89–010

Calendar No. 22

107TH CONGRESS REPORT

1st Session " ! SENATE 107–5

INDEPENDENT OFFICE OF ADVOCACY ACT OF 2001

MARCH 21, 2001.—Ordered to be printed

Mr. BOND, from the Committee on Small Business,

submitted the following

REPORT

[To accompany S. 395]

The Committee on Small Business, to which was referred the bill

(S. 395) to ensure independent and nonpartisan operation of the

Office of Advocacy of the Small Business Administration, having

considered the same, the Committee reports favorably thereon,

with amendments, and recommends that the bill, as amended, do

pass.

I. NEED FOR LEGISLATION

The Office of Advocacy (Office) is a unique office within the Federal government. It is part of the Small business Administration

(SBA/Agency), and its director, the Chief Counsel for Advocacy, is

nominated by the President and confirmed by the Senate. At the

same time, the Office is also intended to be the independent voice

for small business within the Federal government. It is supposed

to develop proposals for changing government policies to help small

businesses and to represent the views and interests of small businesses before other Federal agencies.

The General Accounting Office (GAO) published a report in 1999

on personnel practices at the SBA (GAO/GGD–99–68). The GAO reported that Assistant and Regional Advocates hired by the Office

of Advocacy share many of the attributes of Schedule C political

appointees. During the period covered by the report, Regional Advocates, who are senior staff in the Office of Advocacy, were frequently cleared by the White House personnel office, which is the

same procedure followed for approving Schedule C and non-career

SES political appointees. The report raises questions, concerns and

suspicions regarding the independence of the Office of Advocacy.

Consequently, Chairman Bond introduced the bill to establish a
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sufficiently independent Chief Counsel who would not be obligated

to comply with the political demands of the Administration. Further, the legislation, as approved by the Committee, is written, in

part, to address issues raised by the GAO.

The Independent Office of Advocacy Act of 2001 responds to

these concerns and is designed to build a firewall to prevent the

political intrusion into the day-to-day management of the Office of

Advocacy. The bill requires that the SBA’s budget include a separate account for the Office of Advocacy. No longer would the Office’s funds come from the general operating account of the Agency.

The separate account would also provide for the number of fulltime employees who would work within the Office of Advocacy. No

longer would the Chief Counsel for Advocacy have to seek approval

from the SBA Administrator to hire staff for the Office of Advocacy.

The bill does not alter the 25-year-old statute that permits the

Chief Counsel to hire individuals critical to the mission of the Office of Advocacy without going through the normal competitive procedures directed by Federal law and the Office of Personnel Management (OPM) (15 U.S.C. 634d). The special hiring authority,

which is limited only to employees within the Office of Advocacy,

is beneficial because it allows the Chief Counsel to hire quickly

those persons who can best assist the Office in responding to

changing issues and problems confronting small businesses. An

early draft of S. 395 included a restatement of the special hiring

authority provided under existing law to the Chief Counsel. Although the restatement of existing law was dropped from the bill

at the insistence of the Senator Thompson, Chairman of the Committee on Governmental Affairs, the statutory authority for the

Chief Counsel to hire staff under 15 U.S.C. 634d has not been

modified or rescinded in any way in S. 395 as approved by the

Committee on Small Business.

As the director of the Office of Advocacy, the Chief Counsel for

Advocacy has a dual responsibility. On the one hand, this individual is the independent watchdog for small business. On the

other hand, he or she is also a part of the President’s Administration. These two roles are sometimes very difficult roles to play simultaneously.

The Independent Office of Advocacy Act is designed to make the

Office of Advocacy and the Chief Counsel for Advocacy a fully independent advocate within the Executive Branch acting on behalf of

the small business community. The bill would establish a clear

mandate that the Office of Advocacy will continue to work on behalf of small businesses regardless of the position taken on critical

issues by the President and the Administration.

The Office of Advocacy, as envisioned by the Independent Office

of Advocacy Act of 2001, will be unique within the Executive

Branch. The Chief Counsel for Advocacy will be a wide-ranging advocate, who will be free to advocate change in government programs and attitudes as they effect small businesses.

In 1976, Congress established the Office of Advocacy in the SBA

to be the eyes, ears and voice for small business within the Federal

government. Over time, it has been assumed that the Office of Advocacy is the ‘‘independent’’ voice for small business. While the

Committee believes that the Office of Advocacy and the Chief

Counsel should be independent and free to continue to advocate or
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support positions that might be contrary to the Administration’s

policies, it has become apparent that greater independence for the

Office would improve its ability to advocate on behalf of small businesses.

