U.S. GOVERNMENT PUBLISHING OFFICE

30–942 PDF WASHINGTON : 2018

SHINING LIGHT ON THE FEDERAL REGULATORY 

PROCESS 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

MARCH 14, 2018 

Serial No. 115–73 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://oversight.house.gov 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Trey Gowdy, South Carolina, Chairman 

John J. Duncan, Jr., Tennessee 

Darrell E. Issa, California 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Justin Amash, Michigan 

Paul A. Gosar, Arizona 

Scott DesJarlais, Tennessee 

Blake Farenthold, Texas 

Virginia Foxx, North Carolina 

Thomas Massie, Kentucky 

Mark Meadows, North Carolina 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Mark Walker, North Carolina 

Rod Blum, Iowa 

Jody B. Hice, Georgia 

Steve Russell, Oklahoma 

Glenn Grothman, Wisconsin 

Will Hurd, Texas 

Gary J. Palmer, Alabama 

James Comer, Kentucky 

Paul Mitchell, Michigan 

Greg Gianforte, Montana 

Elijah E. Cummings, Maryland, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Stephen F. Lynch, Massachusetts 

Jim Cooper, Tennessee 

Gerald E. Connolly, Virginia 

Robin L. Kelly, Illinois 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

Raja Krishnamoorthi, Illinois 

Jamie Raskin, Maryland 

Jimmy Gomez, Maryland 

Peter Welch, Vermont 

Matt Cartwright, Pennsylvania 

Mark DeSaulnier, California 

Stacey E. Plaskett, Virgin Islands 

John P. Sarbanes, Maryland 

SHERIA CLARKE, Staff Director 

ROBERT BORDEN, Deputy Staff Director 

WILLIAM MCKENNA, General Counsel 

JAMES LESINSKI, Counsel 

KILEY BIDELMAN, Clerk 

DAVID RAPALLO, Minority Staff Director 


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C O N T E N T S 

Page 

Hearing held on March 14, 2018 ............................................................................ 1 

WITNESSES 

Ms. Kris Nguyen, Acting Director for Strategic Issues, Government Accountability Office 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Mr. Paul Noe, Vice President, Public Policy, American Forest and Paper 

Association 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 30 

Ms. Karen Harned, Executive Director, National Federation of lndependent 

Business: Small Business Legal Center 

Oral Statement ................................................................................................. 54 

Written Statement ............................................................................................ 56 

Professor Nicholas Parrillo, Professor of Law, Yale Law School 

Oral Statement ................................................................................................. 66 

Written Statement ............................................................................................ 68 

Mr. Amit Narang, Regulatory Policy Advocate, Public Citizen 

Oral Statement ................................................................................................. 89 

Written Statement ............................................................................................ 92 

APPENDIX 

U.S. General Services Administration, Office of lnspector General, report 

titled, ‘‘Evaluation of GSA Nondisclosure Policy,’’ submitted by Ms. 

Maloney ................................................................................................................. 128 

Submission of Federal Rules Under the Congressional Review Act form, submitted by Mr. Palmer .......................................................................................... 150 


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SHINING LIGHT ON THE FEDERAL 

REGULATORY PROCESS 

Wednesday, March 14, 2018 

HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The committee met, pursuant to call, at 10:02 a.m., in Room 

2154, Rayburn House Office Building, Hon. Trey Gowdy [chairman 

of the committee] presiding. 

Present: Representatives Gowdy, Duncan, Jordan, Amash, 

Farenthold, Meadows, DeSantis, Ross, Walker, Blum, Grothman, 

Hurd, Palmer, Comer, Maloney, Norton, Connolly, Kelly, 

Krishnamoorthi, Welch, and Plaskett. 

Chairman GOWDY. Good morning. The Committee on Oversight 

and Government Reform will come to order. 

Without objection, the presiding member is authorized to declare 

a recess at any time. 

I want to welcome our guests. I will introduce you individually 

in just a moment, but for now I will recognize my friend from 

North Carolina for his opening statement. 

Mr. Meadows. 

Mr. MEADOWS. Thank you, Mr. Chairman. Thank you for your 

leadership in calling this hearing. 

Obviously, Federal agencies have a very active role assigned to 

them by Congress, and what they do touches the daily lives of the 

public. There is no doubt that Federal agencies play an important 

role in our government, but they should still play by the rules laid 

down by Congress when it comes to issuing the rules themselves. 

The rulemaking process has changed over time and can get very 

technical, but what has not changed is only Congress can legislate 

and agencies cannot issue regulations unilaterally. Rules are supposed to be issued in accordance with several statutes and executive orders, but, as is the case with this hearing today, and it will 

show today, that this doesn’t always happen. In fact, in 2016 alone, 

18 regulations were issued for each law passed by Congress, not to 

mention the hundreds of pages of guidance that came along with 

those regulations. 

According to the Federal Register, agencies issued 3,280 rules 

last year. Now, this amounts to just a little bit less than nine rules 

per day, including weekends and Federal holidays. Now, that’s an 

improvement over the previous administration, where we saw 10– 

1/2 rules passed each day in 2016. 

Now, several laws and executive orders establish a regulatory 

process designed to require agencies to consult with the affected 


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parties, evaluate their benefits and certainly the compliance burdens and other costs, and consider alternatives to regulate. 

Now, we know Federal agencies are not consistently following 

the rules Congress and the President have established. In fact, recently, GAO released the findings of an audit concluding that agencies have become increasingly noncompliant with the Congressional 

Review Act. And when issuing rules at the end of a Presidential 

administration—this is particularly evident—especially when they 

have significant impact, those rules which actually cost the economy at least $100 million. 

Agencies also issue guidance, which is a statement of policy or 

an interpretation of the law or regulations. Generally, guidance is 

supposed to inform the public of how to comply with those laws. 

Unfortunately, we don’t know how many guidance documents agencies have issued, nor do we know how much it will cost the economy. One of our witnesses today has written that, while no one 

knows how many guidance documents are out there, everyone 

agrees that the total is oceanic in scale. 

Late last year, our committee launched an oversight project on 

regulatory guidance documents. In response to our December request, agencies provided information on more than 12,800 documents. Now, the final number is still rising as agencies continue 

to produce the information. 

Agencies have also had difficulty in complying with a few existing requirements for issuing guidance documents. In fact, in 2015, 

the GAO undertook an audit of the Departments of Agriculture, 

Education, Health and Human Services, and Labor and found 

shortcomings in complying with applicable requirements. 

The committee’s oversight project also found widespread noncompliance with the CRA in the executive directives. Agencies reported to the committee that they had submitted just 189 guidance 

documents to Congress and the GAO, as it is required by the CRA. 

That’s a submission rate of less than 0.015 percent. 

In the last 5 months, GAO has issued four opinions to Members 

of Congress finding certain guidance documents are considered 

rules under the Congressional Review Act and, therefore, must be 

submitted. 

Now, in conclusion, we know that more congressional requests 

for opinions on whether certain guidance documents are pending 

before the CRA. Clearly, GAO will never be able to review the more 

than 12,800 guidance documents in our limited sample, let alone 

the entire universe of the agency guidance. And there is some sort 

of disconnect between what the law says and what agencies do. 

So we look forward to hearing your testimony today and you 

shining the light on this regulatory process as we try to make sure 

that we do what is according to the law and the rules and upholding the will of Congress. 

I yield back. 

Chairman GOWDY. I thank the gentleman from North Carolina 

and would now recognize the gentlelady from New York to give her 

opening statement. 

Mrs. MALONEY. Thank you, Mr. Chairman, for calling today’s important hearing. 

And thank you to all of our witnesses here today. 


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I would like to start by making one important point: We all agree 

that rules and guidance documents should be fair, open, and informed by those entities and individuals who are regulated by 

them. However, we cannot simply eliminate them. That would result in chaos. 

I want to point out that it is often members of the business community who want regulations and guidance, because they want certainty, they want clarity. That is critical for them to determine how 

to invest their time and their resources. Guidance documents, even 

though they are nonbinding, are often very useful to regulated entities in explaining how they can stay on the right side of the law. 

The chairman has invited Professor Nicholas Parrillo to testify 

today, and I am pleased that he is here. He issued a report highlighting this point. And he based it on interviews with business 

representatives who stressed the importance of guidance documents. 

For example, Marc Freedman, the executive director of labor law 

policy at the U.S. Chamber of Commerce, and I quote, acknowledged that business sometimes demanded guidance and that it was 

quite reasonable for the agency to provide it to clarify vague legislative rules, end quote. 

Let me give you an example. Industry groups recently asked the 

IRS to issue guidance about the new tax law. The American Institute of Certified Public Accountants wrote to the IRS that specific 

areas, and I quote, ‘‘need immediate guidance in order for taxpayers and practitioners to comply with their 2017 tax obligations 

and to make informed decisions regarding cash flow, entity structure, retirement, wealth transfer, and a vast number of other tax 

planning issues,’’ end quote. 

Professor Parrillo summarized his findings by writing this, and 

I quote: ‘‘It was clear from these interviews that guidance increases 

an agency program’s integrity and efficiency and shields regulated 

parties against unequal treatment, unnecessary work, and unnecessary risk,’’ end quote. 

Guidance works best if there is ongoing interaction between regulators and the regulated entities. This interaction can take the 

form of conversations with stakeholders, advisory committee meetings, townhalls, or even requests for public comment. 

But we need to avoid placing an overwhelming burden on Federal agencies. Guidance documents are effective precisely because 

regulators can issue them more quickly than Federal rulemaking. 

Imposing burdensome requirements on guidance documents will 

mean that agencies will stop using them, depriving the business 

community and others of this very useful tool. 

Formal rules are different, because they carry the force of law. 

They are governed by statutory procedures that require formal 

public participation and the opportunity to appeal to the courts if 

these processes are not followed. This has been the law since we 

enacted the Administrative Procedure Act in 1946. 

My concern is that there are multiple recent examples of the 

Trump administration attempting to circumvent the Administrative Procedure Act or issue agency guidance that is not even public, 

which leads to less transparency and certainty, not more. 


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For example, just last week, the Inspector General for the General Services Administration issued what I thought was an excellent report, finding that the agency’s guidance on how the staff 

communicate with Congress, and I quote, ‘‘lacks transparency,’’ end 

quote, and completely omitted whistleblower protection language 

that is required by the Whistleblower Protection Act. 

Specifically, the IG found that GSA, and I quote, ‘‘created opportunities for confusion, misinterpretation, and inconsistent application among its officials and employees,’’ end quote. 

According to the IG, GSA followed oral instructions from the 

White House to stop responding to oversight and investigative requests from Members of Congress other than committee chairs. 

GSA officials communicated this new policy to staff in, quote, 

‘‘small, in-person meetings,’’ end quote, and through, quote, ‘‘telephone calls and hallway conversations.’’ 

And I’d like unanimous consent to put this excellent report in the 

record outlining these conflicts. 

Chairman GOWDY. Without objection. 

Mrs. MALONEY. In another example, the Department of Labor is 

withholding from the public an economic analysis of its proposed 

rule to allow employers to take the tips from restaurant workers 

and other employees, according to press reports. The Department 

did not publish its analysis, which showed that, quote, ‘‘employees 

would lose out on billions of dollars in gratuities,’’ end quote. 

Hiding from the public an analysis conducted by the agency, especially when it contradicts the agency’s own proposal, is the opposite of the transparency we expect in the rulemaking process. 

For today’s hearing, I am very pleased that we will be able to 

shine a light on the Federal regulatory process, and I look forward 

to the testimony. 

This is ‘‘Sunshine Week.’’ And, after all, as the saying goes, sunlight is the best disinfectant. I hope we can apply that disinfectant 

across the board and not limit it only to those issues with which 

some may disagree. 

Thank you, Mr. Chairman. 

Chairman GOWDY. I thank the gentlelady from New York. 

We are pleased to have a distinguished panel of witnesses-slashexperts. 

I’m going to introduce you en banc and then recognize you individually for your opening statement. 

First, to my left, Ms. Kris Nguyen, Acting Director for Strategic 

Issues at the Government Accountability Office; she is accompanied 

by Mr. Robert Cramer, Managing Associate General Counsel at 

GAO, who will also be sworn in in just a moment; Mr. Paul Noe, 

vice president of public policy at the American Forest and Paper 

Association; Ms. Karen Harned, executive director, National Federation of Independent Business: Small Business Legal Center; 

Professor Nicholas Parrillo, professor of law at Yale Law School; 

and Mr. Amit Narang, regulatory policy advocate at Public Citizen. 

Pursuant to committee rules, I’m going to have to administer an 

oath to you. So if you would please rise, and we’ll do that. 

Do you solemnly swear or affirm the testimony you’re about to 

give will be the truth, the whole truth, and nothing but the truth, 

so help you God? 


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May the record reflect the witnesses answered in the affirmative. 

You may be seated. 

In order to allow the members to ask their questions and to be 

good stewards of your time, I just want you to know your opening 

statements are all part of the record. If I could get you to limit your 

remarks to 5 minutes. 

And there are a set of lights, in theory, that are designed to help 

with that. So if you—I know a lot of our members have not figured 

out the lighting system yet, so I’ll share it with you. Green, you’re 

good. Yellow, speed up, try to get under the light as quick as you 

can. Red, if you could begin to maybe wrap up that final thought. 

So, with that, Ms. Nguyen. 

WITNESS STATEMENTS 

STATEMENT OF KRIS NGUYEN 

Ms. NGUYEN. Chairman Gowdy and members of the committee, 

thank you for inviting me today to discuss Federal regulatory and 

guidance practices. 

Agencies use Federal guidance and regulations to achieve national goals, such as improving the economy and protecting the 

health and safety of the public. The importance of improving the 

transparency of agencies’ guidance and regulatory practices is a 

common theme throughout GAO’s body of work. 

At your request, this testimony focuses on two reports. Our 2015 

report on regulatory guidance addresses selected agencies’ adherence to relevant OMB requirements and internal controls. And our 

recently released report discusses agencies’ compliance with procedural requirements for rulemaking, including the Congressional 

Review Act. 

Regarding our 2015 report, we found that USDA, Education, 

HHS, and Labor did not consistently adhere to OMB requirements 

when developing significant guidance. Specifically, agencies did not 

consistently follow OMB requirements for the development and dissemination of significant guidance. While some agencies had written procedures for the approval of significant guidance, others had 

none or their procedures needed updating. We also found that 

three of the four agencies consistently applied OMB requirements 

for public access and feedback; however, one agency, HHS, did not. 

Agencies also lack adherence to internal controls for nonsignificant guidance. For example, most sub-agencies we reviewed did not 

have written procedures for producing guidance, and about half did 

not regularly evaluate whether issued guidance was effective and 

up to date. 

Nonsignificant guidance is not subject to OMB requirements. As 

such, application of internal controls is important to help agencies 

achieve effective guidance practices. In this report, GAO made 11 

recommendations to the 4 agencies we reviewed. Three of these recommendations remain unimplemented by HHS. HHS cannot ensure transparency and effectiveness of its guidance practices until 

it takes steps to improve its adherence to OMB requirements and 

internal controls. 

For the report GAO issued on Tuesday, we reported, among other 

things, one, the number of regulations issued during Presidential 


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transition periods and their characteristics and, two, agencies’ reported compliance with requirements for issued regulations. 

During the transition from the end of the Clinton, Bush, and 

Obama administrations to the next, the administrations published, 

on average, about two and a half times more economically significant regulations during transition versus nontransition periods. 

Agencies more frequently provided advance notice to the public 

during transition periods, which provided the public opportunities 

to influence the development of these regulations. However, we 

found that agencies less often complied with the CRA in providing 

Congress time to review and possibly disapprove regulations. This 

inconsistent compliance with CRA also occurred during nontransition periods. Agencies’ most common deficiency was the failure to 

provide Congress the required time to review regulations. 

In this report, GAO recommended OMB identify regulations at 

risk for not complying with the CRA and work with agencies to ensure compliance. 

It is important that agencies consistently provide Congress with 

the required time to review regulations throughout a President’s 

term and, in particular, during a Presidential transition, when 

Congress typically has a larger number of regulations to review. 

Improvements made in transparency of the guidance and regulatory process benefit not only the public but also improve congressional oversight. 

Thank you. 

[Prepared statement of Ms. Nguyen follows:] 


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For Release on Delivery 

Expected at 10:00 a.m. ET 

Wednesday, March 14,2018 

GA0-18-436T 

United States Government Accountability Office 

Testimony 

Before the Committee on Oversight and 

Government Reform, House of 

Representatives 

FEDERAL REGULATIONS 

Opportunities to Improve 

the Effectiveness and 

Transparency of 

Regulatory and Guidance 

Practices 

Statement of Kris Nguyen, Acting Director 

Strategic Issues 
8 


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Why GAO Did This Study 

Based on GAO's prior work, this 

testimony addresses: (1) the extent to which USDA, Education, HHS, and 

DOL adhered to OMil requirements 

and internal controls when developing 

regulatory guidance, and (2) agencies' 

compliance with the CRA for 

regulations promulgated during 

presidential transtlions. 

What GAO Recommends 

website. 

In the Mtlrch 2018 report on 

rulemaking at the end tll presidents' 

terms, GAO recommended OMB, as 

part of its regulatory review process. 

Identify economically significant 

regulations at risk of not complying 

with tha CRA and work with agencies 

to ensum compliance. OMB staff did 

not agree or disagree with the 

racommendation. 

FEDERAL REGULATIONS 

Opportunities to Improve the Effectiveness and 

Transparency of Regulatory and Guidance Practices 

What GAO Found 

Agencies GAO reviewed-Departments of Agriculture (USDA), Education 

{Education), Health and Human Services {HHS), and labor {DOL) did not 

consistently adhere to Office of Management and Budget (OMB) requirements 

and internal controls when developing regulatory guidance, as GAO reported ln 

2015. Unlike regulations, regulatory guidance is not generally legally binding and 

is subject to different requirements for regulatory oversight. Agencies weighed 

various factors when they determined whether to issue guidance. The agencies 

GAO reviewed issued different amounts of guidance for various purposes, such 

as explaining plans for implementing regulations, Agencies found few of their 

guidance documents to be "significant," guidance with a broad and substantial 

impact on regulated entities. USDA and Education had written procedures for the 

approval of significant guidance as directed by OMS; DOL's procedures needed 

updating and to be distributed to appropriate agency officials; HHS did not have 

any, GAO found that USDA, Education, and DOL consistently applied OMS's 

requirements far public feedback and access, for example public access to 

guidance through websites, while HHS did not. Agencies can better ensure 

consistent application of review processes and public access to signlficant 

guidance through better adherence to OMB requirements, GAO also found 

opportunities for agencies to improve adherence to internal controls for guidance 

that did not meet OMS's definition of "significant" For example, most 

subagencies GAO reviewed did not have written procedures for the production of 

guidance and about half did not regularly evaluate whether issued guidance was 

effective and up-to-date. Adherence to these internal controls could promote 

quality and consistency in guidance development processes, 

GAO found that agencies did not consistently comply with the Congressional 

Review Act (CRA) for regulations promulgated during the 120-day presidential 

transition periods (September 23 through January 20), as defined by the 

Presidential Transitions Improvements Act of 2015. GAO reported that during the 

transition from the end of one presidential administration to the next, the Clinton, 

Bush, and Obama administrations published on average roughly 2.5 times more 

economically significant regulations during transition periods than during 

nontransitlon periods: increases are typical during transition periods. For these 

regulations, agencies more frequently provided advanced notice to the public, 

thus providing the public opportunities to influence the development of these 

transition period regulations before they were finalized. In their published 

regulations. agencies generally reported complying with four of five procedural 

requirements for promulgating regulations during both transition and 

nontransition periods. Agencies are required to 1) assess the impact of 

regulations on small entities, 2) minimize the burden that information coHections 

impose on the public, 3) assess the costs and benefits of regulations that Include 

federal mandates, and 4) for certain agencies, obtain direct input from small 

entities during rulemaking. Also, a flfth requirement, agencies must comply with 

CRA, which provides Congress an opportunity to review and possibly disapprove 

regulations before they take effect. Agencies less often complied with CRA, 

during both transition and nontransition periods. The most common deficiency 

was agencies' failure to provide Congress the required time to review 

regulations, which GAO has also identified as a deficiency in previous work. 

-------------United States Government Accountability Office 
9 


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Chairman Gowdy, Ranking Member Cummings, and Members of the 

Committee: 

I am pleased to be here today to discuss federal regulatory and guidance 

practices, focusing, at your request, on our 2015 report on guidance 

processes at select agencies, and our recently released report on 

rulemaking at the end of presidents' terms. 1 

Agencies use federal regulations and guidance to achieve national goals, 

such as improving the economy and protecting the health and safety of 

the public. Congress has often asked us to evaluate the implementation 

of procedural and analytical requirements that apply to agencies' 

rulemaking and guidance processes. The importance of improving the 

transparency of those processes is a common theme throughout our body 

of work on federal regulation. Based on our work, this testimony 

discusses: (1) the extent to which the Departments of Agriculture (USDA), 

Education (Education), Health and Human Services (HHS), and Labor 

(DOL) adhered to Office of Management and Budget (OMB) requirements 

and internal controls when developing regulatory guidance and (2) 

agencies' compliance with the Congressional Review Act (CRA) for 

regulations promulgated during presidential transitions. 2 We consistently 

found opportunities to improve the transparency and effectiveness of 

regulatory and guidance practices. 

My statement is based on work that we have issued on regulatory and 

guidance processes prepared at the request of Congress. We made 12 

recommendations to agencies on the topics that I plan to address today, 

eight of which have been implemented to date. 3 We conducted our work 

for these reports in accordance with generally accepted government 

1GAO, Federal Rufemaking: OMB Should Work with Agencies to Improve Congressional 

Review Act Compliance dun!Jg and at thti End of Presidents' Terms, GA0~18-183 

(Washington, D.C.: Mar. 13, 2018) and Regulatory Guidance Processes: Selected 

Departments Could Strengthen lntemai Control and Dissemination Practices, 

GA0-15-368 (Washington, O,C,. Apr. 16, 2015) 

2We conducted this work in response to a requirement in Section 5 of the Edward "Ted·' 

Kaufman and Michael Leavitt Presidential Transitions Improvements Act of 2015, which 

includes a pro11lsion for us to assess final significant regulatory actions promulgated by 

executive departments during specified presidential transition periods. Pub. L. No. 114~ 

136, § 5 130 Stat 301, 307-308 (2016) 

Jrhe 12 recommendations are from two reports: GAO"i5-368 and GAOm18-183. Because 

GAO" 18-183 issued on March 13, 2018 we would not expect OMS to have implemented 

the included recommendation at the time of this hearing 

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Agencies Can Better 

Ensure Effectiveness 

of Guidance through 

Consistent Adherence 

with OMB 

Requirements and 

Internal Controls 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. A more detailed 

discussion of prior reports' objectives, scope, and methodology, including 

our assessment of data reliability, is available in the reports cited in the 

related products list at the end of this statement. 

First, I will discuss our 2015 report on guidance processes at USDA, 

Education, HHS, and DOL, specifically (1) how these agencies decide 

whether to issue regulations or guidance and (2) the extent to which they 

adhere to OMB requirements and internal controls when developing 

guidance.' 

Agency guidance documents, even though they are not generally legally 

binding as regulations or statutes are, can have a significant effect, both 

because of their volume and because of their potential to prompt changes 

in the behavior of regulated parties and the general publics Guidance 

generally serves different purposes than those of regulations. Agencies 

also issue regulatory guidance that sets forth a policy on a statutory, 

regulatory, or technical issue, or an interpretation of a statutory or 

regulatory issue-as illustrated in figure 1 below. The processes by which 

agencies issue guidance and regulations are governed by statutes, 

executive orders, and agencies' policies and procedures, with the aim of 

greater transparency and public participation, enhanced oversight, and 

reduced regulatory burdens. 6 

4We have also issued a report on lntemal Revenue Service (IRS) guidance. See GAO, 

Regulatory Guidance Processes_· Treasury and OMB Need to Reevaluate Long¥standing 

Exemptions of Tax Regulations and Guidance, GA0~16·720 (Washington, D.C.: Sept 6, 

2016) 

5

See Nina A Mendelson. Regulatory Beneficiaries and Informal Agency Po/icymaking, 92 

Camel! L. Rev. 397, 400 (March 2007). 

6

!n particular, the Adminfstrative Procedure Act (APA) establishes broadly applicable 

requirements for prior notice and public comment 5 U.S.C. §§ 551-559. However, 

Congress sometimes enacts laws that direct an agency to issue ru!es without notice and 

comment. !n addition, the APA recognizes that there are circumstances, such as 

responding to an emergency situation !ike a natura! disaster, when providing for notice 

and comment might not be appropriate before issuing a final rule. See GAO, Federal 

Rulemaking: Agencies Could Take Additional Steps to Respond to Public COmments, 

GA0-13-21 (Washington. D.C.: Dec. 20, 2012). 

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Agencies Weighed Various 

Factors When Deciding 

Whether to Issue 

Regulations or Guidance 

Figure 1: Hierarchy of Statutory and Regulatory Authority 

Soo<ce:GAO!matylloisof~utatoryauloo-tty I GA0.16-43eT 

Agency officials considered a number of factors before deciding whether 

to issue guidance or undertake rulemaking. Among these factors at the 

four agencies included in our analysis, a key criterion was whether 

officials intended for the document to be binding (in which case they 

issued a regulation). 7 OMB's Office of Information and Regulatory Affairs 

(OIRA) staff concurred that agencies understood what types of direction 

to regulated entities must go through the regulatory process.' Officials 

7 At some agencies certain types of guidanc-.e is considered legally binding. The internal 

Revenue Service (IRS) has stated that, in addition to statute, and tax regulations, a!! 

guidance published in its Internal Revenue Bulletin can be relied upon by taxpayers as 

authoritative because IRS is bound by it For more information, see GA0-16-720. 

80IRA is the OMB organization responsible for the coordinated review of regulatory 

actions by executive agencies. OIRA also is responsible for providing meaningful 

guidance and oversight so that each agency's regulations are consistent with applicable 

law, the President's priorities, and the principles set forth in executive orders 

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from all four agencies also told us that they understood when guidance 

was inappropriate and when regulation was necessary. They said that 

they consulted with legal counsel when deciding whether to initiate 

rulemaking or issue guidance. 

For example, HHS's Administration for Community Living officials told us 

that they considered a number of factors, including whether the 

instructions to be disseminated were enforceable or merely good practice. 

Specifically, when Administration for Community Living officials noticed 

that states were applying issued guidance related to technical assistance 

and compliance for the state long-term care ombudsman program 

differently, they decided it would be best to clarify program actions 

through a regulation. Officials believed that a regulation would ensure 

consistent application of program requirements and allow them to enforce 

those actions. They issued the proposed rule in June 2013 and the final 

rule in February 2015 9 1n another example, officials at USDA's Food and 

Nutrition Service told us that the decision to issue guidance or undertake 

rulemaking depended on (1) the extent to which the proposed document 

was anticipated to affect stakeholders and the public, and (2) what the 

subagency was trying to accomplish with the issued document. 10 

The agencies used guidance for multiple purposes and differed in the 

amount of guidance they issued. The purposes of guidance included 

explaining or interpreting regulations, clarifying policies in response to 

questions or compliance findings, disseminating suggested practices or 

leadership priorities, and providing grant administration information. 

Guidance documents provide agencies valuable flexibility to help 

regulated agencies comply with agency regulations, and address new 

issues and circumstances more quickly than may be possible using 

rulemaking. 

Guidance documents that meet OMS's definition of "significant" are 

subject to the regulatory practices and requirements established by OMS. 

OMS defines a significant guidance document as guidance with a broad 

and substantial impact on regulated entities. An economically significant 

978 Fed. Reg. 36,449 (June 18, 2013) (proposed rule). 80 Fed. Reg. 7704 (Feb. 11. 2015) 

(final rule) 

10We reviewed guidance processes at the four departments and 25 of their selected 

subagencies, or components that (1) were within the requesting committee's jurisdiction 

and (2) engaged in regulatory or grantmaking activities. For a complete !lst of 

subagencies, see GA0-15~366. 

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guidance document is a significant guidance document that may 

reasonably be anticipated to lead to an annual effect on the economy of 

$100 million or more, among other factors, Guidance that does not fall 

under the definition of "significant" is not subject to the OMS Bulletin, and 

those guidance procedures are left to agency discretion, 11 The four 

agencies we reviewed considered few of their guidance documents to be 

significant As of February 2015, agencies listed the following numbers of 

significant guidance documents on their websites: Education, 139; DOL, 

36; and USDA, 34, 12 We were unable to determine the number of 

significant guidance documents issued by HHS, All four agencies told us 

that they did not issue any economically significant guidance, OIRA staff 

told us they accepted departments' determinations of which types of 

guidance meet the definition of significant guidance, Agencies also varied 

in the amount of guidance they issued, ranging from 10 to more than 100 

documents issued in a single year. 

Agency officials said that mission or the types of programs administered 

can affect the number of guidance documents issued, For example, 

officials from DOL's Bureau of Labor Statistics told us they rarely issue 

guidance-about 10 routine administrative memorandums each year 

related to the operation of two cooperative agreement statistical 

programs, In contrast, DOL's Occupational Safety and Health 

Administration officials told us they have regularly issued guidance to 

assist with regulatory compliance, and could easily produce 100 new or 

updated products each year to provide guidance to regulated entities, 

11A!though the APA does not generally prescribe processes for review of agency 

guidance, in 2007 OMB issued a Final Bulletin fer Agency Good Guidance Practices 

(OMB Bu!!etin) that establishes policies and procedures for the development issuance, 

and use of"significant" gu1dance documents. The Bulletin defines "significant guidance 

document" as a guidance document disseminated to regulated entities or the general 

public that may reasonably be anticipated to (1) lead to an annual effect on the economy 

of $100 ml!Bon 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 Executive Order 12866, 

as further amended. Guidance that does not fall under the definition of ·'significant" is not 

subject to the OMB Bu!!etin, and those guidance procedures are left to agency discretion 

72 Fed. Reg, 3432 (Jan. 25, 2007) 

12Education officials noted that their list of significant guidance documents includes 

documents issued over the past 40 years. 

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Requirements and Internal 

Controls 

Adherence to OMS 

Requirements for Significant 

Guidance 

We found opportunities for agencies to improve regulatory guidance 

processes by strengthening compliance with OMS requirements for 

significant guidance and the use of management controls for producing 

their guidance documents. In 2015. we made 11 recommendations to 

USDA, HHS, DOL and Education to better ensure the adherence to OMS 

requirements for approval and public access of regulatory guidance, to 

strengthen the use of internal controls in guidance processes, and to 

improve the usability of websites with online guidance, three of which 

remain open. 13 USDA, DOL and Education have addressed 

recommendations concerning strengthening the application of 

management controls-internal controls-and improving their websites to 

ensure the public can easily find, access, and comment on online 

guidance. These recommendations for HHS remain open as well as an 

additional recommendation concerning developing written procedures for 

agency approval of written guidance. These actions would help to ensure 

appropriate review and use of these documents, and both could also 

facilitate opportunities for affected parties and stakeholders to provide 

feedback on those documents. 

We found that agencies did not always adhere to OMS requirements for 

significant guidance. The OMS Final Bulletin for Agency Good Guidance 

Practices establishes standard elements that must be included in 

significant guidance documents and directs agencies to (1) develop 

written procedures for the approval of significant guidance, (2) maintain a 

website to assist the public in locating significant guidance documents, 

and (3) provide a means for the public to submit comments on significant 

guidance through their websites. Education and USDA had written 

procedures for the approval of significant guidance as directed by OMB. 

While DOL had written approval procedures, they were not available to 

the appropriate officials, and DOL officials noted that they required 

updating. HHS did not have any written procedures. We found that 

Education, USDA, and DOL consistently applied OMB's public access 

and feedback requirements for significant guidance, while HHS did not. 

13GA0-15-368 

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Application of Internal Controls 

for Guidance Processes 

We also found opportunities for agencies to improve access to their 

guidance. 14 1n April2015, we found that subagencies used different 

strategies to disseminate guidance and all relied primarily on posting the 

guidance on their websites. 15 USDA, DOL, and Education posted their 

significant guidance on a departmental website as directed by OMS; at 

that time HHS did not, but has since posted such a page on its website in 

response to our recommendation. On their websites, agencies used 

several approaches -including organizing guidance by audience or topic 

and highlighting new or outdated guidance-to facilitate access. 

However, we identified factors that hindered online access, including long 

lists of guidance and documents dispersed among multiple web pages. 

Opportunities also exist for agencies to use the web metrics they already 

collect to improve how guidance can be accessed. All agencies and their 

subagencies that we studied collected web metrics, and many used them 

to evaluate online guidance dissemination. However, many of these 

subagencies did not use metrics to improve how they disseminated 

guidance through their websites. Beyond their websites, subagencies 

found other ways to disseminate and obtain feedback on issued 

guidance, including focus groups, surveys, and direct feedback from the 

public at conferences, webinars, and from monitoring visits. 

For guidance that does not meet OMS's definition of significant, we found 

opportunities for agencies to improve guidance development, review, 

evaluation, and dissemination processes by strengthening their 

adherence to internal controls. Wider adoption of these practices could 

better ensure that agencies have internal controls in place to promote 

quality and consistency of their guidance development processes, and to 

ensure that guidance policies, processes, and practices achieve desired 

results, and prevent and detect errors. We recommended that agencies 

strengthen their application of internal controls to guidance practices by 

adopting practices, such as: 

140ur ability to access and find significant and nonsignificant guidance online varied. We 

reported in 2015 that agencies can use available guidelines, sucll as the Guidelines for 

Improving Digital Services developed by the federal Digital Services Advisory Group, to 

help them improve their communications and interactions with customers on their 

websites 

15Whi!e aH components told us they relied primarily on their websites to disseminate 

guidance, they also used many other dissemination methods, including email and 

listservs, meetings, social media, and external partners. 

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Determining Appropriate level of Review to Manage Risk: Most 

subagencies in our study managed risk by determining appropriate 

levels of review. Agencies face multiple risks when going through the 

guidance production process, such as legal challenges that issued 

guidance is asserting binding requirements without having gone 

through the rulemaking process. Agencies can manage risk by 

involving agency management in decisions to initiate guidance, 

prioritize among proposed guidance, and determine !he appropriate 

level of review prior to issuance. 

Maintaining Written Policies and Procedures for the Production 

of Nonsignificant Guidance: Most subagencies we reviewed did not 

have written procedures for the production of non-significant 

guidance. Written procedures for guidance initiation, development, 

and review help ensure that actions are taken to address risks and 

enforce management's directives when an agency is developing 

regulatory guidance. Documented procedures are an important 

internal control activity to help ensure that officials understand how to 

adequately review guidance before issuance. 

Ensuring Communication during the Guidance Development and 

Review Process: Most subagencies we reviewed had methods to 

ensure communication during the guidance development and review 

process. Communication procedures provide an opportunity for 

subagencies to get feedback from agency management. other federal 

agencies, and the public before the guidance issues. For example, 

officials told us that they conferred with other affected subagencies or 

federal departments to ensure consistency of their guidance during 

the development of guidance. 

Regularly Evaluating Whether Issued Guidance is Effective and 

Up to Date: Almost half of the subagencies we reviewed regularly 

evaluated whether issued guidance was effective and up-to-date. 

Agencies benefit from procedures to continually reassess and 

improve guidance processes. Without a regular review of issued 

guidance, agencies can miss the opportunity to revisit whether current 

guidance could be improved and thereby provide better assistance to 

regulated entities and grantees. 

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Compliance with the 

Congressional 

Review Act Could Be 

Strengthened 

Prior studies have indicated that agencies typically issue a larger number 

of regulations during the transition from the end of one presidential 

administration to the beginning of the next administration, relative to 

comparable periods earlier in the administration, a phenomenon often 

referred to as "midnight rulemaking." 16 The Edward "Ted" Kaufman and 

Michael Leavitt Presidential Transitions Improvements Act of 2015 

included a provision requiring us to review final significant regulations 

promulgated by executive departments during the 120-day presidential 

transition periods (September 23 through January 20) at the end of 

Presidents Clinton, Bush, and Obama's administrations and compare 

them to each other and to regulations issued during the same 120-day 

period in nontransition years since 1996. Among other objectives, we 

assessed the extent to which there was variation in (1) the number of 

regulations and their characteristics, such as the types of rulemaking 

procedures agencies used; and (2) agencies' reported ccmpliance with 

procedural requirements for promulgating the regulations, such as 

requirements in the Congressional Review Act (CRA). 17 CRA was 

enacted to better ensure that Congress has an opportunity to review and 

possibly disapprove regulations, in certain cases, before they take effect 

1

E1"he Congressional Research SeNlce, "Midnight Ru!emaking: Background and Options 

for Congress," (Washington, D.C.: Oct 4, 2016), ln 2012, a report on this topic was 

prepared for the consideration of the Administrative Conference of the United States: Jack 

M. Beermann, Midnight Rules: A Reform Agenda, Administrative Conference of the United 

States, May 14. 2012. 

17Pub. L No. 114-136, § 5130 Stat 301. 307-308 (2016). We did not include rulemaking 

by independent regulatory agencies that are not under the direct control of the President 

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Agencies Published More 

Economically Significant 

and Significant Final 

Regulations and Provided 

More Opportunity for 

Public Participation 

During the transition periods at the end of each of the three 

administrations we reviewed, agencies published more economically 

significant and significant final regulations relative to comparable time 

periods earlier in each administration (see figures 2 and 3). 18 In particular, 

the Clinton, Bush, and Obama administrations published on average 

roughly 2.5 times more economically significant regulations during 

transition periods than during nontransition periods. But agencies more 

often, relative to nontransition periods, provided the public an opportunity 

to influence the development of the transition-period regulations by 

providing advanced notice of their issuance in the Unified Agenda, and 

opportunities to comment on proposed regulations before they were 

finalized." 

Order 12866, OMS reviews significant proposed and final rules from 

agencies, independent regulatory agencies, before they are published in the 

Federal Register. The order defines significant regulatory actions as those that: (1) have 

an annual effect on the economy of $1 DO million or more or adversely affect in a materia! way the economy, a sector of the economy, productivity, competition, jobs, the 

environment, publlc 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) materiaHy 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 !ega! mandates, the President's priorities, or the 

principles set forth in the executive order. For the purposes of GA0-18-·183 and this 

statement, we differentiate betw-een the results for "economically significant" regulations 

(criterion 1 above, i.e., generally those with annual economic effects greater than $100 

m!Hion) and the results for other significant regulations (criteria 2.-4 above). We refer to the 

latter category as "significant regulations." Exec. Order No. 12866. Regulatory Planning 

and Review, 58 Fed. Reg. 51,735 (Oct. 4, 1993). 

1

9-rhe semiannual Unified Agenda was established by Executive Order i2866 and 

provides uniform reporting of data on those regulatory and deregulatory activities under 

development or review throughout the fed era! government 

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Figure 2: Number of Final Economically Significant Regulations Published during Specified Presidential Transition and 

Nontransition Periods, 1996~2017 

Number of economically significant regulations publit~hed 

60 President Clinton's administration 

30 

10 

45 

Nontransition periods 

Transition periods 

President eush's administration 58 Pl'll$l<ilmt Obanul'$ admlnl&tration 

33 

Number of economlcalty significant regulations typically recurring annualty 

Note: For the purposes of GAO-18-183 and this statement, we differentiate between the results for 

"economically significanr regulations (i.e« generally those with annual economic effects greater than 

$100 mH!ion) and tne resufts for other significant regulations. Exec. Order No. 12866, Regulatory 

P!annmg and Rev~ew, 58 Fed. Reg. 51,735 (Oct 4, 1993) 

Agencies typically publish a subset of economically significant regulations every calendar year during 

the autumn and early winter months, lrrespective of whether a President ls preparing to !eave office 

For example, the Department of the Interior updated regulations concerning hunUng for migratory 

birds on federal and tribal lands during 18 of the 21 periods reviewed. 

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Figure 3: Number of Final Significant Regulations Published during Specified Presidential Transition and Nontransition 

Periods, 1996~2017 

Number of final significant regulations publisheci 

150 President Clinton's 

administration 

91 

60 

30 

107 

President Bush's 

administration 

126' 

117 

i I .f ~~I I I~~ IIIII~~ I I $K II I~..: Ill~,.;~~;~~~ ri'~ 

Periods (September 23 to January 20) 

Nontransition periods 

Transition periods 

Note: For the purposes of GA0-18·1 83 and this statement we differentiate between the resutts for 

"economically .significant" reguli.l.tlons (i.e .• generally tho:se w1th annual economic effects greater than 

$100 mll!lon) and the results for othsr significant regulations (defined as those that create a serious 

inconsistency or othe~V~~ise interfere with an action taken or planned by another agency; materially 

alter the budgetary impact of entitlements, grants, user fees, or !oan programs or the rights and 

obligations of recipients thereof; or roise novel legal or policy issues arising out of legal mandates. tile 

President's priorities, or the principles set forth in the executive order). Exec. Order No. 12866, 

Regulatory Planmng and ReVIew. 58 Fed. Reg. 51,735 (Oct. 4, 1993}. 

For the 2003-2004 period, 34 agendes submitted separate draft regulations to the Office of 

Information and Regulatory Affairs concemlng government-wide debarment and suspension and 

requirements for drug-free workplaces. But these agencies published or1e final regulation on this 

topic. The OMB data we used for this figure counted ttl is regulation 34 times instead of just once. 

In their published regulations, agencies generally reported complying with 

four of five procedural requirements for promulgating regulations during 

both transition and nontransition periods-the Regulatory Flexibility Act 

(RFA), the Small Business Regulatory Enforcement Fairness Act 

(SBREFA), the Paperwork Reduction Act (PRA), and the Unfunded 

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Mandates Reform Act of 1995 (UMRA). These laws require agencies to 

consider the impact of regulations on small entities, impose additional 

requirements on the Environmental Protection Agency and the 

Occupational Safety and Health Administration to obtain input from small 

entities for rule making efforts that are expected to have a significant 

economic impact on a substantial number of small entities, require all 

agencies to minimize the burden on the public of information collections, 

and require agencies to prepare an assessment of the anticipated costs 

and benefits for any regulation that includes a federal mandate requiring 

nonfederal parties to expend resources without being provided funding to 

cover the costs, respectively. 20 Agencies reported complying for nearly all 

economically significant regulations and the majority of significant 

regulations with these four laws. Agencies less often complied with one or 

more CRA requirements. 21 Over 25 percent of economically significant 

regulations did not comply with the CRA (see figure 4). We estimated that 

15 percent of significant regulations published across all periods reviewed 

failed to meet at least one of the CRA requirements we reviewed. 

