEPRIEST. Yes, I can. The CFPB has really embraced the 

process. I did have the number here. I would have to get it to you, 

but they have done a number of the panels that they are required 

to do. And, in some instances, you know, we think that there has 

been a benefit insofar as the rules that they were thinking about 

versus what they proposed. So even though it is a newer agency, 

they come at it and we come at them with the history of what we 

have been doing with OSHA and the EPA. And I would say that 

the agency has embraced that process. 

Ms. VELA ́ ZQUEZ. Well, one of our concerns is we don’t want for 

regulations to hinder the ability of small banks to provide access 

to capital for small businesses. So this is why it is so important 

that you work with the CFPB to make sure that consideration is 

taken when they issue regulations regarding the cost of credit for 

small businesses. 

Mr. DEPRIEST. I see. Yes, we do that. And we will continue to 

monitor that. 

Ms. VELA ́ ZQUEZ. Thank you. 

I yield back. Thank you, Mr. Chairman. 

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Chairman HARDY. Thank you. If you don’t mind, we are going 

to go a second round if everybody is fine with that. 

Admiral Gay, I would like to ask, on procurement complaints, 

small businesses not getting paid, are you dealing with that within 

your office, or are you getting it out to the appropriate people to 

look at it? 

Admiral GAY. Yes, sir. As we deal with the Federal contract disputes, that is one of the issues that we see. And that is businesses 

not receiving prompt payments on contracts. So, yes, sir, we do see 

that, along with time delays in processing of the contract, and so 

on and so forth. So we do see some of those that involve late payments. 

Chairman HARDY. The question, I guess, though, is these are 

regulatory issues. Are you referring them over to the proper—— 

Admiral GAY. Yes, sir. Yes, sir. 

Chairman HARDY. Okay. 

Admiral GAY. Absolutely. 

Chairman HARDY. Another question for you, Admiral Gay. According to the office’s website, there are board member vacancies 

on six of the 10 regional Regulatory Fairness Boards. For example, 

region 9, which includes Nevada, there are only three board members, and none of them are from my home State of Nevada. Can 

you explain why there are so many vacancies, and what are you 

doing to fill those vacancies? 

Admiral GAY. First of all, thank you for funding that would 

allow me to leave the beltway area to get out there. This is an allhands-on-deck effort. You can’t do that while here inside the beltway. And so what that does is allow me to go out and get recommendations from the RegFair Board members, and also Members of Congress as well, on people that are viable candidates to 

serve on these boards. Another issue is the vetting process. The 

vetting process, as you may or may not know, is meticulous, and 

it is prudent. And I think it should be because these candidates are 

representing the federal government. They are speaking on behalf 

of the government as well. 

Chairman HARDY. If I may on that. 

Admiral GAY. Yes, sir. 

Chairman HARDY. Your selection process, are you involving 

small-business owners, operators, and officers that serve within 

that regional regulatory fairness area? 

Admiral GAY. Yes, sir. 

Chairman HARDY. Okay. Could you also please provide the 

Committee with a list of current Regulatory Fairness Board members for each region and the date that they were appointed by the 

SBA? 

Admiral GAY. Yes, sir, I will do that. 

Chairman HARDY. You know, each Regional Regulatory Fairness Board is supposed to have five members that are appointed 

by the Administrator, receiving recommendations from the chair 

and the ranking member of the House and the Senate Small Business Committees. The current and previous chairmen of the House 

Committee on Small Business have never been asked by the SBA 

for a recommendation. I believe this is a little bit concerning that 

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we have never been asked. And it appears the SBA is not complying with their statutory requirements. 

Admiral GAY. Well, I understand the statutory requirements, 

and I will ensure that any new members on my watch will be reviewed by the chairs. 

Chairman HARDY. With that, I will turn the time over to Ms. 

Adams. 

Ms. ADAMS. Thank you, Mr. Chair. 

Mr. DePriest, Advocacy is required to carry out the panel process 

at EPA, OSHA, and CFPB. Can you comment on what is working 

in this panel process and what can be improved? 

Mr. DEPRIEST. I think that what is working is that the agencies 

are listening to the concerns from the small-entity representatives 

and implementing less burdensome regulations. To follow on with 

Congresswoman Vela ́zquez’ comment, particularly with the CFPB, 

they have held six of the panels since 2012. Some of the issues involved mortgage loan origination and arbitration and payday lending. And we think that we have seen some benefits here. For example, with the mortgage servicing rule, small entities which service 

less than 5,000 loans are exempt from some parts of the rule. And 

so that was a result of the agency listening to the concerns of small 

business. 