For example, funding for the Office of Advocacy comes from the

Salaries and Expense Account of the SBA’s budget. Staffing is allocated by the SBA Administrator to the Office of Advocacy from the

overall staff allocation for the Agency. In 1990, there were 70 fulltime employees working on behalf of small businesses in the Office

of Advocacy. The FY 2001 allocation of staff is 51, but in recent

years the Office has not been fully staffed as the result of the hiring freeze imposed by the SBA Administrator three years ago. The

independence of the Office is diminished when the Office of Advocacy staff is reduced to allow for increased staffing for new programs and additional initiatives in other areas of the SBA, at the

discretion of the Administrator.

II. DESCRIPTION OF THE BILL

The Independent Office of Advocacy Act of 2001 provides for an

effective, independent advocate for small business within the Federal government that is not restricted by the views or policies of

the Small Business Administration (SBA/Agency) or any other

agency. The Act is designed to make the Office of Advocacy and the

Chief Counsel for Advocacy a full independent advocate within the

Executive Branch acting on behalf of the small business community.

Under this bill, the Office of Advocacy will be unique within the

Executive Branch. The Chief Counsel for Advocacy will be a wideranging advocate, who will be free to take positions contrary to the

Administration’s policies and to advocate change in government

programs and attitudes as they impact small business.

The Act establishes for the first time in the Small Business Act

that the Office of Advocacy has the statutory independence and

adequate financial resources to be an advocate for the small business community. In addition to the statement of the Office’s independence, the bill provides for a separate authorization to fund the

Office of Advocacy. As designed in this bill, its annual budget

would be a separate account in the SBA budget, similar to the separate accounts for the Office of Inspector General and the Business

Loans Program. The Act further directs the SBA to provide appropriate and adequate office space at the SBA headquarters and its

field office locations, together with equipment, office supplies, and

communications facilities and services as are necessary to support

the requirements of the Office of Advocacy.

Each appropriation request submitted by the Administration to

the Congress would also provide for the number of full-time employees who would work within the Office of Advocacy. The Chief

Counsel for Advocacy would not need the approval of the SBA Administrator to hire staff. As stated earlier in this report, the bill

does not alter the practice set forth in existing law that allows the

Chief Counsel to hire individuals critical to the mission of the Office of Advocacy without going through the normal competitive procedures directed by federal law and the OPM. Without regard for

the civil service laws and regulations, the Chief Counsel may hire

and terminate those individuals who are considered necessary to
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carry out the duties of the Office. This existing law is intended to

include the regular staff of the Office of Advocacy and such consultants and experts on a temporary or intermittent basis that the

Chief Counsel deems necessary. The special hiring authority rests

solely with the Chief Counsel. It is the Committee’s intention that

the authority of the Chief Counsel to hire staff, consultants and experts would be limited only by the amounts appropriated annually

by the Congress, without further review or approval needed from

the Administration..

Section 4 of the Independent Office of Advocacy Act of 2001 sets

forth in detail the functions of the Office of Advocacy as intended

by the Congress. The Chief Counsel will head up the Office of Advocacy. The Chief Counsel will be appointed by the President from

civilian life with the advice and consent of the Senate without regard to the person’s political affiliation. To be eligible for the position, the nominee cannot have served in any position at the SBA

during the five years preceding appointment.

Because of the independent nature of the office, the committee

established the office in such a manner so that the incumbent

Chief Counsel would not feel that his or her job were in jeopardy

by taking a position critical of or in opposition to an Administration

initiative. To strengthen this position, the bill provides that the

President must notify the Congress 30 days in advance before removing the Chief Counsel from office, except in cases of misconduct, neglect of duty, malfeasance, or if there is reasonable

cause to believe that the Chief Counsel has committed a crime for

which a sentence of imprisonment can be imposed. This provision

does not restrict the President’s removal authority; simply, it is intended to give Congress advance notice that the Chief Counsel is

being removed.

Section 4 sets forth the primary functions of the Office of Advocacy, which the Committee views as wide-ranging and comprehensive insofar as are the needs and problems confronting small businesses nationwide. In setting forth the responsibilities of the Office

of Advocacy, the Committee intends for the Office to serve as focal

point to receive complaints, criticisms and suggestions concerning

the policies and programs of the Federal government that affect

small businesses. Additionally, the Committee believes that

women-owned businesses and minority-owned businesses play an

equally important role in our economy. Therefore, the bill adds

women-owned business concerns to the primary function of the Office of Advocacy.