20Later, the Dodd-Frank Wall Street Refonn and Consumer Protection Act imposed the 

SBREFA requirement for obtaining input from small entities on the Consumer Financial 

Protection Bureau, an independent regulatory agency not covered in GA0~18-183. 

21CRA requires agencies to submit regulations to Congress and to us and to delay the 

effective date of certain regulations in order to provide Congress an opportunity to review 

and possibly disapprove of regulations before they become effective 

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Figure 4: Finat Economically Significant Regulations Detennined to be 

Noncompliant with the Congressional Review Act during Specified Presidential 

Transition and Nontransition Periods, 1996w2017 

Pe-rcentage of economlcaHy significant regutationa detennined 

to be noncompliant with tho Congressional Review Act" 

Nontransition periods 

Transition periods 

-- Noncompliance rate across all transition and n.ontransition periods 

Number of noncompliant regulations 

Source: GAO ana!ys1$ of pt;bhshed regulations, GAO ma)Or r\J!e report$. l'lt'I<Hho> ~sswnsl Recot'd, ! GA.0-1S-436T 

"The noncompliance rdte across ;;~U three transition peliods combmcd was 26.9 per~nt, compared to 

24.3 percent during all nontransition periods combined 

°For the purposes of GA0-18-183 and tt;is statement, we differentiate between the results for 

"economically significanf regulations (i e., generally those with annual economic sffeds greater than 

$100 million) and the results for other significant regulations. Exec. Order Na. 12866, Regulatory 

P!anmng and Rev1ew, 58 Fed. Reg. 51,735 {Oct 4, 1993) 

The most common CRA deficiency for economically significant 

regulations was agencies' failure to provide Congress the required time to 

review and possibly disapprove regulations, which we had also identified 

as a deficiency in previous work. 22 Among the most active regulatory 

agencies for economically significant regulations, the Departments of 

22GAO, Congressional Review Act, GA0~08-268T (Washington, D.C.: Nov. 6, 2007) 

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23 


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Health and Human Services and Transportation had higher rates of 

noncompliance than the government-wide percentages for both the 

transition and nontransition periods we reviewed. However, 

noncompliance was not limited to these two agencies; 17 of the 23 

agencies that published economically significant regulations during the 

periods we reviewed had at least one noncompliant regulation." 

Though agencies are responsible for complying with CRA, OMB is 

responsible under Executive Order 12866 for oversight of agencies' 

rulemaking, consistent with law, and reviews regulations before 

publication, which provides an opportunity to identify and help agencies 

avoid potential noncompliance. Economically significant regulations for 

which OMB completed its review within 3 months before the planned 

effective date were at high risk of not complying with CRA, thus 

increasing the risk that agencies would not provide Congress with the 

required time for its reviews. We recommended that OMB, as part of its 

regulatory review process, identify economically significant regulations at 

potential risk of not complying with CRA and work with agencies to 

ensure compliance. OMB staff did not take a position agreeing or 

disagreeing with the recommendation. 

One of the common themes in our work over several decades is the need 

for transparency of the regulatory review process and opportunities for 

increasing public participation and congressional oversight The potential 

effects of guidance underscore the need for consistent and wellunderstood processes for the development, review, dissemination, and 

evaluation of guidanoe. Further, we found that while there were increased 

opportunities for public participation for regulations promulgated at the 

end of Presidents' terms, there are increasing instances of 

noncompliance with delay requirements under the Congressional Review 

Act Ensuring that agencies consistently provide Congress with the 

required time to review, and possibly disapprove regulations, is important 

throughout a President's term, and particularly following a presidential 

transition when Congress typically has a larger number of regulations to 

potentially review. Improvements made in transparency of the rulemaking 

process benefit not only the public, but congressional oversight 

23See GA0-18~183 for a more detailed discussion of the scope and methodology, 

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GAO Contact and 

Staff 

Acknowledgments 

Chairman Gowdy, Ranking Member Cummings, and Members of the 

Committee, this concludes my prepared statement Once again, I 

appreciate the opportunity to testify on these important issues. I would be 

pleased to address any questions you or other members of the 

Committee might have at this time. 

For questions about this statement, please contact me at (202) 512-2660 

or nguyentt@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this 

statement. Individuals making key contributions to this testimony were 

Tim Bober, Tara Carter, Colleen Corcoran, Robert Cramer, Alix Edwards, 

Shirley A. Jones, Heather Krause, Barbara lancaster, Michael O'Neill, 

and Andrew J. Stephens. 

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Related GAO Products 

(102S44} 

Federal Rule making: OMB Should Work with Agencies to Improve 

Congressional Review Act Compliance during and at the End of 

Presidents' Terms. GA0-18-183. March, 13,2018. 

Regulatory Guidance Processes: Treasury and OMB Need to Reevaluate 

Long-standing Exemptions of Tax Regulations and Guidance. 

GA0-16-720. September 6, 2016. 

Regulatory Guidance Processes: Selected Departments Could 

Strengthen Internal Control and Dissemination Practices. GA0-15-368. 

April16, 2015. 

Regulatory Guidance Processes: Agencies Could Benefit from Stronger 

internal Control Practices. GA0-15-834T. September 23,2015. 

Federal Rulemaking: Agencies Could Take Additional Steps to Respond 

to Public Comments. GAO-B-21. December 20,2012. 

Page 17 
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is not subject to 

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28 

Chairman GOWDY. Thank you. 

Mr. Noe. 

STATEMENT OF PAUL NOE 

Mr. NOE. Thank you, Chairman Gowdy and members of the committee, for the honor to testify before you today on behalf of the 

American Forest and Paper Association and the American Wood 

Council. 

Regulatory transparency is an important and timely issue that 

really goes to the heart of our governmental system—due process, 

transparency, and fundamental fairness and accountability. 

AF&PA and AWC applaud the committee for addressing this issue. 

For over 32 years, I have worked on regulatory policy, including 

in the Senate and the White House Office of Management and 

Budget, private practice, and trade associations. Having lived in 

the belly of the beast, I strongly believe there are many ways in 

which our rulemaking process could be more transparent and accountable. Today, I’d like to offer just a handful of problems and 

potential solutions. 

First, more light should be shined on the vast but often mysterious part of the administrative law universe which is agency 

guidance, also called regulatory dark matter. To be sure, appropriate guidance can play a very beneficial role in regulatory programs, and I don’t want to miss that fundamental point. But the 

truth is nobody knows how many guidance documents there are or 

how to find them all. 

Eleven years ago, when I was at the White House Office of Management and Budget, I worked on an OMB bulletin for agency good 

guidance practices that requires: first, agency procedures for the 

approval and use of significant guidance documents; second, standard elements—for example, agencies were directed to avoid inappropriate mandatory language—and, third, public access and feedback procedures. Each agency was required to maintain on its 

website a current list of its significant guidance documents that 

were in effect, and there also was a requirement to provide for public comment and public requests for modification or repeal of guidance, as well as a presumption of pre-adoption notice and comment 

for economically significant guidance. 

The bulletin is rooted in longstanding recommendations of nonpartisan expert organizations, but, unfortunately, both congressional oversight and GAO reports have shown, as you’ve just heard, 

that agencies have not been complying with this bulletin. 

Thus, I think Congress should elevate good guidance practices 

into statute. And I think an excellent first step would be enactment 

of the Guidance Out of Darkness Act, sponsored by Congressman 

Walker. I can’t imagine why anyone would oppose a bill requiring 

Federal agencies to post all of their guidance on a centralized, publicly accessible location on their website. 

Sometimes agencies have even gone further, and they’ve circumvented the notice-and-comment requirements of the Administrative Procedure Act to essentially regulate through guidance. 

Congress passes broadly written statutes. Agencies follow with 

broadly written regulations. And then, over the years, agencies fill 

in the gaps with highly detailed guidance. 


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29 

As the D.C. Circuit put it, quote, ‘‘The phenomenon is familiar. 

Law is made without notice and comment, without public participation, without publication in the Federal Register or the Code of 

Federal Regulations.’’ 

I commend the Department of Justice for addressing the improper use of agency guidance, and I think more should be done on 

a government-wide basis. 

Second, for over 37 years, regulatory agencies often have circumvented the Presidential orders requiring that regulations maximize net benefits to society by interpreting their statutes to preclude full cost-benefit balancing. This is a huge but unrecognized 

problem that undermines agency accountability and transparency 

and leads to unnecessarily wasteful and ineffective regulations that 

are not designed to enhance societal well-being. 

President Trump should take a historic step to ensure smarter 

regulation by directing the agencies, including the independent regulatory commissions, to interpret their statutes to fully allow benefit-cost balancing unless prohibited by law. 

Third, agencies should be more transparent about key information supporting regulatory decisions. 

And, finally, for the last 12 years, agencies have done a very poor 

job of complying with the Congressional Review Act. It clearly 

mandates that before a rule can take effect the agency must submit 

the rule to Congress for review. And covered rules include both legally binding regulations and agency guidance documents. 

Various reports have shown that many rules have not been submitted to Congress since the law was enacted in 1996, and that’s 

especially true for guidance. That raises questions whether these 

rules are legally in effect. And it also raises questions about Congress’ ability to overturn those rules today under the expedited procedures of the Congressional Review Act even if the rules were 

issued years ago. 

Thank you again for the opportunity to testify today. 

I would be happy to address any questions you may have. 

[Prepared statement of Mr. Noe follows:] 


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American 

Forest & Paper 

Association 

Statement of Paul R. Noe 

AMERICAN WOOD COUNCIL 

Vice President, Public Policy 

American Forest & Paper Association 

American Wood Council 

Before 

House Committee on Oversight and Government Reform 

"Shining Light on the Federal Regulatory Process" 

March 14, 2018 

Chairman Gowdy, Ranking Member Cummings, and Members of the Committee, my 

name is Paul Noe, and I am the Vice President for Public Policy for the American Forest 

& Paper Association and the American Wood Council. Thank you for the honor to testify 

before you on regulatory transparency. This is a fundamentally important issue that 

goes to the heart of our governmental system due process, fundamental fairness and 

accountability, and we applaud the Committee for doing the hard work of addressing it 

I have been involved in regulatory policy in Washington for over 32 years, including the 

privilege of having served as counsel to Chairmen Fred Thompson, Ted Stevens and 

Bill Roth on the Senate Governmental Affairs Committee, and as a drafter of agency 

good guidance practices when I served as Counselor to Administrator John Graham at 

the Office of Information and Regulatory Affairs (OIRA) in the White House Office of 

Management and Budget (OMS). My experience working for the heavily regulated forest 

products industry for the last nine years further reinforces my appreciation of the 

importance of transparency and accountability in our regulatory process. Today, I would 

like to focus on a handful of specific agency problems and offer some solutions 

regarding the need for: (1) better compliance with good guidance practices; 

(2) stronger compliance with presidential orders on benefit-cost analysis, such as 

Executive Order 12866, by interpreting regulatory statutes to allow for balancing the 

benefits and costs of regulations to maximize societal well-being; (3) greater 

transparency about the key information supporting regulatory decisions; and (4) better 

compliance with the Congressional Review Act. 

The American Forest & Paper Association (AF&PA) serves to advance a sustainable 

U.S. pulp, paper, packaging, tissue and wood products manufacturing industry through 

fact-based public policy and marketplace advocacy. AF&PA member companies make 

products essential for everyday life from renewable and recyclable resources and are 
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committed to continuous improvement through the industry's sustainability initiative -

12fi!J£,Cf:::.@f'li£!§?§,.~illfi'Lt'l§1Im,:?.Q,£!,l. The forest products industry a ceo u nts for 

approximately 4 percent of the total U.S. manufacturing GOP, manufactures over $200 

billion in products annually, and employs approximately 900,000 men and women. The 

industry meets a payroll of approximately $50 billion annually and is among the top 10 

manufacturing sector employers in 47 states. 

The American Wood Council (AWC) is the voice of North American wood products 

manufacturing, representing over 75 percent of an industry that provides approximately 

400,000 men and women in the United States with family-wage jobs. AWC members 

make products that are essential to everyday life from a renewable resource that 

absorbs and sequesters carbon. Staff experts develop state-of-the-art engineering data, 

technology, and standards for wood products to assure their safe and efficient design, 

as well as provide information on wood design, green building, and environmental 

regulations. AWC also advocates for balanced government policies that affect wood 

products. AF&PA and AWC work together to advance policies of issues of mutual 

concern, including regulatory reform. 

I. The Need for Better Good Guidance Practices. 

The forest products industry has seen both sides of the coin on agency guidance. In 

some instances, questions of implementation can be appropriately, effectively and 

efficiently resolved through guidance. In others, the use of agency guidance may lack 

appropriate transparency and due process, even to the point of inappropriately and 

unlawfully substituting for regulation. Accordingly, AF&PA and AWC support legislative 

and administrative efforts that ensure transparency, due process and effective 

management for significant agency guidance. 

A. Background1 

President Reagan's Executive Order 12291, which firmly established OMB review of 

rules, was quite broad in scope and applied to virtually all "rules" including both 

regulations (legally binding legislative rules) and agency guidance (non-binding 

interpretive rules and policy statements). When President Clinton replaced the Reagan 

Order in 1993 with Executive Order 12866, it honed in on "significant" regulatory 

actions. Given the vastness of federal regulatory activity, and the limited resources of 

OIRA, it was eminently sensible to try to sort the significant agency activity from the 

insignificant The problem is that while the Clinton Order applied to significant 

regulations, it neglected guidance documents - covering only rules that "the agency 

intends to have the force and effect of law." But there is no doubt that guidance 

documents can be quite significant In fact, agencies issue over 3400 regulations 

1 See John D. Graham and Paul R. Noe, "Due Process and Management for Guidance Documents: Good 

Governance Long Overdue," 1 Yale J. on Reg. 103 (2008). 

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annually, but the volume of guidance documents is orders of magnitude larger, 2 and 

nobody actually knows how many there are. 

Starting in 2002, as part of its obligation to provide recommendations for reform under 

the "Regulatory Right-to-Know Act," OIRA requested public comment on problematic 

agency guidance and regulations, and received public nominations of 49 problematic 

guidance documents in need of reform 3 OIRA received further public comments on 

problematic guidance in response to its request for public comment on its draft Report 

to Congress on the Costs and Benefits of Federal Regulation in 2004 and 20054 and on 

the proposed Bulletin.5 The public response was striking- hundreds of comments from 

a wide array of groups raised concerns small businesses, farmers, state and local 

governments, homebuilders, colleges and universities, large businesses, hospitals, 

trade associations, funeral directors, public interest groups, think tanks, bird watchers, 

and others. A cursory review of the Preamble to the OMB Bulletin, the comments that 

OMB received and posted on its website, and the scholarly litera!ure6 provide many 

examples. 

Although guidance documents may not properly carry the force of law, they are a key 

component of regulatory programs. As the scope and complexity of regulatory programs 

has grown, agencies increasingly have relied on guidance documents to provide 

direction to their staff and to the public. That generally is to the good, and I want to 

clearly acknowledge that agency guidance often is both very important and very helpful 

to the regulated community and others. As OMB stated: 

2 See, e.g., Peter L Strauss, The Rule making Continuum, 41 Duke LJ. 1463, 1469 (1992) {noting that the formally 

adopted rules of the Federal Aviation Administration are two inches thick, but the corresponding guidance 

materials, over forty feet; Part 50 of the Nuclear Regulatory Commission's regulations on nuclear plant safety, in 

loose-leaf edition, is 3/16 of an inch, but the supplemental technical guidance is 9 3/4 inches; and the formally 

adopted regulations of the IRS occupy one foot of shelf space, but Revenue rulings and similar publications, about 

twenty feet); see also H. Comm. on Gov't. Reform, "Non-Binding Legal Effect of Agency Guidance Documents," H.R. 

Rep. No. 106-1009 (2000) (noting that between March 1996 through 1999, NHTSA had issued 1225 guidance 

documents, EPA 2653, and OSHA 1641). 3 OMS, Key to Public Comments, h!!R..V~~tr.hlt@Q~QY£9mbflnfor!$.__kgyrnrn~ (last visited June 24, 

2016); see also, OMB, Stimulating Smarter Regulation: 2002 Report to Congress on the Costs and Benefits of 

Regulations and Unfunded Mandates on State, Local and Tribal Entities, at pp. 75-85 

https :/ /www. whitehouse .gov I sites/_dei au lt/fi les/ omb/ assets/Qmi?Li!:Jf!d!:§lallQ_ZJ:§:J_ort to_,£91lJl.[gg;£..9i. {last 

visited June 24, 2016). 

'OMB, Peer Review and Public Comments on the 2005 Draft Report to Congress on the Costs and Benefits of 

Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, 

!lttrU,~~'t:f:L.:ti.h]lgjll2li!:i"',£.ill'isl1I!l11]ill!lli~LQQu£L!~!l\JJ:l1 (last visited June 24, 2016 ); OM B, Public Comments 

on 2004 Draft Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on 

State, Loco/, and Tribal Entities, (last visited 

June 24, 2016). 5 OMB, Comments on Proposed Bulletin on Good Guidance Practices, 

lllli22"'LV!L':!!£!!!.Jld'Jlli:!JQI,lli;~01ls,lffitl/E:JlQQ.LJ5Qfl'LJ!Q~U::ill'~ (last visited June 24, 2016). 6 See, e.g., Robert A. Anthony, "Interpretive Rules, Policy Statements, Guidances, Manuals and the Like -Should 

Federal Agencies Use Them to Bind the Public?" 41 Duke LJ. 1311 (1992); Robert A. Anthony, "'Interpretive' Rules, 

'Legislative' Rules and 'Spurious' Rules: Lifting the Smog," 8 Admin. U (Spring 1994). 

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"Agencies may properly provide guidance to interpret existing law through 

an interpretative rule, or to clarify how they will treat or enforce a 

governing legal norm through a policy statement. . Guidance 

documents, properly used, can channel the discretion of agency 

employees, increase efficiency by simplifying and expediting agency 

enforcement efforts, and enhance fairness by providing the public clear 

notice of the line between permissible and impermissible conduct while 

ensuring equal treatment of similarly situated parties."7 

Unfortunately, many concerns have been raised that agency guidance practices should 

be better managed, more consistent, transparent and accountable. These concerns are 

reinforced by the GAO report that Congress requested on implementation of the OMB 

Bulletin by four cabinet departments 8 Moreover, there is growing concern that, in some 

cases, guidance documents essentially are being used in lieu of regulations --without 

observing the procedural safeguards for regulations. As the D.C. Circuit put it: 

"The phenomenon we see in this case is familiar. Congress passes a broadly 

worded statute. The agency follows with regulations containing broad language, 

open-ended phrases, ambiguous standards and !he like. Then as years pass, the 

agency issues circulars or guidance or memoranda, explaining, interpreting, 

defining and often expanding the commands in regulations. One guidance 

document may yield another and then another and so on. Several words in a 

regulation may spawn hundreds of pages of text as the agency offers more and 

more detail regarding what its regulations demand of regulated entities. Law is 

made, without notice and comment, without public participation, and without 

publication in the Federal Register or the Code of Federal Regulations."9 

The concern about the need for better management, transparency and due process for 

the development and use of guidance documents inspired OIRA to develop the OMS 

Bulletin for Agency Good Guidance provisions, supplemented by a provision in 

Executive Order 13422 for OMS review of agency guidance. In pertinent part, E.O. 

13422 provided: 

"Significant Guidance Documents 

Each agency shall provide OIRA, at such times and in the manner 

specified by the Administrator of OIRA, with advance notice of any 

significant guidance documents. . Upon the request of the 

Administrator, for each matter identified as, or determined by the 

7 OMB, Stimulating Smarter Regulation: 2002 Report to Congress on the Costs and Benefits of Regulations and 

Unfunded Mandates on State, Local, and Tribal Entities, at p. 72 

U.S. Government Accountability Office, Regulatory Guidance Processes: Selected Departments Could Strengthen 

Internal Control and Dissemination Practices, GA0-15·368 (April2015) (reviewing implementation of OMB Bulletin 

for Agency Good Guidance Practices by the departments of Health and Human Services, Labor, Education and 

Agriculture and finding significant deficiencies). 

9 Appalachian Power Co. v. EPA, 208 F.3d 1015, 1019 (D.C. Cir. 2000) (striking down emissions monitoring guidance 

as requiring notice and comment through legislative rulemaking procedures). 

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Administrator to be, a significant guidance document, the issuing agency 

shall provide to OIRA the content of the draft guidance document, together 

with a brief explanation of the need for the guidance document and how it 

will meet that need. The OIRA Administrator shall notify the agency when 

additional consultation will be required before the issuance of the 

significant guidance document." 

Together, Executive Order 13422 and the OMB Bulletin establish the first governmentwide "rules of the road" to manage the development and use of guidance documents. 

The E.O. 13422 gave clear authority to OMB to review significant agency guidance 

documents, a streamlined version of how OMS reviews significant agency regulations. 

The agencies, in turn, were required to give OMB advance notice of their upcoming 

significant guidance documents. OMB would be responsible for ensuring that other 

interested agencies in the federal family received notice, and occasionally, an 

opportunity to provide input into the most important guidance documents. 

The OMB Bulletin on Good Guidance Practices fit hand in glove with E.O. 13422. First, 

agencies must implement written procedures for the approval of significant guidance 

documents by appropriate senior officials. Agency employees should not depart from 

significant guidance documents without appropriate justification and supervisory 

concurrence. Second, significant guidance documents must have standard elements, 

such as information identifying the document as guidance, the issuing office, the activity 

and persons to whom it applies, the date of issuance, title and docket number. 

Most notably, agencies are directed to avoid inappropriate mandatory language. This 

provision was intended to help curb the problem of ''regulation by guidance document" 

criticized in the Appalachian Power decision and others. It also will obviate wasteful 

litigation and increase fairness and accountability in the exercise of regulatory power. 

The Bulletin also establishes public access and feedback procedures. For example, 

agencies are required to maintain on their Web sites a current list of their significant 

guidance documents, and to provide a means for the public to electronically submit 

comments on significant guidance documents, or to request that they be created, 

reconsidered or modified. Finally, the Bulletin establishes pre-adoption notice and 

comment requirements for guidance documents that rise to the level of being 

"economically" significant. 

When President Obama took office, he retained the OMB Bulletin, but he rescinded 

E.O. 13422. To substitute for the good guidance provisions of E.O. 13422, the OMS 

Director issued a memo to restore the regulatory review process to what it had been 

under Executive Order 12866 between 1993 and 2007. The memo stated: "During this 

period, OIRA reviewed all significant proposed or final agency actions, including 

significant policy and guidance documents. Such agency actions and documents 

remain subject to OIRA's review under Executive Order 12866." 

My understanding is that, under that approach, OIRA reviewed little guidance, and when 

it did, the practice was ad hoc and disorganized. This comes as no surprise since there 

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was no written authority for the practice -- and no procedures governing it The problem 

is that: 

• OIRA desk officers had to already know the guidance existed, and 

• They had to get permission to call in a guidance. 

The shortcomings of this approach are obvious. It is impossible to review what you don't 

know exists. The review process is broken when the first time OIRA desk officers know 

about an important guidance document is when they read about it in the Washington 

Post How many significant guidance documents do you think an OIRA desk officer 

might not know about before it was issued? Plenty, I can assure you. And would it be 

clearly unreasonable for agencies to feel that OMB had no business looking at their 

draft guidance without any explicit authorization? It was no accident that the provision 

for OIRA review of guidance was elevated into an Executive Order rather than simply 

being added to the Bulletin. 

Ignoring guidance inadvertently can undermine OMS's authority to review regulations, 

similar to how it undermines court review, as the D.C. Circuit explained in Appalachian 

Power. The agency could issue broad, open-ended legislative rules that pass through 

interagency review (and court review, and for that matter, Congressional review). Then 

the agency could follow with guidance "expanding the commands in the regulations" to 

a degree that would have raised concerns if those details had appeared in the 

regulations. In fact, one might wonder how OMS's abstention from managing and 

coordinating significant guidance documents may have contributed to the growth in 

"spurious rules" cases in the courts, which increasingly have criticized agencies for 

issuing binding rules without observing the public notice and comment procedures that 

Congress required in the Administrative Procedure Act 10 

B. The Precedent for Good Guidance Practices 

Even before the OMB public comment process, there was a strong foundation for the 

good guidance practices in E.O. 13422 and the OMS Bulletin that was rooted in the 

recommendations of leading authorities that stood for decades. This foundation 

10 The growth in so-called "spurious rule" court cases in the 1990s may not be a coincidence. See, e,g., Gen. Elec. 

Co. v. EPA, 290 F,3d 377 (D.C. Cir. 2002) (striking down PCB risk assessment guidance as a spurious rule requiring 

notice and comment); Appalachian Power Co. v. EPA, 208 F.3d 1015 (D.C. Cir. 2000) (striking down emissions 

monitoring guidance as spurious rule requiring notice and comment); U.S. Chamber of Commerce v. Dep't of 

labor, 174 F.3d 206 (D.C. Cir. 1999) (striking down OSHA Directive as a spurious rule requiring notice and 

comment). See also, OMB, Final Bulletin for Agency Good Guidance Practices, 72 Fed. Reg. 3432, 3435 (Jan. 25, 

2007); OMB, Key to Public Comments, h!JJ/.?;iLI!:L\'!'YI2YllJteh_Q!!l&lill.V.Pmb/regg_Q.U:.Q.Q!Lg_uid c·index/ (last visited 

June 24, 2016). 

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includes the work of many authorities - including the Executive Branch, 11 Congress, 12 

the courts, 13 the American Bar Association, 14 and legal scholars. 15 

First, the Administrative Conference of the United States (ACUS)16 issued 

recommendations for the development and use of agency guidance documents. As far 

back as the mid-1970s, for example, ACUS recognized the importance of ensuring a 

notice and comment process for the most significant guidance documents. ACUS 

Recommendation 76-5 states: 

"Before an agency issues, amends or repeals an interpretive rule of general 

applicability or statement of general policy which is likely to have a substantial 

impact on the public, the agency normally should utilize the procedures set forth 

11 Recommendations of the Administrative Conference of the United States, Agency Policy Statements, Rec. 92-2, 1 

C.F.R. § 305.92-2 (1992), available (stating that 

agencies should not issue statements of general applicability intended to be binding without using legislative 

rulemaking procedures and that agencies should afford the public a lair opportunity to challenge the legality or 

wisdom of policy statements and to suggest alternative choices); Recommendations of the Administrative 

Conference of the United States, Interpretive Rules of General Applicability and Statements of General Policy, Rec. 

76-5, 1 C.F.R. § 305.76 (1992), available (stating that 

agencies should utilize APA notice and comment procedures for interpretive rules of general applicabllity or 

statements of general policy likely to have a substantial impact on the public); The Food and Drug Administration's 

Development, Issuance, and Use a/Guidance Documents, 62 Fed. Reg. 8961 (Feb 27, 1997) (notice) (establishing 

FDA's original good guidance practices); OMB, Draft Report to Congress on the Costs and Benefits of Federal 

Regulations, 67 Fed. Reg. 15,014, 15,034-35 (Mar. 28, 2002) (detailing concerns over soliciting public comments on 

problematic agency gufdance practices and specific examples of guidance documents in need of reform}. 

"See, e.g., U.S. Government Accountability Office, Regulatory Guidance Processes: Selected Departments Could 

Strengthen Internal Control and Dissemination Practices, GA0-15-368 (April2015); Congressional Review Act of 

1996,5 U.S.C. §§ 801-808 (2000) (providing fast-track procedures for Congressional resolutions of disapproval of 

rules and incorporating the APA definition of "rule" to cover guidance documents); Food and Drug Administration 

Modernization Act of 1997, 21 U.S.C. § 371(h) (2000) (establishing FDA good guidance practices as law); 

Congressional Accountability for Regulatory Information Act, H.R. 3521, 106th Cong. § 4 (2000) (proposing to 

require agencies to notify the public of the non-binding effect of guidance documents), H. Comm. on Government 

Reform, Non-Binding Legal Effect of Agency Guidance Documents, H.R. Rep. No. 106-1009 (2000) (criticizing 

"b.ackdoor" regulation); Food and Drug Administration Modernization ond Accountability Act of .1.997, S. Rep. No. 

105-43, at 26 (1997) (raising concerns about the lack of transparency and consistency in the use of guidance 

documents), 

B See, e.g.~ supra note 10. 

14 ABA, Annual Report Including Proceedings of the Fifty-Eighth Annual Meeting 57 (1993) (recommending notice 

and comment for guidance documents likely to have a significant impart on the public}; ABA, Recommendation on 

Federal Agency Web Pages 1 (2001), (recommending that 

agencies post on their Web sites, inter alia, all important policies and interpretations}. 

15 See, e.g., Robert A. Anthony, "Interpretive" Rules, "Legislative" Rules and "Spurious" Rules: Lifting the Smog, 8 

Admin. L.J. I (1994); Robert A. Anthony, Interpretive Rules, Policy Statements, Guidances, Manuals and the LikeShould Federal Agencies Use Them to Bind the Public? 41 Duke L.J. 1311 (1992); see also, OMS, Final Bulletin for 

Agency Good Guidance Practices, at pp. 2-3 & n. 2, 6. 15 ACUS is a federal advisory agency charged with providing recommendations on administrative procedure issues. 

ACUS has made hundreds of recommendations on administrative procedure issues, and most were adopted by 

agencies or by Congress. See Florida State University College of Law, ABA Administrative Procedure Database, 

YY.Y'"tL@Y!Gli!d~Q.\!JliiQfM'i.Lil\111lliJ1'!!9~lli!illlf.J:WJl!(last visited June 24, 2016). 

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in the Administrative Procedure Act subsections 553(b) and (c) .... Where there 

has been no prepromulgation notice and opportunity for comment, the publication 

of an interpretive rule of general applicability or a statement of general policy .. 

should include .. an invitation to interested persons to submit written 

comments'' 17 

ACUS Recommendation 92-2 later added: 

"Agencies should not issue statements of general applicability that are intended 

to impose binding substantive standards or obligations upon affected persons 

without using legislative rulemaking procedures ... Policy statements of general 

applicability should make clear that they are not binding .... Agencies that issue 

policy statements should examine, and where necessary, change their. 

procedures ... to allow as an additional subject requests for modification or 

reconsideration of such statements."18 

In 1993, the American Bar Association (ABA) reaffirmed the ACUS recommendations 

on the use of informal notice and comment procedure for significant guidance 

documents. 19 In 2001, the ABA further recommended that agencies "explore means to 

maximize the availability and searchability of existing law and policy on their websites" 

and include "their governing statutes, all agency rules and regulations, and all important 

policies, interpretations, and other like matters which members of the public are likely to 

request. •>20 

Moreover, Congress produced what became a model for OMS's Good Guidance 

Practices. 21 In the Federal Food and Drug Administration Modernization Act of 1997, 

Congress directed the FDA to issue regulations establishing good guidance practices. 22 

Congress was particularly concerned about public knowledge of, and access to, FDA 

guidance documents; the lack of a systematic process for adopting guidance 

Recommendations of the Administrative Conference of the United States, JnterpreNve Rules of General 

Applicability and Statements of General Policy, Rec. 76-5, 1 C.F.R. § 305.76-5 (1992), available at 

ABA, Annual Report Including Proceedings of the Fifty-Eighth Annual Meeting 57 (1993) ("[T]he American Bar 

Association recommends that: Before an agency adopts a non!egis!ative rule that Js likely to have a significant 

impact on the public, the agency provide an opportunity for members of the public to comment on the proposed 

rule and to recommend alternative policies or interpretations, provided that it is practical to do so; when 

non legislative rules are adopted without prior public participation, immediately following adoption, the agency 

afford the public an opportunity for post-adoption comment and give notice of this opportunity."). 20 ABA, Recommendation on Federal Agency Web Pages 1 (2001), hlli!:f/www.ilJlaneLorg/admiulaw/federa02.pdf. 21 As OMB stated in its Preamble (pp. 4-5), FDAMA and FDA's implementing regulations, as well as the 

recommendations of the former Administrative Conference, informed the development of the Bulletin. 22 Food and Drug Administration Modernization Act of 1997, 21 U.S.C. § 371(h) (establishing FDA good guidance 

practices as law). 

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documents and for allowing public input; and inconsistency in the use of guidance 

documentsn Those same concerns apply to other agencies as well. 

C. The Need for Action24 

The case for Congressional action is strong. The OMB Bulletin has been in effect since 

early 2007 in both Republican and Democratic administrations. Over eleven years is 

more than enough time for the agencies to have fully complied with basic good 

guidance practices. Yet clearly they have not, as shown by Congressional oversight, 

including hearings by Senator Lankford25 and others. Moreover, in 2015, the U.S. 

Government Accountability Office issued a report26 on how four major departments -

the Departments of Agriculture, Education, Health and Human Services, and Labor and 

their 25 component agencies- have complied with the OMB Bulletin. The report 

showed those departments and their component agencies generally had a long track 

record of failing to comply with basic good government requirements of the Bulletin, 

including the following: 

• All components claimed they did not issue any economically significant guidance 

(and thus were not required to conduct pre-adoption notice and comment); 

• Only six of 25 components had written procedures to ensure consistent application 

of guidance (p.25); 

• HHS had no written procedures for approval of significant guidance, and DOL's 

procedures were not available to its staff; 

• Nearly half of the components did not regularly evaluate whether issued guidance 

remained effective; 

• HHS did not post significant guidance was not posted on a departmental website as 

required by OMB; 

• Public online access to guidance was difficult to find and they failed to use of metrics 

to improve dissemination. 

GAO concluded with the following recommendations: 

• HHS and DOL should ensure consistent application of OMS requirements for 

significant guidance; and 

23 Food and Drug Administration Modernization and Accountability Act of 1997, S. Rep. 10543, at 26 {1997). 24 See Paul Noe, "Shining the Light on Regulatory Dark Matter," AF&PA Blog (Feb. 6, 2018), 

hJJrrJ.I.YL\AIW.<J@fl9.2?"Qig[media/blog/bloga/2018/02/06/shining-the-light-on-regulator_'(:Qil.fk-m!JtterSee, e.g., U.S. Senate Committee on Homeland Security & Governmental Affairs, Subcommittee on Regulatory 

Affairs and Federal Management, Hearing on Examining the Use of Agency Regulatory Guidance, Part !!(June 30, 

2016}, 114'h Cong. 2nd Sess., Washington DC. 

26 U.S. Government Accountability Office, Regulatory Guidance Processes: Selected Departments Could Strengthen 

Internal Control and Dissemination Practices, GA0-15-368 {April2015). 

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• All four departments should strengthen use of internal controls in guidance 

production processes and improve online guidance dissemination. 

It is evident that more should be done to improve the development and use of agency 

guidance. For example, Congress could elevate good guidance practices into statute. 

An excellent first step would be enactment of the "Guidance Out Of Darkness Act," H.R 

4809, sponsored by Congressman Walker. The GOOD Act would require federal 

agencies to post all of their guidance in a centralized, accessible location on their 

website. This is a common sense and long overdue requirement of the OMS Bulletin 

that the agencies have failed to comply with.z7 

The Administration also could do more to promote good guidance practices. In fact, the 

Department of Justice (DOJ) recently provided leadership by issuing a memorandum in 

November to prohibit improper guidance documents at DOJ28 and also by more recently 

issuing a memorandum to curb improper use of guidance in civil enforcement cases. 29 

Yet, more can and should be done. For example, the Office of Management and Budget 

could do more to promote good guidance practices on a government-wide basis by 

updating the Bulletin. First, OMB should have procedures for the agencies to inform it 

and other agencies about their intentions to use guidance, coordinate with other 

interested agencies, receive input, and be transparent Basic procedures are needed for 

OMB and other agencies to get a "heads up" during the development of agency 

guidance. Also, the resources should be provided to do the job right Second, the 

agencies could follow the recommendations of the Administrative Conference of the 

United States and the ABA Administrative Law Section to provide streamlined preadoption notice-and-comment for significant guidance documents not just 

"economically significant" guidance- or allow public comment after issuance where 

there is a need for prompt action. My understanding is that FDA does this already and 

the practice has been generally successfuL 

27 Congress also might want to investigate whether agencies have complied with the requirement in 5 U,S,C 

552(a){1)(D) to publish in the Federal Register statements of general policy and interpretations of general 

applicability, 

Memorandum from Attorney General Jeff Sessions to all Components, "Prohibition on Improper Guidance 

Documents" (Nov. 16, 2017), h.t!m.JL~Y>!.JJL§!ifg_,g JI:!m>J!iRress:relelJ~e/file/1012271/downlo'!li 

Memorandum from Associate Attorney General Rachel Brand to Heads of Litigating Components, "Limiting Use 

of Agency Guidance Documents in Affirmative Civil Enforcement Cases" (Jan. 25, 2018), 

bnll&L>YYL~§!ice .e.gy!l.iJ.!'LtQ2Jl.L?2Ldownload 

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II. Curtail the Evasion of Presidential Orders on Benefit-Cost Analysis by 

Interpreting Regulatory Statutes to Allow for Full Benefit-Cost Balancing. 

A. Background 

While efforts to promote the use of benefit-cost analysis30 have been longstanding, over 

time a remarkable consensus has emerged. In the Executive Branch, there is a striking 

similarity among the principles for benefit-cost balancing and centralized review of 

regulation required by every president for over 37 years, from Ronald Reagan to Donald 

Trump. The Judicial Branch, and the Supreme Court in particular, has clarified that 

benefit-cost analysis can have a central role in a host of regulatory programs, and if 

agencies ignore this invitation, they could jeopardize the very regulations they want to 

promote. In Congress, there is a renewed interest in requiring benefit-cost analysis by 

statute that is greater than any time in the past 20 years. 

On their face, probably the greatest consensus on the "cost-benefit state"31 is reflected 

in the Executive orders governing regulatory analysis and review. Going back to 1981, 

President Reagan's Executive Order 12291 established general requirements that, "to 

the extent permitted by law: 

• "[r]egulatory action shall not be undertaken unless the potential benefits to 

society for the regulation outweigh the potential costs to society," and 

• "[r]egulatory objectives shall be chosen to maximize the net benefits to 

society" (Emphasis added). 

Similarly, President Clinton's E.O. 12866, issued in 1993 and still in effect, requires that 

agencies, to the extent permitted by law: 

• "propose or adopt a regulation only upon a reasoned determination that the 

benefits of the intended regulation justify its costs," and 

• "in choosing among alternative regulatory approaches, select those 

approaches that maximize net benefits (including potential economic, 

environmental, public health and safety, and other advantages; distributive 

30 Benefit-cost analysis (BCA) is "[a] systematic quantitative method of assessing the desirability of government 

projects or policies when it is important to take a long view of possible side-effects." OMB Circular A-94, 

"Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs," Appendix A \1992). BCA involves 

calculating and comparing the benefits and costs of regulatory options, including an account of foregone 

alternatives and the status quo, with the goal of identifying the option that would maximize societal welfare. As 

Justice Breyer explained, "every real choice requires a decision maker to weigh advantages against disadvantages, 

and disadvantages can be seen in terms of \often quantifiable) costs." Entergy Corp. v. Riverkeeper, Inc., 556 U .5. 

208 (2009). The term "benefit-cost analysis" can be used interchangeably with "cost-benefit analysis." 

I adopt the definition of the "cost .. benefit state" advanced by President Obama's former OIRAAdministrator, 

Cass Sunstein "that government regulation is increasingly assessed by asking whether the benefits of regulation 

justify the costs of regulation." Cass R. Sunstein, The Cost-Benefit State: The Future of Regulatory Protection, 

Chicago, ll, American Bar Association, Section of Administrative Law and Regulatory Practice (2002). 

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effects; and equity) unless a statute requires another regulatory approach" 

(Emphasis added). 

President Obama's E.O. 13563 (2011) reaffirms the Clinton order and reiterates virtually 

verbatim the two provisions listed above, as well as others. E.O. 13563 also more 

strongly embraces quantitative benefit-cost balancing than the Clinton order by 

elevating both provisions to general principles" that the agencies "must" execute and by 

adding a new principle promoting quantitative benefit-cost analysis and risk 

assessment: 

• "In applying these principles, each agency is directed to use the best available 

techniques to quantify anticipated present and future benefits and costs as 

accurately as possible." 

Thus, there has been strong bipartisan consensus that benefit-cost balancing should 

play a central role in the question of whether and how to regulate. As the Clinton 

Administration explained in OMB's first Report to Congress on the Costs and Benefits of 

Federal Regulation (Sept. 30, 1997): 

"[R]egulations (like other instruments of government policy) have enormous 

potential for both good and harm. Well-chosen and carefully crafted regulations 

can protect consumers from dangerous products and ensure they have 

information to make informed choices. Such regulations can limit pollution, 

increase worker safety, discourage unfair business practices, and contribute in 

many other ways to a safer, healthier, more productive and more equitable 

society. Excessive or poorly designed regulations, by contrast. can cause 

confusion and delay, give rise to unreasonable compliance costs in the form of 

capital investments, labor and on-going paperwork, retard innovation, reduce 

productivity, and accidentally distort private incentives. 

The only way we know how to distinguish between regulations that do good and 

!hose that cause harm is through careful assessment and evaluation of their 

benefits and costs. Such analysis can also often be used to redesign harmful 

regulations so they produce more good than harm and redesign good 

regulations so they produce even more net benefits." (p. 1 0) 

While this remarkable political consensus is laudatory, insufficient progress has been 

made over the last 37 years. There are many reasons why presidential orders directing 

agencies to implement regulatory statutes through benefit-cost balancing have been far 

less effective than intended. This includes the severe and chronic under-funding of 

OIRA (which now has far more responsibilities and less than half the staff it had under 

President Reagan); 32 institutional limitations of the agencies and OMB; and political 

When OIRA was created in fiscal year 1981, it had a full-time equivalent (FTE) ceiling of about 97 staff; by fiscal 

year {FY) 2016, OIRA had about 47 staff. See Susan Dudley & Melinda Warren, G.W. Regulatory Studies Center and 

Washington University in St. louis, "Regulators' Budget from Eisenhower to Obama: An Analysis of the U.S. Budget 

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dysfunctions, including interest group dynamics and Presidential electoral politics. 33 But 

one of the greatest yet most readily addressable impediments to the cost-benefit state is 

that the regulatory agencies have interpreted their statutes to limit their ability to 

fully engage in benefit-cost balancing and to maximize societal well-being, as 

required by the President,34 

Why? Agencies have interpreted their regulatory statutes in ways that circumvented the 

presidential orders and the requirement to maximize net benefits to society, sometimes 

relying on selected pieces of legislative history to limit their interpretations of the 

statutory text Of course, none of that legislative history mel the Bicameralism and 

Presentment requirements for legislation and thus did not require or authorize noncompliance with the presidential benefit-cost orders. 

