I 

113TH CONGRESS 

2D SESSION H. R. 3863 

To amend title 5, United States Code, to establish uniform requirements 

for thorough economic analysis of regulations by Federal agencies based 

on sound principles, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 14, 2014 

Mr. BRADY of Texas introduced the following bill; which was referred to the 

Committee on the Judiciary 

A BILL 

To amend title 5, United States Code, to establish uniform 

requirements for thorough economic analysis of regulations by Federal agencies based on sound principles, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Sound Regulation Act 

5 of 2014’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

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1 (1) Growing Federal regulation that is highly 

2 prescriptive in nature burdens American industry 

3 and impairs its international competitiveness. 

4 (2) Prescriptive regulation takes away flexi5 bility, is adversarial in nature, leads to unintended 

6 consequences, and, especially as it proliferates, slows 

7 economic growth and job creation. 

8 (3) Despite evidence of increasing regulatory 

9 costs, Federal agencies hold fast to the presumption 

10 that their rules are in the public interest. 

11 (4) Some statutes prohibit consideration of 

12 costs and benefits in rulemaking, although none pro13 hibit agency analysis of costs and benefits for in14 formative purposes. 

15 (5) For independent regulatory agencies cost16 benefit analysis is not institutionalized. Executive 

17 agencies perform cost-benefit analysis pursuant to 

18 Executive order and under the purview of the Office 

19 of Information and Regulatory Affairs (OIRA), 

20 which takes direction from the President. No peer 

21 review is required of analyses by either set of agen22 cies. 

23 (6) There are no statutory standards for cost24 benefit analysis in Federal rulemaking and there are 

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1 no consistent, material consequences when rules are 

2 based on faulty or inadequate analysis. 

3 (7) Agencies conduct their own regulatory im4 pact analyses largely by methods of their own choos5 ing and only on a small fraction of the rules they 

6 issue. Agencies use regulatory cost-benefit analysis 

7 mainly in support of favored, preconceived rules 

8 rather than as a decision tool. Common deficiencies 

9 include— 

10 (A) lack of a coherent theory by which to 

11 define a problem, determine why it occurs, and 

12 guide the agency to the most efficient response; 

13 (B) lack of objective evidence that an ac14 tionable problem actually exists, what its di15 mensions are, and how they differ from accept16 able norms; 

17 (C) lack of comprehensive analysis to de18 termine whether a market malfunction exists 

19 and orient rulemaking to its causes, not its 

20 symptoms; 

21 (D) failure to set clear and realistic objec22 tives whose benefits justify the cost of achieving 

23 them; 

24 (E) objectives that are set disconnected 

25 from costs and may be expansive and vague so 

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1 that any regulation can be made to appear ben2 eficial; 

3 (F) agencies increasingly claiming inci4 dental benefits (so-called co-benefits) that are 

5 not in furtherance of the stated objective and 

6 even private (as opposed to public) benefits for 

7 their rules; 

8 (G) failure to develop regulatory options in 

9 light of market analysis and rank them by how 

10 efficiently they will improve the market process; 

11 (H) inconsistent assumptions and meth12 odologies across agencies; 

13 (I) invalid baselines for gauging regulatory 

14 effects; 

15 (J) omissions of important impacts, such 

16 as on employment and international competi17 tiveness of U.S. firms; 

18 (K) failure to reevaluate regulations after 

19 implementation; and 

20 (L) failure to consider the cumulative costs 

21 of regulation by the various Federal, State, 

22 local, and tribal agencies. 

23 (8) Despite continually changing market condi24 tions, agencies do not regularly review their existing 

25 regulations and regulatory regimes. They also do not 

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1 review the division of functions among different Fed2 eral agencies or among Federal, State, local, and 

3 tribal agencies. Regulations lose their purpose, yet 

4 linger and accumulate, imposing unnecessary costs 

5 and slowing economic growth to the detriment of 

6 material living standards and, to some extent, the 

7 very social conditions that are the objects of regula8 tion. 