As I said earlier, the mantra is, you know, better information, 

better rules. And these panel processes allow small businesses to 

be directly involved in the process of writing the regulations. And 

I think there is definitely a benefit to that. 

Ms. ADAMS. One of the ongoing concerns with the Regulatory 

Flexibility Act has been the ability of agencies to continually forego 

the requirement in section 610 that require periodic review of the 

rules. Do you believe that this requirement should be strengthened? 

Mr. DEPRIEST. I would have to really look at that and talk with 

my staff about their experiences with that. My understanding is 

that we have helped agencies map out a plan for how they do their 

610 compliance. And I would like to have the opportunity to talk 

with the staff to see whether that is a possibility. Now, I know that 

later on this year, I will have the opportunity to present some legislative priorities. And I will take a special look at that to see 

whether that should be one of the ones I recommend. 

Ms. ADAMS. All right. Great. 

Admiral Gay, your office is responsible for operating 10 Regional 

Regulatory Fairness Boards, which are comprised of small-business 

owners. What challenges do you face in getting small-business owners to devote their time to serve on the boards? 

Admiral GAY. Again, ma’am, as a segue or a reverse segue back 

to the previous question, I think that in my short time onboard, 

from what I have seen is we have the RegFair Board members are 

very engaged. They are very, very engaged. And they represent 

small businesses well there. The challenges that we have right 

now, again, are getting the vetting process, getting folks through 

the vetting process and me getting out conducting increased outreach events to identify those viable candidates. You had an earlier 

comment about diversity of the board. And it is my job, our job to 

ensure that that board remains diverse. And we are working hard 

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to increase the diversity. But I need to get out and be on the road 

to make sure that I recruit viable candidates for your approval. 

Ms. ADAMS. Okay. So you have a process for ensuring that the 

boards are diverse in terms of minority businesses and their participation? 

Admiral GAY. Yes, ma’am. I think if you look at our report, you 

will see that our membership is diverse. 

Ms. ADAMS. Okay. 

Admiral GAY. Yes, ma’am. 

Ms. ADAMS. Your office had in 2014 its highest caseload in 6 

years, with 420 cases. Do you have sufficient resources, staff and 

otherwise, to handle this volume of cases effectively? 

Admiral GAY. Yes, ma’am. As I stated earlier, we were at seven. 

We are at four now, and that came because someone retired; someone was promoted; someone was transferred. But our boss has 

given me the right H.R. resources to fill those two positions that 

need to be filled. And we should have those two positions filled in 

the next couple of weeks, because I need to get out on the road. 

Ms. ADAMS. Great. Thank you very much. 

I yield back, Mr. Chairman. 

Chairman HARDY. Thank you. 

I turn the time over to Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. I have no more questions, Mr. Chairman. 

Thank you. 

Chairman HARDY. Thank you. I have one more. Mr. DePriest, 

you know, your office actually submitted a letter to the Department 

of Labor on the overtime rule and said the Department’s analysis 

had said, I quote: ‘‘Does not properly inform the public about the 

impact of this rule on small business entities. And due to those 

problems with the analysis, DOL cannot fully consider alternatives 

that would reduce the burdens on small businesses.’’ Can you 

elaborate on the Office of Advocacy concerns on the overtime rule? 

Mr. DEPRIEST. Well, I actually think that the quotation that 

you made really does sum it up. I mean, when we were first presented with this rule, we held several roundtables across the country—three in Washington, one in New Orleans, and one in Louisville—on this issue. And the letter that we wrote was really based 

upon the comments, the small business concerns that these 

changes will add significant compliance costs and paperwork burdens. We are going to actively work with DOL to seek regulatory 

alternatives that have been recommended by small businesses. I 

mean, one of the ones that they are really concerned about is the 

difference between—or how this regulation would affect those in 

low-wage states versus others. One of the reasons we went to New 

Orleans and Louisville was because dollars are spent differently in 

those regions. And we have been advocating for the Department of 

Labor to take that into account. Now, we understand that the DOL 

plans to release their rule later this year. So we are looking at it 

anxiously to see what they determine. 

Chairman HARDY. So, at this point, have they indicated whether they are going to revisit and redo their initial regulatory or give 

you any indication? 

Mr. DEPRIEST. I don’t have any further information on that. 