While only a small minority of statutes explicitly mandate benefit analysis-cost, 35 and a 

very small minority prohibit it, 36 the challenge has been what agencies should do when 

implementing the large majority of regulatory statutes that are silent or ambiguous on 

cost-benefit balancing. One problem that may have contributed to agency evasion of the 

presidential orders is that, in earlier Supreme Court case law from 1981 and 2001, there 

was some misleading dicta that some claimed established a "presumption" against 

for Fiscal Years 1960 through 2017" (May 2016), at p. 20 (Table A-3). In contrast, the agency staff dedicated to 

writing, administering and enforcing regulations rose from 146,000 in FY1980 to over 278,00 in FY2016. As OIRA's 

budget was reduced from about $14 million in 1981 to $8 million in FY2016 in constant 2009 dollars, the agencies' 

budgets increased from about $16.4 billion in FY1980 to over $61 billion in FY2016 in constant 2009 dollars. At the 

same tlme, O!RNs statutory responsibilities have grown throug~ a wide variety of requirements, including: the 

Small Business Regulatory Enforcement fairness Act theE-Government Act, the Unfunded Mandates Reform Act, 

the Congressional Review Act, the Information Quality Act, the Regulatory Right-to-Know Act, the Small Business 

Paperwork Relief Act, and a variety of appropriations riders. See Comment Letter on Federal Regulatory Review 

from Paul R. Noe, American Forest & Paper Association, to OMB's Office of Information and Regulatory Affairs 

{March .16, 2009), fill.ng Comment letter on Federal Regulatory Review from Rosario Palmieri, National Association 

of Manufacturers, to OMB's Office of Information and Regulatory Affairs (March 16, 2009). 

33 See, e.g., John D. Graham and Pau! R. Noe, "Beyond Process Excellence: Enhancing Societal Well-Being/' in 

Achieving Regulatory Excellence, Brookings Institution Press (2016) (discussing the institutional impediments in the 

Executive Branch to ensuring that regulations do more good than harm ... such as bureaucratic turf battles among 

the agencies, failure to utilize both internal and external expertlsef bias1 the mismatch between the vast volume of 

regulation and OlRA's shrinking resources, the large volume of "stealth regulation!/ such as guidance not submitted 

for OIRA review, lack of support for OIRA by varying administrations or leaders, and lack of judicial review for 

benefit-cost balancing- as well as the political impediments in the Executive Branch and Congress to ensuring that 

regulations do more good than harm). 

34 John D. Graham and Paul R. Noe, "A Paradigm Shift in the Cost-Benefit State," University of Pennsylvania law 

School RegBiog (April26, 2016), lJ!!m.;/.i:h':t!)!U]:&Q!Q&!illlL?iilliLQ!l11iiLill:!!hiilll::f!Q~llit:lfr:lb.§l::!±~t:J!l.~J'~l::>.t~J&I. 

See Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) (providing for EPA to mitigate unreasonable 

environmental effects). 

"See Whitman v. American Trucking Associations, 531 U.S. 457 (2001) (Section 109 of Clean Air Act does not grant 

EPA the authority to consider cost in setting National Ambient Air Quality Standards). 

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benefit-cost balancing unless it was clearly authorized in the regulatory statute. 37 But 

more recently, the Supreme Court has made quite clear that agencies have broad 

discretion to implement their regulatory statutes through benefit-cost balancing. 38 

Shortly after President Reagan's groundbreaking Executive Order 12291 imposed a 

cost-benefit test on regulations-- and three years before the Chevron USA v. Natural 

Resources Defense Council (1984)39 decision deferring to EPA's interpretation of an 

ambiguous statute --the Supreme Court held, in American Textile Manufacturers 

Institute v. Donovan (1981),40 that the Occupational Safety and Health Administration 

was not required to engage in cost-benefit analysis in setting "feasible" public health 

and safety standards. But the majority also asserted in dicta that "when Congress has 

intended that an agency engage in cost-benefit analysis, it has clearly indicated such 

intent on the face of the statute."41 

Twenty years later, in Whitman v. American Trucking Associations (2001), an 

unanimous Supreme Court found it "implausible" that the modest standard to set 

national ambient air quality standards at a level "requisite to protect public health with 

an adequate margin of safety" gave the EPA the discretion to determine whether costs 

should moderate the health standards. Writing for the Court, Justice Scalia stated that, 

to prevail in their quest to have the EPA take costs into account, the industry 

respondents would have to show a "textual commitment" of authority for the EPA to 

consider costs in standard setting, and "that textual commitment must be a clear one." 

Yet, in a prescient concurring opinion, Justice Stephen Breyer warned that the Court 

should resist 

"a presumption, such as the Court's presumption that any authority the 

[Clean Air] Act grants the EPA to consider costs must flow from a "textual 

commitment" that is "clear." , . , In order better to achieve regulatory goalsfor example, to allocate resources so that they save more lives or produce a 

cleaner environment- regulators must often take account of all of a proposed 

regulation's adverse effects, at least where those adverse effects clearly 

threaten serious and disproportionate public hard. Hence, I believe that, other 

things being equal, we should read silences or ambiguities in the language 

37 See, e.g. 1 Jonathan Cannon, "The Sounds of Silence: Cost-Benefit Canons ln Entergy Corp. v. Riverkeeper} Inc.," 

34 Harv, Envir. L Rev. 425 {2010); Amy Sin den, "Cass Sunstein's Cost-Benefit Lite: Economics for liberals," 29 

Colum, J. EnvtL L 191, 240 {2004), 

E.g., compare John D. Graham and Paul R, Noe, "A Paradigm Shift in the Cost-Benefit State," University of 

Pennsylvania Law School RegBiog (April 26, 2016), llTIJJ.U.t!fj'f'!:L@l!Jlli/l':&!Jllil~~~'&!:f'lliJLI!:!lQit:;illJIL::!ll:l!J£: 

cost-be~~fit state/ with Amy Sind en, "Supreme Remains Skeptical of the 'Cost-Benefit State,"' University of 

Pennsylvania Law School RegBiog (Sept, 26, 2016) http:l/www.rei(Qiog.org/lQ~§LQ_2fl§b1JJJl.g_Q:_<;_'2§!d!!m~flt-stat~; 

and see John D. Graham and Paul R. Noe, "A Reply to Amy Sinden's Critique of the 'Cost-Benefit State, University 

of Pennsylvania law School Reg81og (Sept. 27, 2016) http:/ /www.regb!og.orgf2016/09/27/graham-noe·rep!y· 

39 467 us 837 (1984), 40 452 U.$, 490 (1981), 

452 U.S, at 509, 

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of regulatory statuses as permitting, not forbidding, this type of rational 

regulation.'"'2 (Emphasis added). 

Finally, in Entergy Corp. v. Riverkeeper, Inc. (2009), the Supreme Court disposed of the 

dicta relating to a purported "presumption" against cost-benefit balancing43 Riverkeeper 

involved a challenge to an EPA regulation under section 316(b) of the Clean Water Act, 

which required that the EPA adopt a standard to "reflect the best technology available 

for minimizing adverse environmental impact" The EPA, with the strong encouragement 

of the White House Office of Management and Budget (OMB), based its standard on 

cost-benefit analysis. Although the statutory provision was silent on the use of costbenefit analysis, the Supreme Court applied Chevron deference in holding that "it was 

well within the bounds of reasonable interpretation for the EPA to conclude that costbenefit analysis is not categorically forbidden." Aligning the issue of agency authority to 

use cost-benefit analysis with Chevron, the Court reasoned that "it is eminently 

reasonable to conclude that" the Clean Water Act's "silence is meant to convey nothing 

more than a refusal to tie the agency's hands as to whether cost-benefit analysis should 

be used, and if so to what degree." In so doing, the Court disavowed the purported 

"presumption" against benefit-cost analysis embodied in American Textile and limited 

American Trucking to "the rather unremarkable proposition that sometimes statutory 

silence, when viewed in context, is best interpreted as limiting agency discretion." The 

Court concluded that the Clean Water Act's silence "cannot bear that interpretation."44 

Riverkeeper raised the ante for agencies that ignore cost-benefit analysis. Although 

Riverkeeper did not require the agency to use cost-benefit analysis, its logical corollary 

is that an agency must now provide a reasoned explanation if it should choose to 

regulate in a way that would do more harm than good, or provide a reasoned 

explanation why the agency is indifferent to that outcome. Otherwise, the agency's 

regulation could be vulnerable to an arbitrariness challenge under the Administrative 

Procedure Act 

That became quite clear in the Supreme Court's decision in Michigan v. EPA (2015), 45 

which involved a challenge to the EPA's decision to regulate hazardous air pollutants, 

such as mercury, from power plants. Section 112(n) of the Clean Air Act authorizes the 

EPA to regulate hazardous air pollutants from power plants only if it concludes that 

regulation is "appropriate and necessary." In reaching that conclusion, the EPA had said 

that cost was irrelevant The Court held that the EPA strayed beyond the bounds of 

reasonable interpretation in concluding that cost is not a relevant factor in determining 

whether to regulate under the "capacious" phrase, "appropriate and necessary." 

42 531 U.S. at 490. 43 556 u.s. 208 (2009). 44 129 S. Ct. at 1508. 45 135 S. Ct. 2699 (2015). 

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Writing for a 5-4 majority in Michigan, Justice Antonin Scalia bluntly stated, "no 

regulation is 'appropriate' if it does significantly more harm than good." Quoting Justice 

Breyer's concurring opinion in Riverkeeper, Justice Scalia further reasoned that: 

"Agencies have long treated cost as a centrally relevant factor when deciding 

whether to regulate. Consideration of cost reflects the understanding that 

reasonable regulation ordinarily requires paying attention to the advantages and 

the disadvantages of agency decisions. It also reflects the reality that "too much 

wasteful expenditure devoted to one problem may well mean considerably 

fewer resources available to deal effectively with other (perhaps more serious) 

problems." Against the backdrop of this established administrative practice, it is 

unreasonable to read an instruction to an administrative agency to determine 

whether "regulation is appropriate and necessary" as an invitation to ignore 

cost."46 

Notably, although the dissenters argued that the EPA could (and did) consider cost at 

the later stage in developing its regulation, all nine Justices agreed on the principle that, 

unless Congress states otherwise, "an agency must take costs into account in some 

manner before imposing significant regulatory burdens." (Emphasis added) 47 

The wisdom in Justice Breyer's American Trucking concurrence supporting cost-benefit 

balancing has prevailed. The Supreme Court now defers to agency interpretations of 

"silences or ambiguities in the language of regulatory statutes as permitting, not 

forbidding, this type of rational regulation."48 

B. The Need for Action 

The importance of clarifying agency authority to use cost-benefit balancing should not 

be underestimated. The majority of environmental statutes -- and, to my knowledge, the 

majority of all regulatory statutes -- are silent or ambiguous on cost-benefit analysis. 

And agencies too often interpret such statutes as only allowing limited consideration of 

costs and benefits. 

Within the broad range of relevant ambiguous statutes, three categories merit 

consideration- statutory provisions that: (1) are silent or ambiguous on the 

consideration of costs and lack a broad "omnibus factor," 49 (2) do not explicitly require 

benefit-cost analysis but authorize consideration of costs and/or contain one or more 

46 576 U.S. at~ Slip Op. at 7·8 (emphasis added). 47 Under longstanding principles of administrative law, an agency may not lawfully neglect an important aspect of a 

problem" Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Michigan 

v. EPA made clear that, unless Congress states to the contrary, cost is an important aspect of the problem of 

whether or not to regulate. 48 American Trucking, 531 U.S. at 490 (Justice Breyer, concurring) (emphasis added). 49 The term "omnibus factor' is used to capture broad, open·ended statutory decisional criteria that typically are 

intended to allow the regulatory agency to consider any factor important for determining the regulatory standard 

that might not otherwise be captured in the other decisional criteria specified by Congress. 

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broad omnibus factors, such as anything that the agency head considers "appropriate," 

"necessary," "relevant," "feasible," "reasonable," "in the public interest," etc., and 

(3) authorize benefit-cost analysis but are ambiguous on the extent or rigor of the 

benefit-cost balancing that may be done. (For examples of statutory provisions in each 

of these categories, see the Appendix attached to this testimony.) I believe that the 

Supreme Court decisions in Entergy Corp. v. Riverkeeper, Inc. and Michigan v. EPA 

advance benefit-cost balancing in interpreting all three subcategories of ambiguous 

statutes. 

President Trump should take an historic step to enhance societal well-being by 

directing agencies, including independent agencies, to reexamine their statutory 

interpretations in light of Riverkeeper and its progeny and-- unless prohibited by 

law·· implement those statutes through cost-benefit balancing. As the Supreme 

Court has concluded, it is "eminently reasonable" to ensure that regulations do more 

good than harm. 5° 

Ill. Greater Transparency on Information Supporting Regulatory Decisions. 

Agencies should be more transparent about key information - whether developed by 

third parties or by the agency --supporting regulatory decisions. Key agency information 

and analyses that support important regulatory decisions, such as benefit-cost analyses 

and risk assessments, should be reproducible. Congressman Meadows' "CLEAR" Act 

(the "Comprehensive Listing of Evidence for Assessments of Regulations Act," H.R 

4230) relates to that concern. The CLEAR Act requires disclosure of research source 

code and data used by a Federal agency in assessing the costs and benefits of new 

regulations. It is important to protect personal and confidential information from 

disclosure, as section 2(a)(2) acknowledges. 

Benefit estimates can be very hard for the public to understand, given the complexities 

and facets that are often hidden in the "black box." This challenge is especially true for 

benefit assessments under various environmental statutes, such as the Clean Air Act 

In fact, according to the recent 2017 annual report from the Office of Management and 

Budget, $182 to $684.1 billion51 or 80% of monetized benefits52 (and 70% of costs) 

associated with Federal regulations reviewed by OMB over the last decade come from 

air regulations. The report goes on to caution that aggregate estimates of benefits and 

costs are "subject to some methodological variations and differing assumptions" over 

time that is especially true for EPA's air pollution regulations 5 3 This observation 

highlights the importance of Agencies revealing the various inputs to these analyses 

working backwards from the monetized estimate to the underlying assumptions about 

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studies used, cause and effect assumptions. model choices, treatment of confounding 

variables in modeling approaches, and distinguishing between associations and true 

causality, which has a much higher scientific standard to demonstrate. 

IV. Better Compliance with the Congressional Review Act. 

A. Background 

Congress intended the reach and power of the Congressional Review Act (CRA) to be 

great because it felt there was an imbalance between Congress and the regulatory state 

-the so-called "fourth branch of government." Article I, Section 1 of the Constitution is 

quite clear: "All legislative powers herein granted shall be vested in a Congress of the 

United States ... "(emphasis added). The legislative and policymaking power of the 

regulatory state has become enormous. The vast majority of "laws" governing our 

country are no longer enacted by the people's elected representatives in Congress, but 

are promulgated by agencies as regulations. 

To put this is context, the Competitive Enterprise Institute publishes a chart they call the 

"Unconstitutionality Index," which compares the annual output of agency rules versus 

Congressional statutes. The contrast is quite striking: over a 15-year period, agency 

rulernaking output exceeded Congressional legislation by a factor varying from 12-fold 

to 51-fold, as shown in the following chart: 

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Tlu? .let de_..: 

Year Final THE 

Rnles Laws 

2003 -U48 198 21 

2004 4101 299 14 

2005 3975 161 2S 

2006 3718 321 12 

2007 3595 188 19 

2008 3830 285 1:3 

2009 3503 125 28 

2010 3573 217 

2011 3807 81 47 

2012 3708 127 29 

2013 3659 72 51 

2014 3554 224 16 

2015 3410 115 30 

2016 3853 211 u~ 

2017 3281 117 

Index: httn.s:/fcei.org/illilfJ2018"unconstltutiona!ity"index"28-federal"ag;ency-rules"every-law"J:Ongr~m-~ 

Qass~~ 

Moreover, the Judiciary has upheld practically every delegation by Congress to the 

agencies over the past 80 years so long as Congress identifies "an intelligible principle." 

The courts also have accorded great deference to agency interpretations of their 

statutes under Chevron54 and deference to agency interpretations of their regulations 

under Auer v. Robbins. 55 

During the New Deal, Congress developed the legislative veto to curb the administrative 

state and added legislative veto provisions to hundreds of different statutes, 56 but the 

the Supreme Court declared the one-House legislative veto unconstitutional in INS v. 

Chadha (1983)s7 Consistent with the Bicameralism and Presentment Clauses of the 

Constitution, the Congressional Review Act was an effort to restore Congress' 

legislative and policymaking authority. As the joint statement of the bill managers stated: 

54 467 u.s. 837 (1984). 55 519 u.s. 452 (1997). 56 See Paul J. Larkin, Jr., "Reawakening the Congressional Review Act, 41 Harv. J. of Law & Pub. Policy 187 (2017), at 

194-96. 

57 462 u.s. 919 {1983). 

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"As more and more of Congress' legislative functions have been delegated to 

federal regulatory agencies, many have complained that Congress has 

effectively abdicated its constitutional role as the national legislature in allowing 

federal agencies so much latitude in implementing and interpreting 

congressional enactments. In many cases, this criticism is well founded. Our 

constitutional scheme creates a delicate balance between the appropriate roles 

of the Congress in enacting laws, and the Executive Branch in implementing 

those laws. This legislation will help to redress that balance, reclaiming for 

Congress some of its policymaking authority, without at the same time requiring 

Congress to become a super regulatory agency."58 

In the CRA, Congress created a new chapter in the Administrative Procedure Act, 

chapter 8, of Title 5 of the United States Code. The CRA provides expedited procedures 

for Congress to review and possibly invalidate agency rules. After Congress receives a 

rule, a member can introduce a resolution to disapprove the rule, and the resolution is 

referred to the relevant committee. However, only 30 Senators or Representatives can 

discharge the resolution of disapproval from committee to the floor. In the Senate, there 

is no filibuster. A resolution can be brought up at any time, and it is not subject to 

amendment, point of order, or motion to postpone consideration. Debate is limited to a 

maximum 10 hours, evenly divided, and a motion to further limit debate is in order and 

not debatable. 59 

If a resolution of disapproval is signed into law by the President, the rule is invalidated, 

and "a new rule that is substantially the same as such a rule may not be issued" 

unless specifically authorized by a new statute .eo 

The CRA also is very broad in scope. First, the CRA adopts the definition of "agency" in 

the Administrative Procedure Act (APA), 5 USC § 551 (1 ). This includes independent 

regulatory agencies. Moreover, the CRA adapts the APA definition of a "rule" at 5 USC 

§ 551 (4). While the CRA has an exclusion for rules of particular applicability, a covered 

"rule" includes "the whole or part of an agency statement of general . . applicability and 

future effect designed to implement, interpret, or prescribe law or policy " This 

includes not only legally binding regulations developed through notice and comment 

(known as "legislative rules"), but also agency guidance (known as interpretive rules or 

policy statements). As the legislative history states, the definition of a covered "rule" 

does not turn on whether a given agency must normally comply with the notice-andcomment provisions of the APA Covered rules include those developed through: 

(1) formal rulemaking, under 5 USC§ 556, § 557; (2) "informal" rulemaking, under 5 

USC § 553; (3) "publication rules"·- statements of general policy and 

interpretations of general applicability required to be published in the Federal 

58 Con g. Rec. S. 3683 (daily ed. April18, 1996). 

59 5 u.s. c.§ 802(d)(2). 

50 5 usc§ 801(b). 

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Register under 5 USC§ 552(a)(1)(D); and (4) all other rules that do not meet the 

procedural specifications of the first three classes (including guidance 

documents such as agency memoranda, frequently asked questions, letters, 

bulletins, circulars, manuals, etc.). 51 

In the CRA, Congress exercised broad authority over all of those rules. The first 

provision of the CRA states: "Before a rule can take effect, the Federal agency 

promulgating such rule shall submit" to each House of Congress and to GAO a report 

containing a copy of the rule and a concise statement relating to the rule, including 

whether it is major, and the proposed effective date of the rule. 62 Moreover, the clock 

to introduce a joint resolution of disapproval using Congress' expedited review 

procedures does not start to run until "the later of the date on which the rule is 

published in the Federal Register or Congress receives the report submitted under 

§ 801(a)(1} 63 In short. every "rule" --legislative rule, interpretive rule, and policy 

statement -- that has not yet been properly submitted to Congress for its review is 

avaifable for being considered under the Congressional Review Act today.64 

Moreover, agency non-compliance with the CRA submission requirement has 

called into question whether any rufe that was not been submitted to Congress 

since the CRA was enacted is legally in effect. 65 

B. The Need for Action 

Various reports indicate that agencies have failed to comply with the Congressional 

Review Act. In many cases, agencies have submitted their major regulations to 

Congress. but this commonly does not appear to be the case for many guidance 

(interpretive rules and policy statements), and to a lesser extent for non-major 

regulations. Most frequently, agencies have failed to submit to Congress rules that were 

not published in the Federal Register (which is common for informal agency interpretive 

rules and policy statements). Some researchers have counted thousands of rules that 

were not sent to Congress as required by the CRA66 The Pacific Legal Foundation 

51 See Cong. Rec., S 3687 (daily ed. April18, 1996). 

62 S USC§ 801(a)(l)(A). 

5 usc§ 802(b)(2). 64 See Larkin, "Reawakening the Congressional Review Act," supra note 56, at 214-15, 252; Todd F. Gaziano, Pacific 

Legal Foundation, Congressional Testimony, "Rulemakers Must Follow the Rules, Too: Oversight of Agency 

Compliance with the Congressional Review Act," before the House Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law, Committee on the Judiciary (Sept. 28, 2017). 

"ld. 

66 See, e.g., Curtis W. Copeland, "Congressional Review Act: Many Recent Final Rules Were Not Submitted to GAO 

and Congress" (July 15, 2014), available at b!!R.~LL\l!.'!L."YEJ!\3Qg[QU.Q_f!tk.c.QlTJliDJ.: 

content/uploads/2017/0S/.£urtisCopei;mi:)Congressjgnal&gyjg_'l{ActManyRecent£ll]aiRul~sWere)iQtS,\.!tl!l1J1l!llilQG_i'l. 

QillJSl.l;Qill[..~.l.Ql~c:E~QQ!; Congressional Research Service, "Congressional Review Act: Rules Not Submitted to 

Report R40997, (Dec. 29, 2009), available at ]J~;ilr_edtaperoilback.com/wp­

!d!!''L'ti'"l.!d!l!£g\l.~i.Rd..Hl.l!':tl..k!'ce.!..f.£:t.\t;'.J,'ili; U.S. Government Accountability Office, "Federal Rulemaking: 

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launched a project tracking rules that have not been submitted to Congress, and they 

list on their website about 17 such significant rulesB7 The Brookings Institution also has 

issued a report finding that about 348 significant rules issued during the last two 

decades were not properly submitted to both Houses of Congress and the U.S. General 

Accountability Office (GAO), as required under the CRA68 Thus, the issue of agency 

non-compliance with the Congressional Review Act is ripe for Congressional inquiry. 

V. Conclusion. 

In summary, the lack of transparency and accountability in our rulemaking process is 

longstanding and ripe for reform. To name just a handful of examples: (1) agencies 

should follow good guidance practices in developing and using guidance; (2) unless 

prohibited by law, agencies should interpret their regulatory statutes to fully comply with 

the longstanding presidential orders to ensure that their regulations provide benefits that 

justify the costs and maximize societal well-being; (3) agencies should disclose to the 

public the key information underlying important regulatory decisions; and (4) agencies 

should better comply with the Congressional Review Act 

Regulatory transparency is foundational to good government and long overdue. Thank 

you again for the honor to testify before you. I would be happy to address any questions 

you may have. 

Perspectives on 10 Years of Congressional Review Act Implementation," GA0-06-601T (March 30, 2016), available 

at http:/ /www.gao.gov{asse~L:IdQL1JJ.6!'illl21 

"~· Jillll2'1::!£.~,!%J!l.im~mii.P1!£lsJ:!l.mi.!Jl!f.u See Philip A. Wallach & Nicholas W. Zeppos, "How Powerful is the Congressionel Review Act," Brookings 

Institution (April4, 2017), available at )J.!J;Qs://www.brookings.edu/research/how-powerful-is-the-congressional22 
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APPENDIX- Categories of Regulatory Statutes 

1. Silent or Ambiguous on Costs and Lack an Omnibus Factor 

Statue ~U.S. Code Regulatory Authority 

Clean Water Act 33 USC§ 1326(b) " ... reflect the besttechnology available for minimizing 

adverse environmental impact." 

Entergy v. Riverkeeper: "best" in§ 1326(b) can mean most 

cost-effective; benefit-cost balancing upheld. 

Resource 42 usc§ 6901 "establish such standards ... as may be necessary to protect 

Conservation human health and the environment" 

and Recovery 

Act See Ml v. EPA: refusal to consider cost in determining 

whether Clean Air Act regulation was "appropriate and 

necessary" was arbitrary and capricious under that 

I 

ffcapacious11 phrase. 

2. Authorize Consideration of Cost and/or Include an Omnibus Factor 

Clean Air Act 42 USC§ 7412(n) determine whether regulation is "appropriate and 

necessary" 

Ml v. EPA: refusal to consider cost was arbitrary and 

capricious under the "capacious" phrase of§ 7412(n), 

"appropriate and necessary." "No regulation is 'appropriate' 

if it does significantly more harm than good." 

Clean Water Act 33 usc use "best technology economically achievable" {BAT). In 

§ 1314(b)(2) assessing BAT, "take into account .. the cost of achieving 

such effluent reduction, non-water quality environmental 

impacts (including energy requirements), and such other 

factors as the Administrator deems appropriate." 

I 

23 
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3. Clearly Authorizes Benefit-Cost Analysis, But Ambiguous on Extent or Rigor of 

Benefit-Cost Balancing 

Energy Policy 42 USC§ 6295(o) Energy conservation standards must be" ... economically 

Conservation Act justified . .. considering ... (I) the economic impact . .. ; {II) 

the savings in operating costs ... compared to any increase 

in the price of, or in the initial charges for, or maintenance 

expenses. .; (Ill) ... savings likely to directly result from 

the imposition of the standard ... (IV) any lessening of the 

utility or performance of the covered products ... ; (V) the 

impact of any lessening of competition ... ; (VI) the need 

for national energy and water conservation; and (VII) other 

factors as the Secretary considers relevant." 

Dodd-Frank Act 15 USC§ 78c(f) llh SEC is required to consid1 ·whether an action is 

"necessary and appropriate in the public interest, the 

Commission shall also consider, in addition to the protection 

of investors, whether the action will promote efficiency, 

competition, and capital formation." 

Business Roundtable v SEC. 647 F.3d 1144, 1148-49 (D.C. Cir. 

2011) (SEC's "failure to apprise itself- and hence the public 

and Congress- of the economic consequences of a 

proposed regulation makes promulgation ofthe rule 

arbitrary and capricious"). 

24 
54 

Chairman GOWDY. Thank you. 

Ms. Harned. 

STATEMENT OF KAREN HARNED 

Ms. HARNED. Thank you, Chairman Gowdy, Ms. Maloney, and 

the rest of the committee, for having this hearing today. On behalf 

of the NFIB, National Federation of Independent Business, I appreciate the opportunity to testify regarding making the Federal regulatory process more transparent. 

Overzealous regulation is a continuous concern for small business. The uncertainty caused by future regulation effectively acts 

as a boot on the neck of small business, negatively impacting the 

small-business owner’s ability to plan for future growth. In a small 

business poll on regulations, NFIB found that almost half of small 

businesses surveyed viewed regulation as a very serious or somewhat serious problem. 

So it is not surprising to learn that America’s small-business 

owners view President Trump’s commitment to rolling back unnecessarily burdensome and duplicative regulation as one of his administration’s greatest accomplishments in his first year in office. 

Due in large part to the Trump administration’s deregulatory 

agenda, small-business optimism is at its highest level in decades, 

according to NFIB’s survey on small-business economic trends, 

which we do monthly. 

But much more work can and should be done to make the Federal regulatory process more transparent and more accountable to 

the American people, particularly when it comes to regulation 

through guidance documents and other sub-regulatory pronouncements that impose new mandates on small business. 

The NFIB Small Business Legal Center outlined this phenomenon in our September 2015 report, ‘‘The Fourth Branch & Underground Regulations,’’ where we also cataloged these abuses. 

Make no mistake: As Paul just said, easy-to-understand guidance 

documents can be an effective tool to help small-business owners 

understand their legal regulatory obligations. In fact, the Legal 

Center frequently directs small-business owners to such helpful 

guidance documents like DOL’s Wage and Hour tip sheets and 

EPA’s One-Stop Shop page for small-business compliance assistance. 

But there is a bright line between merely restating the law as 

it stands and establishing regulatory policy through guidance. A 

true guidance or advisory should do no more than restate the requirements of established law, ideally doing this as plainly and 

simply as possible. It should not impose new affirmative burdens 

on the regulated community. 

NFIB appreciates this committee’s efforts to find solutions that 

will shine light on the regulatory process. In particular, NFIB believes that H.R. 4809, the Guidance Out of Darkness Act, would be 

a positive step forward in providing transparency of agency guidance documents and other sub-regulatory activities. 

We also think Congress should consider requiring agencies to organize guidance materials in some manner that is easily navigable 

and user-friendly. 


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Additionally, NFIB respectfully offers one overarching principle 

for Congress to consider as it explores other legislative solutions: 

The regulated public should have a right to voice concerns over any 

newly announced policy, rule, or administrative interpretation of 

law that could impose affirmative regulatory burdens on them. Regardless of whether the rule in question might be characterized as 

legislative or interpretive, we maintain that it should only be 

adopted and enforced if it has gone through some form of notice 

and comment. 

Finally, NFIB commends Attorney General Sessions for setting 

an example for other agencies to follow with his November 16, 

2017, memorandum that instructs Department of Justice officials 

to no longer issue guidance documents that purport to create rights 

or obligations that bind persons or entities outside of the executive 

branch. 

And we applaud then-Associate Attorney General Rachel Brand 

for following up on that directive with an instruction earlier this 

year to heads of civil litigating components and U.S. attorneys that 

they are not to use the Department’s enforcement authority to effectively convert agency guidance documents into binding rules in 

affirmative civil enforcement litigation. 

NFIB encourages other agencies in the Federal Government to 

follow course and Congress to consider legislative solutions that 

would codify this practice. 

NFIB applauds this committee for highlighting the need to bring 

transparency to its regulation in all forms, including agency guidance documents. Such transparency is critical for America’s smallbusiness owners, who struggle to keep up with the myriad of regulations on the books while they run and grow their business. 

Thank you for having me testify today, and I look forward to 

your questions. 

[Prepared statement of Ms. Harned follows:] 


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Statement for the Record of Karen R. Harned 

Executive Director, NFIB Small Business Legal Center 

Before the 

United States House of Representatives 

Committee on Oversight and Government Reform 

March 14, 2018 

National Federation of independent Business (NFI B) 

1201 F Street, NW Suite 200 

Washington, DC 20004 
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Chairman Gowdy and Ranking Member Cummings, 

On behalf of the National Federation of Independent Business (NFI B), I appreciate the 

opportunity to submit for the record this testimony for the House Committee on 

Oversight and Government Reform hearing entitled, "Shining Light on the Federal 

Regulatory Process." 

My name is Karen Harned, and I serve as the Executive Director of the NFIB Small 

Business Legal Center. NFIB is the nation's leading small business advocacy 

association, representing members in Washington, D.C., and all 50 state capitals. 

Founded in 1943 as a nonprofit, nonpartisan organization, NFIB's mission is to promote 

and protect the right of its members to own, operate, and grow their businesses. NFIB 

proudly represents hundreds of thousands of members nationwide from every industry 

and sector. 

The NFIB Small Business Legal Center is a nonprofit, public interest law firm 

established to provide legal resources and be the voice for small businesses in the 

nation's courts through representation on issues of public interest affecting small 

businesses. 

Impact of Regulation on Small Business 

Overzealous regulation is a continuous concern for small business. The uncertainty 

caused by future regulation effectively acts as a "boot on the neck" of small businessnegatively impacting a small business owner's ability to plan for future growth. Since 

January 2009, "government regulations and red tape" have been listed as among the 

top-three problems for small business owners, according to the NFIB Research Center's 

monthly Small Business Economic Trends survey. 1 Within the small business problem 

clusters identified by the NFIB's Small Business Problems and Priorities report, 

"regulations" rank second only behind taxes. 2 

When it comes to regulations, small businesses bear a disproportionate amount of the 

regulatory burden. 3 This is not surprising since it's the small business owner, not one of 

a team of "compliance officers" who is charged with understanding new regulations, 

filling out required paperwork. and ensuring the business complies with new federal 

mandates. The small business owner is the compliance officer for her business and 

every hour that she spends understanding and complying with federal regulation is one 

less hour she has available to service customers and plan for future growth. 

In a Small Business Poll on regulations, NFIB found that almost half of small businesses 

surveyed viewed regulation as a "very serious" (25 percent) or "somewhat serious" (24 

percent) problem 4 NFIB's survey was taken at the end of 2016, and, at that time, 51 

Center (January 2018), 18, available online at b!1mli.~mt,JJij!;_,9Q!J!{assets/SJ2ET2 
58 


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percent of small business owners reported an increase in the number of regulations 

impacting their business over the last three years. 5 

Compliance costs, difficulty understanding regulatory requirements, and extra 

paperwork are the key drivers of the regulatory burdens on small business. 6 

Understanding how to comply with regulations is a bigger problem for those firms with 

one to nine employees since 72 percent of small business owners in that cohort try to 

figure out how to comply themselves, as opposed to assigning that responsibility to 

someone else. 7 

Finally, NFIB's research shows that it's the volume of regulations that poses the largest 

problem for 55 percent of small employers, as compared to 37 percent who are most 

troubled by a few specific regulations 8 

Small Business Applauds Deregulation Under Trump Administration 

With that as background, it is not surprising to learn that America's small business 

owners view President Trump's commitment to rolling back unnecessarily burdensome 

and duplicative regulation as one of his Administration's greatest accomplishments in 

his first year in office. Every president has contributed to the problem of overregulation, 

with tens of thousands of pages added to the Federal Register every year. 

The Trump Administration, to its great credit, has reversed that trend -- reducing the 

number of pages in the Federal Register by 36 percent (61 ,949 pages in 2017 as 

compared to 97,110 pages in 2016).9 For the fiscal year 2017, PresidentTrump 

promised to eliminate two regulations for every new one proposed. But the 

Administration exceeded that goal --eliminating 22 regulations for every new regulatory 

action. 10 Indeed, agencies undertook 67 deregulatory actions and levied only three 

regulatory rulesn 

And the Trump Administration promises even more deregulation in 2018. 12 To that end, 

on September 7, 2017, Office of Information and Regulatory Affairs (OIRA) 

Administrator Neomi Rao issued a memorandum to the regulatory reform officers at all 

federal agencies directing each agency to propose "a net reduction in total incremental 

regulatory costs for FY 2018."13 The Administrator noted that this instruction carries out 

visited March 1, 2018). 5 /d. 

'ld. 

7 ld. at 10. 

'!d. at 9. 9 Records by Law Librarians Society of O,C, available online 

2018). 

Fact Sheet: "'President Donald J. 

online at blm§if'!:tc~~lYJ:'Jj§)l...QM§Jl.,llQ.i!&J:i;!l!lrul§.:§i'l!§!!!.§!J.l§l!lL'O.\Ikl.!lr!l:Q.\!llii.!;!±.tl!!!Illl.:il!ill:<§'li.!:!lll::\1§Cll!lJ,!l§.llil!Jl 

2018). 

llld. 

I d. 13 Memorandum from Neomi Rao, Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget, 

Executive Office of the President, to Regulatol)' Reforrn Offices at Executive Departments and Agencies regarding ··FY 2018 

Regulatory Cost Allowances," (Sept. 7. 2017). available online at 

https://www, whitehouse.gov/sltes/whitehouse.govlfi!es/omb/memoranda/20 17 /FY%2020 18%20Regulatory%20Cost%20A!!owances. 

pdf (last visited March 12, 2018). 

3 
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"the regulatory policies and priorities outlined in Executive Orders 13771 and 13777, 

including the goal 'to lower regulatory burdens on the American People by implementing 

and enforcing regulatory reform."' 14 Administrator Rao, quoting Executive Order 13777, 

said "(i]t is the policy of the United States to alleviate unnecessary regulatory burdens 

placed on the American people."15 

Agencies Increasingly Use "Guidance Documents" And Other "Sub-regulatory" 

Pronouncements To Regulate 

Knowing the negative impact that unnecessary and burdensome regulation has on 

small business, it has been disconcerting to see agencies increasingly use guidance 

documents and other "sub-regulatory" pronouncements to impose new mandates on 

small business. The NFIB Small Business Legal Center outlined this phenomenon and 

cataloged abuses of it in our September 2015 report, 'The Fourth Branch & 

Underground Regulations." 16 

Underground Regulation Through Guidance 

Make no mistake, easy-to-understand guidance documents can be an effective tool to 

help small business owners understand their regulatory obligations. Practical 

considerations likewise demand that agencies must prepare documents breaking-down 

and summarizing regulatory requirements, the steps necessary for permit approvals, 

enforcement priorities, etc. Such guidance documents are important, not only as a tool 

to ensure that agency employees interpret and apply existing statutes and regulations in 

a consistent manner, but also in giving the regulated community fair notice as to how 

the agency intends to administer and enforce the law. In fact, the NFIB Small Business 

Legal Center frequently directs small business owners to such helpful guidance 

documents, like the Department of Labor's (DOL) Wage and Hour Tip Sheets and the 

Environmental Protection Agency's (EPA) one-stop page for small business compliance 

assistance. 17 

But there is a bright and discernable line between merely restating the law as it stands 

and establishing regulatory policy through "guidance." 

In a true guidance or advisory, the document should do no more than restate the 

requirements of established law ideally as plainly and simply as possible. But where 

the agency offers an interpretation that seeks to apply existing legal principles to 

address questions of statutory interpretation that are not well settled, there is a 

significant risk that the new interpretation may impose affirmative burdens on the 

regulated community. 18 While the agency's interpretation would have to be applied and 

/d. 

" The Fourlh Branch & Underground Regulations. NFIB Small Business Legal Center (September 2015), available online at: 

http-s:!twwvti,nflb,com/pdfs/foprth~branch··Ufiderground-regu!ations--nftb.pdf {last visited March 11, 2018). 17 Department of Labor Wage and Hour Division Fact Sheets, available online at https:/Jwww ,dol.govfiNHD/fact-sheets-index.htm 

(last visited March 11, 2018); U.S. EPA Small Businesses Resource Information Sheet, available online at: 

httos:fl>m1.Yi.&P....l2JiQJ!.(.§lt'E.§£vl.Q.@ction/fil<a.§/2017 -06/do9d!!lli.nts/sma!!bus!t)esslnfo.pdf (last visited March 11, 2018). 

Hl "FDA's growing dependence on guidance documents presents a couple of problems. First these informal announcements may 

operate as de facto rules but escape norma! procedural safeguards for their promulgation or review. Second, they allow the FDA to 

take positions that do not even constrain agency officials, which !eaves regulated entities guessing about their rights and 

obligations." Lars Noah, Governance by the Backdoor Administrative Law (Lessons?) at the FDA. 93 Neb, L. Rev. 89, 97 (2014), 

4 
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affirmed in court before it could be officially incorporated into the standing body of 

regulatory law, the "guidance" may nonetheless impose immediate burdens on the 

regulated community as a practical matter. This is because a newly announced 

interpretation puts the public on notice that the agency intends to administer and 

enforce the law in a certain manner. Anyone who ignores the new interpretation --

proceeding with business as usual -- risks fines, sanctions, enforcement actions, and/or 

lawsuits. 

Underground Regulation Through Amicus 

Another way an Administration can set federal regulatory policy without raising public 

awareness --and political backlash -- is through strategic amicus filings in cases 

between private litigants, where there is potential to establish precedential authority on 

a question of statutory interpretation. These "friend of the court" briefs are intended to 

guide the court's analysis on difficult legal questions. In principle they should offer useful 

insights, expertise and practical considerations that the court may find helpful in 

resolving thorny issues. 19 

In some cases a judge will call upon the Department of Justice (DOJ), or other 

agencies, to file an amicus brief because courts assume that an agency, charged with 

administering and enforcing a statute, may offer particularly valuable insight and 

institutional expertise. 20 In other cases, federal agencies proactively file these briefs 

when they have identified cases that, in their view, raise important open questions of 

statutory construction. 21 Most commonly these briefs urge reversal of an arguably errant 

district court judgment that the agency believes causes disharmony between 

jurisdictions, or which might otherwise have serious implications for how the agency 

administers or enforces a statute. 

As such, agencies have traditionally used amicus briefs as a tool to ensure consistent 

interpretations of statutes or to weigh in on cases of great importance. 22 But, in recent 

years, some scholars have raised concerns over the appearance that amicus briefs are 

being used to advance the President's political agenda. Notably, University of Maryland 

Law School professor, Deborah Eisenberg published a comprehensive analysis of the 

DOL's amicus practices since the New Deal.23 Her study confirmed that there has been 

a steep escalation in DOL's amicus activity in the past quarter-century.z< Though the uptick began under the Clinton and George W. Bush administrations, amicus activity 

significantly increased under the Obama administration. 25 

In this vein, there is certainly a legitimate role for an agency, charged with administering 

and enforcing a statute on behalf of the public, to bring to light practical considerations 

19 Federal Rules of Appellate Procedure, Rule 29. (stating that an amlcus must explain why its brief is desirable and relevant). 20 Deborah Thompson Eisenberg, Regulation by Amicus: The Department of Labor's Policy Making in the Courts, 65 Fla. L Rev. 

1223.1244, FN 128 (2013). 

"See eg., Ben James. DOL Says Judge Dropped Ballin Hears! Intern Wage Row, Law360 (April?. 2014). 22 See e.g., Eisenberg, supra note 20 at 1245 ('The most active DOL amicus curiae activity in FLSA cases occurred immediately 

after the Act's passage. After the battle to achieve passage of the FLSA, the Roosevelt and Truman administrations used amicus 

briefs to estabHsh judicia! precedents broadly construing the scope of the FLSA's protections. lndeed, more than half of aU FLSA 

amicus briefs in the database {170 out of 324 briefs) were filed by these two administrations.") 

n See generally, supra note 20 

24Jd. 

25 Jd. 

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and institutional expertise that may elucidate an issue. As with private parties who may 

have an interest in the resolution of a statutory issue, these agencies may have some 

organic interest in their amicus filings. But, when an administration changes its position 

or announces a new interpretation in amicus filings --or even in a direct enforcement 

action --there is a likelihood that the newly asserted position is politically or ideologically 

motivated. 26 And regardless of whether the agency has in fact asserted its new position 

to influence public policy, it nonetheless undermines the goal of ensuring public notice 

and opportunity for comment when adopting a position that will impose new burdens on 

individuals or businesses. 