The bill requires and authorizes the Chief Counsel to submit certain reports to the President and the Congress, including an annual report on the Regulatory Flexibility Act. The Committee believes strongly that these reports should not be subject to the mandatory review and editing that has historically been required by

past and current Administrations. In August 1999, when this legislation was first approved unanimously by the full Senate, the bill

was amended at the request of Senator Thompson to insure that

the other Congressional Committees with a specific interest in the

Regulatory Flexibility Act receive the annual reports, including the

Senate Committee on Governmental Affairs, the House Government Reform Committee and the Senate and House Judiciary Committees. This change has been included in S. 395. In order for the
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Committees on Small Business of the Senate and House of Representatives to carry out their responsibilities on behalf of the

small business community, it is important that they receive regular

reports from the Chief Counsel that have not been submitted to the

OMB or any other Federal department or agency for editing and/

or approval.

An early version of S. 395 restated the existing law, which directs each Federal agency to provide the Chief Counsel with all information that the Chief Counsel believes is necessary to carrying

out the responsibilities of the Office of Advocacy (15 U.S.C. 634e).

At the insistence of the Senate Committee on Armed Service, the

reference to this provision was dropped from the bill. The Committee believes that this authority is very important, and the fact

that this provision is not restated in S. 395 as approved by the

Committee should in no way be interpreted as a modification or

recission of existing law.

The bill authorizes such sums as are necessary for carrying out

the responsibilities of the Office of Advocacy. The amounts appropriated should remain available until spent and should not be limited to fiscal year limitations. This subsection is intended to give

the Chief Counsel the flexibility to respond to matters that come

before the Office of Advocacy without the pressures of obligating

funds, perhaps prematurely, prior to the end of a fiscal year.

If, at the time of enactment, there is a sitting Chief Counsel for

Advocacy who was reviewed and approved by the Committee and

the full Senate, it is the intention of the Committee that the incumbent will continue to serve subject to the requirements of this bill

once enacted.

III. COMMITTEE VOTE

In compliance with rule XXVI(7)(b) of the Standing Rules of the

Senate, the following vote on S. 395 was recorded on February 28,

2001. A motion by Senator Kerry to adopt the Independent Office

of Advocacy Act was approved by a unanimous recorded vote, with

the following Senators voting in the affirmative: Bond, Kerry,

Burns, Bennett, Snowe, Enzi, Fitzgerald, Crapo, Allen, Ensign,

Levin, Harkin, Lieberman, Wellstone, Cleland, Landrieu, Edwards,

and Cantwell.

IV. COST ESTIMATE

In compliance with rule XXVI(11)(a)(1) of the Standing Rules of

the Senate, the Committee estimates the cost of the legislation will

be equal to the amounts indicated by the Congressional Budget Office in the following letter.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, March 7, 2001.

Hon. CHRISTOPHER S. BOND, Chairman, Committee on Small Business,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 395, the Independent Office

of Advocacy Act of 2001.
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If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Ken Johnson.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 395—Independent Office of Advocacy Act of 2001

S. 395 would authorize the appropriation of such sums as necessary for the Office of Advocacy within the Small Business Administration (SBA). In addition, the bill would clarify the office’s role

and would codify requirements for reports to the Congress on

issues affecting small businesses.

Based on information from the SBA, CBO estimates that the office will spend about $4 million in 2001. Assuming appropriations

of the necessary amounts, we estimate that SBA would spend

about $5 million a year over the 2002–2006 period to implement S.

395. The increase in estimated costs would primarily cover anticipated inflation.

S. 395 would not affect direct spending or receipts; therefore,

pay-as-you-go procedures would not apply. S. 395 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would not affect the budgets of

state, local, or tribal governments.

The CBO staff contact is Ken Johnson. This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget

Analysis.

V. EVALUATION OF REGULATORY IMPACT

In compliance with rule XXVI(11)(b) of the Standing Rules of the

Senate, it is the opinion of the Committee that no significant additional regulatory impact will be incurred in carrying out the provisions of this legislation. There will be no additional impact of the

personal privacy of companies or individuals who utilize the assistance authorized by this legislation.

VI. CHANGES IN EXISTING LAW

In the opinion of the Committee, it is necessary to dispense with

the requirement of rule XXVI(12) of the Standing Rules of the Senate in order to expedite the business of the Senate.

VII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

The Act is titled the ‘‘Independent Office of Advocacy Act of

2001.’’