9 (9) Agencies typically do not conduct regulatory 

10 cost studies proactively and report to Congress un11 necessary costs that are not under the agencies’ con12 trol because of the way laws are written. Agency rec13 ommendations on how to improve the efficiency of 

14 regulation by modifying an existing statute could be 

15 helpful to Congress. 

16 SEC. 3. UNIFORM USE OF COST-BENEFIT ANALYSIS. 

17 Section 553 of title 5, United States Code, is amend18 ed by adding at the end the following: 

19 ‘‘(f)(1) Prior to any rulemaking under this section, 

20 an agency shall comply with the following: 

21 ‘‘(A) The agency shall identify, in the con22 text of a coherent conceptual framework and 

23 supported with objective data— 

24 ‘‘(i) the nature and significance of the 

25 market failure, regulatory failure, or other 

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1 problem that necessitates regulatory ac2 tion; 

3 ‘‘(ii) the reasons why national eco4 nomic and income growth, advancing tech5 nology, and other market developments will 

6 not obviate the need for the rulemaking; 

7 ‘‘(iii) the reasons why regulation at 

8 the State, local, or tribal level could not 

9 address the problem better than at the 

10 Federal level; 

11 ‘‘(iv) the reasons why reducing rather 

12 than increasing the extent or stringency of 

13 existing Federal regulation would not ad14 dress the problem better; and 

15 ‘‘(v) the particular authority by which 

16 the agency may take action. 

17 ‘‘(B) Before the agency increases the ex18 tent or stringency of regulation based on its de19 terminations pursuant to subparagraph (A), it 

20 shall— 

21 ‘‘(i) set an achievable objective for its 

22 regulatory action and identify the metrics 

23 by which the agency will measure progress 

24 toward the objective; 

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1 ‘‘(ii) issue a notice of inquiry seeking 

2 public comment on the identification of a 

3 new objective under clause (i); and 

4 ‘‘(iii) give notice to the committees of 

5 Congress with jurisdiction over the subject 

6 matter of the rule. 

7 ‘‘(C) The agency, if the agency is not seek8 ing to repeal a rule, shall develop at least 3 dis9 tinct regulatory options, in addition to not regu10 lating, that the agency estimates will provide 

11 the greatest benefits for the least cost in meet12 ing the regulatory objective set under subpara13 graph (B) and, in developing such regulatory 

14 options, shall apply the following principles: 

15 ‘‘(i) The agency shall assume that in16 dividuals are rational and not qualify that 

17 assumption unless the agency— 

18 ‘‘(I) has conclusive evidence of a 

19 detrimental systematic behavioral 

20 bias; and 

21 ‘‘(II) can devise behavioral regu22 latory options that do not preclude 

23 any choices of market participants. 

24 ‘‘(ii) The agency shall, to the extent 

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1 centives to solve a problem and not sup2 plant private incentives any more than nec3 essary. 

4 ‘‘(iii) The agency shall consider the 

5 adverse effects that mandates and prohibi6 tions may have on innovation, economic 

7 growth, and employment. 

8 ‘‘(iv) An agency’s risk assessment 

9 shall be confined to its jurisdiction, subject 

10 to specific regulatory authority. Agency as11 sessments of the risks of adverse health 

12 and environmental effects shall follow 

13 standardized parameters, assumptions, and 

14 methodologies. An agency also shall pro15 vide analyses of increases in risks, what16 ever their nature, produced by the regu17 latory options under consideration. 

18 ‘‘(v) The agency shall avoid incongru19 ities and duplication in regulation at the 

20 Federal, State, local, and tribal levels. 

21 ‘‘(vi) The agency shall compare and 

22 contrast the regulatory options developed 

23 and explain how each would meet the regu24 latory objective set pursuant to subpara25 graph (B). 