Underground Regulation Through Executive Order 

Finally, the President can set policies that substantively impose new burdens on the 

regulated community through executive orders. In some cases, the President chooses 

to allow an opportunity for notice-and-comment on important executive orders; however, 

in recent years executive orders have been issued without an opportunity for open and 

transparent deliberation. 

NFIB believes none of the "sub-regulatory" tools outlined above are an appropriate way 

to create new regulatory obligations since each imposes a new burden without going 

through the Administrative Procedure Act's (APA) notice-and-comment process. 

Example Of Agencies Inappropriately Using "Sub-regulatory" Pronouncements 

To Impose New Regulatory Burdens On Small Business 

IRS Prohibits Stand-Alone Reimbursement Accounts under the Affordable Care Act 

When Congress passes complex regulatory schemes, like the Affordable Care Act 

(ACA or "Act"), it can be very difficult for the regulated community to understand its legal 

obligations. For agencies implementing a law like the ACA, the goal should be to issue 

guidance that restates the law in straightforward terms that any person can understand 

without resorting to lawyers and accountants. Unfortunately, in the implementation of 

the ACA, the U.S. Department of Health and Human Services, DOL, and the Internal 

Revenue Service (IRS), in many cases, did not effectively explain the ACA's 

requirements in easily digestible terms. 

Even worse, in some cases, where the Obama administration offered "guidance," it was 

not so much 'restating the law' as providing an interpretive gloss. Rather than explaining 

certain ambiguous provisions, federal agencies issued interpretive statements which 

effectively pronounced new rules -- imposing legal obligations and liabilities that 

Congress may not have ever intended. Still worse, these underground regulations were 

pronounced without any opportunity for public comment. One clear example was IRS's 

guidance on stand-alone reimbursement accounts (i.e., the practice of giving employees 

a set amount of money for their health care expenses on a monthly or annual basis in 

lieu of health insurance). The IRS issued a guidance document, which declared this 

Elsen burg, supra note 20 at 1229 {"The increasingly politically charged nature of both agency's amicus efforts as seen during the 

Bush and Obama administrations in particular- and the ideological split in the Supreme Court's decisions about whether to defer to 

them portends a chaotic future for FLSA litigation ln the lower courts. But one thing is clear: the agency amicus strategy can be a 

potent tool of po!!cymak!ng."). 

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practice illegal under the ACA -- even though no single provision of the ACA directly 

addressed stand-alone reimbursement accounts. 

This interpretive rule was certainly consistent with the Obama administration's stated 

goal to achieve near-universal health insurance coverage through, among other things, 

employer-provided health insurance. So, it was not surprising that the IRS chose to 

interpret ambiguous provisions of the ACA in a manner that affirmatively discouraged 

employers from giving employees money to use toward their health expenses in lieu of 

providing health insurance. But there was no clear textual prohibition on this practice --

likely because many in Congress assumed employers would be free to continue offering 

these benefits to employees or to pursue this arrangement as an alternative to paying 

costly health insurance premiums. 

Many small business owners wanted to provide their employees with some financial 

assistance toward their health care expenses, even if they couldn't afford to offer health 

insurance. But IRS never sought input from these business owners. Instead, the agency 

chose to issue a definitive interpretation of the ACA proclaiming the practice illegal --

without any public outreach. Through sub-regulatory guidance, IRS effectively made 

law. And employers who chose to defy IRS risked severe penalties of $100 per day, for 

each employee or $36,500 per employee, per year27 

Yet one cannot go so far as to say that the agency's interpretive rule was plainly 

inconsistent with the text of the ACA Indeed, the Act was either silent or incoherent on 

this issue. But, the troubling thing is that courts will generally defer to an agency's 

interpretation, which enables the Executive Branch to flesh out ambiguities in 

accordance with the President's preferred policy objectives, as what happened here. 28 

The agency's interpretation may or may not comport with the interpretation a court 

might think most appropriate; however, it will likely receive deference if challenged. 29 

Although IRS refused to conduct notice-and-comment outreach before issuing that 

interpretive rule, America's small business owners spoke up loudly to their elected 

officials. Appropriately, Congress- not unelected bureaucrats- passed the 21 51 Century 

Cures Act and affirmatively made law allowing small employers to provide stand-alone 

health reimbursement accounts to their employees. 30 

DOL Changes its Interpretation of Qualifying Exempt Employees Under the FLSA 

Employers must properly classify their employees as either "exempt" or "non-exempt" 

under the Fair Labor Standards Act (FLSA) because only "exempt" employees can be 

paid a flat salary. 31 "Non-exempt" employees must be paid an hourly wage and are 

entitled to overtime if they work more than 40 hours in a week. As such, employers face 

the possibility of federal enforcement actions and lawsuits for backpay should they 

According to NF18 research, in 2015, 16 percent of small employers were ln violation of the rule and another 20 percent were 

serlous!y considering offering the prohibited benefit Small Business's lntrodudion to the Affordable Care Act, Part l!l, NFIB 

Research Foundation, (November 2015), avaifabfe online at hl!Qr;:Jly,~nfill&Q!Jm>m!iJ.!illC:llld!:§J1!l!Y.:;UilliJ&[ 

March 11, 2018). 

"Perez v. Mortgage BankersAss'n. No. 13-1041, 2015 WL 998535, at 15 (U.S. March 9, 2015) (J. Thomas concurring), 29 /d, at 12 (J. Scalia concurring). 30 Section 18001 of Pub. 114-255 (December 13. 2016). 

,, 29 u.s.c. 201 

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misclassify an employee. 

In Christopherv. SmithK/ine Beecham Corp., 132 S. Ct. 2156,2167 (2012), the U.S. 

Supreme Court held that an agency should not receive deference on a newly asserted 

position where the agency has failed to give the public fair notice of the change, or 

where individuals and businesses have acted -- in reasonable reliance -- on the 

agency's previous position. The case was brought by pharamacutical sales 

representatives who alleged that they had been misclassified as "exempt employees" 

when they should have been classified as "non-exempt" 

The employer in SmithK/ine had prudently relied on existing DOL regulations, which 

addressed the exemption for "outside salesm[e]n."32 long-standing DOL regulations 

defined the term to mean "any employee ... [w]hose primary duty is ... making sales ... "33 

Since 1940 DOL stressed a liberal interpretation of the term. 34 But, in a 2009 amicus 

brief, filed in the Second Circuit, DOL announced a new, and more narrow, 

interpretation of its regulations. 35 And DOL filed amicus briefs in Smith Kline to further 

advance this new position, but with an apparently 'evolving' rationale. 36 

Under DOL's new interpretation unveiled in the agency's amicus filings, pharmacuetical 

sales representatives could not qualify as exempt "outside salesm[e]n" because they did 

not technically consummate sales. 37 As a technical matter pharmaceutical sales 

represenatives are forbidden by law from finalizing a sale. Under state and federal law 

they may only promote their company's prescription drugs, meaning that, at most, they 

could obtain a "nonbinding commitment from a physician to prescribe those drugs in 

appropriate cases."38 But, for decades DOL had allowed pharmaceutical companies to 

treat their sales represenatives as falling within the "outside salesman" definition 39 As 

the defendant-company pointed out, DOL had explicitly "stressed that [the] 

requirement!,] [for qualification as an outside salesman,] [was] met whenever an 

employee 'in some sense [made] a sale."40 As such, the Supreme Court appropriately 

viewed DOL's new position with skepticism, not only because it constituted a change in 

position, but because it would result in an "unfair surprise" for employers 41 

The Supreme Court ultimately refused to defer to DOL's new position because it would 

32 Christopher v, SmithK!ine Beecham Corp., 132 S. Ct. 2156, 2167 (2012} 

C.F.R. § 541.500. 

SmithKiine Beecham Corp., 132 S. Ct. ai 2163. 35 "DOL first announced its view that pharmaceutical sales representatives are not outside salesmen in a series of amicus briefs, 

there was no opportunity for public comment, and the interpretation that initially emerged from the DOL's internal decision maklng 

process proved to be untenable." SmithKline Beecham Corp., 132 S. Ct. at 2160. 36 ''The DOL changed course after the Court granted certiorari ln this case, however, and now maintains that '[a]n employee does 

not make a 'sale'." unless he actually transfers title to the property at issue: The DOL's current interpretation of its regulations is 

not entitled to deference under Auer v. Robbins ... Although Auer ordinarily calls for deference to an agency's interpretation of its 

own ambiguous regulation, even when that interpretation is advanced in a legal brief,. this general rule does not apply In all cases. 

Deference is inappropriate, for example, when the agency's interpretation is 'plainly erroneous or inconsistent with the regulation', or 

when there is reason to suspect that the interpretation 'does not reflect the agency's fair and considered judgment on the matter 

. ·<There are strong reasons for withholding Auer deference in this case. Petitioners invoke the DOL's interpretation to impose 

potentially massive !lability on respondent for conduct that occurred well before the interpretation was announced. To defer to the 

DOL's interpretation would result in precisely the kind of 'unfair surprise' against which this Court has long warned." Smith Kline 

Beecham Corp., 132 S. Ct. at 2159. 

"/d. at 2166. 

"ld. at 2163-64. 

"/d. at 2163. 40fd. 

"/d. at 2167. 

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have imposed "massive liabilit[ies] on [employers] for conduct that occurred well before 

[the new] interpretation was announced."42 The Court based its decision on equitable 

concerns over the lack of notice to the regulated public. This suggests that due process 

concerns can, and should, trump an agency's discretion on matters for which the 

agency has already spoken, at least where individuals or businesses have acted in 

reliance on the agency's orginal posisition. More broadly, NFIB believes that regulation 

by amicus is the type of sub-regulatory, opaque regulation that agencies should be 

prohibited from using. 

Congressional Solutions 

NFIB appreciates this committee's efforts to find solutions that will shine light on the 

regulatory process, particularly when it comes to guidance documents and the other 

"sub-regulatory" activities I have outlined above. In particular, NFIB believes H.R 4809, 

the "Guidance Out Of Darkness Act" or "GOOD Act," would be a positive step forward in 

providing transparency of agency "sub-regulatory" activities. We also think Congress 

should consider requiring agencies to organize guidance materials in some manner that 

is easily navigable and user-friendly. 

Additionally, NFIB respectfully offers one over-arching principle for Congress to 

consider as it explores other legislative solutions: the regulated public should have a 

right to voice concerns over any newly announced rule, policy, or administrative 

interpretation of law that may impose affirmative regulatory burdens on individuals or 

businesses. We would call this a moral imperative in a liberal democratic system. 

Indeed, if government exists to serve the people, it has fiduciary-like duties to ensure 

transparency and provide concerned citizens with an opportunity to be heard. 

Otherwise, there is an undue risk that government serves its institutional interests or 

may be captured by the interests of politically powerful factions. Thus, we maintain that 

government necessarily violates its fiduciary duties to the public when the President, or 

an agency, adopts burdensome rules outside the light of an open and deliberative 

notice-and-comment process. 

The principle is straight-forward. Regardless of whether the rule in question might be 

characterized as either a "legislative" or "interpretive" one, we maintain that it should 

only be adopted and enforced if it has gone through some form of notice-and-comment 

process. This is a normative argument-- a matter of good governance. 

As the law currently stands, only "legislative rules" must go through notice-and-

'Comment But perhaps it is time consider tweaking that rule. For one, it is notoriously 

difficult to distinguish between legislative and interpretive rules. Yet, more 

fundamentally, liberal democratic principles demand that institutions should be reformed 

to at least ensure transparency and the opportunity for public comment on "important" or 

"significant" rules, which we would define as those imposing substantive regulatory 

burdens, including added compliance costs. 

/d. 

9 
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We submit that a "guidance" should more properly be viewed as a substantive 

regulation if it imposes new compliance costs or otherwise exposes individuals or 

businesses to new liabilities. If the interpretation is not already well settled, it should not 

be applied unless and until concerned citizens have had an opportunity to voice their 

concerns. Under this framework, only controversial "guidance documents" would need 

to go through notice-and-comment procedures because guidance on settled questions 

would not be viewed as imposing any new regulatory burden. Of course, the APA 

currently exempts "interpretive rules" from notice-and-comment procedures. But maybe 

it is time to reconsider that exemption, considering the reality that agencies frequently 

pronounce changes in regulatory policy in a manner that imposes new burdens on the 

public without giving any opportunity for citizens to voice concerns. At least notice-andcomment would encourage public participation, awareness and perhaps meaningful 

dialogue. 

NFIB, therefore, commends Attorney General Sessions for essentially doing just what 

we suggest regarding the operations of the Department of Justice in a November 16, 

2017, memorandum entitled "Prohibition on Improper Guidance Documents." The 

memorandum to all department components instructed, "[e]ffective immediately, 

Department components may not issue guidance documents that purport to create 

rights or obligations binding on persons or entities outside the Executive Branch 

(including state, local, and tribal governments.)" 43 Attorney General Sessions' 

memorandum was followed by a memorandum from then Associate Attorney General 

Rachel Brand instructing heads of civil litigating components and U.S. Attorneys "not to 

use its enforcement authority to effectively convert agency guidance documents into 

binding rules" in affirmative civil enforcement litigation. 44 

NFIB encourages other agencies in the federal government to follow course and 

Congress to consider legislative solutions that would codify this practice. 

Conclusion 

NFIB applauds this Committee for highlighting the need to bring transparency to 

regulation in all its forms, including agency guidance documents and other regulatory 

pronouncements. Such transparency is critical for America's small business owners 

who struggle to keep up with the myriad of federal regulations on the books while they 

run and work to grow their businesses. 

Thank you for inviting me to testify today. I look forward to answering any questions you 

may have. 

43 Memorandum from U,S. Attorney General Jeff Sessions for "all components," regarding "Prohibition on Improper Guidance 

Documents" (November 16, 2017), available online at https:/!www.lust!ce,gov/opa/press~re!ease/f!lel10i2271/download 

44 Memorandum from U.S. Associate Attorney General Rachel Brand for "heads of civil litigating components and U.S. Attomeys'' 

Use Guidance Documents In Affirmative Civil Enforcement Cases" (January 25, 2018}, available 

10 
66 

Chairman GOWDY. Yes, ma’am. Thank you. 

Professor. 

STATEMENT OF NICHOLAS PARRILLO 

Mr. PARRILLO. Mr. Chairman, Ms. Maloney, and members of the 

committee, thank you for the opportunity to testify this morning. 

The principal basis for my testimony is a study of Federal agency 

guidance documents that I conducted as a consultant for the Administrative Conference of the United States, for which I interviewed 135 individuals across a range of agencies, industries, and 

NGOs. 

The Conference recently completed the process of adopting a new 

recommendation on guidance. I participated extensively in that 

process, and I broadly support the recommendation, though I am 

not testifying as a representative of the Conference. 

The term ‘‘guidance’’ covers all general statements that an agency makes, short of issuing full-blown regulations, that advise the 

public on how the agency plans to exercise its discretion or interpret law. 

Guidance is an important means for increasing the transparency 

of regulation. When an agency chooses individual targets for enforcement or decides individual applications for licenses or benefits, 

the agency has the option to proceed case by case. The case-by-case 

approach can subject regulated parties to uncertainty and unequal 

treatment. Guidance redresses this problem by telling regulated 

parties in a general, comprehensive, understandable way how the 

agency plans to handle individual proceedings. 

Regulated parties often want this guidance and complain about 

not getting enough of it. On the other hand, guidance can undermine transparency if guidance substitutes for notice-and-comment 

rulemaking. 

Given these competing considerations, we confront what you 

might call a transparency tradeoff. You can try to increase transparency if you mandate that any policy an agency makes about a 

certain matter has to be made through an open process like notice 

and comment, but an open process eats up scarce agency resources. 

So, if the agency is strapped, it may react to this mandate by giving up articulating any general policy on the matter, which would 

be the worst outcome for transparency. 

In grappling with this tradeoff, it helps to consider why guidance 

is exempt from notice and comment to begin with. Guidance, unlike 

a full-blown regulation, is supposed to be nonbinding. The idea is 

that it’s okay to issue a policy without the safeguards of notice and 

comment so long as the policy is not cut and dried, so long as the 

agency in individual proceedings is flexible and open-minded when 

regulated parties argue for individual departures from the policy. 

But agencies are sometimes inflexible. One might assume that 

flexibility is an agency’s path of least resistance, such that inflexibility must be the product of some conscious and nefarious purpose 

to treat guidance like a regulation. But that kind of blanket assumption is mistaken. Agencies face external pressures 

andunintended internal dynamics that can make them inflexible by 

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The new Conference recommendation suggests organizational reform measures to counter this inflexibility. Admittedly, many of 

these measures require managerial initiative and the commitment 

of resources, which may be in short supply. 

For example, an agency may inflexibly refuse to approve a company’s request for a departure from guidance because the agency 

fears that the company’s competitors will complain about an 

unlevel playing field or that NGOs and the media will complain 

about favoritism. The Conference explains how the agency can 

head off these complaints by being transparent and publishing reasons for the departure that become applicable to all similar cases 

going forward. But formulating defensible reasons is costly. 

To their credit, some agencies have sought to provide a degree 

of transparency and public participation on a wholesale basis when 

a guidance document is first adopted—measures that may approach notice and comment without going all the way. 

As my research and the Conference recommendation indicate, 

the benefits and costs of such participation for the agency and the 

public depend on certain factors that vary a lot by program and 

document. 

Also, agencies undertaking these measures need to anticipate 

certain pitfalls. For example, if an agency promises to take public 

comment pre-adoption on more guidance documents than it has the 

resources to process the comments for, it may end up leaving a lot 

of documents in draft form indefinitely, which can cause stakeholder confusion. 

I’ll be happy to discuss these matters and any others in response 

to your questions. Thank you. 

[Prepared statement of Mr. Parrillo follows:] 


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Written Testimony of 

Nicholas R. Parrillo 

Professor of Law, Yale Law School 

Before 

United States House of Representatives 

Committee on Oversight and Government Reform 

"Shining Light on the Federal Regulatory Process" 

March 14,2018 

Chairman Gowdy, Ranking Member Cummings, and members of the Committee, thank 

you tor the opportunity to testify on the federal regulatory process and the role of guidance in 

that process. 

The term "guidance" covers all general statements that an agency makes, short of issuing 

full-blown binding regulations. that advise the public on how the agency plans to exercise its 

discretion or interpret law. 1 Part l of my testimony explains that guidance is a very important 

means for increasing the transparency of federal agencies. though the use of guidance can detract 

tram transparency if it substitutes for notice-and-comment rulcmaking. If one's goal is to 

increase transparency, one must confront a ditlicult tradeoff: if you attempt to increase 

transparency by requiring an agency to make policy only through highly participatory processes 

like notice and comment (which eat up lots of ageney resources), the agency may give up 

articulating any policy at all. which is actually the worst outcome for transparency. Part I! 

examines the principal justification for why guidance can be issued without notice and comment: 

1 ''Guidance'~ is an umbrella term that covers "\vhat the Administrative Procedure Act (APA) colls '"general 

'·interpretative rules.~· 5 U.S.C. § 553(b)(A). Neither of these two terms is defined in the 

dtcd ATTORN!~Y GENERAi"'S ivfANl!Al. ON TilE ADMINISTRATIVE PROCEDURE Acr (l947) 

defines general statements of policy as ''statements issued by an agency to advise the public prospectively of the 

manner in which the agency proposes to exercise a discretionary power·· and defines interpretative rules as "'rules or 

statements issued by an to advise the public of the agency's construction of the statutes and rules which 

administers<" ld. at 30 n.3. is understood to include not only statements addressed 

to the public but also public statements to agency staff with the understanding that the statements 

the statrs treatment of members of the public (e.g .. a published cnf<lrccmcnt manual or nclrm:lt-vvnt:mc 

manual). Sec Michael Asimow, Public Participation in the Adoption Rules 

75 MICH. L. REV. 520,556 (1977) (noting that guidance "might be 

without real difference in impact .. ). Also. is conventionally understood to include not 

addressing a generic class but also statements that arc technically 

one or a fC\Y parties yet arc understood to the public more 

H.Hward (e.g .. letters in response to individual requests for interpretations as these are 

understood as precedential). See Office of Management and Budget. Final Bulletin H>r Agency Good Guidance 

Practices, 72 Fed. Reg. 3432, 3435 {2007). 
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that guidance, unlike a full-blown regulation, is not binding. In particular, l consider a common 

critique of this justification, i.e., that guidance is practically coercive in real life. Guidance can 

have powerful coercive effects in certain identitlable circumstances, but these effects arc far 

from universal, and even when they happen, they typically are not consciously intended by 

agency officials. Coercive effects can be mitigated by certain institutional reforms. though many 

ofthese reforms would require resources and managerial initiative that may be in short supply. 

Part Jll considers the distinct questions that arise when guidance is deregulatory in nature, such 

that its use may shut out the people protected by regulatory statutes from participating in agency 

initiatives that may harm them. Part IV examines the ways in which agencies. when using 

guidance instead of notice-and-comment rulemaking, can taster transparency and public 

participation in ways that approach what is done in full-blown rulemaking. I consider the costs 

and benefits of these practices. which vary widely between different agencies and policies, and I 

note how they may sometimes lead to unintended and perverse consequences that require our 

vigilance. 

Overall, this is a subject fraught with tradeoffs between competing goods, variation 

between different regulatory areas, the risk of unintended consequences, and solutions that will 

work only with a commitment of scarce resources. Because of all this, improvements are most 

likely to be effective if pitched at a workable level of specificity. This counsels caution 

regarding any sweeping trans-agency legislation. It counsels in favor of seeking improvement at 

the level of an individual agency or program, either through oversight or possibly through 

legislation if there is sufficient groundwork laid through dialogue with the agency and 

experimentation at the agency. In dealing with any particular agency or program, my hope is 

that this testimony is helpful in setting forth questions that must be asked, pittalls that must be 

watched for, and a toolkit of potential reform practices to be considered for their suitability. 

The principal basis for my testimony is a study that I conducted on federal agency 

guidance as a consultant for the Administrative Conference ofthe United States (ACUS). The 

2 NICHOLAS R. PARRILLO. FEDERAL AGENCY GUIDANCE: AN INSTITUTIONAL PERSPECTIVE, FINAL REPORT TO THE 

ADMJNISTRAIJVE CONFERENCE OF THE UNITED STATES (Oct. 12, 2017), available at 

https:iiwww.acus.gov/sites/dcfault/!iles/documcnts/parrillo-agency-guidance-final-report.pdf [hereinafter Parrillo 

Report]. The tl1cus of the study was guidance documents that are supposed to be nonbinding on the agency and the 

public. This focus definitely includes all general statements of policy (a.k.a. policy statements), as there is a 

consensus that policy statements are defined--and distinguished from full-blown regulations~-by their nonbinding 

status. This focus would also include interpretative rules insofar as interviewees thought such rules were supposed 

to be nonbinding. Hmvevcr~ there is inconsistency and confusion in the case la\v and among officials and 

2 
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study rested mainly on interviews that I conducted with people from a range of agencies, 

industries, and NGOs. In all, I interviewed 135 individuals, with the vast majority of interviews 

lasting for between 60 and 90 minutes each, all between September 2016 and July 2017. The 

interviews were unstructured. Of the 135 interviewees, 26% were in agencies (all career 

officials), 48% in industry, 19% in NGOs and unions, and 7% "other." Of the people outside the 

agencies (that is, in industry, NGOs, unions, or "other"), who totaled exactly l 00, there were 58 

fonner agency officials (of whom 35 had been career, 10 had been Democratic political 

appointees, and 13 had been Republican political appointees). !located the interviewees through 

a chain-referral process, beginning with a nucleus of well-networked individuals with diverse 

sectoral affiliations (ACUS agency contacts and ACUS public members), asking them for names 

of knowledgeable people, interviewing those people, asking those interviewees for yet more 

names, and so forth iteratively. This method leverages the knowledge of people within the 

system to find out who the knowledgeable people are; it is a method suited to a subject like the 

everyday workings of guidance, which is relatively unexplored and fraught with "unknown 

unknowns. " 3 

Although ACUS commissioned the study, my analysis and conclusions were my own; the 

study was published with me listed as sole author, including a disclaimer noting that the opinions 

stakeholders about whether interpretative rules are to be nonbinding or if they are to be defined instead (or perhaps 

additionally) by the tact that they are confined to providing merely incremental clarifications ofthe underlying 

statutes or regulations that they interpret. For an excellent critical review ofhov.' the case law has sought to define 

policy statements and interpretative rules, sec Ronald M. Levin, Rulemaking and the Guidance Exemption. 70 

ADMIN. L. REV. (tbrthcoming 2018), manuscript available at 

https:llpapers.ssrn.com/sol3ipapers.ciin?abstract_id-2958267 (Jan. 31, 20 18). For more detail on the scope of my 

study \Vith respect to policy statements and interpretative rules, see Parrillo Report, supra note 2, at 22-26. In 

adopting a Recommendation on the usc of guidance after receiving my study on hovv agencies should handle 

documents meant to be nonbinding~ ACUS directed its Recommendation at policy statements (the category of 

guidance that is clearly of nonbinding status) ':vhile noting that "many'' parts of the Recommendation ''may also be 

helpful with respect to agencies' use of interpretive rules.'' ACUS Recommendation 2017-5: Agency Guidance 

Through Policy Statements. 82 fed. Reg. 61728, 61734 (Dec. 29, 2017). 3 Because following up every single interview lead would have rapidly multiplied the interviewee pool beyond what 

f could manage. I sought to strike a balance between breadth and depth, following the chain~refcrral process for one 

.. link'' of the chain wherever it led~ then follo-wing it for the second --link'' only for certain regulatory areas. and then 

fi.lr the third "link" only for two agencies on which I wanted to go into particular depth (those being EPA, because of 

the unmatched scale of its regulatory operations and its unmatched prevalence in legal controversy over both 

guidance and legislative rulemaking, and FDA, because of its heavy reliance on guidance documents and its use of 

an unusually ti.mnalized process li.w issuing guidance). I also sought additional referrals on a supplemental basis to 

fill certain gaps in my understanding. yielding a small number of additional interviewees. In the end. 24% ofthc 

interviewees were expert on EPA, 23% on FDA, and betwcen4% and ll% each on OSHA. the Department of 

Energy, USDA, FAA, HI-IS (besides FDA), and the banking regulatory agencies. for a complete description of the 

study's methodology, see Parrillo Report, supra note 2, at 196-205. 

3 
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and views therein were my own and not necessarily those of ACUS 's members.' In addition to 

conducting the study, I extensively participated in ACUS's internal process tor devising and 

adopting a Recommendation on agency use of guidance. I broadly suppmi the Recommendation 

that the Conference (drawing partly upon my suggestions but also making many changes to 

them) ultimately adopted. 5 I shall discuss certain aspects of that Recommendation in my 

testimony. However, I am not giving any of this testimony as a representative of ACUS. 

I. Guidance as a Plus and Minus for Transparency 

A. Guidance as a Plus for Transparency 

Guidance is a very important means for boosting the transparency of government. This is 

clearest when, in the absence of issuing guidance, the agency would fall back on case-by-case 

individual decisionmaking. 

To appreciate this point, we must start by recognizing that acts of Congress often give a 

lot of discretionary power to agencies. Congress may prohibit an activity in vague tenns, and an 

agency may then be empowered to interpret the prohibition and, given limited resources, decide 

which violators will be pursued and which not. Or Congress may provide tor the grant of a 

license or benefit on ceiiain conditions, which may be vaguely stated, and a federal agency may 

then be empowered to fill in the gaps and decide which regulated parties seeking the license or 

benefit will get it. 

In circumstances like these, where agencies have wide latitude to interpret law and 

exercise discretion in any individual proceeding, it is possible the agency will make its decisions 

case-by-case--an approach that is usually not transparent. 6 To be sure, certain legal doctrines 

4 As noted on the cover page of my report. cited in supra note 2: 'This report was prepared tor !he consideration of 

the Administmtive Conference of the United States. The opinions. views and recommendation expressed are those 

of the author and do not necessarily reflect those of the members oflhc Conference or it.'l committees, except \Vhcrc 

formal recommendations ofthc Conference are cited:' 5 ACUS Recommendation 20 I 7-5, supra note 2. Besides serving as a consultant to ACUS on this project, I am also 

a member of the approximately 100-person assembly that is the plenary decisiomnaking body for ACUS. having 

served in that capacity since July 20!6. However, because I served simultaneously as consultanl lc" the project on 

guidance. l was recused from voting on !he Recommendation arising from that project. 

'Case-by-case dccisionmaking, despite its disadvantages for transparency, is generally permitted as a matter of 

administrative law. SEC v. Chenery Corp., 332 U.S. 194 (1947). 

4 
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require the agency to treat like cases alike, but those doctrines do not apply to enforcement, 7 and 

even in areas where they do apply, they may do little practical good where individual cases are 

so fact-bound, or so few, or (conversely) so numerous that it is hard to identifY relevant 

precedent when new cases arise. Case-by-case decisionmaking can therefore subject regulated 

parties to great uncertainty about what they are supposed to do and what to expect of the agency. 

A regulated party may invest a lot of resources in seeking a license or benefit according to a 

ce1tain understanding of what the agency expects, only to find out, after the investment is sunk, 

that the agency wanted something different. Or a regulated party may take a certain course of 

action, believing it will not lead to any trouble, only to be hit with an enforcement proceeding, at 

which point the party finds out what the agency expected ajter suffering the reputational damage 

and process costs of enforcement. In either of these cases, the regulated party could have 

avoided serious losses if only it had known in advance what the agency was thinking. When 

regulated parties do not know what the agency is thinking, it becomes harder for them to plan for 

the fi.!turc and invest in productive activity. Moreover, when individual proceedings are decided 

case-by-case, there is higher risk that similarly situated parties will be treated differently; this is 

always problematic, and especially if the parties are market competitors. 

Guidance is the readiest means tor an agency to tell the public what it is thinking-to 

announce how it plans to make individual decisions on enforcement, licenses, benefits, etc., and 

to do so in a more general, comprehensive, and understandable way than is possible through 

particularized explanations of fact-bound individual detenninations. 8 

Given that regulated parties want to know what the agency is thinking, it is no surprise 

that a huge number of them-! would guess most firms in most industries most of the time-· 

consider guidance a positive good that they affirmatively want. For example, when l interviewed 

the counsel to the home appliance manufacturers' association, he said that, without guidance, we 

would be "cast adrift" in terms of what the agency regulating us thinks. 9 Even interviewees who 

mounted very substantial critiques of what they considered the abuse of guidance recognized that 

7 Heckler v. Chaney, 470 U.S. 821 ( 1985) (holding that individual nonenforcement decisions are committed to 

agency discretion and not subject to judicial scrutiny), 8 For full discussion ofthe advantages of guidance over case-by-case dccisionmaking. see Parrillo Report. supra 

note 2. at 28-30. 9 Cited in id. at 35. 

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much guidance was nonetheless essential and that businesses sometimes wanted agencies to 

issue more guidance. 10 

Indeed, it will often be harder for an agency not to issue guidance than to issue it, since 

refraining from issuing guidance may require remaining resolutely silent in the face of regulated 

parties' entreaties for clarification. 11 When regulated firms come to EPA saying they are 

confused and need something explained, ''EPA's instinct is to answer the question," as a former 

program office director at the agency told me. 12 This is no surprise: regulated parties seek 

guidance so they can get in line with agency expectations and head otT confrontation, and that is 

in the agency's interest, too. And once the agency starts answering questions, it would be hard 

for the agency to keep those answers secret even if it wanted to. The same interviewee gave an 

example of how EPA clarificatory letters could be obtained by a regulated party through the 

Freedom oflnformation Act 13 Another fonner EPA progran1 office director recalled that, once 

his office began issuing such individualized answers in the form of letters, those letters got 

"passed around" among industry, and parties besides the addressees began to rely upon them. 14 

And once guidance is being provided to individuals who seck it, the agency begins to see that it 

would be more efficient and fair to provide that guidance in the form of more general public 

documents. A former SEC of1icial recalled that, decades ago, he spent 30 hours per week on 

"phone duty," answering the inquiries of regulated parties who called in. The giving of advice in 

this ad hoc manner by individual staff members, he said, was inferior to the provision of general 

guidance, toward which the SEC more recently shifted. More general guidance was better 

because ad-hoc advice-giving led to inconsistency between answers, ate up more staff time, and 

created an unlevel playing field among regulated parties, some of whom phoned while others did 

not. 15 Thus, unless an agency shuts itself off from stakeholder demands, or foregoes obvious 

means to increase efficiency and fairness, it is going to end up issuing guidance. 

The upshot of all this is that numerous agencies issue large amounts of guidance. 

Guidance's page count for various agencies has been estimated to dwarf that of actual 

10 On regulated parties' demand [or guidance. see id. at 35-37. 11 This paragraph draws upon Parrillo Report, supra note 2. at 36-37. 

Cited in id. at 36. 

Cited in id. at 36. 14 Cited in id. at 36. 

"Cited in id. at 36-37. 

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regulations by a factor of twenty, forty, or even two-hundred. 16 As suggested in the preceding 

paragraph, guidance can proliferate in so many diverse, decentralized, and program-specific 

ways-often in bottom-up fashion when regulated parties ask questions of frontline officialsthat there is no comprehensive catalogue of all of it. 

B. Guidance as a Minus for Transparency 

Despite guidance's potential to promote transparency, it can sometimes be a minus for 

transparency if an agency issues guidance when it would otherwise issue full-blown binding 

regulations (known as "legislative rules''). The reason is that legislative rules are required to be 

issued through the legislative rulemaking process of the Administrative Procedure Act (APA), 

including notice and comment, in which the agency publishes a proposed rule, takes comments 

from the public, and then, upon issuing a final rule, gives an extensive response to the 

comments-an extraordinary degree of agency engagement with stakeholders. Guidance, by 

contrast, is exempt from this highly participatory and open process. 17 What officially justifies 

this lessened process for guidance is that guidance is not binding on the agency or the public in 

the way a legislative rule is. (On whether this nonbinding status is a reality or a fiction-and 

thus whether it can really justify the less-open process for issuing guidance----see Part II below.) 

C. The Transparency Tradeoff 

When it comes to transparency, guidance involves a difficult tradeoff. On the one hand. 

guidance provides more transparency about what the agency's thinking is than does case-by-case 

decisionmaking. On the other hand, guidance provides less transparency about how the agency 

formulates what it thinks than does legislative rulemaking. It would be a mistake to think we can 

maximize transparency by telling agencies always to formulate their general thinking through 

legislative rulemaking. That is because such rulemaking takes a long time and expends a lot of 

16 See Peter L. Strauss, The Rulemaking Continuum, 4 t DUKE L.J. 1463, !468-69 (1992) [hereinafter Strauss. 

Rulemaking Continuum]; Peter L. Strauss, Publication Rules in the Rulemaking Spectnun: Assuring Proper Respect 

for an &sential Element, 53 ADM lN. L. REV. 803,805 (20tll). For more on the ubiquity of guidance. see Parrillo 

Report, supra note 2, at 34-35. 17 5 C. S.C. § 553(b)(A). l must add a qualification to the poinllhat guidance, when substituted for 

rulemaking. diminishes transparency. Because legislative rules are otlicial!y binding while guidance not (see 

ir!fra, Part it is possible to write guidance in more colloquial language than can be used in legislative rules. This 

makes it usc guidance as a means to explain regulatory schemes to less-sophisticated regulated parties who 

!ack counsel·-a plus fbr transparency, Parrl\lo Report. supra note 2~ at 30-3 L 

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agency resources. 18 There is only so much policy that can be formulated through that process in 

the near tenn. If we tell an agency that, on a certain matter, it must formulate its genera! thinking 

(if at all) only through legislative rulemaking, then maybe the agency will opt for such 

rulemaking instead of guidance, and there will be an increase in transparency. But maybe the 

agency will instead give up developing any general thinking on the matter, or greatly delay doing 

so, because it has already expended all the resources it has currently available lor legislative 

rulemaking on other matters that are crying out for such treatment. In that case the agency ends 

up leaving the matter to case-by-case decisionmaking, which is the worst outcome for 

transparency. 19 Regarding FDA, which industry has sometimes criticized for its overuse of 

guidance, an executive at a drug manufacturer said he could see the argument "in the abstract" 

lor why legislative rulemaking was better, but he said sardonically that he preferred to know 

what FDA was thinking "rather than wait twenty years" for a legislative rulemaking to finish. 

Guidance, he said, is "the best you can do." 20 More generally, we should be cautious about 

imposing additional process requirements on the issuance of guidance in the name of 

transparency, because such requirements can potentially discourage issuance of guidance to 

hegin with, perversely diminishing transparency on net. 

U. Is the Nonbinding Status of Guidance Reality or Fiction? 

How should an agency strike a balance between the transparency benefits of issuing 

guidance and the transparency disadvantages of not going through legislative rulcmaking? The 

conventional answer is that legislative rules are legally defined by the fact that they are binding 

on the agency and the public, whereas guidance documents are not. 21 Thus, if the agency wants 

to articulate its thinking in a way that is cut-and-dried, to be followed automatically in later 

individual proceedings, then it must formulate that thinking through legislative rulemaking. But 

ifthe agency wants to articulate its thinking on a more tentative basis, with the understanding 

that it reserves discretion to be flexible and open-minded about doing things differently in later 

individual proceedings, then it can articulate its thinking through guidance. It is okay for the 

18 See Parrillo Report, supra note 2. at 3 !-34. 19 See American Mining Congress v. MSHA, 995 F.2d 1106. !111-!2 (D.C. Cir. 1993). 2

° Cited in Parrillo Report, supra note 2, at 33. 

il.t least, general statements of policy arc universally thought to be nonbinding; the question of whether 

interpretative rules arc nonbinding is more uncertain. See supra note 2. 

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agency to forego public engagement when it originally formulates a norm wholesale so long as 

the agency is going to engage with regulated parties' arguments for doing things difterently later, 

at the retail level, when the norm is individually applied. 22 

This mandate that guidance be nonbinding and flexible has made guidance a subject of 

controversy. The tear is that agencies in real life are not tentative or flexible when it comes to 

guidance but instead follow it as if it were a binding legislative rule, and regulated parties are 

under coercive pressure to do the same. If agencies do use guidance as a binding norm, as 

feared, they undermine the mandate of the APA that general binding policies should be made 

only through the open and participatory procedures oflegislative rulemaking. 

lt this tear based on reality? To answer this question, we must break it into two parts. 

First, we must ask what pressure a regulated party feels to follow guidance when the guidance is 

operative, that is, when the agency has not granted a party's individual request for a dispensation 

from the guidance. Second, we must ask whether agencies are practically open to granting such 

dispensations-in other words, are agencies flexible? 

A. When and Why Regulated Parties Are Under Pressure To Follow Guidance Absent a 

Dispensation 

Regulated parties often (though not always) tee! strong pressure to follow guidance. But 

the origins of this pressure usually lie not in some plot hatched by the agency but instead in a 

series of structural factors hard-wired into modern regulation and the legislation that establishes 

it, nearly all of which are vastly beyond the control of the agency officials who are issuing or 

using a guidance document. ln other words, this is not the kind of pressure that can be mitigated 

by using legislation or oversight to tell officials not to act with coercive intent, for official intent 

is not usually what is at play here. 

There are four major structural factors that incentivize regulated parties to follow 

guidance. First, legislation may require regulated parties to obtain pre-approval, that is, to seek 

the affirmative assent of the agency in order to get some legal advantage, like a permit or 

monetary benetit. If the advantage sought is important to the party, and if the agency's decision 

20 As Michael Asirnow aptly slated: "If the public is denied an advance opportunity to influence a policy statement, 

it should have a fair chance to persuade a decisionmaker to follow a diftercnt course when the discretionary function 

is actually exercised in a subsequent investigation. formal or informal adjudication, or other proceeding:' Michael 

Asirnow. Nonlegis/ative Rulemaking and Regu!ato1y R~form. 1985 DUKE L,l, 381. 39L 

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is uncertain and subject to delay, the incentive to follow whatever the agency's wishes appear to 

be (including guidance) can be overwhelming. 23 Second, the legislative scheme may subject the 

regulated party to continuous monitoring and frequent evaluations by the agency. If the law is 

complex, the regulated party will inevitably end up failing to comply with at least a few 

prohibitions or approval requirements. To insure against this contingency. the party will invest 

in its relationship to the agency, that is, seek to build up the agency's trust and confidence in its 

good faith and cooperativeness, including by following guidance. 24 Third, the regulated firm is a 

"they," not an "it,'' and the last generation has seen rapid growth in new cohorts of corporate 

personnel-most prominently "compliance officers"-whose backgrounds, socialization, and 

career incentives arguably give them an especially strong incentive to maintain good relations 

with the agency and therefore to follow guidance. 25 Fourth, a regulated party subject to ex post 

enforcement will have an incentive to follow guidance that increases with the probability of 

detection of noncompliant behavior, the cost of an enforcement proceeding irrespective of 

outcome, the probability of an unfavorable outcome, and the probable sanction in that event. 

This fom1h factor is probably the most obvious, but l must emphasize that its incentive power 

cannot be simply assumed, tor it varies greatly depending on the structure of the statute and the 

agency. In some (though far from all) contexts, dynamics arise similar to those in coercive pleabargaining, meaning the regulated party cannot expect, without prohibitive risk, to get the 

accusation meaningfully examined and adjudicated by an official distinct from the enforcement 

personnel. This creates a strong incentive to avoid being accused in the first place.26 

Conversely, in areas where these four structural factors are mostly weak or absent, 

interviews indicate that regulated parties are relatively less likely to follow guidance. Examples 

arc FTC consumer protection, CFPB regulation of most nonbanks, EPA enforcement against 

permitless discharges into protected waters, and OSHA regulation of most employers. 27 Thus, 

the pressure to follow guidance, though real, is far from universal. 

If an agency official works within a statutory and regulatory structure where most or all 

of the four factors are robust, then whatever that official issues in the fonn of guidance will quite 

Parrillo Report, supra note 2. at 37-44. 

!d. at 45-56. 

!d. at 56-64. Although one may argue that this grmvth is driven partly by governmental pressure. that pressure 

emanates mainly from the U.S. Sentencing Commission's Organizational Guidelines and from Justice Depat1ment 

erosecutorial practice, id. at 58, rather than f!·om any regulatory agency. 

-' !d. at 64-76. 27 !d. at 76-90. 

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likely be followed by regulated parties. But that is not because any agency official sets out with 

conscious purpose to coerce anybody. The structural incentives to follow the guidance will 

operate on regulated parties regardless ofthe official's subjective state of mind. Of course it is 

possible that an official may consciously recognize these structural incentives and consciously 

anticipate that they will operate in a way that shifts regulated parties' behavior toward what the 

guidance says. Indeed it seems fair to assume that most high-ranking agency officials would be 

aware of these factors. But if such knowledge disqualifies those officials from issuing guidance, 

then all agencies operating in areas where most or all of the four factors listed above are robust 

(pre-approval requirements, long-term firm-agency relationships, compliance cohorts in industry, 

and high-stakes ex post enforcement) would be largely disqualitied from ever issuing guidance. 