Section 2. Findings

This section describes the need for an effective, independent advocate for small business within the Federal government that is

not restricted by the views or policies of the Small Business Administration (SBA/Agency) or any other agency. This section also sets

forth the important role the Office of Advocacy plays in providing
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research, information and its expertise on small business matters

to the Congress and the Executive Branch.

Section 3. Purposes

This section states that the purpose of the Act is to ensure that

the Office of Advocacy has the statutory independence and adequate financial resources to be an advocate for small business. The

Office of Advocacy is directed to keep the Senate and House Small

Business Committees and the SBA Administrator informed on matters of importance to small businesses.

Subsection (3) provides that there will be a separate authorization for the Office of Advocacy.

Subsection (4) states that the Office of Advocacy will continue to

monitor Agency compliance with the Regulatory Flexibility Act and

will report annually to the Congress. Subsection 5 states that the

purpose of the Act is to enhance the role of the Office of Advocacy

in the panel review process.

Section 4. Office of Advocacy

Section 4 amends Title II of Public Law 94–305 (15 U.S.C. 634a

et seq.) describing the Office of Advocacy.

Section 202 of Title II defines specific terms including ‘‘Chief

Counsel’’ and ‘‘Office.’’

Section 203 of Title II establishes within SBA the Office of Advocacy and designates the Chief Counsel for Advocacy to manage the

Office. This section sets forth that the Chief Counsel shall be nominated by the President, who shall give the Congress 30 days notice

should he decide to remove the Chief Counsel, except in cases of

misconduct, neglect of duty, malfeasance, or if there is reasonable

cause to believe that the Chief counsel has committed a crime for

which a sentence of imprisonment can be imposed. Section 203 also

requires the SBA to submit a separate budget request each year for

the Office of Advocacy.

Subsection (c) of Section 203 sets forth the following primary

functions for the Office of Advocacy:

(1) Examine the role played by small business within the

U.S. economy;

(2) Examine the effectiveness of Federal subsidy and assistance programs;

(3) Measure the direct costs of regulation on small business

concerns;

(4) Determine the impact of the U.S. tax system on small

business concerns;

(5) Study the ability of the private sector to meet the credit

needs of small business and determine the impact of government demands for credit on small business concerns;

(6) Determine the availability of credit and management assistance to small business concerns;

(7) Evaluate the efforts of Federal agencies and the private

sector to help minority-owned and women-owned small business concerns;

(8) make recommendations to help in the development and

strengthening of minority- and women-owned small business

concerns;
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(9) Make recommendations to help small business expand to

their full potential and to assess any common reasons for businesses success and failures;

(10) Develop a set of criteria to be used to define small businesses;

(11) Make recommendations on issues and regulations affecting small business concerns; and

(12) Evaluate the efforts of each Federal agency and of private industry to assist small business concerns owned and controlled by veterans and service-disabled veterans.

Subsection (d) of Section 203 also describes the following additional functions of the Office of Advocacy:

(1) Serve as a focal point for receipt of complaints, criticisms

and suggestions concerning the policies and programs of the

Federal government that affect small business concerns;

(2) Counsel small business concerns on how to resolve their

difficulties with the Federal government;

(3) Develop proposals to improve the policies and activities

of Federal agencies so that they can better assist small business concerns;

(4) Represent the interests and views of small business concerns before other Federal agencies;

(5) Encourage both private and public entities to disseminate

information about services and programs for small business

concerns; and

(6) Carry out its responsibilities under the Regulatory Flexibility Act.

Subsection (e) of Section 203 directs the SBA to provide the Office of Advocacy with adequate office space in the headquarters and

field offices. The SBA shall also provide equipment, office supplies,

and communications facilities and services as are necessary.

Section 206 of Title II directs the Chief Counsel to submit an annual report on Agency compliance with the requirements of the

Regulatory Flexibility Act to the Senate and House Committees on

Small Business, the Senate Committee on Governmental Affairs,

the House Committee on Government Reform and the Senate and

House Committees on the Judiciary. Further, the Chief Counsel is

authorized to prepare and submit to the President and Congress

such reports as he or she deems necessary. In no case shall a report from the Office of Advocacy be submitted in advance to OMB

for approval or Administration clearance.

Section 207 of Title II authorizes such sums as are necessary to

be appropriated for the Office of Advocacy.

A new Subsection (d) has been added to Section 207 to permit

the incumbent Chief Counsel for Advocacy, if one exists at the time

of enactment, to continue to serve in that position after the date

of enactment of this Act in accordance with the requirements of

Title II.

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