II 

113TH CONGRESS 

2D SESSION S. 2099 

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 SENATE OF THE UNITED STATES 

MARCH 10, 2014 

Mr. COATS introduced the following bill; which was read twice and referred 

to the Committee on Homeland Security and Governmental Affairs 

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 and impairs the inter3 national competitiveness of industry in the United 

4 States. 

5 (2) Prescriptive regulation takes away flexi6 bility, is adversarial in nature, leads to unintended 

7 consequences, and, especially as it proliferates, slows 

8 economic growth and job creation. 

9 (3) Despite evidence of increasing regulatory 

10 costs, Federal agencies hold fast to the presumption 

11 that their rules are in the public interest. 

12 (4) Some statutes prohibit agencies from con13 sidering costs and benefits in rulemaking, although 

14 no statutes prohibit agencies from analyzing the 

15 costs and benefits of rules for informative purposes. 

16 (5)(A) Cost-benefit analysis is not institutional17 ized for independent regulatory agencies. 

18 (B) Executive agencies perform cost-benefit 

19 analysis pursuant to Executive order and under the 

20 purview of the Office of Information and Regulatory 

21 Affairs (commonly referred to as ‘‘OIRA’’), which 

22 takes direction from the President. 

23 (C) Peer review is not required for cost-benefit 

24 analysis by independent regulatory agencies or exec25 utive agencies. 


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1 (6) There are no— 

2 (A) statutory standards for cost-benefit 

3 analysis in Federal rulemaking; or 

4 (B) consistent, material consequences when 

5 rules are based on faulty or inadequate anal6 ysis. 

7 (7) Agencies— 

8 (A) conduct their own regulatory impact 

9 analysis— 

10 (i) largely by methods of their own 

11 choosing; and 

12 (ii) only on a small fraction of the 

13 rules they issue; and 

14 (B) use regulatory cost-benefit analysis 

15 mainly in support of favored, preconceived rules 

16 rather than as a decision tool. 

17 (8) Common deficiencies in the regulatory anal18 ysis used by agencies include— 

19 (A) lack of a coherent theory by which 

20 to— 

21 (i) define a problem; 

22 (ii) determine why the problem occurs; 

23 and 

24 (iii) guide the agency to the most effi25 cient response; 


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1 (B) lack of objective evidence that an ac2 tionable problem actually exists, what its di3 mensions are, and how they differ from accept4 able norms; 

5 (C) lack of comprehensive analysis to— 

6 (i) determine whether a market mal7 function exists; and 

8 (ii) orient rulemaking to the causes, 

9 not the symptoms, of the market malfunc10 tion; 

11 (D) failure to set clear and realistic objec12 tives whose benefits justify the cost of achieving 

13 the objectives; 

14 (E) objectives that— 

15 (i) are disconnected from costs; and 

16 (ii) may be expansive and vague so 

17 that any regulation can be made to appear 

18 beneficial; 

19 (F) agencies increasingly claiming— 

20 (i) incidental benefits (also known as 

21 ‘‘co-benefits’’) that are not in furtherance 

22 of the stated objective; and 

23 (ii) even private, as opposed to public, 

24 benefits for rules; 

25 (G) failure to— 


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1 (i) develop regulatory options in light 

2 of market analysis; and 

3 (ii) rank regulatory options by how ef4 ficiently they will improve the market proc5 ess; 

6 (H) inconsistent assumptions and meth7 odologies across agencies; 

8 (I) invalid baselines for gauging regulatory 

9 effects; 

10 (J) the omission of important impacts, 

11 such as the impact on employment and on the 

12 international competitiveness of United States 

13 firms; 

14 (K) failure to reevaluate regulations after 

15 implementation; and 

16 (L) failure to consider the cumulative costs 

17 of regulation by the various Federal, State, 

18 local, and tribal agencies. 

19 (9)(A) Despite continually changing market 

20 conditions, agencies do not— 

21 (i) regularly review their existing regula22 tions and regulatory regimes; or 

23 (ii) review the division of functions— 

24 (I) among different Federal agencies; 

25 or 


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1 (II) among Federal, State, local, and 

2 tribal agencies. 