That is to say, many and perhaps most agencies would be disqualified from ever issuing 

guidance, despite its importance to government transparency and the fact that numerous 

regulated parties demand it. That cannot be right. 

lf1.ve really want to protect regulated parties from feeling strongly pressured to follow 

guidance in the absence of an agency dispensation, we would have to reform quite substantially 

the structural features of the administrative state that create strong incentives to discern and 

follow an agency's wishes. There are arguments for reforming those structural features, but 

these would have major consequences and implicate a host of issues ranging well beyond the 

controversy over guidance. Pre-approval requirements have been condemned by some as 

intolerable encroachments on liberty, 28 but abolishing them would entail radical rollbacks of 

health, safety, and environmental regulation and could worsen uncertainty for regulated industry; 

more incremental reforms are also possible, but these, too, implicate wide-ranging questions. 29 

The tendency of heavily-regulated businesses to invest in positive relationships to their regulator 

may create dangers of coercion or favoritism, and there are obvious (if costly) means of 

preventing those relationships rrom forming (as by rotating agency personnel), yet doing so 

would dramatically increase information costs to the agency, 30 and might incline it to become 

28 Richard A. Epstein. The Permit Power Meets the Constitution, 81 !OWAL. REV. 407 (1995) 

Eric Biber & J.B. Ruhl, The Permit Power Revisited: 771e Theory and Practice qf RegulatOJy Permits in the 

64 DUKE L.J. 133 (2014) (on the use of general permits). 

CC DANiEL CARPENTER, REPUTATION AND POWER: 0RGANIZAT!ONAL [MAGE AND PHARMACEUTICAL 

REGULATION AT THE FDA 663 (20 !0) ("Firms' reputations matter in part because a resource-constrained and 

uncertain regulator is compelled to rely partially upon trust"). 

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more impersonal, exacting, and punitive. 31 The rise of the compliance profession has been 

attacked as a stealth reform imposed on corporate America by uneleeted and ill-informed Justice 

Department prosecutors, 32 but corporate compliance programs are now the norm across many 

industries are considered by many to be a salutary development; in any case, they cannot be 

eliminated without a major dislocation. And while there are proposals to reform administrative 

law enforcement to make settlement bargaining less coercive-for example, to redraft statutes to 

diminish liability and penalties or to establish more neutraL independent institutions to oversee 

enforcement personnel33-these, too, have high costs and wide-ranging implications. 

B. When and Why Agencies are Inflexible When Asked for Dispensations 

Although structural factors create a strong incentive to follow certain guidance absent a 

dispensation, the agency can mitigate this coercive effect by being open-minded and flexible 

when a regulated party seeks a dispensation. 34 But in real life, agencies are sometimes 

inflexible. One might assume that flexibility is the path ofleast of resistance for an organization, 

such that any inflexibility must reflect some conscious and nefarious plan. But that is wrong. 

Federal agencies face a host of external pressures and internal dynamics that can make them 

naturally intlexible. The very real fact of agency intlexibility can be mostly (though not entirely) 

explained by agencies' sensitivity to competing rule-of-law values that favor consistency, by 

their lack of resources, and by their inertia in the face of unintended organizational tendencies 

that foster rigidity. 

First oft: we must recognize that agencies are quite often under active stakeholder 

pressure to be inflexible (a.k.a., to be consistent) and that these stakeholder pressures spring from 

legitimate concerns that agencies would be remiss to ignore. Most prominently, any regulated 

firm that receives a favorable departure from guidance will put its competitors at a disadvantage, 

and those competitors will protest. Further, they may come to lose faith in the predictability of 

the agency and in the idea that the agency provides them a level playing field---a shift that may 

If a regulator has a continuing series of interactions with a regulated party. it may need to be punitiYe only as a 

last resort within a larger framework that hegins (and usually ends) with presumptive mutual trust. See generally 

AYRES & JOHN BRAITHWAJTE, RESPONSIVE REGULATION: TRANSCENDING THE DEREGULATION DEBATE (1992). 

Scan J. Griffith, Corporate Governance in an Era '!fComp/iance, 57 WM. & MARY L. REV. 2075, 21 17-30 

Rachel E. Barkow, Overseeing Agency Enforcement, 84 GEO. WASH. L. REV. 1129, 1143-50 (2016). 

·

14 See Parrillo Report. supra note 2, at 13 (collecting authorities on the need for llexibility and open-mindcdness on 

guidance). 

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cause them to withdraw from cooperation with the agency, thereby diminishing compliance and 

making the whole regulatory program less effective. 35 Meanwhile, individualized flexibility on 

guidance, if it favors a particular regulated party, smacks of favoritism and thereby attracts the 

negative scrutiny of the media, NGOs, and members of Congress. 36 On top of all this, some 

competitors of the firm that received the favorable departure from guidance will be stung by the 

apparent unfairness and understandably ask, ·'why can't I get this exception, too?" One 

departure thus invites other requests for departure, and these requests eat up the agency's 

resources and pose the danger that any coherent policy will unravel. To prevent all this from 

happening, the agency may simply deny departure requests to avoid opening the floodgates to 

begin with. 17 

Significantly. there is a way for an agency to maintain flexibility while addressing these 

legitimate pressures for consistency: it can take an approach that emphasizes transparency about 

departures from guidance, which I callprincipledflexibility. 38 That is, for each departure the 

agency makes, it gives a written explanation that is accessible to other agency officials and to the 

public, with the understanding that the exception then becomes generally applicable to like cases 

prospectively. Principled flexibility helps refute accusations of favoritism, cabins the rationale 

for each departure so as to avoid opening the floodgates to more requests, promotes fairness 

among competitors by ensuring that all exceptions become generally available on a prospective 

basis, and aids predictability because the obligation to provide a reason for each departure will 

tamp down the number of departures and make it easier to anticipate when departures may 

happen. In some contexts (though certainly not all), principled flexibility may be required by the 

AP A's arbitrary-or-capricious standard, though it is not practical to think judicial enforcement 

will be the main <.!riving force behind agencies' adoption of it. 

Crucially-and unfortunately-principled flexibility is not easy to implement, though 

many agencies try. It takes resources and runs into certain managerial obstacles. Most 

"Parrillo Report, supra note 2, at 93-98. 36 ld. at 98-10!. 

ld.at 101-03. 38 ld. at 103-07. My formulation of principled flexibility is inspired by two sources. One is Robert Kagan's study of 

the Nixon wage-price freeze (which is not about guidance but policy-application more generally). and particularly 

Kagan's distinction between the ·~judicial mode .. of policy-application (corresponding to principled flexibility) and 

''legalism'' (corresponding to inflexibility). ROBERT A. KAGAN, REGULATORY JUSTICE: IMPLEMENTING A WAGEPRIZE FRI'EZE 91-96 (1978). The other source is Peter Strauss's suggestion that guidance be treated like agency 

adjudicatory precedent, with an APA~style obligation to give reasons for any departure. Strauss, Rufemaking 

Continuum, supra note 16, at 1472-73, 1485-86. 

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important, the reason-giving mandate means that every request for departure requires time and 

money to evaluate, Regulated parties requesting departures can bear some of this cost, but 

saddling them with it chills requests for departures to begin with (thereby increasing practical 

inflexibility). And besides, the agency itself has to do some independent investigation. 

Inflexibility resulting from the cost of evaluation and reason-giving manifests itself especially in 

programs that combine a high volume of individual decisions, scant resources, and time pressure. 

Further, the need Jor a higher-level official to sign otT on each departure-which many agencies 

require and many commentators and institutional pronouncements endorse-f(lrces departures 

through a bottleneck of political appointees and senior civil servants who have especially limited 

time and lack fine-grained information about the matters they arc reviewing. This renders 

departures yet harder to grant. 39 A former senior EPA oftlcialnow in private practice, ret1ecting 

on these factors, expressed frustration with EPA personnel's rigid use of guidance but did not 

accuse them of bad faith: ''they fed stuck," she said.~0 

On top of these organizational and resource-based obstacles to principled flexibility, there 

are additional such obstacles that stand in the way of flexibility of any kind, principled or not. 41 

Flexibility requires that regulated parties be able to go over the heads of frontline oftkials who 

deny departures and act too rigidly, but such appeals may antagonize the frontline officials and 

prompt them to retaliate. Such retaliation may be unconscious, but the prospect of it can 

nonetheless chill regulated parties from seeking flexibility. Even if officials never retaliate, a 

perception within the regulated community that they do so, if not actively dispelled by the 

agency, can have a similar effect For their part, higher-level officials, when faced with appeals, 

have various institutional motives to back up their subordinates irrespective of the merits ofthe 

ca<;e, More subtly, the rule/guidance distinction is not intuitive to most people (except perhaps 

lawyers), and that lack of understanding can make flexibility harder to achieve. ln addition, the 

day-to-day business of a government office can socialize its personnel to be less receptive to 

regulated-party requests, though sometimes more receptive. Offices that have day-to-day habits 

of cooperating with industry (like program offices engaged in rulemaking) tend to he more 

flexible on guidance-related matters than. say, enforcement offices. Finally, it is possible to get 

For lull discussion of obstacles to implementing principled Ocxibility. see Parrillo Repor!, supra note 2, a! 107-

Cited in id. at 16. 

On obstacles discussed in this paragraph, sec id. at 116-27. 

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agencies to be more flexible by giving training on the rule/guidance distinction to their 

personnel, though this tends to be most effective when the trainers arc embedded relatively close 

to the decisionmakers and can monitor and counsel them on an ongoing basis-something that is 

not cheap. 

All that said, there are some instances in which agencies hold fast to guidance not 

because of legitimate external pressures for consistency, nor because of inertia or resource 

poverty in the face of organizational pathologies. but instead because agency personnel think the 

guidance is right. 42 That is. they are committed to the substantive content of the guidance, and 

this can keep the agency from being practically open to the possibility of departure. Of the many 

reasons why agencies are inflexible, this one is the most problematic. If an agency is not going to 

consider departing from a policy, by reason of thinking the policy is right, that is the archetypal 

scenario for legislative ru!emaking. Notably. however, the interviews indicate that the agency 

personnel who are commiited to the substance of a guidance document are often the political 

appointees or the career officials but not both; 43 thus, if a strong norm in favor of flexibility and 

open-mindedness can be articulated, it may be possible t<x the politicals to effectively invoke the 

norm against the career officials and vice versa. 

Any reform effort to address the coercive effects of guidance must recognize that agency 

flexibility is a good aspiration, but it is not the path of least resistance. Being flexible requires 

undertaking active managerial reform and may involve expending resources. Consistent with 

this understanding, ACUS Recommendation 2017-5 sets forth organizational measures that will 

promote flexibility, including ( 1) publishing reasons for individual departure decisions and 

making them applicable to all like cases going forward; (2) assigning departure decisions to 

components of the agency most likely to be socialized to have productive dialogue with 

stakeholders; (3) redirecting appeals from frontline denials of flexibility to higher-level officials 

who are not the direct superiors of the officials who issued the initial denial; (4) training and 

monitoring frontline officials to ensure they understand the rule/guidance distinction and treat 

parties· requests for departures in a welcoming manner; and (5) facilitating opportunities for 

ombudspersons, stakeholder associations, or other intermediaries to make departure requests and 

give feedback to the agency on guidance practices more broadly. But the Recommendation 

42 ld. at 128-32. 

ld. at 129-31. 

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recognizes that, given the costs of these measures, agencies cannot, as a practical matter, make 

these efforts in favor flexibility on everything a!l the time. Priorities must be set. ln deciding 

which guidance documents warrant the most active exertions in favor of flexibility, the 

Recommendation assigns a higher priority to guidance documents likely to have a greater impact 

on the public, e.g .. because regulated parties are under strong pressure to follow them absent a 

dispensation (due to structmal factors discussed above). It assigns a lower priority to guidance 

documents whose value lies more in providing consistency and predictability per sc than in the 

document's choice of substantive content:14 

III. Deregulatory Guidance and Regulatory Beneficiaries 

Distinct questions may arise when it comes to deregulatory guidance, that is, guidance 

that promises, at least tentatively, to treat regulated entities favorably, as by suggesting that a 

certain course of regulated-party conduct enjoys a safe harbor in license applications or is a low 

priority for enforcement. If this guidance shifts the status quo in a more industry-tricndly 

direction, one can expect regulated parties to alter their behavior so as to follow it, not because of 

any of the quasi-coercive structural factors discussed in Part II, but simply because it is what 

they want to do. But ifthis happens, the people Congress intended to protect by regulationregulatory beneficiaries-may be harmed. Under D.C. Circuit case law, such beneficiaries can 

get the guidance struck down if it is too rigid, meaning the agency must either go through 

legislative rulemaking or rework the guidance to be more flexible (i.e., so that the agency, in any 

particular individual proceeding, remains "open-minded" to the possibility of treating the 

regulated party more stringently than the deregulatory guidance suggests). 45 

It is doubtful that tlexibility in deregulatory guidance is typically a useful remedy for 

regulatory beneficiaries. Flexibility operates at the micro-level of individual adjudicatory and 

enforcement proceedings. ln most such proceedings, no regulatory beneficiaries are going to 

show up. There will thus be nobody to make the requests for departure that are the lifeblood of 

tlexibility. 46 It seems the best approach----except in the select areas where NGOs representing 

beneficiaries have the practical capacity to participate in individual adjudication and 

"ACUS Recommendation 2017-5. 45 See Parrillo Report, supra note 2, at 46 ld. at 135-37. 

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enforcement-is for agencies to seek to promote participation by regulatory beneficiaries by 

soliciting such beneficiaries' views (and the views ofNGOs who represent them) on a wholesale 

rather than retail basis, at the time when guidance is initially issued or modit1ed at a general 

level. This will usually be the form of participation most suited to NGOs' limited resources. 

lV. Public Participation in the Issuance of Guidance 

Though the APA does not require it, agencies can voluntarily provide for public 

participation in the formulation and issuance of guidance. This means transparency and 

participation occur at the wholesale level, as distinct from the retail level when a guidance 

document is applied in individual proceedings where a particular party may argue for a 

dispensation. This wholesale form of participation may be especially suited to regulatory 

beneficiaries, as noted in Part Ill, but it can also be quite valuable to regulated parties and to the 

agency itself. 

There are diverse means by which agencies can seek public input on the formulation and 

issuance of a guidance document. The agency can reach out individually to selected 

stakeholders whom it already knows; it can hold public discussions on developing the guidance 

at stakeholder meetings, workshops, forums, roundtables, sessions at conferences, webinars, or 

other such events (for which invitations will often be distributed through agency listservs); it can 

use an advisory committee as a channel for public participation; or it can voluntarily undertake 

notice and comment on a published draft ofthe guidance document before adopting the 

guidance, which is the maximal option in terms of broad, open, and impersonal participation. 47 

Note, however, that voluntary notice and comment on guidance is still usually much faster and 

less costly than legislative rulemaking, since it does not involve the same demands in terms of 

cost-benefit analytic requirements, record-building and voluminous responses to comments in 

contemplation ofjudicial review, etc."8 

ln deciding what level of public participation an agency should seek on the issuance of 

guidance-and especially in deciding whether the agency should undertake notice and comment 

on it-we must weigh several potential benefits and costs. One potential benefit is the technical 

47 ld. at 139-43. 48 !d. at 143-50. 

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information that stakeholders may provide, which may greatly improve the guidance (e.g., by 

helping the agency anticipate and account for potential implementation problems). That said, 

broadening participation (with notice and comment being the maximum) may see diminishing 

returns on this front depending on how concentrated or diffuse the actors with useful 

information are. If information is concentrated, then narrow outreach to a few stakeholders may 

provide just as good technical information at much less cost. 49 

A second potential benefit of notice and comment on guidance is that it gives the agency 

better political information, that is. helps the agency anticipate which stakeholders may challenge 

the guidance at a political or legal level, so the agency can make a better-inlormed decision on 

whether to proceed and how, diminishing the likelihood of being overridden by Congress or the 

courts. That said, there is enough inertia in agency-stakeholder interactions that, if the agency 

refrains for seeking input and simply issues the guidance, stakeholders may acquiesce in a way 

they would not if the agency were openly tentative about the initiative. Tentativeness can 

sometimes invite resistance and confrontation. 50 

A third potential benefit of notice and comment on guidance is that it may increase the 

legitimacy of the guidance and of the agency itself, in the sense of giving stakeholders a sense 

that the agency issues guidance through a fair process in which they have ''buy-in," which may 

increase stakeholder willingness to cooperate with and support the agency and its program. 

There are at least three specific ways in which notice and comment can increase legitimacy, 

though each has its complications and limits, First, notice and comment can give stakeholders 

confidence that the agency understands and is responsive to their concerns. But this is a doubleedged sword: under some circumstances notice and comment can come to seem like an empty 

gesture and might therefore alienate stakeholders (e.g., if the agency rarely makes changes in 

response to comments, or finds the cost of giving a response to comments prohibitive)51 

Second, because notice and comment is more general and impersonal than other forms of 

participation, it can foster legitimacy by deflecting charges that an agency is biased in terms of 

which voices it is willing to hear. This point seems especially important for NGOs. some of 

whose officials see notice and comment as leveling the playing field between them and industry. 

Public comment also allays the anxiety that officials commonly have about the possibility of 

"!d. at 150-53. 50 !d. at 153-54. 

ld. at 155-57. 

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being accused of favoritism. Yet that very anxiety can iead agencies not only to undertake notice 

and comment but also to close off any interchanges with stakeholders that occur outside the 

public-comment process. which some industry representatives thought was counter-productive. 

since it prevents iterative and informal dialogue that may be optimal for agency learning. 52 

Third, notice and comment may increase legitimacy simply by broadening the pool of 

participants, as exemplified by the fact that some draft guidance documents have recently been 

toea! points lor "mass comment" campaigns sponsored by advocacy groups, rising to the tens of 

thousands of comments. lfthe rulemaking context is any guide, however, agencies have tended 

to ignore such mass comments, or to use them only in an opportunistic way; it is not entirely 

clear how agencies can use such comments meaningfully, as they arc not usually written to be 

part of a deliberative and anal)'tic dccisionmaking process. as opposed to a plebiscitary one. 

Against the potentially great yet uncertain benefits of notice and comment on guidance 

(technical and political infonnation and legitimacy), one must measure the costs. in time and 

resources. Several interviewees pointed out that, if agency personnel responsible for guidance 

expend effort to seek public input on the guidance they issue, they will have less capacity to 

issue guidance on other subjects, leaving regulated parties adrilt in some areas. One major 

question is whether the agency should provide a response to the comments it receives: this 

renders participation more meaningful, yet it greatly increases the cost to the agency. Further. it 

is possible that the cost of participation may rise so high as to seriously hamper the agency's 

capacity to make policy at all, which may actually delegitimize the agency in the eyes of 

regulatory beneficiaries-an unintended and extremely perverse consequence. 54 

Thus, the potential benefits and costs of notice and comment on guidance are numerous, 

they vary with context, and they are sometimes counter-intuitive. Notice and comment will often 

be worth it, but deciding whether it is involves a context-specific judgment. 

For this reason, decisions about whether to seek notice and comment on guidance should 

he made document-by-document or perhaps agency-by-agency, in the sense that an agency can 

adopt a procedural rule requiring notice and comment lor an objectively-defined broad category 

of its guidance. But a government-wide requirement for notice and comment on anything but the 

!d. at 157-60. 5

·'Id. at 160-62. 

ld. at 162-66. 

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very most extraordinary guidance documents would be rash. 5

5 Making decisions on 

participation on a narrower basis allows for more learning about what works best, and it cabins 

the consequences of any decisions that do not turn out well. Consistent with this, ACUS 

Recommendation 2017-5 says an agency "may make decisions about the appropriate level of 

public participation document-by-document or by assigning certain procedures for public 

participation to general categories of documents." It urges agencies to consider many of the 

various costs and benefits listed in the discussion above. 56 

Further. broad mandates for notice and comment on guidance (even if only agency-wide 

rather than government-wide) risk two major unintended consequences. First, if there is an 

agency-wide procedural rule requiring notice and comment for a large category of guidance, and 

the agency lacks the resources to process all the comments it receives on all the documents, the 

agency may end up leaving many guidance documents in published ''draft'' form indefinitely, 

without ol1lcially adopting them. This has sometimes happened at FDA, for example, and 

elsewhere. 57 When regulated parties have incentives to comply with whatever they perceive to 

be the agency's wishes (as described in Part ll), those parties may take a draft guidance 

document to be a reflection ofthose wishes, and they may therefore follow its content, regardless 

of its draft status. This outcome defeats the purpose of notice and comment And it can actually 

be even worse than that It is possible that most of the guidance documents left indefinitely in 

draft are in that state because of the agency's insul1lcient resources. while some remain 

indefinitely in draft because there is too much disagreement within the agency to reach a 

decision about which comments to accept. Regulated parties are well-advised to follow guidance 

that ret1ccts the agency's view but is held up due to lack of resources, but not to follow guidance 

that is held up because the agency cannot come to any agreed-upon view. Yet it may be difficult 

f(x regulated parties to tell what the reason is for the holdup of any particular draft. The result is 

that regulated parties are left guessing, which increases their decisiomnaking costs and the risks 

they bear and un-levels the playing field among regulated competitors. To head off these 

problems, ACUS Recommendation 2017-5 urges that, if an agency adopts the FDA-like 

approach of providing for participation on a general category of documents, it "should consider 

rhe Office of Management and Budget's Good Guidance Practices (cited in supra note ! ), calling for preudoption public comment on "economically significant'' guidance documents, appear to cover only a rdatively tiny 

number of very extraordinary documents. See Parrillo Report, supra note 2, at 16 7-68. 

"ACL'S Recommendation 2017-5. supra note 2. at 61736-37 (paragraphs 9, 11). 

For full discussion of this phenomenon, see Parrillo ReporL supra note 2, at !71-8 I. 

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whether resource limitations may cause some documents ... to remain in draft for substantial 

periods of time," and if so, it should either "(a) make clear to stakeholders which draft policy 

statements, if any, should be understood to reflect current agency thinking; or (b) provide in each 

draft policy statement that, at a certain time after publication. the document will automatically 

either be adopted or withdrawn.'' 58 

A second major unintended consequence that may arise from a broad mandate for notice 

and comment on guidance is that guidance may thereby become so legitimate-in the eyes of 

agency officials and/or stakeholders or political overseers---that it may come near to replacing 

legislative rulemaking altogether. 59 This would not necessarily be a bad outcome; some critics 

think legislative rulemaking's process burdens have risen too high, and this would be a means of 

radically reducing them. I take no position on this question. but there is no doubt that it is a 

profound one. If we categorically adopt notice and comment for guidance on a broad basis, we 

may flnd that this profound question effectively gets decided without us thinking about it, unless 

we couple the participatory mandate with some safeguard to ensure that legislative rulemaking 

continues to be undertaken for some substantial fraction ofthe agency's policies. 

While I advise that decisions about notice and comment on guidance should have a scope 

no broader than an individual agency, lam not saying that such decisions should be left to the 

agency itself Congressional overseers and the White House can put pressure on particular 

agencies with respect to their participation policies for guidance, or even their participation 

decisions regarding individual documents, as when congressional scrutiny (among other factors) 

caused FDA in 1997 to adopt an unusually participatory procedural framework for issuing 

guidance (later ratified by legislation), or when OMB successfully pressed EPA to take public 

comment on certain key guidance documents even though some EPA ol11cials thought the 

agency should not 60 The demands of congressional overseers and the White House play a 

salutary role on this subject, but those demands are most likely to be well-conceived when 

pitched at a workable level of specitlcity. 

Thank you again for the opportunity to discuss this important subject !look forward to 

the Committee's questions. 

ACUS Recommendation 2017-5. supra note 2. at 61737 (paragraph 11 ). 59 On this see Parrillo Report, supra note 2, at 181-84. 

ld. at J 85-86. 

21 
89 

Chairman GOWDY. Thank you, Professor. 

Mr. Narang. 

STATEMENT OF AMIT NARANG 

Mr. NARANG. Chairman Gowdy, Ranking Member Maloney, and 

members of this committee, thank you for the opportunity to testify 

today. I am Amit Narang, regulatory policy advocate of Public Citizen’s Congress Watch. 

Public Citizen is a national public interest organization with 

more than 400,000 members and supporters. For more than 40 

years, we have successfully advocated for stronger health, safety, 

consumer protection, and other rules, as well as for a robust regulatory system that curtails corporate wrongdoing and advances the 

public interest. 

Public health and safety regulation has been among the greatest 

public policy success stories in our country’s history. Regulations 

have made our air far less polluted and our water much cleaner. 

They have made our food and drugs safer. They have made our 

workplaces less dangerous. They have made our financial system 

more stable. They have protected consumers from unsafe products 

and from predatory lending practices. They have made our cars 

safer. They have outlawed discrimination on the basis of race and 

gender and much more. 

These regulations are now considered to be bedrock protections 

widely popular with the public. In short, our regulatory safeguards 

are to be celebrated and emulated. Yet there is much more 

progress to be made in addressing threats to the health, safety, environmental, and financial security of hardworking American families. 

Unfortunately, President Trump and his administration are taking the country in exactly the opposition direction, embarking on 

a radical and unprecedented deregulatory agenda that is certainly 

pleasing corporate special interests by repealing regulatory protections at their behest, but at the expense of making everyday Americans less safe in countless ways. 

One of the key drivers of this administration’s attack on public 

protections is Executive Order 13771, the so-called two-for-one executive order, that requires agencies to get rid of existing regulations that protect the public in order to allow for new ones that 

protect the public. This executive order fundamentally conflicts 

with numerous statues that Congress has passed to direct agencies 

to protect the public in a wide variety of areas, including food safety, consumer protection, environmental protection, auto safety, civil 

rights protections, and many more. 

None of these laws require, much less permit, agencies to only 

protect the public up to the point that it imposes no new costs on 

corporate stakeholders. I urge this committee to monitor 

agencydecisions under the executive order to ensure maximum 

transparency when agencies delay, block, or are otherwise unable 

to finalize regulatory protections due to the executive order. 

Making matters worse, President Trump’s claimed motivation for 

his deregulatory agenda, that it will create economic growth, has 

been proven flat-out false. In January of this year, Goldman Sachs 

issued a report that found, quote, ‘‘no evidence that employment or 


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90 

capital spending accelerated more after the election in areas where 

regulatory burdens are higher,’’ end quote. 

Likewise, in its most recent annual report to Congress on the 

costs and benefits of Federal regulations, OMB found that regulations over the last 10 years have provided the public with up to 

$800 billion in net benefits. 

Since the focus of this hearing is on transparency, I want to direct the committee’s attention to a number of deeply troubling instances where agencies are rolling back regulatory protections 

while actively seeking to avoid transparency. 

The first example is the most urgent, as it relates to language 

in the budget proposal currently being considered for fiscal year 

2018 that would exempt the EPA from complying with the Administrative Procedure Act when repealing the Clean Water Rule. 

Any attempt to carve out the repeal of the Clean Water Rule 

from compliance with the EPA, as well as numerous other laws designed to provide transparency and accountability to the public, including the Freedom of Information Act, should be deeply troubling 

to all members of this committee and Congress, no matter their position on the Clean Water Rule. 

More broadly, it sends the message to the public that Congress 

is willing to give agencies a free pass on transparency and public 

participation when it comes to deregulation but not when putting 

regulatory protections in place. 

I urge members of this committee to demand the removal of this 

rider on a bipartisan basis. 

Second, reports indicate that the Department of Labor deliberately withheld economic analysis it conducted for a rulemaking 

that potentially would transfer billions of dollars from the pockets 

of restaurant servers and workers to the pockets of employers, as 

Ranking Member Maloney noted. 

What is even more unusual is that the rule was reviewed and 

cleared by the Office of Information and Regulatory Affairs, or 

OIRA. It is highly uncommon for OIRA to allow agencies to issue 

rules it has reviewed without any accompanying cost-benefit analysis. 

I encourage the committee to scrutinize closely OIRA’s rule and 

the refusal to release the analysis, which certainly has called into 

question the integrity of the OIRA review process. 

Finally, critical new guidance unanimously approved by the 

EEOC that would clarify workplace protections against sexual harassment, including based on sexual orientation, has been under review at OIRA since November, with no indication when the guidance will be finalized. With renewed attention on the prevalence of 

sexual harassment in the workplace, this guidance is needed now 

more than ever. 

Beyond specific rules, agencies under the Trump administration 

continue to be evasive in disclosing the identities of the Regulatory 

Reform Task Force officers at agencies authorized to carry out 

President Trump’s deregulatory agenda. Given numerous reports of 

conflicts of interest, this lack of transparency only adds to suspicions of regulatory capture by corporate special interests and further undermines the public’s faith in government agencies acting 

in the public’s interest. 


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91 

Transparency should not be a partisan issue, and there are opportunities to increase transparency in the regulatory process that 

deserve bipartisan support, both with respect to specific deregulatory actions taken under the Trump administration and broader reforms, such as making guidance documents more accessible to the 

public and ensuring that OIRA follows basic transparency provisions and requirements as stipulated in its governing executive orders. 

Public Citizen stands ready to work with members of this committee that seek to improve the effectiveness and transparency of 

regulations that protect working families and consumers. 

Thank you. 

[The statement of Mr. Narang follows:] 


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Written Testimony of 

AmitNarang 

Regulatory Policy Advocate, Public Citizen 

before the 

The House Oversight and Government Reform Committee 

on 

"Shining Light on The Federal Regulatory Process" 

March 14, 2018 
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Mr. Chairman and Members of the Committee, 

Thank you tor the opportunity to testify today on regulatory policy issues. l am Am it Narang, 

Regulatory Policy Advocate at Public Citizen. Public Citizen is a national public interest 

organization with more than 400,000 members and supporters. For 45 years, we have advocated 

with some considerable success for stronger health, safety, consumer protection and other rules, 

as well as for a robust regulatory system that curtails corporate wrongdoing and advances the 

public interest. 

Public Citizen chairs the Coalition for Sensible Safeguards (CSS). CSS is an alliance of more 

than 75 consumer, small business, labor, scientific, research, good government, taith, 

community, health and environmental organizations joined in the belief that our country's system 

of regulatory safeguards provides a stable framework that secures our quality oflife and paves 

the way for a sound economy that benefits us all. Time constraints prevented the Coalition from 

reviewing my testimony in advance, and today l speak only on behalf of Public Citizen. 

Over the last century. and up to the present. regulations have made our country stronger, better, 

safer, cleaner, healthier and more fair and just Regulations have made our food supply safer; 

saved hundreds of thousands of lives by reducing smoking rates; improved air quality, saving 

hundreds of thousands of lives; protected children's brain development by phasing out leaded 

gasoline; saved consumers billions by tacilitating price-lowering generic competition for 

phannaceuticals; reduced toxic emissions into the air and water; empowered disabled persons by 

giving them improved access to public facilities and workplace opportunities; guaranteed a 

minimum wage, ended child labor and established limits on the length of the work week; saved 

the lives of thousands of workers every year; protected the elderly and vulnerable consumers 

from a wide array of unfair and deceptive advertising techniques; protected minorities and 

vulnerable populations from harassment and discrimination based on race, gender and sexual 

orientation and promoted equality under the law for such populations; ensured financial system 

stability (at least when appropriate rules were in place and enforced); made toys safer; saved tens 

of thousands oflives by making our cars safer; and much, much more. 

In short, regulation is one of the greatest public policy success stories in terms of benefits to the 

public and is a testament to the power of Congress in protecting the public through passage of 

critical, foundational laws such as the Clean Air Act, the Clean Water Act, the Occupational 

Safety and Health Act, the Consumer Product Safety Act, the Civil Rights Act, various food 

safety laws, and many more. Strong and effective public health and safety regulations are a 

reflection of Congress' desire to protect everyday Americans through laws that are still among 

the most popular and cherished by the public. 

Unfortunately, this Administration has sought to roll back regulatory safeguards in radical and 

unprecedented fashion. Public Citizen's report from last year, entitled "Sacrificing Puhlic 
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Protections on the Altar of Deregulation,'' presents a full accounting of hundreds of regulatory 

protections that were unilaterally withdrawn by agencies under the Trump Administration before 

completion based on detailed empirical analysis of data disclosed in the Spring Unified 

Regulatory Agenda of2017. 1 In addition. Congress has resorted to the Congressional Review 

Act, which bypasses normal legislative procedures and accountability, in order to repeal 14 

critical regulatory protections2 in a variety of areas that were issued near the end ofthc previous 

Administration. Finally, agencies have begun the process of repealing rules finalized under the 

last Administration and delaying others indefinitely by categorizing them as "long term" actions 

in the most recent Unified Regulatory Agenda3 

President Trump's Executive Order on regulations, l3 771,4 is a key driver of deregulatory 

activity at all agencies. EO 13771 generally restricts agencies from issuing the most important 

and benetlcial new regulations (i.e. significant regulations) unless agencies are able to first 

identify and remove at least two other existing regulations and which result in costs savings that 

tully offset costs imposed by new regulations. In other words, agencies are only allowed to 

protect the public to the extent that it imposes no new costs on corporate stakeholders. Further, 

the EO places pressure on agencies to ensure that any regulatory protections the agency seeks to 

adopt must be fashioned in a way that minimizes costs in order to comply with allocated 

regulatory budgets under the EO, rather than in a way that maximizes the effectiveness and 

benefits of the regulatory protection to the public. Agencies have already identified hundreds of 

crucial public protections as subject to EO 13771 5 and. thus, required to be offset by 

deregulatory actions. Among those are new lead in drinking water standards, ne>v gun control 

measures, new vehicle, truck, and train safety standards, dozens of new environmental 

protections including restrictions on toxic chemicals, safety standards for new tobacco products 

like e-cigarettes, numerous workplace safety protections, and updates to energy efficiency 

standards. 

President Trump has justified his deregulatory agenda as a means to create economic growth. 

After one year, the evidence is clear that there has been no such economic growth. Both GDP 

and jobs figures show that there has been no greater economic growth under this Administration 

than there was under the last Administration-" Goldman Sachs issued a report in January of20 17 

that undermines any claims that deregulation under the Trump administration has led to job or 

economic growth. Goldman Sachs studied w-hether job growth and capital spending have been 

1 https ://www .citizen .org/sites/ def a ult/fi les/trum p-with drawn-regs-report. pdf 2 https://rulesatrisk.org/ 

3 https://www.reginfo.gov(public/do/eAgendaMain 

' https: //www. f ederalregist er.gov I doc u m ents/2017/02/03/2 017-02451/ reducing-regulation-and-controllingregulatory-costs 

'In the most recent Unified Regulatory Agenda of Fall 2017, agencies have begun identifying regulatory actions 

listed on the Agenda as "regulatory," "deregulatory"]," or otherwise "exempt" for purposes of EO 13771. 6 https:/ /www. washington post .com/blogs/right-tu rn/wp/20 18/02/13/ president-trumps-deregulationflop/?utm_term~.a97ce3cff3ae 
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stronger in sectors and companies that were more highly regulated before the most recent 

election. According to Goldman Sachs, "[W]e find no evidence that employment or capital 

spending accelerated more after the election in areas where regulatory burdens are higher.'' 7 

In addition to regulations, guidance documents have played an essential role in ensuring that 

Americans receive the benefits of the aforementioned and other regulatory protections. As 

discussed more fully later in this testimony, agencies have relied on guidance documents to 

supplement critical public protections in a wide variety of areas by clarifying the technical details 

ofregulations and their applications to particular situations. It is thus important to maintain the 

efficient and effective use of guidance documents as an essential tool in helping agencies protect 

the public. Due to the scope ofthis hearing. l wiH focus my testimony on guidance documents in 

particular and the incorrect perception that agencies issue guidance documents without adequate 

transparency to the public. 

I. What Are Guidance Documents? 

The term ·'guidance documents'' does not appear anywhere in the Administrative Procedure Act 

(APA) but has generally come to be understood as encompassing a wide variety of agency 

actions that are not considered to be binding rules which typically undergo notice and public 

comment and are subject to other requirements under the APA. Examples of such actions include 

general agency interpretations of existing legislative rules, statements outlining how an agency 

intends to regulate an evolving policy area. training manuals written for internal agency statT. 

compliance guides directed to the general public, advisory opinions tailored to individual case 

facts, and memoranda from agency leaders providing direction to agency staff members. Thus. 

agencies use guidance documents not just to manage internal operations but also to communicate 

essential information to outside parties. 

In ce1tain circumstances, agencies do have the discretion to implement congressional mandates 

or clarify ambiguities in rulemakings through the use of guidance documents. In other 

circumstances, agencies are only authorized to implement congressional mandates through use of 

notice and comment ru!emaking. The distinction between guidance documents and notice and 

comment rules is cemented in the APA which explicitly exempts interpretive rules, general 

statements of policy, and other agency actions that comprise guidance documents. 

When agencies have the authority to do so, agencies may opt to issue guidance documents rather 

than notice and comment rules because doing so allmvs agencies to communicate its views on 

agency interpretations of !ega! authorities and policies to both regulated entities and the public in 

7

http://www.aei.org/publication/whats-been-the-economic-impact-of-trumps-deregulation-push/ 
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a significantly more efficient and expeditious manner than under notice and comment 

rulemaking. Thus, guidance documents allow agencies to avoid devoting scarce time and 

resources to unnecessary rulemaking. On the other hand, guidance documents are not legally 

binding on the public which then restricts enforcement of potential non-compliance with 

guidance documents. Therefore, agencies must weigh the efficiency advantages that are inherent 

in guidance documents against the lack of legally binding eJTect when deciding to adopt 

guidance documents as opposed to notice and comment rules. 

!\. Guidance Documents Are Not Being Abused or Overused 

Unfortunately. the usage of guidance documents has come under unwarranted criticism based on 

a mistaken belief that agencies deliberately use guidance documents to place binding 

requirements on regulated parties while evading rulemaking. In his comprehensive and insightful 

report for the Administrative Conference of the United States (ACUS), 8 Professor Nicholas 

Parillo states plainly that use of guidance that is then followed by regulated parties ''is not 

because of any 'intent' on the part of the official to bind anyone.'· Professor Parillo is certainly 

correct in dispelling the notion that bad-faith intent on the agency's part is driving the use of 

guidance documents. Rather, Professor Parillo makes clear that structural factors in the 

regulatory process incentivize both regulators to use guidance in appropriate circumstances and 

regulated parties to tollow and, in many cases, affirmatively seek issuance of guidance 

documents. Unfortunately, critics of perceived over usage of guidance documents by agencies 

continue to insist on the dispelled notion that agencies deliberately intend to evade rulemaking 

requirements by issuing guidance documents that bind regulated parties. Such allegations of 

agencies using guidance documents to flout ru!emaking are soundly rejected by the available 

empirical evidence. The leading study is a 2010 study by Connor Raso in the Yale Law Joumal9 

examining whether federal agencies improperly issue guidance documents instead oflegally 

binding notice and comment rules on a widespread basis. Rasa tested this by identifYing 

situations where agencies would in theory have a strong incentive to issue guidance rather than 

notice and comment rules such m; at the end of presidential terms when agencies do not have 

enough time to complete notice and comment rulemaking or whether agencies issued more 

guidance documents under divided government in order to avoid congressional scrutiny. The 

study found no evidence that suggests agencies use guidance documents strategically to make 

important policy decisions outside the notice and comment process. 

B. Guidance Documents Benefit the Public 

The enormous variety of guidance documents across agencies makes it difficult to encapsulate 

the impacts and effects of guidance documents in a broad manner without significant nuance and 

context. Yet, there is no doubt that guidance documents provide Americans with enormous 

benefits similar to public health and safety regulations that undergo notice and comment. Below 

8 https :f /www .acus .gov I sites/ default/files/ documents/ pa rrillo-agency-guid a nee-draft -report. pdf 

'Connor Raso, Strategic or Sincere? Analyzing Agency Use of Guidance Documents, 119 Yale U. 782 (2010). 
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is a small and non-exhaustive sampling of guidance documents from different agencies that 

make clear how vital guidance documents are to protecting the public: 

• Opioid and Infectious Disease Guidance: The Centers for Disease Control (CDC) 

recently issued guidance directing physicians to limit the prescription of opioid pain 

medication in an effort to combat the serious and growing epidemic of addiction to opioid 

pain medication that has resulted in fatal overdoses involving pain medication and illegal 

hard drugs in many parts of the country. 10 The CDC has also recently issued Zika virus 

guidance that clarities the dangerous health impacts of the Zika virus, particularly for 

pregnant women, and provides guidance for how to avoid contracting the virus. 11 The 

CDC had issued similar guidance lor the Ebola virus last year. 

" Lead Guidance: The Environmental Protection Agency (EPA) has issued numerous 

guidance documents related to the prevention oflead poisoning among the public and 

particularly children. 12 These include guidance to homeowners about the dangers of lead 

in paint and the options for lead abatement and guidance to real estate developers on how 

to conduct renovations in a safe manner to avoid lead poisoning as well as information on 

the presence of lead that should be disclosed to prospective homcbuyers. EPA has also 

issued important guidance on the harmful presence of lead in drinking water including 

information on protecting schools and child care facilities from lead contamination as 

well as simple and clear fact sheets on the EPA's revisions to its regulations controlling 

lead in water. 

• Food Safety Guidance: the Food and Drug Administration (FDA) has used guidance 

documents extensively to ensure the safety of fbods sold in the U.S. and prevent tainted 

food outbreaks. Specifically, the FDA has provided clarity on what does and does not 

constitute "adulterated'' foods and how to produce and transport food in a safe manner 

that avoids contamination. Examples of such guidance include the prevention of 

salmonella in eggs which leads to tbod poisoning and best manufacturing practices for 

infant fixmula to ensure its safety and quality. 14 

• Airline Safety: The Federal Aviation Administration (FAA) has used guidance 

documents to ensure both the safety of airplanes by clarifying manufacturing and 

operational requirements as well as the safety of passengers by prohibiting passengers 

from bringing dangerous items onto airplanes. 15 

10 http://www.cdc.gov/drugoverdose/prescribing/guideline.html 

http:/ /www.cdc.gov/zika/pdfs/clinicianppt.pdf 

"https://www.epa.gov/lead/lead-policy-and-guidance 

http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatory!nformation/ 

http://www. fda .gov /Food/G u ida nceRegu lation/G uid an c eDocu ments Regulatorylnformation/ ucm38445 1. htm 15 https:f/www.faa.gov/regulations_policies/ 
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" Oil and Pipeline Safety Guidance: The Federal Railroad Administration (FRA) and the 

Pipeline Hazardous Materials and Safety Administration (PHMSA) jointly issued safety 

alerts in 2014 warning of the dangers of transporting volatile crude oil by rail and 

clarifying the need for companies transporting crude oil by rail to notify local authorities 

when crude oil trains were passing through their jurisdictions and the nature ofthe crude 

oil cargo being transported. 16 These actions were taken amidst ongoing crude oil train 

derailments and explosions and came well before the finalization of regulations that 

imposed new oil train safety standards. 