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1 ‘‘(D) The agency shall estimate the costs 

2 and benefits of each regulatory option devel3 oped, notwithstanding any provision of law that 

4 prohibits the agency from using costs in rule5 making, at least to the extent that the agency 

6 is able to— 

7 ‘‘(i) exclude options whose costs ex8 ceed their benefits; 

9 ‘‘(ii) rank the options by cost from 

10 lowest to highest; 

11 ‘‘(iii) estimate the monetary cost of 

12 any adverse effects on private property 

13 rights, identify the categories of persons 

14 who experience a net loss from a regu15 latory option, and explain why the negative 

16 effects cannot be lessened or avoided; 

17 ‘‘(iv) establish whether the cost of an 

18 option exceeds $50,000,000 for any 12- 

19 month period, except that the dollar 

20 amount shall be adjusted annually for in21 flation based on the GDP deflator, and the 

22 President may order that a lower dollar 

23 amount be used for a particular period; 

24 and 

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1 ‘‘(v) identify the key uncertainties and 

2 assumptions that drive the results and pro3 vide an analysis of how the ranking of the 

4 options and the threshold determination 

5 under clause (iv) may change if key as6 sumptions are changed. 

7 ‘‘(E) The estimates pursuant to subpara8 graph (D) shall— 

9 ‘‘(i) follow the methodology estab10 lished pursuant to paragraph (2)(A); 

11 ‘‘(ii) to the maximum extent prac12 ticable, comply with any guidelines issued 

13 by the Administrator of the Office of Infor14 mation and Regulatory Affairs pertaining 

15 to cost-benefit analysis; and 

16 ‘‘(iii) include, at a minimum— 

17 ‘‘(I) agency administrative costs; 

18 ‘‘(II) United States private sector 

19 compliance costs; 

20 ‘‘(III) Federal, State, local, and 

21 tribal compliance costs; 

22 ‘‘(IV) Federal, State, local, and 

23 tribal revenue impacts; 

24 ‘‘(V) impacts from the regulatory 

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1 dustries in the role of suppliers and 

2 consumers to each industry substan3 tially affected, especially in terms of 

4 employment, costs, volume and quality 

5 of output, and prices; 

6 ‘‘(VI) nationwide impacts on 

7 overall economic output, productivity, 

8 consumer and producer prices; 

9 ‘‘(VII) international competitive10 ness of United States companies; and 

11 ‘‘(VIII) distortions in incentives 

12 and markets, including an estimate of 

13 the resulting loss to the United States 

14 economy. 

15 ‘‘(F) The agency shall publish for public 

16 comment all analyses, documentation, and data 

17 under subparagraphs (A) through (D) for a 

18 public comment period of at least 30 days (sub19 ject to applicable limitations under law, includ20 ing laws protecting privacy, trade secrets, and 

21 intellectual property) and correct deficiencies or 

22 omissions that the agency becomes aware of be23 fore choosing a rule to propose. 

24 ‘‘(2)(A) Beginning not later than the date that 

25 is 180 days after the effective date of this section— 

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1 ‘‘(i) each agency shall, by rule, estab2 lish and maintain the specific cost-benefit 

3 analysis methodology appropriate to the 

4 functions and responsibilities of that agen5 cy and establish an appropriate period for 

6 review of new rules to assess the cost effec7 tiveness of each such new rule at achieving 

8 the objective identified under paragraph 

9 (1)(B)(i) the new rule was intended to ad10 dress; 

11 ‘‘(ii) the methodology so established 

12 shall— 

13 ‘‘(I) include the standardized pa14 rameters, assumptions, and meth15 odologies for agency assessments of 

16 risk under paragraph (1)(C)(iv); 

17 ‘‘(II) comply, to the maximum 

18 extent practicable, with technical 

19 standards for methodologies and as20 sumptions issued by the Adminis21 trator for the Office of Information 

22 and Regulatory Affairs; 

23 ‘‘(III) include the scope of bene24 fits and costs consistent with the 

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1 tified in the establishment of the regu2 latory objective under paragraph (1); 

3 ‘‘(IV) not include consideration 

4 of incidental benefits but only those 

5 benefits that were considered in the 

6 establishment of the regulatory objec7 tive; 