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Chairman HARDY. With that, I would like to thank you both for 

coming. I appreciate your being here and your testimonies. I appreciate what you do. And if there is anything this Small Business 

Committee can do to help strengthen those issues that will help 

strengthen our small businesses, that is what we are here for. As 

we know, our small businesses operate nimbly and swiftly to build 

and create and offer some of the most innovative and reliable goods 

and services in the marketplace. They pour their hearts and minds 

into their companies. However, navigating the rulemaking process 

and complying with regulations is a huge challenge. This Administration is making it a lot more difficult for small businesses to keep 

their doors open. That is why your offices and duties are so important. Small businesses need you to continue to aggressively advocate for them and assist them. 

This Subcommittee will continue to closely monitor your offices 

and your activities and work to ensure that the federal agencies 

comply with their statutory obligations under RFA. 

I ask unanimous consent that the members have 5 legislative 

days to submit their statements and support materials for the 

record. 

Without objection, this meeting is adjourned. 

[Whereupon, at 1:48 p.m., the subcommittee was adjourned.] 

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A P P E N D I X 

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Created by Congress in 1976, the Office of Advocacy of the U.S. Small 

Business Administration (SBA) is an independent voice for small business within the federal government. The Chief Counsel for Advocacy, 

who is appointed by the President and confirmed by the U.S. Senate, directs this office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal 

agencies, federal courts, and state policy makers. Issues are identified 

through economic research, policy analyses, and small business outreach. 

The Chief Counsel’s efforts are supported by Advocacy’s staff in Washington, D.C., and by Regional Advocates throughout the country. For 

more information about the Office of Advocacy, visit http://www.sba.gov/ 

advocacy, or call (202) 205–6533. 

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Chairman Hardy, Ranking Member Adams, and Members of the 

Committee, good afternoon. As the Chief Counsel for Advocacy, I 

would like to thank you for the opportunity to appear before the 

Committee today to discuss the Office of Advocacy and its many accomplishments during Fiscal Year 2015 (FY2015). 

When the Office of Advocacy was first created in 1976, it was 

charged with providing small businesses with an independent and 

credible voice in the federal rulemaking process. Too often, small 

businesses have been unduly burdened by one-size-fits-all regulations from federal agencies. 

During the past 40 years, the Office of Advocacy has facilitated 

greater consideration of small business impacts through economic 

research, regulatory flexibility trainings, comment letters, 

roundtables, publications, and collaboration with federal officials 

throughout government. Federal agencies treat Advocacy as a partner in the rulemaking process in the effort to reduce the regulatory 

burden on small business. 

As the seventh Senate-confirmed Chief Counsel, I will ensure 

that the office continues to work with federal agencies to mitigate 

the potential costs of regulation on small entities. To further describe our dedication to this cause, I would like to update you on 

Advocacy’s efforts and accomplishments on behalf of small business 

during FY2015. 

Regulatory Outreach 

From draft until final proposal, Advocacy engages federal officials throughout the entire rulemaking process. Advocacy’s 

roundtables, comment letters, and interagency discussions are vital 

to alerting federal officials to the potential impacts on small entities and producing alternatives to help reduce any burdens. 

Roundtables 

Advocacy’s regulatory roundtables gather federal officials, trade 

associations, and small business stakeholders from across the country for substantive presentations and open discussions about regulatory issues. During topics that included: (1) occupational exposure 

limits and other safety requirements; (2) overtime pay; (3) regulation of small drones; (4) federal procurement; (5) national emission 

standards; and (6) tax reform. Notably, our staff conducted 

roundtables in Louisville, New Orleans, and Washington, D.C. to 

discuss new federal procurement regulations. 

Comment Letters 

Once a proposed rule has been published and is open for public 

comment. Advocacy will often submit written comments voicing the 

concerns of small entities. These comment letters are a major tool 

used by Advocacy to ensure federal officials consider the impacts on 

small business, as federal agencies are compelled by statute to respond. During FY2015, Advocacy submitted 28 comment letters to 

15 different agencies on a variety of issues. The majority of these 

comment letters addressed either: (1) the need for flexible alterSBREP-219 with DISTILLER

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natives supporting small business; (2) inadequate analysis of the 

impact on small entities; (3) improper certification of the rule; or 

(4) requests for greater outreach to small entities. 

Regulatory Impact 

The Office of Advocacy has worked for nearly forty years to create a more flexible regulatory environment for small business in 

the United States. Advocacy’s positive impact on the federal rulemaking process can be seen in many ways: (1) as first-year costsavings; (2) as greater consideration of small business concerns in 

particular areas; and (3) as greater compliance with the RFA by 

federal agencies. Taking each of these parts into account provides 

an accurate portrayal of Advocacy’s success. 

Cost Savings 

During FY2015, Advocacy achieved over $1.6 billion in first-year 

cost savings as a result of its efforts on behalf of small business. 