• Wage and Hour Guidance: the Department of Labor (DOL) provides guidance for 

employees regarding their rights under various labor laws and employers regarding their 

responsibilities under the law. This guidance is specific to industry sectors and includes 

guidance on prohibited employment for children and employee rights and benefits under 

the Family Medical Leave Act. 17 

• Sexual Assault Guidance: The Department of Education's Office of Civil Rights (OCR) 

has issued guidance documents to address the growing problem of sexual harassment and 

assault on college campuses. 18 Title !X ofthe Education Amendments of 1972 empowers 

OCR to prohibit sex discrimination in federally funded educational institutions. OCR has 

routinely issued technical clarification and guidance to provide educational institutions 

with clarity of their obligations to students under title IX. Those include "equitable" 

proceedings with respect to allegations of sexual harassment or assault and findings under 

a clear preponderance of the evidence standard. Unfortunately, the Department of 

Education has decided to rescind this guidance under the Trump Administration, thereby 

providing less clarity to educational institutions seeking to police and combat growing 

instances of sexual harassment on campus. 

Agencies have also relied on guidance documents to protect the right of minorities and other 

vulnerable populations that have historically been subject to discrimination. The following are 

examples of guidance documents that have promoted racial, gender, and sexual orientation 

equality: 

• Employment Discrimination Guidance: the Equal Employment Oppmtunity Commission 

(EEOC) issues only guidance interpreting title VII of the Civil Rights Act of 1964 

because it is barred by Congress from issuing substantive regulations which implement 

title VII. 19 Thus, guidance documents are crucial to the EEOC's mission of preventing 

discrimination in hiring practices and in the workplace.20 

16 https://www.transportation.gov/briefing-room/emergency-order 17 https://www.dol.gov/whd/fact-sheets-index.htm 18 https:/ /www2 .ed .gov /a bout/ offices/ list/ ocr /letters/ colleague-2011 04.html 19 42 USC§ 2000e-12 20 https:/ /www.eeoc.gov/laws/guidance/enforcement_guidance.cfm 
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• Disability Discrimination Guidance: The Department of Justice (DOJ) has issued 

guidance related to the Americans with Disabilities Act (ADA) in order to clarify the 

rights of persons with disabilities and to prevent discrimination against such persons 

based on their disabilities. In 20 I 0, DOJ issued comprehensive guidance that provided 

standards for state and local governments to ensure disabled access to public facilities, 

such as wheelchair access. 21 

• Sexual Orientation Discrimination Guidance: A number of agencies, including the 

EEOC, the Department of Education, and the Department of Housing and Urban 

Development. issue guidance to prevent discrimination in education, housing, and 

employment based on sexual orientation. Most recently, the DOJ and the Department of 

Education jointly issued guidance under title IX of the Education Amendments of 197222 

requesting that public education institutions, including higher education institutions, 

allow transgendered students to use restroom facilities of their preference in order to 

protect both the personal safety and the civil rights oftransgendered students.23 The 

Department of Education has also released guidance that aids educational institutions in 

combatting bullying on the basis of sexual orientation. ~ Unfortunately, the Department 

of Education has rescinded guidance on protection oftransgendered students, thereby 

potentially undermining fundamental civil rights protections for those students. 

C. Guidance Documents Benefit Business 

One of the primary purposes of guidance documents is to address regulatory uncertainty among 

businesses as to an agency's interpretation and application of a specific law or regulation. Often 

times, businesses explicitly request such guidance and rely on an agency's ability to quickly and 

fully provide such guidance. Within this category, there are certain guidance documents that are 

issued exclusively for the benefit of businesses and other regulated entities. Any "one-size-fitsall" changes to the guidance document process will make it harder for agencies to issue the 

following types of guidance documents that are designed to benefit business and industry 

stakeholders: 

No Action Letters: Many agencies use No Action Letters (NAL) to clarify for businesses 

whether a particular activity violates an agency's regulation. In other words, these letters provide 

a "safe harbor" for businesses by ensuring that businesses will not be punished when engaging in 

an activity that could potentially run atoul of a regulation. The Securities and Exchange 

Commission (SEC) issues many NALs and is the prototypical example. NALs are usually 

directly requested by businesses that have a strong interest in agencies responding to their 

requests on an expedited basis. Courts have held that SEC NALs are essentially guidance 

21 https:/ /www .ad a .gov I regs2 010/201 OADASta nda rds/G uida n ce 20 lOADAstandards. htm 

20 u.s.c. §§ 1681-1688 (1972). 23 http:/ /www2 .ed .gov I about/offices/list/ocr /letters/colleague-2 01605-title-ix-tra nsgender .pdf 24 http://www. ed .gov (news/ press-relea ses/b ullying-students-disabi lities-add ressed-guid anceamerica%E2%80%99s-schools 
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documents that are exempt from notice and comment requirements. While NALs are directed at 

individual parties or businesses. the SEC and other agencies make the NALs publicly available 

on their website and thus NALs have the elfect of encouraging other businesses to take 

advantage of the "safe harbor" to engage in the same activity. In this way, NALs are used to set 

broad policy without notice and comment. Recently, the Consumer Financial Protection Bureau 

(CFPB) instituted aNAL process in order to allow innovative and consumer-friendly financial 

products to be marketed without the possibility of an adverse CFPB enforcement action. CFPB 

decided that NALs would not be subject to notice and comment because that would 

"unnecessarily discourage NAL applications and delay the NAL process." 

Small Business Compliance Guides: Congress has required agencies to issue guidance to 

reduce compliance costs for businesses. and small businesses in particular. Agencies routinely 

issue ··compliance guides" when finalizing a regulation in order to provide regulated parties with 

a clear and easy to understand manual for how to comply with the new regulation. While these 

guides have proven helpful tor businesses. there is a lack of awareness that such compliance 

guides exist in the first place due to a lack of agency resources to promote awareness of 

compliance guides. 

D. Trump Administration Usage of Guidance Documents 

Despite rhetoric !Tom Trump Administration officials denouncing agency use of guidance 

documents and claims of alleged overuse of guidance documents by the previous 

Administration. agencies under the Trump Administration have already issued hundreds of 

guidance documents and, in all likelihood, will continue to do so. For example, Treasury recently 

issued a notice20 alerting the public that it intends to issue guidance clarifying the application of 

the so-called '"carried-interest" provisions of the recently enacted tax law to private equity and 

hedge fund managers, many of whom have claimed that Treasury does not have the authority to 

issue guidance to clarify what are essentially legislative drafting errors that can only be corrected 

by Congress. The EPA has issued guidance revoking the so-called '"once in always in'" policy 

that could incentivize major industrial pollution sources to reverse the progress made in reducing 

air pollution under the Clean Air Act. 27 ·rhe Department of Justice recently issued lengthy 

guidance28 pursuant to Ex~-cutivc Order 13798 stipulating existing protections for religious 

liberty under Federal laws. Attorney General Jeff Sessions has directed DOJ officials to adhere 

to the guidance. The Department of Health and Human Services has issued guidance permitting 

states to refuse Medicaid reimbursement for Planned Parenthood for preventative health 

scrvices 29 This week, the Department of Education issued guidance that asserts the primacy of 

https:/ /www.justice.gov/opa/pr/attorney-general-jeff-sessions-rescinds-25-guidance-documents 26 https ://www. wsj .com/ articles/treasury-issues-tax -guidance-limiting-carried ·interest -provisio n-1519921428 

https ://www. vox.com/ en ergy-and-envi ronment/2018/1/26/ 169 36104/ epa-trump-toxic -air-pollution 28 https://www.justice.gov/opa/pr/attorney-general-sessions-issues-guidance-federal-law-protections-religiousliberty 

29 https://www. politico. com/story /2 018/02/12/trum p-h h s-pl ann ed-pa renthood-pol icy-3 38084 
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federal authority in preempting state authority to regulate student loan servicers, thereby 

incentivizing loan servicers to ignore strong state standards preventing such servicers from 

taking advantage of students with loans or debt.30 

E. The Dangers of Guidance Document Relorms 

While the available empirical evidence demonstrates that there is no abuse of guidance 

documents in order to evade the notice and comment rulcmaking process, it is impossible to 

ignore the strong incentive agencies have to avoid what has become an increasingly ineftlcient 

and dysfi.mctional rulemaking process across regulatory sectors and at virtually every agency. 31 

If the Committee believes that agencies should be taking action through notice and comment 

rulemaking rather than through guidance documents, the solution is to make the notice comment 

process more efficient and streamlined rather than forcing guidance documents into the notice 

and comment framework reserved for rulemaking. Turning non-binding guidance documents 

essentially into rules subject to notice and comment as well as other procedural requirements, 

such as OIRA review, will do nothing to cure the delays and inefficiencies inherent in the current 

regulatory process. It will only expand those delays to more agency actions that are designed to 

address regulatory uncertainty in an expedited manner. 

F. Making Guidance Documents More Accessible to the Public 

There is a mistaken perception that there is currently inadequate transparency with respect to 

guidance documents. Under the Freedom of Information Act agencies are generally required to 

make guidance documents available to the public. Thus, while agencies do typically comply with 

this requirement, the way in which agencies disseminate guidance documents to the public varies 

according to each agency. In most cases, it is incorrect to assume that agencies are deliberately 

withholding guidance documents from the public. Nonetheless, there is certainly room for 

improvement in making guidance documents more accessible to the public in a fashion that is 

standardized across agencies. Such an effort would increase public awareness of, and 

accessibility to, guidance documents and should be supported on a bipartisan basis. 

One key difficulty in drafting legislative proposals to standardize accessibility of guidance 

documents across agencies is the fundamental problem of clearly defining the guidance 

documents that would be subject to new accessibility requirements. As mentioned previously, 

there is no current commonly accepted definition of guidance document which certainly should 

not be surprising given the numerous types of agency actions and pronouncements that can be 

characterized as a guidance documents. Attempts to define guidance documents in legislative 

proposals and previous Executive Orders clearly manifest the difficulty of doing so. For 

30 https;f /www. ws j. com/a rticles/tru mp-admi n istration -tells-states-to-stop-regula ling-federal-student .. loans· 

1520640480?mod=searchresults&page=2&pos=S 

31 http://www.citizen.org/unsafedelaysreport 32 5 U.S.C. SS2{a)(l)(D), 552{a){2){B). 
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example, EO !3771 subjects a category of guidance documents, "significant'' guidance 

documents, to the requirements under the EO. The EO det!nes this category by parroting 

language from the definition of"significant" regulation under EO 1286634 and then stipulating 

what is not a signif!cant guidance document by reference to numerous agency actions and 

pronouncements that do not constitute "significant" guidance documents for purposes of the EO. 

lt is telling that one of the most visible attempts to define guidance documents did so by 

referencing what should not be considered a guidance documents rather than setting forth a clear 

and simple definition of what is a guidance document. 

Congress must be thoughtful and deliberate in setting forth a det!nition of guidance document 

under any legislative proposal seeking to make those documents more accessible to the public. 

Specitkally, it would be unwise for such a proposal to contain any definition that is too narrow 

or highly prescriptive. There is no need to define guidance in problematic ways in order to 

achieve accessibility and transparency aims. In order to maintain bipartisan support tor making 

guidance documents more accessible to the public, Congress should be very careful in defining 

guidance documents appropriately. 

II. Lack of Transparency in the Regulatory Process under the Trump Administration 

In the following section, I detail a number of troubling instances where Congress is seeking to 

reduce, rather than increase, transparency with respect to deregulatory measures as well as 

instances in which the Trump Administration has taken deregulatory actions that have raised 

significant transparency concerns. 

A. Exempting the Repeal of the Clean Water Rule trom the APA 

Congress is currently considering potential omnibus legislation that would fund the govemment 

for tiscal year 2018. Tucked into one of the appropriations bills that funds the EPA is a stunning 

ideological policy rider that would wholly exempt the repeal of the Clean Water rule from 

compliance with the APA,35 as well as potentially other procedural and substantive requirements 

under other applicable laws including the Clean Water Act. 

The result would be to free the EPA from the fundamental requirements of transparency, 

reasoned decision-making based on evidence, and public participation required by the APA. In 

other words, Congress is authorizing the EPA to repeal the Clean Water rule in the least 

transparent fashion possible thereby foreclosing any opportunity for the public to provide the 

https:/jwww. whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17 -21-0MB.pdf 34 https:j /www.reginfo.gov/public/jsp/Utilities/EO _12866.pdf 35 Sec. 108, Energy and Water Development and Related Agencies Appropriations Act, 2018 (H.R. 3266). 
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agency with feedback, and in a manner that may potentially insulate the EPA fi'om legal 

challenges to the repeaL The supporters of this rider appear to be willing to sacritlcc basic 

transparency requirements and good government accountability measures in order to obtain their 

preferred policy outcome. This is unacceptable. 

The committee's concern with the current lack of transparency in the regulatory process must 

begin with this proposed ideological rider that seeks to exempt the repeal of the Clean Water rule 

from compliance with the APA and other statutes governing EPA authority to ensure that our 

nation's waterways are fi·ee of dangerous pollution and toxins. It is imperative that members of 

this comm ittec who support preserving transparency in the regulatory process, regardless of 

whether the action being taken is regulatory or deregulatory in nature, urge appropriators and 

budget negotiators to remove this provision that shrouds the repeal of the Clean Water rule in 

secrecy. 

B. Intentional Suppression of Economic Analysis in the Department Of Labor's Tip Wage 

Rule 

Last month, news reporting revealed that the Department of Labor (DOL) deliberately withheld 

economic data16 showing that rolling back the tip wage rule would result in signitlcant economic 

costs to hardworking Americans across the country that rely on tips to make sure they and their 

families are able to make ends meet. According to the reporting, the Department of Labor 

conducted an economic analysis to determine the economic impact of rolling back the lip wage 

rule promulgated under the Obama administration which would have protected tips earned by 

restaurant workers. Allegedly, the analysis showed clearly that rolling back the rule would result 

in the transfer of potentially billions of dollars in tips from restaurant workers to restaurant 

owners and employers. After repeated attempts to refashion the analysis to lower the expected 

transfer of tip income, Secretary Acosta allegedly directed DOL staff to publish the proposed 

rule without any economic analysis. The rule was subsequently proposed in the Federal Register 

without any accompanying economic analysis. 

DOL's deliberate withholding of relevant data during a rulemaking process fundamentally 

undermines the integrity of that rulcmaking process. Equally troubling is the fact that the Office 

oflnformation and Regulatory Affairs (OIRA) reviewed the proposed rule before it was 

published and allowed the rule to be published without any economic analysis, thereby 

signitlcantly undermining the integrity of its regulatory review process. As stipulated by 

Executive Order 12866, O!RA typically reviews '·significant" or "economically signitlcant" 

rulemakings from Executive agencies before such rulemakings are proposed or tlnalized by the 

issuing agency in order to determine that the rulemaking is grounded in credible data and 

analysis. including economic analysis, and to allow for interagency review of the proposed or 

tina! rulemaking. Thus, it is highly unusual !or a rule !hat is reviewed and cleared by OlRA to 

36 https://bnanews.bna.com/daily-labor-report/labor-dept-ditches-data-showing-bosses-could-skim-waiters-tips 
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contain no economic or cost-benefit analysis when published. Indeed, the current Administrator 

ofOlRA noted in her confirmation hearing OIRA's role in ·'ensuring that administrative 

agencies ... base their decisions on the best possible economic and technical analysis" and 

promised to "ensure the continuity ofOIRA's principles ... and maintain the integrity of the 

process."37 

Robust congressional oversight and accountability will be critical to getting to the bottom of 

what happened here. Public Citizen applauds the members of the House Education and 

Workforce committee who have sought answers and accountability from DOL. 38 Members of 

this committee should request the same accountability and answers from OIRA. In the interest of 

transparency, OlRA must make available to the public any economic analysis it reviewed that 

was ultimately not included in the proposed rule and the basis upon which it authorized DOL to 

publish the proposed rule without the economic analysis (or analyses) it had conducted. 

If DOL finalizes the current rule under consideration, it is likely to be overturned and thrown out 

as "arbitrary and capricious" if challenged in court. Under the APA, the primary law governing 

agency compliance with the rulemaking process, agencies are required to "consider all relevant 

factors" when conducting a rulemaking and ensure that the agency provides a "rational basis" for 

the agency action based on the rulemaking record. In this case, it is clear that DOL did not 

consider all relevant factors and instead DOL actively sought to exclude relevant data from the 

rulemaking record in order to avoid undermining the rational and legal basis for their action 

rolling back the tip wage rule. Courts are likely to find that this rollback is anything but the 

product of"reasoned decision-making," as required under the APA, and that the suppression of 

relevant data resulted in a rulemaking that is "arbitrary and capricious" due to the agency's abuse 

of discretion. These violations of the APA are certainly serious enough to prevent courts from 

granting DOL chevron deference. Instead, courts are likely to throw out this rule as unlawful 

under the APA. 

Ifthere is a silver lining here, it is that DOL's deliberate concealment of the economic data not 

only substantially weakens the policy and legal justifications for rolling back the tip wage rule, 

but it substantially strengthens the justification for keeping the tip wage rule that DOL issued 

under the previous administration. The economic data clearly shows that the tip wage rule 

protects the economic security of hardworking Americans and their families. Rolling back the 

rule will simply take hard earned money from the pocket books of tipped workers. This is 

exactly why the Department of Labor and Trump Administration sought to conceal the economic 

data. It is time for Congress to hold DoL accountable for keeping the public in the dark and 

ensure that DoL gets back to doing its job of protecting hard-working Americans. 

37 Rao, N., United States Senate Homeland Security and Government Affairs Committee {June 7, 2017) 

(http://www .hsga c.senate .gov I downloa d/testi mony-rao-2017 -05-06) 38 https:/ 1 democrats-edworkforce. house .gov I media/press-releases/scott -and-dem-1 eaders hip·hol d-foru m-onadministrations-harmful-proposed·tip-rule 
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C. Office of Management and Budget Report to Congress on the Costs and Benefits of 

Federal Regulations 

Federal health, safety, and environmental regulations are one of the best investments that our 

government can make according to cost-benet1t figures compiled by OMB on a yearly basis and 

submitted to Congress under the "Regulatory Right to Knmv Act." The report details the costs 

and benet1ts of those rules where agencies were able to fully monetize costs and benefits over the 

preceding ten fiscal years. Every year the report has been issued by OMB, the report has shown 

that the public health, safety, and environmental benefits of the regulations issued that fiscal year 

have substantially exceeded the costs to regulated companies and corporations 39 

The OMB draft report for 2017, which covers rules issued in fiscal year 2016, once again found 

benefits of those rules dramatically exceeding the costs. The draft report showed that rules with 

monetized costs and benefits issued under President Obama's last year in office provided the 

public with 6 dollars of benefits for once one dollar in compliance costs for regulated entities. 

This is a rate of return on investment that more than fully justifies any compliance costs 

associated with health, safety, and environmental regulations. 

The Committee should note that this year's draft report missed the deadline for submission to 

Congress by approximately two months. While the report was supposed to be submitted to 

Congress, at least in draft form, by the end of the calendar year 20 !7, OMB ended up submitting 

the report at the end of February 2018. ln addition, OMB released the report late on a Friday 

evening and without any accompanying statement or press release that would draw attention to 

the report. Public Citizen believes the report provides important information to the public and 

should be disseminated in a way that maximizes accessibility and awareness by the public. 

D. Lack of Transparency With Respect to Regulatory Guidance 

There have been a number of troubling developments regarding both the rescission of guidance 

in less than transparent fashion as well as delay in issuing guidance that is critical to protecting 

the public without making the reasons for such delay transparent to the public. 

I want to focus the Committee on one important area of much-needed oversight with respect to a 

draft guidance document40 from the Equal Employment Opportunity Commission (EEOC) that 

was sent to OIRA for review in November of2017 after unanimous approval by the commission 

and still is under review with no clear indication as to when it will be released to the EEOC tor 

final publication.41 The guidance clarifies the application of laws administered by the EEOC in 

preventing both sexual and sexual orientation -based harassment. This is a much-needed 

resource 1or employers at a moment when renewed public attention on sexual harassment, 

39 https :/ /www. whitehouse .gov jo mb/information -regulatory-affairs/reports/ 

41 http:/ /thehill.com/regulation/administration/373938-harassment-guidance-for-employers-awaits-approvalfrom-white-house 
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including based on sexual orientation, has focused on ways that government action can combat 

harassment in the workplace, 

It is disappointing to see O!RA continue to review this guidance much longer than the 90 days 

generally allowed under EO 12866 for OIRA regulatory review, OIRA has made no public 

indication as to why it has not yet completed its review of the guidance or on what basis it 

asserted authority to review the guidance in the first place. Because existing OIRA authority to 

review guidance is quite narrow as compared to regulatory review, OIRA 's review of guidance is 

tar more selective and thus indicative of potential concern and opposition to the guidance by 

O[RA, the Administration, or both. In general, Public Citizen encourages OIRA to make clear 

when it invokes the authority to review guidance, on what substantive or procedural basis OIRA 

has sought to review the guidance including any concerns OIRA may have with the guidance, 

and strictly follow the review periods laid out in EO 12866 in conducting and concluding its 

review of guidance, 

[JL Reform Measures to Increase Transparency under the Trump Administration: 

There are several areas that present opportunities for the Trump Administration and Congress to 

increase transparency on both regulatory and deregulatory actions. While the regulatory process 

is already subject to multiple requirements for reasoned decision making and transparency, 

certain gaps in transparency persist in the regulatory process, 

A. Lack of Transparency at OlRA 

A series of GAO reports, beginning in2003, 42 have documented numerous transparency 

concerns regarding the regulatory review process at O!RA. In multiple reports, GAO has found 

that O!RA does not comply with many of the most important transparency provisions in 

Executive Order 12866, the primary Executive Order governing OIRA's regulatory review 

process. O!RA has thus far been unwilling to adopt recommendations that have been made 

repeatedly by GAO, most recently in 2016, to improve the transparency of its regulatory review 

process. 

The most crucial reform, in terms of creating transparency at O!RA that is on par with the 

Executive agencies it oversees, would be for OIRA to disclose the substance of the changes it 

makes to draft proposed and final rules submitted to them for review. One of the virtues ofthe 

notice-and-comment rulemaking process by which agencies adopt significant regulations is its 

inherent transparency. Agency justifications fur its decisions regarding the substance of the rule, 

including its response to comments and agency studies or analyses of the rule, turm the 

transparent basis for adopting the rule, The Federal Register, where agencies publish their 

42 Government Accountability Office, OMB's Role in Reviews of Agencies' Draft Rules and the Transparency of 

Those Reviews, GA0-03·929 
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regulatory actions and accompanying analyses, is the cornerstone of transparency in the 

regulatory process. 

By contrast, almost none of the substantive changes that OIRA makes to draft agency rules 

during its review are required to be disclosed to the public.43 Irrespective of the number and 

importance of those changes, the public only gets to see the version of the rule in the Federal 

Register with those changes already incorporated. In practical tern1s, this means that OIRA is 

able to escape accountability for any changes to a regulation it reviews. This certainly makes it 

difficult to assert that the OJRA review process improves regulations since OlRA does not show 

its work. In the rare instance where the agency issuing the rule discloses requested changes and 

edits during the OIRA review process, attribution of the changes is not disclosed meaning the 

public is unclear whether OIRA requested the changes or potentially another agency that 

submitted comments during the interagency review process. 

B. Lack of Transparency under EO 13777 

In order to implement EO 13 771, President Trump issued EO 13 77i4 which largely assigned 

duties and responsibilities to newly created "regulatory reform task forces" which would oversee 

implementation of EO 13771 at each agency. While EO 13777 gives considerable authority to 

these task force officers, one stunning omission is any requirement to disclose the identity of the 

task force officers themselves. Furthermore, many agencies have been resistant to disclosing the 

identity of these officers, despite EO 13777 having been issued over a year ago. It is critical that 

the public know which agency officials are carrying out the deregulatory agendas at each agency 

and that the public have confidence such officials are not taking action that present a conflict of 

interest by benefitting those that formerly employed such ofncials. 

C. Lack of Transparency Regarding How Deregulation Benefits President Trump, White 

House Officials, or Top Agency Officials 

Recently, there has been increased interest in revisiting an agreement between the Internal 

Revenue Service and OIRA that would result in IRS submitting greater number of regulatory 

actions to O!RA for regulatory review. When the GAO studied the issue, it included statements 

from a former OIRA Administrator that indicate one of the rationales for excluding OJRA review 

ofiRS rules was to "insulate the Executive Office of the President from the charge that it might 

use OMB's review of!RS for political purposes."45 

There are a significant number of instances in addition to the one above where deregulatory 

actions taken by this Administration could potentially directly benefit the President himself or 

43 Rules promulgated under the Clean Air Act by the Environmental Protection Agency do require that substantive 

changes made by OIRA to draft proposed and final rules be disclosed. 44 https:/ /www.federalregister.gov/ documents/2017 /03/01/2017-04107 /enforcing-the-regulatory-reform-agenda 45 Government Accountability Office, Treasury and OMB Need to Reevaluate Long-standing Exemptions of Tax 

Regulations and Guidance, GA0-16-720, at pg. 26. 
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top officials in his Administration. Last year, Public Citizen released a report46 with Rep. 

Cicilline that outlined over a dozen examples ranging from the repeal of the Clean water rule 

potentially benefiting golf courses owned by President Trump's business holdings to DOL's tip 

wage rule potentially benefitting casinos or restaurants owned by or affiliated with President 

Trump. 

In order to make such potential conflicts of interest transparent to the public, Rep. Cicilline 

introduced the DRAIN the Swamp Act (H.R. 4014) which would require agencies to analyze the 

potential direct benefits of any significant regulatory action, including repeals, to President 

Trump and top government officials. Public Citizen encourages members of Congress to support 

H.R. 4014 in order to provide the public with a clearer picture as to how members of the 

Administration, including the President, are benefitting from deregulatory actions that they 

direct. 

46 https ://www. citizen vox.org/201 7 /10/11/d eregulating-do II ars-trumps-a nti-regulation-agen da-boostpocketbook/ 
109 

Chairman GOWDY. Thank you. 

The gentleman from Tennessee, Judge Duncan, is recognized. 

Mr. DUNCAN. Well, thank you very much, Mr. Chairman. 

About a year and a half ago, I read about a new book by a prominent Boston lawyer who was educated at Princeton and Harvard, 

and he wrote this. He said, quote: ‘‘The average professional in this 

country wakes up in the morning, goes to work, comes home, eats 

dinner, and then goes to sleep, unaware that he or she has likely 

committed several Federal crimes that day. Why? The answer lies 

in the very nature of modern Federal criminal laws, which have exploded in number but also have become impossibly broad and 

vague,’’ unquote. 

And while that quote pertains to Federal criminal laws, it really 

applies all over the scope of Federal regulation. They have exploded 

in number, to such an extent that the staff has provided us with 

an article from the Competitive Enterprise Institute entitled ‘‘Ten 

Thousand Commandments,’’ and they estimate in this article that 

the annual cost, the yearly cost of Federal regulatory activity is 

costing our economy as much as $2 trillion a year. 

And what I’ve noticed over the years is that the more heavily 

regulated any industry becomes, it ends up in the hands of a few 

big giants. And I know the Congress, several years ago, passed the 

Dodd-Frank law. Before we passed that law, the five largest banks 

had 22 percent of total deposits in this country; now they’ve got 45 

percent. And there have been hundreds of small banks and credit 

unions that either have gone out of business or have been forced 

to merge or have been bought out. 

And so we passed a law aiming at the big giants, but we hurt 

the little guys. And it seems that applies in almost every industry. 

Ms. Harned, have you noticed that same trend? 

Ms. HARNED. Absolutely. I’ve seen it my whole career, including 

before I was at NFIB. We represented at my food and drug law 

firm a small-business owner, actually a couple, that were targeted 

by the DEA. And it was through that process—at the time, they 

were trying to get at, you know, the meth lab issue, which is an 

important one. But you saw, through the regulations, through all 

of that, a more consolidated part of that industry. 

Later, you saw it in grocery stores when it came to WIC programs. And I’ve seen it in—you can really see it in so many industries. And Dodd-Frank is a perfect example. It was the community 

banks that were getting closed, not the big ones. 

And so there’s a reason for this. The small-business owner is the 

one doing the regulatory compliance. They do not have legions of 

attorneys to scour the regulations of the Federal Register, much 

less the guidance documents we’re here talking about today. 

Mr. DUNCAN. When the FDA was small and far less bureaucratic 

than today, many years ago, we had very many small companies 

in the drug business. Now the drug business is in the hands of a 

few big giants. 

Mr. Noe, I saw you shaking your head up and down. Have you 

seen this in your industry? 

Mr. NOE. Sir, I think it’s an across-the-board issue. And you’ve 

even heard, you know, some of the leaders of the largest banks 

talking about how Dodd-Frank created a moat to help them keep 


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competitors out. So there can be a very unfortunate effect where, 

you know, larger entities can try to use regulations as a barrier to 

entry to create a competitive advantage vis-a-vis smaller entities. 

I think that’s true across the board. 

Mr. DUNCAN. I notice also in some of the material we’ve been 

provided that fewer than 200—that the committee requested information on more than 12,000 guidance documents. Fewer than 200 

guidance documents were submitted to the Government Accountability Office, as required by the Congressional Review Act. 

Ms. Nguyen, do you think it’s accurate to say that the Congressional Review Act is being ignored by most of the agencies? 

Ms. NGUYEN. Based on our recent work, we found that noncompliance with CRA does exist for the periods that we reviewed, 

so during the transition periods as well as nontransition periods. 

So what it means is that the most common deficiency that we 

found includes the provision for agencies to provide Congress with 

adequate time to review regulations. 

Mr. DUNCAN. Well, I can tell you, I was a lawyer and a judge 

before I came to Congress, and yet there’s so many laws and rules 

and regulations on the books in this country today, I don’t think 

they’ve even designed a computer that can keep up with all of 

them, much less a human being. 

And as this article that I—this book I quoted from, I think it’s 

accurate to say that almost everybody in this room has violated 

several Federal laws, rules, and regulations. They didn’t mean to, 

they didn’t know they were. But with this explosion of laws, rules, 

and regulations, it’s happening all across this country today, and 

it’s a very sad thing. 

I yield back. 

Mr. MEADOWS. [presiding.] I thank the gentleman from Tennessee. 

The chair recognizes the gentlewoman from New York, Mrs. 

Maloney, for 5 minutes. 

Mrs. MALONEY. Okay. Thank you, Mr. Chairman. 

In 2016, the Obama administration’s Department of Health and 

Human Services sent a guidance letter informing States that it’s 

against the law to terminate Medicaid providers, particularly family-planning providers like Planned Parenthood, for ideological reasons. 

This guidance came at a time when some States were aggressively trying to ban and defund Planned Parenthood simply because they provide family-planning services as well. They based 

their efforts on unsubstantiated allegations made by David 

Daleiden, who circulated misleading and heavily doctored videos in 

2015. 

I would point out that our very committee conducted an exhaustive investigation of these claims, and we concluded, on a bipartisan basis, that his allegations were completely false. Even our 

former chairman, Representative Chaffetz, went on national television to tell the world that we here on this committee found no 

evidence that they broke the law. He sat right here in this chair, 

and he said he found—he, quote, ‘‘found no wrongdoing,’’ end quote. 


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Yet some States and outside advocacy groups continue to cite 

these discredited claims as a rationale for continuing to target 

Planned Parenthood to this day. 

In January, the Trump administration rescinded the Obama-era 

guidance in a follow-on guidance letter to State Medicaid directors. 

Last month, Ranking Member Cummings sent a letter to the Department of Health and Human Services raising the concerns after 

a whistleblower provided documents showing that an extreme antichoice group known as Alliance Defending Freedom was behind 

this recision. The whistleblower provided a draft guidance letter 

written by the group, and it appears that HHS rescinded the 

Obama guidance at the urging of this group. 

So I’d like to ask Mr. Narang, in your view, is it a best practice 

to consult secretly with one outside group while not consulting at 

all with other groups that would be affected by agency guidance? 

Mr. NARANG. I do think that sounds like an improper use of guidance in this instance. And it is troubling to me that it potentially 

was adopted at the behest of one particular individual or group. 

Mrs. MALONEY. And should HHS have conducted additional informal outreach to other stakeholders, such as Planned Parenthood, as well? 

Mr. NARANG. I do think that it would have been more appropriate to also include Planned Parenthood in guidance that would 

directly potentially affect them. 

Mrs. MALONEY. And, Mr. Narang, what other steps should HHS 

have taken? 

Mr. NARANG. Well, as I was saying, I do agree that it would be 

an improvement to make guidance more accessible, which can be 

termed more transparent, but I think the key is making it more 

accessible to the public. So this type of guidance, it would have 

been helpful, clearly, to make it accessible to the public, potentially 

in draft form. 

Mrs. MALONEY. Okay. 

And, Professor Parrillo, you wrote a report on these issues that 

was the basis for the Administrative Conference’s best practices 

guide. Would you agree that it is generally not a best practice to 

consult secretly with one outside group while not consulting at all 

with other groups that would be affected? 

Mr. PARRILLO. Ms. Maloney, there are a variety of means for 

agencies to take stakeholder input on guidance. 

One of them is targeted outreach, in which there’s not a public 

announcement that the guidance is being considered, but, rather, 

the agency selects certain stakeholders to talk to. This has the—— 

Mrs. MALONEY. Since my time is limited, could I just specifically 

ask, what would have been the best practice in this situation? 

Mr. PARRILLO. In the case of targeted outreach, I think agencies 

would typically get diverse points of view, multiple sides. 

Mrs. MALONEY. Okay. 

The Obama guidance document clarified the law. It stated what 

the Social Security Act and accompanying regulations require. 

So, Mr. Narang, despite what the Trump administration may be 

trying to do, it cannot contravene Federal law, correct? 

Mr. NARANG. Well, that’s true. And it will likely end up in court 

if that’s the case. 


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Mrs. MALONEY. So, at this point in time, under the law, States 

still may not refuse to provide Planned Parenthood with funding 

just because they have ideological disagreements with them. Is that 

right, Mr. Narang? 

Mr. NARANG. Guidance documents are nonbinding. 

Mrs. MALONEY. Okay. 

My time is almost up, but I’d just like to close by saying it’s good 

to hear that, at least at this point in time, States cannot refuse to 

pay Planned Parenthood for Medicaid services lawfully provided. 

Thank you. 

Mr. MEADOWS. The gentlewoman’s time has expired. 

So, Mr. Narang, I want to make sure that that last comment— 

so you’re saying guidance documents are nonbinding. That’s your 

official testimony here today? 

Mr. NARANG. That’s not just my official testimony; it is the very 

nature of guidance documents. 

Mr. MEADOWS. All right. 

The gentleman from Ohio is recognized for 5 minutes, Mr. Jordan. 

Mr. JORDAN. I thank the chairman. 

I first want to start by just saying the assertions made by the 

gentlelady from New York—I couldn’t disagree more. 

First of all, remember, those videos that were produced, the day 

after the first video came out, Cecile Richards issued an apology. 

Last time I checked, you don’t apologize unless you’ve done something wrong. 

And the group who said that they were heavily edited and 

changed, guess who that group was? Fusion GPS. We know how 

much you can trust them. Fusion—the same organization that was 

paid by the Clinton campaign, the DNC, to put together this dossier, ‘‘salacious and unverified.’’ Not my words; former FBI Director 

James Comey’s words under oath in front of a congressional committee. That’s who said those tapes were heavily edited. You can’t 

trust that. I mean, that was just ridiculous. 

Mr. Noe, let me get back to the subject at hand. So let me summarize—I think I’m summarizing, and then I want your response. 

So, when I look at what GAO reported and the work that the 

oversight staff has done in this area, it seems to me you could say 

some agencies are actually just skirting the whole rulemaking process altogether, trying to get around it. Some are actually exempt. 

The IRS has this memorandum of understanding that they don’t 

even really have to follow the rulemaking, the CRA process. And 

then a whole bunch of them use the guidance rules versus actually 

going through the formal process. In fact, I think it was, like, 90 

percent of the rules issued are actually guidance. Like, 12,000 was 

what the staff determined, the committee staff determined. 

So you have all that going on, but yet we still have this CRA Act 

where Congress can get rid of some of these and we can get rid of 

them. And we’ve done 16 in 1 year. 

So is that kind of an accurate sort of overall assessment? Some 

are skirting it. Some don’t even have to follow them, they’re exempt, namely the Internal Revenue Service. And then those that 

do go through any kind of rulemaking process, it’s largely guidance 

and not the actual formal rule itself. Is that accurate, Mr. Noe? 


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Mr. NOE. Congressman Jordan, yes, it is. 

I was the lead Senate counsel in the Congressional Review Act, 

and I can tell you it was Congress’ intent that all the covered rules 

would be submitted. And they haven’t been. And that’s something 

everybody should be concerned about. 

I mean, I think the good news here is that it’s very easy for the 

agencies to comply. We all have email. It’s easy to send your rule 

to Congress. And they haven’t done it. 

And, unfortunately, this pattern of Congress imposing procedures 

for the purposes of transparency and accountability on the agencies—and as soon as they get hold of that mandate, they often 

make Swiss cheese out of it. 

Mr. JORDAN. Why is the IRS exempt? 

I mean, one of the findings the committee staff and GAO found 

was only 1 of more than 200 tax regulations issued was determined 

by the IRS to be significant, which I find interesting. My guess is 

taxpayers might think more than 1 out of 200 is actually significant, but somehow the agency felt like only 1 was significant. 

So why are they exempt? Why do they get the special deal? It 

seems to me that’s the one agency you’d want to make sure they’re 

doing things exactly by the book and as transparent as possible, 

particularly in light of their history, recent history. 

Mr. NOE. I guess it seems that they’re exempt because they say 

so. 

I used to work at the Office of Management and Budget reviewing rules. There is a memorandum of understanding about what 

rules should come over from the IRS. They have driven a Mack 

truck through that. 

And I would just refer you to the Wall Street Journal piece written by former Clinton OIRA Administrator Sally Katzen and 

former Bush OIRA Administrator Susan Dudley that points out 

that that should come to an end. 

Mr. JORDAN. And it seems to me, in light of their recent history, 

an organization with the power and influence that the IRS has and 

exercises over Americans’ lives, their history of specifically targeting conservative groups—they did it in a systematic way, they 

did it for a sustained period of time, they did it—it seems to me 

all the more reason to have them follow the rulemaking process 

and be subject to OIRA as we move forward. 

Mr. NOE. Yeah, I’m hopeful—— 

Mr. JORDAN. Do you think we need legislation to do that, to overturn this memorandum? Or what? 

Mr. NOE. You know, I think maybe calling them up here and 

asking them—— 

Mr. JORDAN. Oh, we’re more than willing to do that. Yeah. 

Mr. NOE. —to answer to that. 

One reason I say maybe if Congress were to step in here is, honestly, I think, you know, they’ve had years to comply with these executive directives and they have made Swiss cheese out of them. 

So I think they either need to come to an understanding with you 

all—— 

Mr. JORDAN. I think the chairman and I would be happy to call 

them back. 


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Mr. NOE. —they’re going to comply or else they’re going to face 

legislation. 

Mr. JORDAN. We’ll probably bring you back, too, and talk about 

it when we have the IRS in here as well. 

But thank you, Mr. Noe. 

Thank you, Mr. Chairman. I yield back. 

Mr. MEADOWS. I thank the gentleman’s recommendation for a 

followup hearing with some of the individuals. I can assure you 

that not only will we have a hearing but we will go ahead and follow up. And any recommendations for other potential witnesses 

who abuse the system would be welcome for this committee. 

The chair recognizes the gentlewoman from the District of Columbia, Ms. Norton, for 5 minutes. 

Ms. NORTON. Thank you, Mr. Chairman. 

Early in the Trump administration, there emerged a rule that— 

so-called two-to-one rule—we’ll repeal two regulations for every 

new regulation. And I’m concerned with whether or not this rule 

violates the Administrative Procedure Act. 

Now, one can understand that a new administration might well 

want to overturn some regulations that they regard as burdensome 

or otherwise. That is perfectly rational. But the APA, the Administrative Procedure Act, requires a rational basis for all parts of rulemaking. 

Now, sacrificing two for one does not seem to me to be a rational 

basis. Pass one rule that helps protect the air we breathe; get rid 

of another rule that protects the water we drink. I’m not even sure 

how one would proceed. 

Ms. Nguyen, do you think there could be an APA concern here, 

a procedural concern, with the two-for-one rule? 

Ms. NGUYEN. GAO does not take a legal position—— 

Ms. NORTON. I didn’t ask you for your legal position. Do you 

think there could be an APA—and surely you know about that— 

concern with a blanket two-for-one rule? 

Mr. CRAMER. I’m Robert Cramer from the General—— 

Ms. NORTON. Please sit down at the table so you may be heard. 

Mr. CRAMER. Okay. 

I think the question you’re posing is a legal question, whether 

there is a violation of some provision of the APA as a result of this 

executive order. We haven’t considered that, so we can’t, then, express an opinion at this—— 

Ms. NORTON. Do you think it is appropriate for you to consider 

that? I can understand you may not have done so. I am asking you, 

is it appropriate for you to do so, given the regulations that have 

been overturned and the two-for-one rule. 

Mr. CRAMER. When we receive requests from Members of Congress for opinions—— 

Ms. NORTON. I am asking for an opinion now. And I ask you to 

write the chairman of the committee your opinion on whether the 

two-for-one rule is in keeping with the Administrative Procedure 

Act. 

Mr. Parrillo, do you have a view, at this point, on that? 

Mr. PARRILLO. I have not studied the issue enough to give an 

opinion. 


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The argument that a challenger would make would be that a 

particular recision of a rule is arbitrary or capricious, because the 

reason for it was in order to make room for this other rule that is 

not sufficiently related. 

On the other hand, there is, for example, some D.C. Circuit 

precedent to suggest that as long as the recision of a rule can be 

justified on the official record, then political pressure regarding the 

choice that an agency makes between different possible regulatory 

choices, each of which could be justified in themselves, that that is 

not untoward. 

Now, this is a controversial issue, in terms of whether this D.C. 

Circuit precedent is a good idea, but that is to give you an idea of 

the arguments on both sides. 

Ms. NORTON. Mr. Narang, there is a court suit, and I understand 

standing has been an issue, but, perhaps, you could tell us the 

basis for an attack on the two-for-one rule. 