8 ‘‘(V) limit consideration of costs 

9 and benefits to costs and benefits that 

10 accrue to the population of the United 

11 States; 

12 ‘‘(VI) constrain the agency from 

13 presuming that continued augmenta14 tion or tightening of mandates and 

15 additional prohibitions cause benefits 

16 and costs to change linearly but deter17 mine at what point benefits will rise 

18 less than, and costs will rise more 

19 than, proportionally; 

20 ‘‘(VII) include comparison of in21 cremental benefits to incremental 

22 costs from any action the agency con23 siders taking and refrain from actions 

24 whose incremental benefits do not ex25 ceed their incremental costs; and 

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1 ‘‘(VIII) include analysis of effects 

2 on private incentives and possible un3 intended consequences; and 

4 ‘‘(iii) the agency shall adhere to the 

5 methodology so established in all 

6 rulemakings. 

7 ‘‘(B) If the agency does not select the 

8 least-cost regulatory option as its proposed rule, 

9 the agency shall justify its selection, explain10 ing— 

11 ‘‘(i) how that selection furthers other 

12 goals or requirements relevant to regu13 lating matters within the agency’s jurisdic14 tion and why these should override cost 

15 savings; and 

16 ‘‘(ii) why each of the other regulatory 

17 options not chosen would not sufficiently 

18 further such other goals or requirements. 

19 ‘‘(C) If the agency makes a determination 

20 under paragraph (1)(D) that the monetized cost 

21 of a rule exceeds the applicable monetary limit 

22 under clause (iv) of such paragraph for any 12- 

23 month period, the agency head shall— 

24 ‘‘(i) first issue an advanced notice of 

25 proposed rulemaking; 

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1 ‘‘(ii) provide notice to the appropriate 

2 Congressional committees and keep such 

3 committees informed of the status of the 

4 rulemaking; and 

5 ‘‘(iii) ensure that— 

6 ‘‘(I) the agency shall notify the 

7 Administrator of the Small Business 

8 Administration, the Director of the 

9 Office of Management and Budget, 

10 and affected parties, and provide each 

11 such person with information on the 

12 potential effects of the proposed rule 

13 on affected parties and the type of af14 fected parties that might be affected; 

15 ‘‘(II) not later than 15 days after 

16 the date of receipt of the materials de17 scribed in subclause (I), the Director, 

18 in consultation with the Adminis19 trator, shall identify representatives of 

20 affected parties, 25 percent of which 

21 shall represent small business con22 cerns (as such term is defined in sec23 tion 3(a) of the Small Business Act), 

24 when possible, and all the major 

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1 tunity to obtain advice and rec2 ommendations about the potential ef3 fects of the proposed rule; 

4 ‘‘(III) the agency shall convene a 

5 review panel consisting wholly of full6 time Federal officers, employees, and 

7 contractors in the agency responsible 

8 for the proposed rule, the Director, 

9 the Administrator, and the represent10 atives of affected parties identified 

11 pursuant to subclause (II); 

12 ‘‘(IV) the agency shall conduct a 

13 detailed analysis of the costs and ben14 efits of the regulatory option it is ad15 vancing, and, in doing so— 

16 ‘‘(aa) the agency shall con17 sider the cumulative and inter18 active costs of regulatory require19 ments of Federal, State, local, 

20 tribal, and (where applicable) 

21 international regulations; and 

22 ‘‘(bb) the agency shall iden23 tify the key uncertainties and as24 sumptions that drive the results 

25 and provide an analysis of how 

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1 the ranking of the regulatory op2 tions changes if the key assump3 tions are changed; 

4 ‘‘(V) the panel shall review agen5 cy material prepared in connection 

6 with this subsection, including any 

7 draft proposed rule, and review the 

8 advice and recommendations of each 

9 affected party representative identi10 fied; 

11 ‘‘(VI) not later than 60 days 

12 after the date the agency convenes a 

13 review panel pursuant to subclause 

14 (III), the review panel shall report on 

15 the comments of the affected party 

16 representatives and its findings as to 

17 issues related to the provisions of this 

18 subsection, and such report shall be 

19 made public as part of the rulemaking 

20 record; 