Generally, savings come from the difference in cost between the 

proposed rule and the final rule. These savings resulted from eleven separate rules proposed by five different agencies: (1) the Department of Energy; (2) the Food and Drug Administration; (3) the 

Occupational Safety and Health Administration; (4) the Bureau of 

Land Management; and (5) the Environmental Protection Agency. 

For the majority of rules, the first-year cost savings arises from 

a one-time implementation cost. However, for rules such as OSHA’s 

final Cranes and Derricks in Construction final rule, the initial implementation of the rule was delayed for three years. Advocacy’s efforts resulted in over $13 million in savings for each year, saving 

small businesses $40 million cumulatively over those three years. 

Greater Consideration of Small Business Concerns 

Advocacy’s efforts have also produced positive outcomes that are 

not quantifiable and are not captured in cost-savings projections. 

Advocacy’s partnering approach to federal agencies and small business trade associations often help facilitate greater consideration of 

small business concerns in federal rulemakings and federal initiatives. For example, during FY2015, Advocacy obtained greater consideration of small business concerns in three federal rulemakings 

and three federal initiatives. Advocacy’s engagement of federal officials from the Food and Drug Administration and the Federal Communications Commission produced more flexible regulations on animal food controls and on competitive bidding rules, respectively. 

Advocacy’s leadership and hard work on a federal cybersecurity 

framework resulted in the National Institute of Standards and 

Technology conducted a panel on the impacts of federal 

cybersecurity regulations on small federal contractors. Similarly, 

Advocacy provided valuable regulatory advice to the agencies involved in the Transatlantic Trade and Investment Partnership negotiations. Advocacy’s participation in several rounds of negotiations helped garner greater consideration of small business issues 

on the international stage. 

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Greater Compliance with the RFA 

Advocacy has established cooperative relationships with most 

federal agencies, and has successfully facilitated greater compliance with the RFA throughout the government. As federal agencies 

have become more familiar with the RFA and have actively 

partnered with Advocacy, agencies throughout the government 

have produced more flexible and less burdensome regulations. Such 

success has been achieved through Advocacy’s respected publications, technical assistance, and formal trainings on the RFA. 

Since 2002, Advocacy has conducted formal trainings on RFA 

compliance for federal agencies and other stakeholders. These 

trainings have been a valuable resource in achieving greater regulatory flexibility and greater consideration of small business concerns. Over the past thirteen years, Advocacy has conducted 

trainings for 18 cabinet-level departments and agencies, 67 separate component agencies and offices, 22 independent agencies, and 

various special groups including congressional staff, small business 

organizations, and trade associations. In FY2015 alone, Advocacy 

conducted trainings for 126 federal officials from a variety of different agencies, exceeding our annual goal by over 25 percent. 

In addition to these formal trainings, Advocacy offers federal 

agencies technical assistance regarding RFA compliance. Throughout the rulemaking process, Advocacy is in daily contact with agencies to provide technical assistance in complying with the RFA. 

Such assistance can include: (1) estimates of the numbers of businesses likely to be affected by a proposal; (2) legal opinions on RFA 

issues; (3) the review of draft materials; (4) arranging roundtables 

with affected industry representatives; and (5) other assistance 

specific to each case. 

Economic Research and Outreach 

Since its creation, Advocacy has provided current and policy-relevant information on important issues affecting small businesses. 

During FY2015, the Office of Advocacy provided small business 

owners, researchers, policymakers, and other stakeholders with 26 

contracted and internal research publications on several topics relevant to today’s economy, including: (1) access to capital; (2) employment; (3) innovation; (4) veterans; and (5) minority- and 

women-owned businesses. 

During FY2015, Advocacy also established a new program series 

entitled ‘‘Small Business Economic Research Forums.’’ These forums provide interested parties with an opportunity to discuss relevant small business issues with our research team and other 

stakeholders. These forums also inform Advocacy’s staff of the cutting-edge topics that are affecting small businesses across the country. During the series’ inaugural year, eight research forums were 

held on topics such as consumer credit, student loan debt, tax exemptions, and new sources of capital. 

Communications Outreach 

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Advocacy’s information team keeps in touch with concerned 

stakeholders through Advocacy’s website, various publications, 

email alerts, and social media presence. Our monthly newsletter, 

The Small Business Advocate, reaches nearly 37,000 electronic subscribers. In addition, our specialized email alerts provide valuable 

information to thousands more, including over 28,000 research subscribers and over 25,000 regulatory subscribers. Advocacy also frequently updates stakeholders on Facebook, Twitter, and Advocacy’s 

blog. 