Mr. NARANG. Well, I think this is a very good question. And, as 

much as I would like to answer it, unfortunately, I am not able to, 

due to our pending litigation challenging the executive order as unconstitutional. It has not been resolved on the basis of standing 

just yet. The court has—— 

Ms. NORTON. What do you argue in court? 

Mr. NARANG. We are arguing that the executive order fundamentally violates certain clauses in the Constitution, namely, the take 

care clause that the President takes care that laws are faithfully 

executed. 

If I could take a minute to talk about the real world impacts of 

this executive order and illustrate it. It is going to make it very difficult, if not impossible, I believe, for agencies to issue the most important beneficial regulations to the public. 

Let’s take the lead and drinking water standard rule. I think we 

can all agree it is much-needed and it will be enormously beneficial. It will likely be quite costly, as well, and it is necessary for 

the EPA to offset those costs. We are talking about offsets that are 

not that available to agencies. 

Over the course of the last year, the administration said that 

they have only about $560 million in regulatory offsets. If the lead 

and drinking water rule costs more than $560 million, but provides 

massive benefits that outweigh the costs, they still will not be able 

to issue the rule, and that is the deregulatory offsets for all agencies, just for one rule. It really is going to be very difficult to protect the public with this executive order in place. 

Ms. NORTON. Thank you very much. 

Chairman GOWDY. The gentlelady yields back. 

The gentleman from North Carolina. 

Mr. MEADOWS. Thank you, Mr. Chairman. 

Ms. Nguyen, let me come to you, because the gentleman at the 

end of the table, Mr. Narang, said that guidance is nonbinding. 

In your expertise, would you suggest that the agency’s view all 

guidance as nonbinding? 

Ms. NGUYEN. Regarding our past work looking at guidance, guidance is typically nonbinding. But for the IRS, we found that they 

consider their guidance to be authoritative because their examiners 


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are bound by the statutes and what they are able to do. We don’t 

have a particular recommendation in that—— 

Mr. MEADOWS. So is there a statute that would say that the IRS 

guidance should be binding and all other agencies should not? Is 

there a statute that says that? Not an interpretation, but a statute. 

Mr. CRAMER. If I may answer. 

Mr. MEADOWS. Sure. 

Mr. CRAMER. No, there is no statute. 

Mr. MEADOWS. There is no statute, so there is no law that would 

suggest that the IRS guidance should be treated differently than 

other agencies, is that correct? Is that your sworn testimony? 

Ms. NGUYEN. It is important to know why the IRS, many of 

their—— 

Mr. MEADOWS. I don’t want you to opine. 

Is there a law that would suggest that the IRS guidance should 

be treated differently than guidance from other agencies, yes or no? 

Ms. NGUYEN. There is no statute. 

Mr. MEADOWS. Okay. So if there is guidance, that they continue 

to put out, that has the effect of law, would you suggest, and I will 

let your counsel answer this, would you suggest that they are actually infringing on the legislative process of Congress if, indeed, they 

are putting forth guidelines and rules that have the effect of law, 

but yet are not warranted by statute? 

Mr. CRAMER. If the IRS—— 

Mr. MEADOWS. I need you to speak into the mic 

Mr. CRAMER. If the IRS is issuing guidance that is binding on the 

regulated community, the public, that would be a violation of the 

APA—— 

Mr. MEADOWS. Okay. And I agree with you. And so let me tell 

you the problem that I have here. Because they have issued a number of different guidances, and we have a letter before the GAO 

right now, as it relates to what I call the silent returns and the 

fact of the implementation of the Affordable Care Act. And so as 

we are asking you—and I understand you only have two reviewers 

that review this for the entire GAO, is that correct? 

Mr. CRAMER. Actually, we don’t have a dedicated staff to these. 

Mr. MEADOWS. So it is even worse than two reviewers, okay. 

So as we go with this, here is my concern. If the IRS is able to 

do rules and regulations at the pace of 9 to 10 rules a day, and our 

action, under the Congressional Review Act, would require a laborious month, two month, three month process to overturn that, do 

you see how Congress would be at a disadvantage of them encroaching in on our legislative jurisdiction? 

Mr. CRAMER. Certainly. The Congressional Review Act was intended to give Congress the ability to oversee agency rulemaking 

and to place a check on old rulemaking. 

Mr. MEADOWS. So would you also, would the GAO also, and, as 

I say, we have a request there, indicate that if, indeed, the IRS has 

not followed a statute that would give them the ability to write 

guidance, then they do not have really a legal basis for that guidance, other than a memo of understanding, how could it be binding 

on the American taxpayer if, indeed, there is not a statute that 

would support their guidance and rulemaking? 


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Mr. CRAMER. If a person affected by the guidance challenged that 

in court, a court could rule on whether it is binding. 

Mr. MEADOWS. So are you suggesting, since I am affected by 

that, are you suggesting that we should file a lawsuit against the 

IRS, instead of just actually overturning or giving Congress the 

ability to overturn that? 

I guess here is my concern, and I will cut to the chase on this 

long, laborious line of questioning. We have a request into GAO. 

GAO is wanting us to check with the IRS and the Department of 

the Treasury to have them opine on whether they believe that their 

guidance actually is mandated. And you are telling me today, with 

this testimony, that they believe that they are in compliance. 

Why would we ask the very agency, of whom they believe is 

doing it correctly, to opine on whether they are doing it correctly 

or not? Why would it not be a GAO decision to say that this has 

the operation of rules and laws and is subject to the Congressional 

Review Act? 

And I will yield back to the chairman, and if he gives you time 

to answer that, that is certainly within his purview. 

Chairman GOWDY. I did find the gentleman’s line of questioning 

to be long, but not laborious, so I would allow time for an answer 

in the fullest way you want to give it. 

Mr. CRAMER. I will be happy to answer the question. 

We have been asked to give an opinion on whether a specific IRS 

action is a rule for purposes of the Congressional Review Act. 

As part of our standard procedure, whenever we are asked questions of that nature, we do reach out to the agency because we 

need to hear their views on the law and come to an understanding 

of why it is that they did what they did, at least in their view. It 

is kind of like a judge, when he has to decide a case, has to get, 

from both sides, their view on the law. 

That is the process we are following. We are just trying to get 

the full picture, legally, so that we can, hopefully, make the right 

decision. 

Chairman GOWDY. I want to thank the gentleman from North 

Carolina, who has become as much of an expert as any Member of 

Congress can be, in this important, but difficult and challenging 

subject matter area. So I thank Mr. Meadows. 

The gentleman from Iowa is recognized. 

Mr. BLUM. Thank you, Chairman Gowdy, and thank you to our 

panelists for being here today. 

I am not a lawyer. I am a career small business person. And a 

wise person once said the following, and it has stuck with me ever 

since: The complex favors the large. 

And someone mentioned earlier in their testimony that regulations end up building moats around large businesses. In fact, over 

the last 8 years, regulations have driven industry consolidation. 

Call me old-fashioned, but I think industry market forces should 

drive consolidation, if there is any, not regulations. 

I looked the number up. Under President Obama’s administration, we added 20,642 new regulations on the books. I mean, we 

are called ‘‘regulation Nation,’’ and yet we want our businesses to 

compete globally and provide good-paying jobs with good-paying 


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benefits. Of course we all want that. But we have a 600-pound sack 

of regulations on every business’ back. 

Regulations have driven consolidation in the banking industry 

with Dodd-Frank; healthcare industry with the ACA Act; agriculture, I am from Iowa. I don’t know about you, but I don’t think 

it is good for our country, and it is not good for our citizens to have 

five companies controlling our financial sector, five companies controlling our food supply, and five companies providing our 

healthcare. 

We have a lot of lawyers in Congress, probably too many actually, with all due respect. We need more people who have met a 

payroll. Most folks have never met a payroll. I have met a payroll 

for over 20 years. 

So I would like to ask Ms. Harned—that is the correct way to 

pronounce that, I hope—you are with NFIB, what type of impact 

does this have on small businesses, all the regulations? 

Ms. HARNED. Right. So we have done numerous surveys on this, 

because regulations have been a perennial problem for small-business owners. And, honestly, it is always the top three problems, 

second only—or third only to taxes and health insurance, regardless of if it is good or bad, as far as how many are coming out of 

the regulatory state. 

Complying with regulations is a problem for small-business owners because 72 percent of those employers that have ten or fewer 

employees are the regulatory compliance officer. They are reading 

the rule and they are trying to figure out how to comply with it. 

What are they not doing? They are not managing their business. 

They are not growing it, they are not managing staff, and they are 

not trying to get new customers. And that, we think, is not helpful 

for the economy. And, honestly, that is very much, I think, why you 

will see, especially in these heavily regulated areas, more consolidation. 

Mr. BLUM. Two trillion dollars, somebody mentioned earlier, it 

costs the economy every year. 

In small businesses, could they pay their employees more or 

could they offer better healthcare to their employees if they weren’t 

paying all these costs? We don’t want no regulations, okay. We just 

want a happy medium, happy balance. If they had less regulations, 

could they help their employees out more? 

Ms. HARNED. Absolutely. All of the research that has been done 

on this has shown that the disproportionate burden is real cost, I 

think. One study recently, $10,000 per employee for small employers to comply with regulation. When you consider the fact that our 

members at NFIB, on average, net $50,000 to $75,000 a year, they 

are not counting their gold coins. This is real dollars that they can’t 

afford to spend. 

Mr. BLUM. Counting their bit coins or their gold coins? 

Mr. Noe, the same question to you. 

Mr. NOE. I think this is a basic problem. I think what makes our 

country great is that it is a free market democracy, and that starts 

with the free market and all the benefits it can deliver in terms 

of wealth creation, economic security, jobs, and all the other benefits. 


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Certainly if there are market failures, there should be addressed 

things like emissions, environmental health, and safety standards 

that I feel so strongly about. Those are all important issues that 

should be addressed by a regulatory system, but we ought to do it 

in a rational way. 

I think there should be a congressional requirement that all regulations should do more good than harm. 

Mr. BLUM. Mr. Narang, 20,000, not that we are counting, 20,642 

new regulations in the Obama administration. How much is 

enough? How much is enough? How much do you think businesses 

can handle before we don’t have any businesses? 

Mr. NARANG. At Public Citizen, I have met many individuals 

that have lost loved ones due to a lack of effective strong regulations that have had children have asthma due to being sited close 

to polluting sources. It is very important to hear from all voices in 

this debate, and so it is critical to hear from small-business owners 

and small business representatives. But I think it is just as critical 

to hear from the folks, the average Americans, that benefit from 

regulations on a daily basis. We all benefit from regulations on a 

daily basis. 

Mr. BLUM. Can we keep adding 20,000 regulations every two 

terms, two administrations, can we keep doing that? 

Mr. NARANG. I have many stories to share where there was a 

lack of adequate and effective regulation. 

Mr. BLUM. Is that the exception or the rule? 

Mr. NARANG. I don’t think it is the exception. 

Mr. BLUM. You don’t think so? 

Mr. NARANG. Well, let me say this. As much as it is my honor 

and pleasure to testify here today, I really would encourage this 

committee to hear from folks we talk to at Public Citizen, and 

other organizations that work with us, that benefit from regulations and that have been dramatically harmed by a lack of adequate and strong regulations. 

Mr. BLUM. I yield back my time, Mr. Chairman, that I do not 

have. 

Chairman GOWDY. The gentleman from Iowa yields back. 

The gentleman from Alabama is recognized. 

Mr. PALMER. Thank you, Mr. Chairman. 

I want to begin with the lady from the GAO, Ms. Nguyen. 

In your written testimony, you talked about regularly evaluating 

whether issued guidance is effective and up to date. Does the GAO 

have any estimate of the percentages that were not considered effective and up to date of the regulations? 

Ms. NGUYEN. We haven’t done work to determine the extent to 

which how much is done. 

I want to share an example of an agency who does have procedures in place to review whether or not guidance is current. DOL, 

for example, has this process in place. And through this process, 

DOL was able to reduce 85 percent of its guidance for a subagency. 

Mr. PALMER. I appreciate that. I am a big fan of the GAO, by 

the way. I think you guys do great work, but I try to utilize your 

work so the questions that I am asking is in a context of how do 

we improve a situation. And so when you have requirements— 

these are requirements imposed on the agencies and they don’t 


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comply. I mean it is great to point out that one does, but they all 

should—are there any penalties, any remedies applied for those 

who fail to comply? 

Ms. NGUYEN. As noted in our report, we have made recommendations to agencies to improve their adherence to OMB requirements 

for significant rules guidance, and also to adhere to internal controls for nonsignificant guidance. 

Mr. PALMER. I appreciate that, and I hate to cut you off, but I 

have only got a few minutes left. 

That is part of the problem we see time and time again. It is the 

same thing with improper payments. There are laws actually 

passed by the Obama administration, signed by the President, that 

requires agencies to report the improper payments, but they don’t. 

The GAO writes a report and has recommendations, but there is 

no enforcement. That is a huge issue. I mean, what good does it 

do to have these requirements if nobody complies? 

Ms. NGUYEN. GAO does not have enforcement authority, although we do have a good record of agencies implementing our recommendations. Generally, we have close to an 80 percent implementation of recommendations, and we believe this is the case because of the quality of our work. 

Mr. PALMER. Okay. I want to make sure you understand. I am 

not assigning this responsibility to the GAO. I am simply pointing 

out, this is a public hearing, for the public to understand, that we 

don’t require the agencies to comply with the guidelines that we 

give them. Eighty percent might be a B-minus. I think we owe it 

to the taxpayers to be an A-plus. We owe it to the people trying 

to create jobs to be an A-plus. 

And on another point here, under the Congressional Review Act, 

the agencies are required to submit new regulations for congressional review. Do you have any idea how many regulations that 

were not submitted to Congress for review? 

Mr. CRAMER. If I may, I will handle that question. We do track 

everything that we receive. So if asked whether we have received 

a particular rule or set of rules, we can check our database to see. 

We do not know, at this point, for example, in 2017, whether 

there were rules that were not submitted to GAO. We don’t keep 

track of that information on a daily basis, simply because what we 

do track is what we do get. 

Mr. PALMER. Well, it is a problem, because in your recommendations and in what you found, you point out that, for the most part, 

they don’t comply, and that there is an economic impact of these 

regulations that really Congress never has the opportunity to respond to. 

And I just think, Mr. Chairman, that is an issue that we have 

got to address. Like I said, I don’t attribute that to the GAO. That 

is our responsibility. 

Professor Parrillo, I am a member of the article I project, which 

is made up of a bicameral group of members seeking to strengthen 

Congress by reclaiming its constitutional legislative powers that 

are now being improperly exercised by the executive branch, which 

this previous line of question kind of leads into this. 

Congress, as a body, has ceded most of its lawmaking authority 

to the executive branch by writing vague laws. They give Federal 


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agencies wide latitude to interpret the law in a way that fits their 

agenda. It has been said that the most dangerous words in any 

piece of legislation are ‘‘the Secretary shall determine.’’ 

How many of these problems being considered today could be 

prevented if Congress wasn’t in the business of writing them? 

Chairman GOWDY. Professor Parrillo, the gentleman’s time is expired, but you may answer his question. 

Mr. PALMER. Thank you, Mr. Chairman. 

Mr. PARRILLO. I do think Congress has a demonstrated capacity 

to make choices and put details in legislation. Several of the environmental statutes. The 1990 overhaul of the Clean Air Act, for example, really do cabin agency discretion in significant ways. 

I would note that there is some academic scholarship indicating 

that the more staff a legislature has, the more it is capable of writing relatively detailed statutes and cabining agency discretion. This 

is a set of conclusions arising from a comparative study of the different State legislatures. That legislatures that have more staff 

tend to delegate to the bureaucracy less. That is possibly one thing 

to consider. 

Mr. PALMER. Mr. Chairman, I would like to make a statement, 

for the record. 

There were 12,000 guidance documents identified in response to 

the committee’s request, and only 189 were submitted to Congress 

and the GAO in accordance with the Congressional Review Act. I 

yield back. 

Chairman GOWDY. The gentleman from Alabama yields back. 

I will go last. 

Ms. Nguyen, I am one of those too many lawyers my colleagues 

make reference to from time to time. I am not a subject matter expert here, or anywhere else. But I suspect lots of people that are 

following this issue, and maybe they are watching the hearing, 

aren’t subject matter experts either. So I get that all of you are experts and the vernacular just rolls off your tongue. But for lots of 

people, they don’t know what a midnight regulation is, they don’t 

know what the CRA is, they don’t know what a guidance document 

is. 

So, with respect to midnight regulations, how, if at all, does it 

impact the CRA? 

Ms. NGUYEN. The midnight rulemaking is defined by the mandate that, in terms of our review, it is defined by a specific period 

between September 23 and January 20. So we were asked, mandated, to look at the midnight rulemaking. It is referred to that because of that period. 

And in terms of the CRA, as I noted, we found that compliance 

with CRA for the transition period, in comparison to the nontransition period, is they are about the same. 

The trend that is important to note is that compliance with the 

CRA has increased over time. 

Chairman GOWDY. Could you tell us which agencies had the 

highest rate of noncompliance? 

Ms. NGUYEN. The two agencies that have the highest rate of noncompliance are HHS and DOT, and EPA has the lowest noncompliance rate. 


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Chairman GOWDY. What justification or explanation were offered 

by the two with the highest rate of noncompliance? 

Ms. NGUYEN. Because of the breadth and scope of our work, we 

were asked to look at noncompliance—the compliance with midnight rulemaking over the course of 20 years for various procedural 

requirements. So, therefore, we did not have the opportunity to inquire with those agencies. 

Mr. CRAMER. If I may add, we are taking steps to notify those 

agencies of their noncompliance, to call to their attention their obligations under the Congressional Review Act. 

Chairman GOWDY. So you think it is a matter of oversight rather 

than intentionality? 

Mr. CRAMER. I wouldn’t want to speculate that on that. I don’t 

know. We haven’t looked at that question. 

Chairman GOWDY. Is there a correlation between noncompliance 

and economically significant regulations? 

Ms. NGUYEN. Our study shows that economically significant regulations have a noncompliance rate of about 25 percent, and 15 

percent for significant rules. 

Chairman GOWDY. All right. For those who have never heard the 

term before, what is a guidance document? 

Ms. NGUYEN. Guidance are used by agencies to provide timely information to agencies. And agencies also use them to convey how 

they plan to interpret regulations. Guidance generally are not legally binding. 

Chairman GOWDY. Whenever you use works like generally, it 

makes we wonder that there is an exception to that. 

Ms. NGUYEN. The exception is what we discussed earlier with the 

notion that the IRS views their guidance to be authoritative. 

Chairman GOWDY. If I heard Professor Parrillo correctly, there is 

no legal force—lay the IRS aside—there is no legal force attached 

to guidance documents. Are there any legal presumptions attached 

to it? Excepting that it doesn’t have force of law, are there certain 

presumptions attached to guidance documents? 

Ms. NGUYEN. I cannot speak about the presumption issue. That 

is really from the perspective of the regulated parties. 

Chairman GOWDY. Can I ask your lawyer, is there a legal presumption attached in any way with guidance documents? 

Here is what is vexing me. When I hear the professor say—and 

I am sure he is right—that it is not intended to have the force of 

law or for everyone to conform their conduct that they still want 

to go on a case-by-case basis—whenever I hear the phrase case by 

case, that is just Latin for no guidance. There is no uniformity. If 

you are going to go case by case, which is what I think is what I 

understood him to say, then what is the purpose and/or legal effect 

of guidance documents? 

Mr. CRAMER. I believe that guidance documents, by definition, 

are not legally binding on the regulated community. There have 

been complaints over the years, however, from the regulated community, that at times agencies are imposing binding requirements 

on the regulated community through guidance, rather than going 

through a rulemaking procedure. And I think that is the underlying complaint behind the use of guidance. 


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Not where it is used for the purposes for which it is intended, 

but rather to impose binding requirements that should really be 

going through a rule making process. 

Mr. MEADOWS. Will the gentleman yield for a follow-up question 

to your point? 

Chairman GOWDY. Certainly. 

Mr. MEADOWS. The Chairman is spot on, and he is in a line of 

questioning that, quite frankly, is at the very heart of this hearing. 

Is guidance typically—and where he is going with this is, does it 

have any other meaningful effect, either through previous jurisprudence or lawsuits where guidance has been used in a way that 

connotates a rule or a regulation instead of just guidance? 

Mr. CRAMER. I think it would be fair to say that there have been 

complaints that guidance has been used to impose requirements 

that should not have been imposed unless they went through a rule 

making process. 

Mr. MEADOWS. I yield back. Thank you, Mr. Chairman. 

Chairman GOWDY. Well, let me ask one other question. 

Is there a colorable claim or cause of action if the assertion is 

that this discretion referenced by Professor Parrillo, was applied 

disparately to this group versus that group? Is that a cause of action? Is that a colorable claim from a litigation standpoint that this 

exercise of discretion was used disparately? 

Mr. CRAMER. I think actually Professor Parrillo might be best 

qualified to answer that question. 

Chairman GOWDY. I am sure he has written a law review article 

on it. He may direct us to it. 

Mr. PARRILLO. On the question of whether, as I understand your 

question, whether inconsistency between individual cases would be 

subject to a judicial challenge, if the context were enforcement, 

then, no. Because under Heckler v. Cheney, at least one off enforcement decisions or decisions not to enforce—or to enforce in the first 

place—are not subject to judicial review. 

If we move beyond the context of enforcement and we talk about 

agency adjudication, such as permanent or something like that, 

then if an agency does not follow the reasoning that it used for a 

prior individual decision and gives no explanation of why it didn’t 

follow that reasoning, then that would be subject to a judicial challenge. So it varies by the type of individual proceeding we are talking about. 

Chairman GOWDY. Thank you. 

The gentleman from Wisconsin. 

Mr. GROTHMAN. I have all sorts of questions, but at the beginning I would like to yield to my good friend, Congressman Palmer. 

Mr. PALMER. I thank the gentleman. Just very quickly on that 

point about 12,000 guidance documents and only 189 were submitted. 

There is no place on the GAO form for meaningfully reporting 

guidance. Don’t you think that it would help matters to have that 

on the form? 

And, Mr. Chairman, I would like to enter this into the record. 

Mr. CRAMER. GAO has issued a number of opinions on whether 

guidance documents are rules for purposes of the Congressional Review Act. It is up to the agencies to decide when they are issuing 


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guidance whether they have an obligation to comply with respect 

to the Congressional Review Act, with respect to that particular 

guidance document, does it meet the definition of a rule under the 

APA. 

We call them all rules. And when we are asked to consider 

whether a particular guidance document is a rule for purposes of 

the Congressional Review Act, at the end of the day, it is a rule. 

Mr. PALMER. I don’t want to take up the gentleman’s time. I just 

think you ought to add that on your form. It might help get a better response. 

I thank the gentleman, and I yield back. 

Mr. GROTHMAN. Just a general question. I am going back 25 

years to my day as a lawyer. And at the time—at least I used to 

do with the IRS—guidances were kind of treated as law. And that 

is why they made the guidances, right? If you brazenly disobeyed 

the guidances, you were kind of risking the wrath of the IRS, don’t 

you think that is accurate? 

Mr. CRAMER. I think that is one of the complaints that regulated 

community. 

Mr. GROTHMAN. Why else would they issue the guidances? 

Mr. CRAMER. Guidance does serve a lot of useful functions to 

communicate regulated public, who, in many cases, would like to 

know what the agency is thinking about a particular issue. 

Mr. GROTHMAN. Right, right. That is exactly the point. 

If you issue a guidance, it is for a purpose, right? The purpose 

is to tell the public—be it a business or an attorney or whatever— 

how the agency will interpret an ambiguity. And if you brazenly go 

against the guidance—you can do it and hope you are not caught. 

That is fine. I wasn’t afraid to do that. But the reason the guidance 

is out there is you can expect, if you don’t follow the guidance, that 

if you get caught, you are going to be challenged in some fashion, 

isn’t that true? I am sure that is true of other agencies as well, 

right? 

Mr. CRAMER. That certainly may be the case. 

Mr. GROTHMAN. Of course it is the case. Why do you say it may 

be the case? Of course it is the case. Why else issue the guidance, 

right? Does anybody else have a comment on that? 

Isn’t that, of course, what the guidance does? It means the agency is going to interpret an ambiguity in a law in such a such a way, 

and if you brazenly disobey the guidance, then you are going to 

wind up challenged in some fashion, maybe a win in court? It is 

true it isn’t legally binding. But it does say you could wind up in 

court, doesn’t it? 

Mr. PARRILLO. If I may answer that question? 

Mr. GROTHMAN. Sure. 

Mr. PARRILLO. So, yes, if the agency is empowered to proceed 

case by case, in other words, only on the basis of precedence from 

prior individual proceedings, then, in any future proceeding, it can 

exercise discretion and interpret law as it sees best constrained 

just by this prior precedence. And so the guidance is a way of saying this is what we are planning to do in the absence of some argument from the regulated party that we should do things differently. 

And if it is guidance, they have to answer that argument. 

Mr. GROTHMAN. Right. But why else issue the thing, right. 


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And I guess the question is, right now, as I understand it, in general, maybe always, there is no public participation on guidance, 

and that is the benefit of a rule as opposed to guidance. In a rule, 

if the agency is doing something dumb, maybe, or offensive, it will 

come out because you have to have some public input. In guidance, 

there is no public input. Do you think there should be a little space 

for public input on guidance? 

Ms. HARNED. May I take that? 

Mr. GROTHMAN. Sure. 

Ms. HARNED. Yes. I really appreciate the question, because NFIB 

absolutely thinks that there needs to be some space for comment. 

Does it have to go through the whole notice and comment, like a 

rulemaking? No. 

But the idea that small-business owners and other members of 

the regulated community even know what these are is an issue, 

much less getting to say, hey, this is how this is going to impact 

me. As a practical matter, yes, we think that would be a good practice. 

Mr. NOE. Congressman, could I jump into, just from my experience having been at the White House Office of Management and 

Budget drafting the Good Guidance Bulletin they have, we were 

very responsive to the agencies that you don’t want to ossify the 

guidance process, because there are a lot of potential benefits to 

guidance, if they are done right. And we agreed. 

So we just said, for the most significant guidance that might 

have a potential to lead to an economic impact, but, we were very 

clear, it is something that reasonably could be anticipated to lead 

to an impact, not cause it directly, because, of course, guidances are 

supposed to not be legally binding, but the agencies made beyond 

Swiss cheese out of that. In fact, it is so bad, the report that the 

GAO did in 2015 showed that the agency said—this is four major 

departments of the government with 25 agencies—we have zero, so 

we have zero guidance that should be subject to pre-adoption notice 

and comment. 

That is where we are, and that is why I am saying the White 

House Office of Management and Budget should amp up that guidance. You all ought to think about legislating a requirement that 

there be good guidance practices. You have already done it for one 

agency. 

In 2000, Congress, by statute, required the FDA to do a regulation to set good guidance practices. This is an agency that deals 

with life and death issues, and they have operated—my understanding is that people are generally happy with the way that 

works, and I don’t see any reason other agencies shouldn’t be able 

to operate at that level. 

Mr. GROTHMAN. Thank you. 

Mr. NARANG. Could I respond very quickly? 

Mr. GROTHMAN. We would love to have you respond. 

Mr. NARANG. Thank you, Congressman. 

Let me just say that if Congress does impose procedural requirements on guidance documents, like notice and comment, or on a 

subset of guidance documents, that approximate what we have 

with APA notice and comment rulemaking, then I think it is an 

open question, maybe right now an academic question, but an open 


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question as to whether we should then be giving the agencies the 

option to make those guidance documents binding. 

What is the point of an agency going through a robust guidance 

document process that looks like rulemaking if they are going to 

have a nonbinding document? 

I think the more realistic outcome would be that they not issue 

guidance. 

Mr. GROTHMAN. Well, I am just going to respond, you know, 

there are times where guidance is good because you have got to 

come up with something on a dime to interpret a law that Congress 

passed, or explain the way an agency is going to treat things, and 

that is fair. If you are not going to go all the way through the administrative rule process, you don’t want it to become the force of 

law, if it is something less than that, see. 

But I do think there are times, thinking back 25 years, in which 

you had guidances that sometimes made, when I was a lawyer, 

that guidances made absolutely no sense, or you wonder who in the 

world thought up this. 

And I would think if there was a little bit of input from the private sector community and maybe woken up some bureaucrat over 

at, because I primarily dealt with the IRS, but there are other 

agencies too, would have woke them up and said, yeah, man, I 

didn’t think of that. 

Okay, so you can’t go through the whole process because you 

want to turn something around quick, but enough that your bureaucracies can understand how this guidance looks from the other 

side of the mirror. 

Mr. PARRILLO. May I respond on that point? 

Chairman GOWDY. Well, let me just say, I have been 

uncharacteristically liberal. We have been over 3 minutes over his 

time. I will let you respond. Can you give us the Reader’s Digest 

version in your response? 

Mr. PARRILLO. There are some agencies that voluntarily undertake notice and comments for precisely the reasons that you just 

suggested. EPA does this on a substantial number of guidance documents, the National Organic Program at the USDA, other agencies much less so. 

As Mr. Noe mentioned, the FDA is required by statute to take 

notice and comments on a large category of its guidance documents. A lot of people are quite happy with that. The difficulty 

they run into is that they will sometimes leave a document in draft 

for quite a long time because they don’t have the resources to process all of the comments. 

Chairman GOWDY. The gentleman from Wisconsin yields back. 

I want to thank all of our witnesses for not just your expertise 

on a really important subject matter, but also your comity with 

each other and with the members of the committee. 

With that, the hearing record will remain open for two weeks for 

any member to submit written opening statements or questions for 

the record. 

If there is no further business, without objection, the committee 

will stand adjourned. 

[Whereupon, at 11:44 a.m., the subcommittee was adjourned.] 


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APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD


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Introduction 

The Office of Inspector General (OIG), Office of Inspections reviewed allegations regarding a 

new General Services Administration (GSA) nondisclosure policy concerning employee 

communications with Congress. Our review included whether GSA implemented such a policy, 

and if so, whether the policy violated the Whistleblower Protection Enhancement Act (WPEA) 

or other laws, regulations, or GSA policy. 1 

From February 20, 2015 to July 24, 2017, GSA had a published policy governing congressional 

and intergovernmental communications. In February 2017, GSA began implementing a series of 

additional unpublished policies that effectively amended GSA's published policy governing 

communications with Congress. 

On July 24, 2017, GSA issued a new published policy governing congressional and 

intergovernmental communications that remains in effect today. The current published policy, 

however, does not reflect aspects of GSA's prior unpublished policies that remained in practice 

as of December 2017. The current published policy also does not reference White House policy 

statements regarding communications with Congress, which GSA officials state are also part of 

GSA's policy. 

The GSA policies we reviewed include: 

• GSA Order ADM 1040.2, Congressional and lntergovemmental Inquiries and Relations, 

in effect February 20, 2015 until its cancellation on July 24, 2017; 

• a series of unpublished policies implemented by GSA from February to May 2017, 

further restricting communications by GSA employees with Members of Congress or 

congressional staff other than committee chainnen; 2 

• an unpublished policy GSA implemented based on written guidance the White House 

Office of Legislative Affairs provided to GSA in May 2017; and 

• GSA Order ADM 1040.3, Congressional and lntergovemmentallnquiries and Relations, 

in effect July 24, 2017, to the present. 

All of the above GSA policies operate as nondisclosure policies, and none contain the 

whlstleblower protection language that the WPEA requires be included in federal government 

nondisclosure policies. The WPEA's whistleblower protection language serves the important 

purpose of alerting federal employees that any nondisclosure policies, forms, or agreements 

imposed by the federal government do "not override employee rights and obligations created by 

1 The WPEA was enacted as Pub. L. No. 112-199, 126 Stat. 1465 (2012). 

2 For purposes of this report, a "Member" refers to any Member of the Senate or the House of Representatives, 

Delegate to the House of Representatives, the Resident Commissioner from Puerto Rico, or the Vice President 

acting other than in the capacity of a committee chairman. See 5 U.S.C. § 2106 (20!2). "Chairmen" refer to those 

Members acting in the capacity of a duly appointed chair of a congressional committee under the n>les of the Senate 

and House of Representatives. 
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JElS-002 

existing statute or Executive Order relating to classified information, communications with 

Congress, the reporting of violations to an inspector general (IG), or whistleblower protection." 3 

GSA did not comply with its own internal policymaking directive in implementing its 

unpublished policies governing congressional communications from February to July 2017. 

GSA's failure to follow its established process for creating and implementing new policies led to 

inconsistent awareness and interpretation of the policies. Finally, GSA's current written policy 

governing congressional and intergovernmental relations and inquiries is ambiguous and should 

be clarified to avoid confusion on the part of GSA employees, Members of Congress, and 

potential whistleblowers. 

Our report makes two recommendations to address the issues identified during the evaluation. 

Background 

The Whistleblower Protection Enhancement Act {WPEA) 

Congress enacted the WPEA in 2012 to strengthen federal government whistleblower rights and 

protections. 4 The WPEA requires all federal government "nondisclosure policies, forms, and 

agreements" implemented on or after the WPEA's effective date to include specific language 

clarifying that the policy, form, or agreement in question does not impact statutory whistleblower 

protections. 5 In particular, the WPEA mandates that all such federal government nondisclosure 

policies, forms, and agreements include the following statement: 

These provisions are consistent with and do not supersede, conflict with, or 

otherwise alter the employee obligations, rights, or liabilities created by existing 

statute or Executive order relating to (l) classified infmmation, 

(2) communications to Congress, (3) the reporting to an Inspector General of a 

violation of any law, rule, or regulation, or mismanagement, a gross waste of 

funds, an abuse of authority, or a substantial and specific danger to public health 

or safety, or ( 4) any other whistleblower protection. The definitions, requirements, 

obligations, rights, sanctions, and liabilities created by controlling Executive 

orders and statutory provisions are incorporated into this agreement and are 

3 S. REP. No. 112-155, at 16(2012), reprinted in 2012 U.S.C.C.A.N. 589,604. 

4 See H.R. REP. 112-508(!), at 5, 2012 WL !962907, at •s (2012) ("Whistleblowers are crucial in helping to expose 

waste, fraud, abuse, mismanagement and criminal activity across the Federal government. Their disclosures can 

save billions of dollars, and even human lives. It is vital that Congress encourage- not discourage- these wellintentioned individuals from coming forward. To accomplish that, prospective whistleblowers must be protected 

from reprisaL"); S. REP. No.1 12-155, at 1 (2012), reprinted in 20!2 U.S.C.C.A.N. 589, 589 ("The Whistleblower 

Protection Enhancement Act of2012 will strengthen the rights ofand protections for federal whistleblowers so that 

they can more effectively help root out waste, fraud, and abuse in the federal government."). 

5 Pub. L. No. 112-199, § ll5(a)(l), 126 Stat. at 1473 (codified as 5 U.S.C. § 2302 statutoty note). Section 

ll5(a)(3)(B) ofthe WPEA governs nondisclosure policies, fonns, or agreements in effect prior to the effective date 

of the WPEA. WPEA, Pub. L No. ! 12-199, § ll5(a)(3), 126 Stat at 1465. All ofthe GSA polices reviewed in this 

evaluation were implemented after WPEA's effective date. 

2 
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controlling. 6 

As the WPEA mandates that the required whistleblower protection language be included in 

"any" nondisclosure policy, form, or agreement, regardless of type, the WPEA effectively 

requires that such policies, forms, and agreements be made in writing. 

Section 104 of the WPEA defines the implementation or enforcement of any nondisclosure 

policy, form, or agreement as a "personnel action," and makes it a prohibited personnel practice 

to implement or enforce "any nondisclosure policy, f01m, or agreement" that does not contain the 

required whistleblower protection language. 7 Dming the time period reviewed, the governing 

appropriations acts also contained provisions stating that"[ n]o funds appropriated in this or any 

other Act may be used to implement or enforce ... any other nondisclosure policy, form, or 

agreement if such policy, fom1, or agreement does not contain" the language mandated by the 

WPEA8 

The U.S. Office of Special Counsel is responsible for protecting federal employees and 

applicants from reprisal for whistleblowing and for assisting agencies in educating the federal 

workforce about whistleblower rights and protections. The U.S. Office of Special Counsel has 

advised executive departments and agencies that the statement mandated by the WPEA "should 

be incorporated into every non-disclosure policy, form, or agreement used by an agency."9 

GSA's internal whlstleblower protection website likewise provides that the required 

whistleblower protection language "applies to, and must be included in, non-disclosure policies, 

forms, or agreements of the Federal government with current or former employees." 

GSA Policies Governing Congressional Inquiries during the Period Reviewed 

From February 2015 to the present, GSA implemented a series of published and unpublished 

policies governing communications by GSA employees to Congress and other intergovernmental 

entities. 

6 5 U.S.C. § 2302 statutory note (2012). 

7 5 U.S.C. §§ 2302(a){2)(A)(xi), 2302(b)(13). 

'Consolidated Appropriations Act, 2017, Div. E, Financial Services and General Government Appropriations Act, 

Title Vll, § 744, Pub. L. No. !!5-31, 131 Stat. 135, 389 {May 5, 2017); Consolidated Appropriations Act, 2016, 

Div. E., Financial Services and Government Appropriations Act, Title VII,§ 744, Pub. L. No. 1!4-113, 129 Stat. 

2242,2485 (December 18, 2015); Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 

1!3-235, Div. E, Financial Services and Genera! Government Appropriations Act, 2015, Title VI,§ 747, 128 Stat. 

2!30, 2392 (December 16, 2014). The relevant provision ofthe Consolidated Appropriations Act of2016 remained 

in effect through a series of continuing resolutions and legislation until the Consolidated Appropriations Act of 2017 

was signed into law. 

9 Memorandum from Special Counsel Carolyn Lerner for Executive Departments and Agencies on the 

Whistleblower Protection Enhancement Act of2012 and Non-Disclosure Policies. Forms, and Agreements, at 2 

(March 14, 2013), available at https:llosc.goviPagesiPPP-Resources.aspx. See also Memorandum from Special 

Counsel Henry J. Kerner for Executive Departments and Agencies on Non-Disclosure Policies, Forms, or 

Agreements (Februmy l, 2018), amilab/e at https:/losc.gov/Resources!NDA%20Memo%20Update.pdf. 

3 
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l. GSA Order ADM 1040.2, Congressional and Intergovernmental Inquiries and 

Relations (February 20, 2015) 

GSA Order ADM I 040.2 outlined the agency's written policy for handling congressional and 

intergovernmental inquiries and relations in effect from February 20, 2015 until its cancellation 

on July 24, 2017. The order informed employees that "GSA must speak with one voice." To tbis 

end, the order "sets out procedures all GSA employees must follow in providing information 

about GSA policies and positions to Congress, State, local, tribal, and foreign governments." 10 

The order required that GSA employees immediately forward all congressional communications 

they received, "whether by correspondence, telephone calls, email, fax, or any other media," to 

GSA's Associate Administrator for Congressional and Intergovernmental Affairs (OCIA 

Associate Administrator) for coordination by the Office of Congressional and Intergovernmental 

Affairs (OCIA). The order provided that "OCIA will be responsible for coordinating all 

responses back to Congress to ensure they are accurate, timely, helpful, and consistent with the 

views of the Agency and the Administration." 11 The order did not carve out an exception for 

whistleblower communications. 

The order also set forth GSA's general policy that "GSA employees must obtain approval from 

the [OCIA] Associate Administrator ... or his/her designee before responding to inquiries from 

Congress for the Administrator's or other official GSA position on legislation or other 

substantive issues to ensure accurate and up-to-date information is provided." 12 The order 

defmed "Congressional inquiries" to include those from Members of Congress, their personal 

and leadership staff, congressional committee staff and others, such as the Congressional Budget 

Office and Congressional Research Service. 13 

The order was intended to ensure, among other things, that "the Administrator's and 

Administration's positions and policies are conveyed to Congress ... accurately, clearly, 

promptly, professionally, and consistently" and that the Administrator be kept "informed of all 

agency-related matters of interest to Congress .... " 14 

2. Unpublished implemented policies from February to May 2017 governing 

communications with Congress 

In Febtuary 2017, GSA began to deviate from its prior practices for responding to congressional 

inquiries, based on oml guidance and direction from the White House. GSA's Senior White 

10 GSA Order ADM 1040.2, Congressional and Intergovernmental Inquiries and Relations (February 20, 20!5), at 

§ 3. 

11 ld. at§ 5a(l). 

" I d. at § 4. The order provided for limited exceptions for some senior GSA officials and provided that the 

Associate Administrator may grant conditional waivers on a case-by-case basis. I d. at § 7. 

llJd. 

14 !d. at § La. 

4 
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House Advisor and Acting General Counsel serving at the time, orally communicated the initial 

changes to others at GSA. Initially, the new policy prohibited responding to "oversight" or 

"investigative" congressional inquiries made by Members other than Chairmen. GSA officials 

told us the policy was based on the conclusion that individual Members do not have oversight or 

investigative authority, and that only the Senate and House as a whole, or congressional 

committees, have this authority. 

The Senior White House Advisor and Acting General Counsel communicated the new policy to 

GSA officials involved in coordinating communications with Congress, including personnel in 

the Administrator's Office, the OCIA, the Office of Administrative Services, and the Office of 

General Counsel (OGC). Some of these officials then orally communicated the new policy to 

their subordinates. GSA personnel told us they heard about the new policy at different times and 

in different settings, ranging from small in-person meetings to telephone calls and hallway 

conversations. 

Acting Administrator Timothy Home, Acting Deputy Administrator Anthony Costa, and several 

other senior GSA leaders stated that the new policy was a change from GSA's prior practice. 

GSA officials stated that the prior practice had been to process all congressional inquiries for a 

substantive response, while sometimes providing a redacted response or more limited 

information to Members than would be provided to Chairmen. GSA officials identified 

information protected from disclosure under the Privacy Act or the Procurement Integrity Act as 

examples of the type ofinfonnation that would have been disclosed to Chairmen but not to other 

Members under GSA's prior practice. 15 

GSA officials stated that the new policy changed over time. Initially the new policy was not to 

respond at all to oversight or investigative inquiries or requests from Members other than 

Chairmen. Some GSA officials estimated that this policy lasted approximately a month, during 

which the agency provided no responses to individual Member inquiries. Other GSA officials 

stated that the policy did not apply to inquiries made on behalf of a Member's constituents or to 

inquiries relating to services GSA provided to Congress, such as furnishing office space, as these 

were not deemed to be oversight-related. 