21 ‘‘(VII) where appropriate, the 

22 agency shall modify the proposed rule 

23 or the cost-benefit analysis under sub24 clause (IV) based on the report under 

25 subclause (VI); 

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1 ‘‘(VIII) subject to applicable limi2 tations under law, including laws pro3 tecting privacy, trade secrets, and in4 tellectual property, the agency shall 

5 publish for comment all analyses, doc6 umentation, and data under this para7 graph for a public comment period of 

8 at least 30 days and correct defi9 ciencies or omissions that the agency 

10 becomes aware of before adopting a 

11 proposed rule; and 

12 ‘‘(IX) affected parties, including 

13 State, local, or tribal governments, 

14 and other stakeholders may partici15 pate in the rulemaking by means such 

16 as— 

17 ‘‘(aa) the publication of ad18 vanced and general notices of 

19 proposed rulemaking in publica20 tions likely to be obtained by af21 fected parties; 

22 ‘‘(bb) the direct notification 

23 of interested affected parties; 

24 ‘‘(cc) the conduct of open 

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1 cluding soliciting and receiving 

2 comments over computer net3 works; and 

4 ‘‘(dd) reducing the cost or 

5 complexity of procedural rules to 

6 ease participation in the rule7 making. 

8 ‘‘(D) Every 4 years the agency shall con9 duct a review of all rules of the agency in effect 

10 and determine based on objective data whether 

11 its rules are working as intended, furthering 

12 their objectives, imposing unanticipated costs, 

13 and generating a net benefit or not, and shall 

14 amend such rules if appropriate. The agency 

15 shall report to Congress the findings of each 

16 such review. 

17 ‘‘(E) Any person may petition an agency to 

18 amend an existing rule made prior to the estab19 lishment of methodology under this paragraph, 

20 and, if the agency denies such a petition, that 

21 denial shall be subject to review under chapter 

22 7 of this title. 

23 ‘‘(F) Notwithstanding any other provision 

24 of law, including any provision of law that ex25 plicitly prohibits the use of cost-benefit analysis 

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1 in rulemaking, an agency shall conduct cost2 benefit analyses and report to Congress the 

3 findings with specific recommendations for how 

4 to lower regulatory costs by amending the stat5 utes prohibiting the use thereof. 

6 ‘‘(3) For purposes of this subsection— 

7 ‘‘(A) the term ‘regulatory options’ means 

8 any action an agency may take to address an 

9 objective identified under paragraph (1)(B)(i), 

10 including the option not to act; 

11 ‘‘(B) the term ‘private incentives’ means fi12 nancial gains or losses that motivate actions by 

13 private individuals and businesses, and does not 

14 include any law or regulation that prescribes 

15 private actions or outcomes; and 

16 ‘‘(C) the term ‘incidental benefit’ means a 

17 claimed benefit outside the specific regulatory 

18 objective or objectives identified under para19 graph (1)(B)(i) a rule is intended to address as 

20 identified in paragraph (1)(A). 

21 ‘‘(4) All determinations made under this sub22 section shall be subject to review under chapter 7.’’. 

23 SEC. 4. CONGRESSIONAL REVIEW. 

24 Section 801(a)(2) of title 5, United States Code, is 

25 amended by adding at the end the following: 

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1 ‘‘(C) The Comptroller General shall exam2 ine the cost-benefit analysis for compliance with 

3 the requirements of section 553(f), including 

4 the agency methodology established under sec5 tion 553(f)(2)(A). 

6 ‘‘(D) The Comptroller General shall exam7 ine any risk analysis under section 

8 553(f)(1)(C)(iv) pertaining to the cost-benefit 

9 analysis for compliance with the requirements 

10 of section 553(f). 

11 ‘‘(E) The Comptroller General also shall 

12 examine the agencies’ quadrennial regulatory 

13 reviews for consistency with the requirements of 

14 section 553(f) and report to Congress on the re15 sults.’’. 

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