Regional Advocates 

The ten Regional advocates play a vital role in maintaining an 

open dialogue with the vast majority of small entities that operate 

outside of the Washington, D.C. area. They interact directly with 

small business owners, small business trade associations, and state 

officials to educate them about the benefits of regulatory flexibility. 

Regional advocates conduct outreach to identify areas of concern 

for small business and assist headquarters staff with specific actions, such as recommending participants for Small Business Regulatory Enforcement Fairness Act panels that require small entity 

representatives. They also alert businesses in their respective regions about regulatory proposals that could affect them. During 

FY2015, Advocacy’s regional advocates participated in more than 

500 outreach events, exceeding their annual goal of 360. 

Conclusion 

In closing, I would like to thank the Committee and its staff for 

its continued support of the Office of Advocacy. As Chief Counsel, 

I look forward to working closely with you on the important issues 

affecting small entities across this country. If there are any questions, I would be pleased to answer them. 

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Thank you Chairman Hardy and Ranking Member Adams for 

providing me this opportunity to comment on how the Office of the 

National Ombudsman can and does help improve the regulatory 

environment for America’s small businesses. 

I look forward to working with this committee to improve the 

regulatory enforcement environment for our nation’s 28 million 

small businesses. I am also excited that Darryl L. DePriest is now 

on bard as the Chief Counsel for the Office of Advocacy. I meet 

with Mr. DePriest weekly to discuss synergies our offices execute 

to ensure a fair regulatory environment. We both agree that a 

strong working relationship with frequent communication and collaboration is critical to the SBA’s mission of counseling and protecting America’s small businesses against unnecessary regulatory 

burdens. 

While the Office of Advocacy is responsible for ensuring fairness 

in the implementation stages of federal regulations, the Office of 

the National Ombudsman (ONO) works to ensure regulations are 

being fairly enforced once they are enacted. Pursuant to the Small 

Business Regulatory Enforcement Fairness Act (‘‘SBREFA’’), this 

office was created to serve as a powerful voice for America’s small 

businesses. 

In fulfilling this role, we conduct public hearings and outreach 

events (including roundtables and meetings) in each of SBA’s ten 

regions, providing small businesses with forums where they voice 

their comments about federal regulatory enforcement actions without fear of retaliation. 

We work with and encourage regulators to address entrepreneurs’ comments and concerns promptly, and wherever possible, 

to opt for compliance assistance and education rather than moving 

directly to levy penalties and fines. Additionally, in our annual report to Congress, we rate federal agencies on the timeliness and 

quality of their responses to comments received from small businesses. 

Our office also facilitates regional regulatory fairness boards 

(RegFair boards) in each of the SBA regions. Each RegFair board 

consists of 5 small business owners who serve as the eyes and ears 

for small businesses in their communities, states, and regions. 

They work with local small businesses to address regional concerns 

regarding federal regulatory enforcement or compliance issues. 

These RegFair boards have been and continue to be vital assets 

and advocates. In addition to receiving comments regarding regulatory fairness, our office also receives comments regarding other 

issues; such as, contracting, access to capital, loan policy and business training, counseling and other support. 

During FY-15, our staff conducted more than 80 outreach events, 

4 regional regulatory fairness hearings and 1 national hearing here 

in Washington, DC. Through the aggressive efforts of our district 

and regional offices and SBA resource partners and federal agency 

representatives, these roundtables and hearings continue to be very 

well attended and productive. 

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In my brief three months onboard, this office has held one regulatory enforcement fairness hearing, 2 small business roundtables 

in Nevada and several outreach events with small business owners 

and entrepreneurs. I have met and established personal relationships with senior leaders at 12 federal agencies, discussing ways 

we can better work together to reduce regulatory burdens for small 

businesses. During the next six months we plan on conducting several roundtables and hearings and hosting our annual meeting 

with members of the ten regional regulatory fairness boards. 

It is important to note that all of our hearings, meetings, and 

partnership programs with small business stakeholders, have been 

in close collaboration with other federal agencies, we truly value 

their critical presence and participation. 

Attached you will find a schedule of the ONO activities for FY15, as well as the planned events for the first two quarters of FY16. 

In closing, I’d like to state that, on behalf of Administrator 

Contreras-Sweet, and the great staff in the Office of the National 

Ombudsman, we look forward to working with all of our teammates 

and the members of Congress, to eliminate unnecessary regulatory 

burdens on small businesses as they continue to fuel America’s economic prosperity. 

I thank you again for the opportunity to appear here today and 

will be happy to answer any questions. 

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