GSA modified the policy in March 2017 to permit the disclosure of publicly available 

information, or information that would be subject to release to any requester under the Freedom 

of Information Act (FOIA), in response to Member inquiries deemed to be oversight or 

The Department of Justice Otllce of Legal Counsel (OLC) has advised that the Privacy Act generally prohibits the 

disclosure of protected Privacy Act inlormation to individual Members, except for those authorized to act on behalf 

of a Congressional committee such as committee chairs. Application of Privacy Act Congressional-Disclosure 

Exception to Disclosures to Ron/ring Minority Members, 25 Op. O.L.C. 289 (2001). Similarly, the Procurement 

Integrity Act prohibits the disclosure of competitively sensitive procurement information on pending federal 

procurements, but contains an exception for disclosure to Congress or a committee or subcommittee of Congress. 

41 u.s. c.§§ 2102, 2107(5) (2012). 

5 
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investigative in nature. According to GSA's Chief of Staff, GSA made this change based on 

additional guidance from the White House. 16 

With this change in policy, GSA also modified its procedures for processing congressional 

inquiries. In responding to congressional inquiries, OCIA first made an assessment as to whether 

the inquiry constituted an oversight or investigative inquiry. For inquiries by Members or 

congressional staff that OCIA categorized as oversight or investigative in nature, OCIA then 

considered whether it could respond to the request with documents already publicly available. If 

not, OCIA referred the inquiry to GSA's FOIA office, which processed the inquiry to identify 

any responsive records that would be subject to release under FOIA. 17 The FOIA office then 

conveyed the results of that processing to OCIA, and identified the inquiries for which the FOIA 

office had fonnd responsive documents. OCIA then resumed control of the rest of the 

congressional coordination process. OGC also advised on compliance with the new policy during 

the course of their legal review of proposed responses to congressional inquiries. 

The FOIA process involves a search of existing agency records to identify responsive records 

subject to public release and it is not well equipped to respond to some types of congressional 

inquiries, such as requests for narrative responses to questions. In such cases, GSA would not 

provide a complete response. 

Shortly after they modified the policy, GSA officials also determined that requests made under 

the so-called "Seven Member Rule" would be processed as individual requests on the part of 

each requesting Member. The Seven Member Rule refers to a statute providing that, on the 

request of any seven Members of the House Committee on Government Operations (now known 

as the House Committee on Oversight and Government Refmm), or any five Members of the 

Senate Committee on Governmental Affairs (now known as the Senate Committee on Homeland 

Security and Governmental Affairs), an Executive agency "shall submit any information 

requested ofit relating to any matter within the jurisdiction of the committee." 18 

TI1e treatment of requests made under the Seven Member Rule became an issue after eight 

Members of the House Committee on Oversight and Government Reforrn requested documents 

from GSA in a February 8, 2017, letter invoking the Seven Member Rule. 19 GSA had recently 

provided documents in response to a previous request invoking the Seven Member Rule statute 

16 The GSA Senior White House Advisor became the GSA ChiefofStaffon March 26, 2017. 

17 Prior to the implementation of this new policy, the FOIA division had not been involved in the processing of 

congressional inquiries, although the OCIA and FOIA offices would sometimes coordinate on overlapping 

congressional and FOIA requests. 

IS 5 U.S.C. § 2954 (2012). 

19 The February 8, 2017, request sought unredacted documents pertaining to the Trump Old Post Office ground lease 

that GSA had previously dedined to produce in response to a request by four Representatives. 

6 
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on January 3, 2017.20 However, GSA officials told us that the Department of Justice Office of 

Legal Counsel (OLC) instructed GSA not to provide any documents in response to the February 

8, 2017, Seven Member Rule request These officials understood from OLC that under the 

Department of Justice's long-standing interpretation the statute applied only to a limited set of 

old reports that were relevant during the 1920s and that the Seven Member Rule statute was now 

effectively obsolete. After discussing the matter with OLC, GSA decided to process Seven 

Member Rule re{juests as individual Member requests and to obtain OLC concurrence before 

releasing responses to such requests. 21 

GSA's decision to process individual Member and Seven Member Rule inquiries through its 

FOIA office meant that the agency effectively handled such requests as FOIA requests without 

officially designating them as such. As a result, FOIA procedural safeguards may not apply to 

Member requests. A private citizen unhappy with an agency's response ton FOIA request has 

the right to challenge the agency's determinations on releasability through both an administrative 

appeal and judicial remedies. The GSA officials we interviewed said they did not know whether 

the agency's response to a Member request processed through GSA's FOIA office would be 

subject to the FOIA appeal process, as that issue had not yet come up. 

In at least one instance, GSA did not provide documentation to Minority congressional leaders 

despite being expressly requested to do so by a Chairman. Representative Jason Chaffetz, then 

serving as Chainnan of the U.S. House Committee on Oversight and Government Reform, sent 

two congressional requests to GSA, dated February 9, 2017 and February 16, 2017 respectively, 

on behalf of that Committee. 22 Both Chailman requests stated, "When producing documents to 

the Committee, please deliver production sets to the Majority staff in Room 2157 of the Raybum 

House Office Building and the Minority staff in Room 2471 of the Rayburn House Office 

Building." The instructions on the Committee's document requests likewise directed GSA to 

deliver two sets of the documents to be produced, "one set to the Majority Staff and one set to 

the Minority Staff." 

'

0 The January 3, 2017, response pertained to a December 22, 2016, request that sought information related to the 

Trump Old Post Office ground lease, 

" A November 2, 2017, federal suit brought by 17 Democratic Members ofthe U.S. House of Representatives 

Committee on Oversight and Government Reform against Acting Administrator Home alleges that GSA denied the 

plaintiffs' Seven Member Rule request, as well as two subsequent letters invoking the Seven Member Rule ;tatute, 

in a letter dated July 17, 2017, which stated that "'the Executive Branch's longstanding policy has been to engage in 

the established process for accommodating congressional requests for information only when those requests come 

from a committee, subcommittee, or chairman authorized to conduct oversight."'(Ebjah E. Cummings, eta/. v. 

Timothy 0 Home, No.1 :17-CV-02308 (D.D.C. filed November 2, 2017)(Complaint 1, 4, 21-27). 

"The first request asked GSA to describe its plans to address a specific clause (37.19) found in the Trump Old Post 

Office, LLC ground lease agreement and to provide all guidelines and policies that GSA utilized in administering its 

outlease program. The second requested information and documents regarding GSA's efforts to address 

recommendations made by the Government Accountability Office regarding GSA's building portfolio and the 

Federal Buildings Fund. 

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Despite these instructions, OCIA officials stated that they did not send the responses to Minority 

staff members as directed and "assumed they [Minority staff] received this information as part of 

the internal committee staff distribution." A GSA Senior Advisor to the Administrator, notified 

the GSA White House Liaison and the GSA Senior White House Advisor, on February 28, 2017 

that "I will have [OCIA] take off the cc to Cummings [Congressman Elijah Cummings, Ranking 

Member]" for the congressional request dated February 16, 2017. The GSA Senior Advisor to 

the Administrator then communicated this guidance to the Acting Associate Administrator for 

OCIA. 

3. Unpublished policy based on written White House guidance in May 21117 

Until May 2017, GSA officials communicated all information regarding GSA's new treatment of 

Member inquiries orally and did not reduce GSA's unpublished policies to writing. GSA 

officials told us that this was because GSA expected more definitive guidance from the White 

House or OLC before formalizing the policy. 

On May 19,2017, the White House Office of Legislative Affairs provided the OCIA Associate 

Administrator with written guidance on responding to letters from Members of Congress.23 

Senior GSA officials, including Administrator Emily Murphy (who was then serving as Senior 

Advisor to Acting Administrator Home), told us they understood this to be the more definitive 

guidance that GSA officials had been expecting. 24 According to these officials, the guidance was 

consistent with what GSA had already put into place. Under GSA's policy, GSA only would 

provide publicly available facts and publicly accessible records to Member inquiries that were 

oversight in nature. 

The following week, Acting Administrator Home testified before a congressional subcommittee 

that GSA "has instituted a new policy that matters of oversight need to be requested by the 

Committee Chair."25 Home testified that the policy had already been implemented, though it was 

not yet in writing, and that GSA was "working on formalizing the policy."26 Home described 

GSA's practice under the new policy as follows: 

However, ifit's an oversight matter not requested by the Committee chair, we'll 

respond to the letter saying that we can't provide ... if it's information that's not 

"The GSA Senior Advisor to the Administrator became the OC!AAssociate Administrator on April30, 2017. The 

guidance provided to GSA was marked as a "Presidential record" excluded from public disclosure under the 

Presidential Records Act. 

24 Administrator Murphy served as the White House Liaison from January to April 2017 and Senior Advisor from 

April to December 2017. She was sworn in as Administrator on December 12, 2017. 

"See Testimony of GSA Acting Administrator Hon. Tim Home before the U.S. House of Representatives 

Committee on Appropriations, Subcommittee on Financial Services, at 1:15:40-51 (May 24, 201 7), available at 

https:l/appropriations.house.gov/calendar/eventsingle.aspx?EventiD=394879). 

,. !d. at 1:15:54-1:!6:04. 

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public information, information that would need to be redacted then we will 

redact the information --we will provide public inf01mation but for matters of 

oversight the request needs to come from the Committee chairY 

Horne confirmed that the policy extended to requests made under the Seven Member Rule 

statute.28 

On July 12, 2017, Horne testified before another congressional subcommittee that he had "been 

given an overall general policy of the Administration that for matters of oversight, that those 

requests need to come from the Chair."29 He also testified that GSA had "received a policy that 

says on matters of oversight we will respond to committee requests, not individual Member 

requests. " 30 

4. GSA Order ADM 1040.3 Congressional and lntergovemmentallnquiries and 

Relations (July 24, 2017) 

OnJuly24, 20!7, GSA issued GSA Order ADM 1040.3, which revised and replaced GSA's 

February 2015 order. Like its predecessor, GSA Order ADM 1040.3 "sets out procedures all 

GSA employees must follow in providing information about GSA policies and positions to 

Congress, State, local, tribal, and foreign governments." The order also admonishes that "GSA 

must speak with one voice," requires that employees fotward all congressional communications 

they receive to the OCIA Associate Administrator, and requires that OCIA coordinate aU 

responses to Congress 31 

The new written order largely tracks the language of the p1ior order, with two changes of 

significance for purposes of this review. First, in describing OCIA's responsibility for 

coordinating responses to Congress, GSA ADM l 040.3 adds a reference to a published opinion 

issued by OLC on May 1, 201732 The new GSA Order states: 

21 ld. at 1:18:56-1:19:23. 

1

' Responding to a question as to why GSA had not responded to an outstanding request made under the Seven 

Member Rule, Horne responded, "It's the policy of the Administration that for matters of oversight GSA will 

respond to the Committee chair." ld. at 1:18:32-41. 

29 Testimony of GSA Acting Administrator Hon. Tim Horne before the U.S. Hou,,e Committee on Transportation 

and Infrastructure, Subcommittee on Economic Development, Public Buildings, and Emergency Management, at 

1 :39:50-J :40:00 (July 12, 2017), ami/able at 

https:lltranspottation.house,govlcalendarleventsingle,aspx?Event!D=4{1!734. 

30 U at 2:12:20-2:12:39. 

GSA Order ADM 1040.3 Congressional and intergovernmental Inquiries and Relations (July 24, 2017), at §§3, 

5(a)(l). 

"The referenced OLC opinion is available at https://wwwjustice.gov/olclopinions-main. 

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The Office of Congressional and Intergovernmental Affairs (OCIA) will be 

responsible for coordinating all responses back to Congress to ensure they are 

accurate, timely, helpful, and consistent with the views of the Agency and the 

Administration as outlined in the Department of Justice Office of Legal Counsel 

opinion "Authority of Individual Members of Congress to Conduct Oversight of 

the Executive Branch, "dated May 1, 2017. 33 

We discuss this OLC opinion in Finding 3 below. Second, GSA ADM l 040.3 adds a new 

provision entitled "Whistleblower Protection" which states: 

This Order does not abrogate or interfere with any rights or protections extended 

to GSA employees by the Whistleblower Protection Act of 1989 (WPA) as 

amended by the Whlstleblower Protection Enhancement Act of2012 (WPEA). 34 

The order does not contain the whistleblower protection language provided in the WPEA. 

The order also does not address the continuing applicability of GSA's prior unpublished policy 

as described by Acting Administrator Home in congressional testimony less than two weeks 

before the new order was issued. The oontinued application of the unpublished policy was 

evident on August 2, 2017, when the GSA Public Buildings Service Acting Commissioner 

testified before the Senate Committee on Environmental and Public Works. In response to a 

question whether he would commit to fully responding to questions from any member of the 

Committee regarding the procurement process for a new FBI headquarters, the Acting 

Commissioner stated "GSA will respond to questions from the Chair, yes."35 When asked if 

GSA would respond only to the Chair, the Acting Commissioner replied that "GSA's response 

will be in line with the current Administration's policy on responding to oversight questions." 

Findings 

Finding 1: GSA policies regarding communications with Congress operate as nondisclosure 

policies under the WPEA but do not include the WPEA 's whistleblower protection 

language, 

The WPEA requires all federal government "nondisclosure policies, forms, and agreements" 

implemented after its effective date to include specific language clarifying that the policy, form, 

or agreement in question does not impact statutory whistleblower protections. 

33 GSA Order ADM l 040.3 Congressional and Intergovernmental Inquiries and Relations (July 24, 20 17), at 

§ 5(aXl) (new language in italics). 

34 Jd. at§ 7. 

3

' Testimony of GSA Acting Commissioner, Public Buildings Service, Michael Gelber before the U.S. Senate 

Committee on Environment and Public Works, at 00:55:10-00:55:50 (August 2, 2017), available at 

https://www .epw.senate.gov/publicllndex.cfm!hearings?ID~3C2544C2-00314813-8230-A 714 3EE5D6D2. 

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The Senate report described the history and purpose of these provisions: 

In 1988, Senator Grassley sponsored an amendment to the Treasury, Postal and 

General Government Appropriations bill, which is referred to as the "anti-gag" 

provision. This provision has been included in appropriations legislation every 

year since then. The annual anti-gag provision states that no appropriated funds 

may be used to implement or enforce agency non-disclosure policies or 

agreements unless there is a specific, express statement informing employees that 

the disclosure restrictions do not override their right to disclose waste, fraud, and 

abuse under the WPA, to communicate with Congress under the Lloyd-La Follette 

Act, and to make appropriate disclosures under other particular laws specified in 

the statement. 

S. 743 would institutionalize the anti-gag provision by codifying it and making it 

enforceable. Specifically, section 115 of the bill would require every 

nondisclosure policy, form, or agreement of the U.S. Government to contain 

specific language set forth in the legislation informing employees of their rights. 

This required language will alert employees that the nondisclosure policy, form, 

or agreement does not override employee rights and obligations created by 

existing statute or Executive Order relating to classified infonnation, 

communications with Congress, the reporting of violations to an inspector general 

(IG), or whistleblower protection36 

Each of the GSA policies outlined above operate as a deterrence to GSA employees who wish 

to report waste, fraud, and abuse in GSA programs to Congress. The Office of Special Counsel 

has determined that a supervisor's email to employees "not to communicate with Inspector 

General auditors, stating that 'We need to have one voice'" was "a nondisclosure policy in 

violation of the WPEA."37 Both GSA Order ADM 1040.2 and 1040.3 caution employees that 

36 S. REP. No. 112-155, at 16 (2012), reprinted in 2012 U.S.C.C.A.N. 589, 604; see also id. at 45,2012 

U.S.C.C.A.N. at 633 ("Section 115(a) requires all federal nondisclosure policies, forms, and agreements to contain 

specified language preserving employee obligations, rights, and liabilities created by e~isting statute and Executive 

Order with respect to disclosure of information."); H. REP. No. 112-508(1), 2012 WL 1962907, at *9 (Section I 15 

"[c]odifies and gives a remedy for the anti-gag statute from overriding whistleblower rights. Specifically, the bill 

would require every nondisclosure policy, form, or agreement of the Government to contain specific language 

informing employees of their rights."). 

The Senate Report, S. Rep. No. 112-155, at 16 n. 64 (20!2), reprinted in 2012 U.S.C.C.A.N. at 604, notes that the 

Lloyd-La Follette Act is codified at 5 U.S.C. § 7211 (2012), which provides: "The right of employees, individually 

or collectively, to petition Congress or a Member of Congress, or to furnish information to either House of 

Congress, or to a committee or Member thereof, may not be interfered with or denied." For pUiposes ofTitle 5, 

"'Member of Congress" means the Vice President, a member ofthe Senate or the House of Representatives, a 

Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico." 5 U.S.C. § 2106 

(2012). 

See Press Release, U.S. Office of Special Counsel, OSC's Enforcement of the Anti-Gag Order Provision in 

Whistleblower Law (January 25, 2017), available at https;//osc.gov/News/pr17-03.pdf. 

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"GSA must speak with one voice." Moreover, both orders require employees to report all 

communications they receive from Congress, and to coordinate their responses through OCIA. 

Employees understandably may be deterred from reporting waste, fraud, or abuse to Congress if 

agency policy requires them to immediately forward to the OCIA Associate Administrator any 

congressional inquiries they receive and to coordinate their responses through OCIA. 

Several of the GSA officials we interviewed stated that whistleblowers were not considered in 

the implementation of the series of unpublished policies from February to July of2017, and that 

GSA did not intend that any of the policies discourage or otherwise impact whistleblowers. 

However, given that the written policies state that "GSA must speak with one voice," and direct 

employees to forward all congressional inquiries to and coordinate any response with OCIA, the 

absence of the WPEA language in these policies increases the potential for employee confusion 

about the impact of the policies on whistleblower protections and may chill the willingness of 

potential whistleblowers to come forward. As discussed in Finding 2, the risk of confusion is 

even greater with respect to the unpublished policies. 

GSA should have included the WPEA's "anti-gag" whistleb!ower protection language in each of 

its policies, to ensure the policies made clear that they did not affect the protections afforded to 

federal government whistleblowers. Agency officials have agreed that the policies need 

clarification on this point. Acting Administrator Home testified before Congress that while the 

unpublished policy then in place at GSA would not preclude GSA employees from having 

whlstleblower-type conversations with congressional representatives, "we do need to clarify the 

policy."38 Similarly, Acting Deputy Administrator Costa stated that GSA Order 1040.2 was 

perhaps "not so clear" with respect to its application to whistlebiower activity. The inclusion in 

GSA's new Order 1040.3 of a brief statement on whistleblower protection is a step in the right 

direction. However, even this statement is insufficient because it does not track the more 

detailed anti-gag language mandated by the WPEA. 

In response to our report, GSA accepts our first recommendation and reports it has initiated the 

formal clearance process to amend GSA Order ADM I 040.3 in order to include the WPEA's 

mandatory anti-gag provision. GSA's inclusion of this language will notify employees that the 

order does not impact their whlstleblower rights and protections. (See Appendix.) 

GSA, however, disagrees with the OIG's inte1pretation of the WPEA that ADM 1040.3, as 

written, operates as a nondisclosure policy. Instead, GSA asserts that the scope of the WPEA's 

anti-gag rule can be read as limited to two commonly used government nondisclosure 

" The Acting Administrator stated, "the new policy would apply to matters of oversight and ... we would manage 

that through our correspondence system, so ... there is nothing that would preclude any member of GSA from 

having any conversation, whistleblower-type conversations, with any Member. The issue is that the Administration 

policy says that oversight issues need to come from the Committee Chair .... [W]e do need to clarify the policy." 

Testimony of GSA Acting Administrator Hon. Tim Home before the U.S. House of Representatives Committee on 

Appropriations, Subcommittee on Financial Services, all: 17:16-50 (May 24, 201 7), available at 

https://appropriations.house.govlcalendarleventsingle.aspx?Event!D=394879. 

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agreements for classified national security information access, settlement agreements with 

nondisclosure provisions, and "policies related to these types of items." GSA points to § ll5(a) 

of the WPEA, codified as 5 U.S.C. § 2302 note, which provides: "Each agreement in Standard 

Forms 312 and 4414 of the Government and any other nondisclosure policy, form, or agreement 

ofthe Government shall contain" the language found in§ 2302(b)(l3). We do not believe that 

the language relied upon by GSA supports such a narrow interpretation. The Supreme Court 

rejected the type of statutory analysis GSA makes when the Court considered analogous 

language in Ali v. Federtll Bureau of Prisons, 552 U.S. 214 (2008). Nothing in the overall 

statutory context of the WPEA suggests that the two listed national security nondisclosure 

agreements were the exclusive focus of its anti-gag provision or that Congress was unconcerned 

about other types of nondisclosure policies, forms, and agreements. 39 Instead, the requirements 

of the WPEA extend to those widely used forms "and any other nondisclosure policy, form, or 

agreement of the Government."40 As the Court concluded with the statutory language at issue in 

Ali, such "unmodified, all-encompassing" language is best read as "what it literally says."41 

The agency also asserts that ADM 1040.3 is "no different from" OMB Circular A-19 which 

"does not contain" the WPEA's anti-gag rule language. However, as the agency acknowledges, 

A-19 addresses coordination between OMB and executive agencies. A-19, most recently revised 

in 1979, does not address which employees may or may not make disclosures to Congress. 

While an agency is entitled to have policies to ensure that communications of official agency 

positions are cleared through designated officials, as discussed in our report we found that GSA 

used language that inhibits whistleblowers from reporting their concerns to Congress. 

Finding 2: GSA's implementation of unpublished policies between February and July 2017 

did not comply with GSA's internal directive for creating and implementing new policy, 

leading to opportunities for confusion, misinterpretation, and inconsistent application. 

GSA did not follow its own policy for establishing internal directives when it implemented its 

unpublished policies governing communications with Congress. GSA Order OAS P 1832.1A, 

The GSA lntemai Directives System (October 10, 2014), establishes "a single, uniform system of 

authoritative issuances used to convey organization functions, policies, responsibilities, and 

required procedures." The internal directives system provides for the orderly processing, internal 

review, approval, and dissemination of directives. Order OAS P 1832.1A sets out a clearance 

process that includes reviews by the primruy office involved in drafting the directive and a 

review by the Executive Secretariat and additional stakeholders, including a required legal 

Ali Fed. Bur. of Prisons, 552 U.S. at 226 (interpreting the phrase "by any officer of customs or excise or any 

other law enforcement officer" in the Federal Tort Claims Act, 28 U.S.C. § 2680(c) (2012)). 

""5 U.S.C. § 2302 note (emphasis added). 

41 Id., at 2!4, 227-28; see also id.at 220 ("Congres.~· use of 'any' to modify 'other law enforcement officer' is most 

naturally read to mean law enforcement officers of whatever kind"). 

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review by OGC. This process requires concurrence of all parties before the policy is finalized in 

writing. 

In implementing changes to its policy governing congressional communications from February 

to July 2017, GSA did not publish the terms of the policy, and instead orally communicated the 

terms of the policy to a limited number of GSA employees, who in tum orally communicated the 

policy to others. The unpublished policy also evolved over time. 

As a result, interpretation of the new policy varied from one GSA official to another. We 

interviewed l3 GSA officials from the Office of the Administrator, OGC, OCIA, Office of 

Administrative Services, and Public Buildings Service. One of the GSA officials, an OCIA 

Congressional Liaison Specialist who served as the Acting Associate Administrator for OCIA 

from January to April2017, stated that there was not a new policy but that OCJA had received 

oral "instructions" that GSA needed to be thoughtful and prioritize requests from Chairmen. 

Another GSA official, the former OGC Regional Counsel for the National Capital Region, said 

she could only recall receiving "direction," not a new policy, on providing responses to 

congressional requests. However, the remaining 11 GSA officials told us there was a new oral 

policy, and variably described the policy as: 

• not to respond to Minority party Members of Congress (l ); 

" not to respond to anyone but committee chairs (2); 

• not to respond to anyone but committee chairs, but only in oversight matters ( 6); 

" provide unredacted information to committee chairs only (I); or 

only provide Minority party Members of Congress information that would be released 

to the general public (1). 

The GSA officials also provided various responses as to when the policy was actually in effect. 

Several GSA officials stated that there was uncertainty and confusion about the terms and scope 

of the policy, particularly in its early stages. Murphy described initially receiving multiple 

questions about the policy and requesting further clarification from the GSA Acting General 

Counsel about it Some GSA officials also said they were not certain they were always familiar 

with the most current version of the policy, given that it was often evolving. 

We have not been able to identify the full impact of the potentially inconsistent interpretation 

and application of the GSA policies reviewed because of limitations in GSA's recordkeeping. 

OCJA officials stated that they only tracked formal congressional inquiries. The Associate 

Administrator for OCIA told us that OCIA did not maintain records of phone calls or informal 

requests from congressional members or their staff, and did not keep notes of GSA briefmgs to 

Congress. 

GSA employees stated that its unpublished policies were based on the conclusion that the law 

did not require GSA to respond to oversight or investigative inquiries other than those coming 

fi·om Chai1men. GSA provided no precise definition for what constituted an oversight or 

investigative congressional inquiry. Different GSA officials and documents referenced the 

following categories of information as potentially outside the scope of oversight or investigatory 

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inquiries: information on legislation, requests related to confmnation proceedings, projectrelated issues, "general program information," and requests for "technical assistance." Murphy 

stated that GSA clarified the policy at some point to permit responses to oversight inquiries by 

subcommittee chairs, and Home stated that the policy did not apply if a Chairman stated that he 

or she wanted GSA to respond to a request from a particular Member. Despite these reported 

refmements the GSA Public Buildings Service Acting Commissioner understood the policy 

simply to be not to respond to requests from Minority members of Congress. He also stated that 

the policy appeared to be inconsistently applied. 

To the extent that GSA employees, including potential whistleblowers, received differing 

information, there was no written document that they could consult to confirm the official terms 

of the policy. This remained the case even after GSA received written guidance from the White 

House Office of Legislative Affairs in May 2017. GSA did not incorporate the terms of that 

guidance into any internally published GSA order, policy, guidance, or other document that GSA 

employees could consult. The only written policy in place at the time governing GSA 

congressional inquiries was GSA Order ADM 1040.2, which did not address the te1ms of GSA's 

unpublished policies. 

GSA's management displayed apparent confusion concerning the policy when two congressional 

hearings held on the same day produced contradictory testimony about the policy. On 

July 12, 2017, before a subcommittee of the U. S. House Transportation and Infrastructure 

Committee, Acting Administrator Home reiterated his previous testimony regarding the 

nondisclosure policy stating, " ... the Administration's policy is to reh'Pond on matters of 

oversight ... to requests from the chairman." However, in a separate hearing held later on that 

same day, both Alan Thomas, Commissioner of the GSA Federal Acquisition Service, and 

Robert Cook, Deputy Commissioner and Director of Technology Transformation Services, stated 

they were not aware of the nondisclosure policy attested to by Home. 42 Further, when Mr. Cook 

was questioned if he would commit to responding to requests from members of Congress, Mr. 

Cook responded that the Technology Transformation Services would respond regardless of 

"where the request came from" which contradicted the policy relayed by Home just a few hours 

earlier. 

Finding 3: GSA Order ADM 1040.3 is ambiguous and lacks transparency as to what GSA's 

current congressional communications policy is. 

GSA Order ADM l 040.3 makes two changes of significance for this review to the p1ior GSA 

Order ADM l 040.2. First, the order adds a "Whistleblower Protection" provision that differs 

from the language in the WPEA. Second, the order adds new language that creates uncertainty 

over GSA's actual practices and its adherence toAdminlstration policy. The earlier order 

provided that congressional responses be "accurate, timely, helpful, and consistent with the 

42 Hearing before the U.S. House Committee on Oversight and Government Reform, Subcommittees on Government 

Operations and Information Technology. Testimony of Mr. Alan Thomas and Mr. Robert Cook. 

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views of the Agency and the Administration."43 The new order adds: "as outlined in the 

Department of Justice Office of Legal Counsel opinion, 'Authority of Individual Members of 

Congress to Conduct Oversight of the Executive Branch,' dated May 1, 2017."44 

It is not clear from the order itself, or from a review of the referenced May I, 2017, OLC 

opinion, what GSA's policy is with regard to individual Member requests. The OLC opinion 

concluded that individual Members "do not have the authority to conduct oversight in the 

absence of a specific delegation by a full house, committee, or subcommittee."45 The opinion 

also recognized that Executive Branch agencies have discretion in deciding whether and how to 

respond to inquiries from individual Members, and have historically followed a "general policy 

of providing only documents and information that are already public or would be available to 

the public through the Freedom ofinformation Act, 5 D. S.C. § 552." 46 GSA's unpublished 

policies with regard to individual Member requests comported with the historical practice 

described in the OLC opinion. However, the new order does not explicitly adopt that practice as 

GSA's policy. 

Further confusing the issue, just days before the issuance of GSA Order ADM 1040.3, the 

Director of the White House Office of Legislative Affairs stated that the May 1, 2017, OLC 

opinion did not set forth the cun·ent Administration's policy. On June 7, 2017, Senator Charles 

E. Grass ley, Chairman of the U.S. Senate Committee on the Judiciary, wrote to the President 

objecting to the conclusions reached in the May 1, 2017, OLC opinion and urging the White 

House to rescind the opinion. 47 The White House Director of Legislative Affairs responded in a 

letter dated July 20,2017, that the May I, 2017, OLC opinion constituted legal advice and "was 

43 GSA Order ADM 1040.2, Congressional and Imergovernmento/Jnquiries and Relations, § S.a.(l) (February 20, 

2015). 

44 GSA Order ADM 1040.3, Congressional and Illlergovernmenta/ Inquiries and Relations,§ 5.a.(l) (July 24, 2017) 

(emphasis added), available at https://www.justice.gov/olclopinions. 

"See Authority of Individual Members of Congress to Conduct Oversight of the Executive Branch, Op. O.L.C., at 1 

(May 1, 2017) (hereinafter "the May 1, 2017, OLC opinion"). 

"'I d. at 3. 

"Letter from Chairman Charles Grassley to the Han. Donald J. Trump (June 7, 2017), available at 

https:l/www.grassley.senate.gov/news!news-releases/grassley-cal!s-president·rescind-olc-opinion-shieldingbureaucrats·scrutiny. Chairman Grassley contended that the OLC opinion "erroneously rejects any notion that 

individual members of Congress who may not chair a relevant committee need to obtain information from the 

Executive Branch in order to carry out their Constitutional duties," and urged the Executive Branch to "work to 

cooperate in good faith with all congressional requests to the fullest extent possible." ld. at 2, 6. 

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not intended to provide, and did not purport to provide, a statement of Administration policy."48 

The letter further stated: 

The Administration's policy is to respect the rights of all individual Members, 

regardless of party affiliation, to request infmmation about Executive Branch 

policies and programs. The Administration will use its best efforts to be as timely 

and responsive as possible in answering such requests consistent with the need to 

prioritize requests from congressional Committees, with applicable resource 

constraints, and with any legitimate confidentiality or other institutional interest 

of the Executive Branch. Moreover, this policy will also apply to other matters on 

which individual Members may have an interest, whether it be considering 

possible legislation, evaluating nominees for confirmation, or providing service to 

constituents. 49 

The OCIA Associate Administrator and an OCIA Congressional Liaison Specialist told us that 

GSA has fully adopted the Administration's positions outlined in the July 20, 2017, White House 

letter. These officials also stated that OClA continues to process most Member requests that it 

deems oversight in nature through GSA's FOIA office, and that OCIA limits its responses 

accordingly. They stated that there are exceptions to FOIA processing, such as requests or 

inquiries where a "yes" or "no" answer, an easily accessible answer, or a narrative response is 

deemed appropriate and there is no need for further FOIA processing. The Congressional Liaison 

Specialist stated that GSA applies this same process to requests made under the Seven Member 

Rule statute, though GSA has not yet provided any responses processed tluuugh the FOIA office 

to any Seven Member Rule requests. 

Based on the above, GSA appears to be following its unpublished policy concerning the 

processing ofindividual Member oversight requests as FOIA inquilies. However, GSA's order 

does not state this, and does not contain the full anti-gag language prescribed by the WPEA. 

Clarifying GSA's current policy, and including the WPEA's whistleb!ower protection language, 

would provide GSA employees with a written document that clearly infurms them of the official 

te1ms of the policy. Including the language prescribed by the WPEA would also assure 

employees that GSA's policy does not supersede, conflict with, or otherwise alter existing 

employee whistleblower and congressional communication protections. Such clarification would 

4S See Letter from White House Director of Legislative Affairs Marc Short to Chairman Charles Grassley, at 2 (July 

20, 2017} (hereinafter the "July 20, 2017, White House letter"), available at 

https:/lwww.grassley.senate.gov/news/news-relenseslgrassley-wins-commitments-cooperation-administrationoversight-requests. It is not clear whether GSA was aware of the July 20, 2017, White House letler when it adopted 

GSA Order ADM 1040.3 on July 24,2017. While the letter was dated July 20, 20!7, it was not made public by 

Chairman Grassley's office until July 28, 20! 7. See Press Release, Office of Sen. Charles Grassley, Grass ley Wins 

Commitmems of Cooperation from Administration on Oversight Requests (July 28, 2017). 

"Id. at 2. 

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promote transparency and minimize the potential for confusion, misinterpretation, and 

inconsistent application. 

In response to our report, the agency stated that it commits to responding to requests from 

individual Members "to the fullest extent allowable under the law" but qualifies that request by 

referring to unspecified longstanding policies. (See Appendix.) 

Conclusion 

From 2015 through 2017, GSA implemented a series of published and unpublished policies 

governing responses to congressional inquiries. These policies should have contained, but did not 

contain, the whistleblower protection language that the WPEA requires be included in 

nondisclosure policies. GSA's failure to include the required language increases the risk of 

confusion and may chill the willingness of potential whistleblowers to come forward. 

GSA's use of unpublished policies did not comply with internal directives and created 

opportunities for confusion, misinterpretation, and inconsistent application among its officials 

and employees. GSA officials informed of the policies described different interpretations of the 

policies and the time periods in which they were in place. Other GSA employees, including some 

senior GSA officials, were either not informed of the policies or learned of them only secondhand. 

Finally, GSA's current policy with respect to congressional inquhies lacks transparency, despite 

GSA's issuance of a new published order in July 2017. GSA officials in OCIA stated that at least 

some aspects of the prior unpublished policy are still in place, yet the current order does not 

clarify whether GSA is continuing its prohibition of employees from responding to individual 

Member inquiries deemed to be oversight or investigative in nature, or limiting the response to 

such inquiries to agency records identified through GSA's FOIA process. 

Recommendations 

GSA's leadership should: 

1. Include the anti-gag provision required by the Whistleblower Protection Enhancement 

Act of2012 in GSA's order on congressional and intergovernmental inquiries and 

relations. 

2. Clarify GSA's policy on communications with Members of Congress in GSA's order on 

congressional and intergovernmental inquiries and relations. 

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Objectives, Scope, and Methodology 

This evaluation was conducted by the Office of Inspections to determine whether GSA 

implemented a nondisclosure policy regarding employee communications with Congress and if 

so, whether the policy violates the Whistleblower Protection Enhancement Act or other laws, 

regulations, or GSA policy. To accomplish our objectives, we: 

Researched laws, rules, regulations, and other federal guidance on employee and agency 

communications with Congress; 

Reviewed GSA policies, orders, and procedures related to the management of responses 

to congressional inquiries; 

Reviewed relevant audits and inspections conducted by GSA OIG, GAO, and other 

federal agencies; 

Interviewed agency management and staff from the OCIA, OGC, FOIA office, and 

Administrator's Office 

Reviewed OCIA correspondence records; and 

Reviewed email documentation for OCIA, OGC, and the Administrator's Office staff. 

Our evaluation was conducted from May through December 2017, in accordance with the 

Council of the Inspectors General on Integrity and Efficiency Quality Standards for Inspection 

and Evaluation (January 2012). 

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JE18-002 

Appendix: Management Comments 

Offi.ce of CQHgrcsslonal !tnd lntargovernmenta! Affairs 

March 2, 2018 

MEMORANDUM FOR PATRICIA 0. SfiEEHAN 

ASSISTANT INSPECTOR GENERA 

FROM: P, BRENNAN HART, Ill 

ASSOCIATE ADMINISTRA 

OFFICE OF CONGRESSIO 

AFFAIRS(S) 

SUBJECT: Evaluation or GSA Nond/sc/0$/Jfe Policy Draft Report (JEF-{)10-000) 

The U. S. General Servk:es Admlnfstrallon (GSA) and lhe Ol!lce of Inspector General (OIG) 

share the goal of fostering an environment where ills sefe to report waste, fraud, or 

mismanagement With this In mind, GSA appreciates the OIG review and two 

recommendations regarding ths GSA policy governing official congressional communications, 

ACM 1040.3 (the GSA Order). GSA is commHted to being so fortflooming as possible with 

regard to congressional oversight requests B!ld in<JMdual Member requests for Information. 

Regarding the first racornmendatlon, GSA firmly recognizes ths Importance of protection for 

whlstleblowers and the valuable role thst whlsUeblowers play in bolstering oversight. GSA 

consistently supports employees' rights In this area through whlsllebtower traininga and 

circulating lnfonnation slating whisffebtower righls, processes, and assurances of legal 

pro taction. Respectfully, GSA disagrees with OIG's Interpretation of ths Wlllsffeblower 

Protection Enhancement Act of 2012 (P.L 112·199) (WPEAl and Its conclusion that the GSA 

Orner consnlules a "nondloolosure policy" under the statute. Nolwllhslandlng that 

disagreement, GSA amended the GSA Order to include ths paragraph ralerenced In 6 U.S. C. 

§ 2302(b)(13), as recommended bytha OIG, and has Initiated the formal claarancs prooeu for 

ths amended Order, 

There Is nothing in the WPEA or i!s legislative history that defines "nondisclosuna policy" lor the 

purposes of 5 U.S.C. § 2302(b)(13~ A reasonable parson can interprallhe requlnameniS of the! 

provlslon as limited to Items Ilks specific nondisclosure agreements (e.g., Standard Forms 312 

and 4414}, sel!lement agreements with a nondiscloSure provision, or pollcles related to lhasa 

types of !toms. For example, WPEA section 115{a), "Nondlsclosuna pcllcles, forms, and 

agreements," conlalns a government-wide prohibnlon on the use of nondisclosure agreements 

w!!hout lhs whls!!eblower pt'olecllon statement found In 5 U.S. C.§ 2302(b)(13) and spaclfically 

enumerates Standard Fonms 312 and 4414 as subject to the prohibition. 

Unlike those examples of nondisclosura policlas, the GSA Order states a procedure to ensure 

thai all official responses to congressionally initiated requests are vetted to provide !he agency's 

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Washington, DC 

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JE18-002 

offiCial po~Hion on particular matters. This centralization of congresslooallntaraction ensures 

both uniformity and ronslstency of message, whic~ minimizes confusion on bOOalf o1 agency 

personnel, Members end staff In Congress, and the pull!lc. Previous GSA orders on the topic 

detail simUar requirements for Office of Congressional and lnlergovammental Allairs 

involvement. While the GSA Order does not detail every step or consideration In a response, It 

ensures there Is a slnljle ollice with the appropriate authority and discretion to proparty present 

the official agency posnion on any matter of congressional inquiry. In that respect, the GSA 

Oroer Is no different !rom the Office of Management end BudQet'& (OMB) Circular A-19 

Legislative Coordination and Clearance, wh!dl requires prior coon:l!nation by agencies with 

OMB on various interactions with Members of Congress end does not contain the language 

found In 5 U.S.C. § 2302(b){13) regarding whistleblowe< rights. 

Ultlmately, whet differentiates the GSA Order from a nondisclosure policy is the! a 

whisHeblower's communications with Congress ere not official agency positions and am 

therefore outside the scope of the GSA Order. This is consistent with the defln"ion or 'disclosure' In 5 U.S.C. § 2302(a)(2)(D), which spedfically exempts 'a communication 

concerning policy decisions tha! lawfully exercise discretionary authority." However, It is always 

worthwhile to remind employees of their whistleblower rights and, therefore, as stated above, 

GSA heo nsplaced the general reference to whlslleblowar rights In the GSA Order with the 

specific language contained in the statute. 

With respect to !he second recommendation, !he OIG evaluation staled there was uncertainly in 

!he GSA Order on GSA's policy of responding to individual Mambers of COngress. For clarity, 

GSA has updated the Order and removed the reference to the Office of legal Counsel's May 1, 

2017, opinion. GSA will continue to use Its best efforis to be timely in responding lo requests 

from aH Members of Congress. As While House Dir&clor of legislative Affairs, Marc Short, 

staled In his July 20,2017, letter to Chairman Chuck Gressley," ... the Executive Branch should 

voluntarily release information to Individual Members where possible." The OIG evaluation also 

commented the! Members of Congress (non-chelrmen) Who submit requests for records are 

often treated lll<e requesters under the Freedom of Information Acl (FOIA). GSA recognizes the 

important mle of congressional oversight and routlnaly provides lnfonnation through document 

productions and briefings upon request to Membern on a ll!lriety or topics In efforts to maintain 

transparency. GSA's actions are consistent with longslaoding Executive Branch policy through 

numerous administrations.' GSA will continue to respond to rongresslonal requests to the 

lutlest extant aUowable under the law and consistent with longstanding agency and Executive 

Branch policies. 

GSA appreciates lis partnership with the legislative branch and lool<slorward to continued 

opportunities to work with Congress-Committees and individual Members. 

1 Applicalion of Privacy Act Congress~ &ceplion to Disc1osi.Jres to Ranldng Mincrlly Membenr. 2-5 Op. 

O.l.C. 26!1(2001 ). s .. also, Authority ollndMduol Members of Congreu to Condud Dveui¢11 of tile E!wcv!M> Bronc!!, 41 Op. O.LC. 1(2017). See aloo, Alissa M. OOian et al., Cang. R....,n:h Son~., Rl30240, Cong. Ovors/ghl 

Manua/56{2014). 

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·~ 41217 

Submission of Federal Rules 

Under the Congressional Review Act 

D President of the Senate D Speaker of the House of Representatives D GAO 

Please flU the circles e!ectronlcelly or with black pen or #2 penciL 

1. Name of Department or Agency 2. Subdivision or Office 

4. Rule Identification Number (R!N) or Other Unique Identifier (lf applicable} 

5. Major Role 0 Non-major Role 0 

6. Final Rule 0 Other 0 

7. With respect to thls rule, dld your agency solicit public comments? YesO NoO NIAO 

8. Priority of Regulation (fill in one} 

0 Economically Significant; or 

Significant; or 

Substantive, Nonsignificant 

9. Effective Date (if applicable) 

10. Is a concise Summary af the Rule provided? Yes 0 

0 Routine and Frequent or 

Informational/Administrative/Other 

(Do not complete the other side 

of this form If filled In abov~.) 

No 0 

Submitted by: ________________ {signature) 

Name:------

Title: 

For Congressional Use Only: 

Date Received: ______ _ 

Committee of Jurisdiction: ____________________ _ 

11109199 

1111111 

I 

Ill