3 (B) Regulations lose their purpose, yet linger 

4 and accumulate, imposing unnecessary costs and 

5 slowing economic growth to the detriment of— 

6 (i) material living standards; and 

7 (ii) to some extent, the very social condi8 tions that are the objects of regulation. 

9 (10)(A) Agencies typically do not— 

10 (i) proactively conduct regulatory cost 

11 studies; and 

12 (ii) report to Congress on unnecessary 

13 costs that are not under the control of the 

14 agencies because of the way laws are written. 

15 (B) Agency recommendations on how to im16 prove the efficiency of regulation by modifying an 

17 existing statute could be helpful to Congress. 

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

19 Section 553 of title 5, United States Code, is amend20 ed by adding at the end the following: 

21 ‘‘(f)(1) Before an agency publishes or otherwise pro22 vides notice of a notice of proposed rulemaking under this 

23 section, the agency shall comply with the following require24 ments with respect to the proposed rule: 


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1 ‘‘(A) The agency shall identify, in the context 

2 of a coherent conceptual framework and supported 

3 with objective data— 

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

5 market failure, regulatory failure, or other 

6 problem that necessitates regulatory action; 

7 ‘‘(ii) the reasons why national economic 

8 and income growth, advancing technology, and 

9 other market developments will not obviate the 

10 need for the rulemaking; 

11 ‘‘(iii) the reasons why regulation at the 

12 State, local, or tribal level could not address the 

13 problem better than at the Federal level; 

14 ‘‘(iv) the reasons why reducing rather than 

15 increasing the extent or stringency of existing 

16 Federal regulation would not address the prob17 lem better; and 

18 ‘‘(v) the particular authority under which 

19 the agency may take action. 

20 ‘‘(B) Before the agency increases the extent or 

21 stringency of regulation based on its determinations 

22 pursuant to subparagraph (A), the agency shall— 

23 ‘‘(i) set an achievable objective for its regu24 latory action and identify the metrics by which 


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1 the agency will measure progress toward the ob2 jective; 

3 ‘‘(ii) issue a notice of inquiry seeking pub4 lic comment on the identification of a new ob5 jective under clause (i); and 

6 ‘‘(iii) give notice to the committees of Con7 gress with jurisdiction over the subject matter 

8 of the rule. 

9 ‘‘(C) If the agency is not seeking to repeal a 

10 rule, the agency shall develop not less than 3 distinct 

11 regulatory options, in addition to not regulating, 

12 that the agency estimates will provide the greatest 

13 benefits for the least cost in meeting the regulatory 

14 objective set under subparagraph (B) and, in devel15 oping such regulatory options, shall apply the fol16 lowing principles: 

17 ‘‘(i) The agency shall, to the extent prac18 ticable— 

19 ‘‘(I) attempt to engage private incen20 tives to solve a problem; and 

21 ‘‘(II) not supplant private incentives 

22 any more than necessary. 

23 ‘‘(ii) The agency shall consider the adverse 

24 effects that mandates and prohibitions may 


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1 have on innovation, economic growth, and em2 ployment. 

3 ‘‘(iii)(I) The agency’s risk assessment shall 

4 be confined to the jurisdiction of the agency, 

5 subject to specific regulatory authority. 

6 ‘‘(II) Agency assessments of the risks of 

7 adverse health and environmental effects shall 

8 follow standardized parameters, assumptions, 

9 and methodologies. 

10 ‘‘(III) The agency shall provide analyses of 

11 increases in risks, whatever their nature, pro12 duced by the regulatory options under consider13 ation. 

14 ‘‘(iv) The agency shall avoid incongruities 

15 and duplication in regulation at the Federal, 

16 State, local, and tribal levels. 

17 ‘‘(v) The agency shall compare and con18 trast the regulatory options developed and ex19 plain how each would meet the regulatory objec20 tive set pursuant to subparagraph (B). 

21 ‘‘(D) The agency shall estimate the costs and 

22 benefits of each regulatory option developed, not23 withstanding any provision of law that prohibits the 

24 agency from using costs in rulemaking, at least to 

25 the extent that the agency is able to— 


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1 ‘‘(i) exclude options whose costs exceed 

2 their benefits; 

3 ‘‘(ii) rank the options by cost from lowest 

4 to highest; 

5 ‘‘(iii) estimate the monetary cost of any 

6 adverse effects on private property rights, iden7 tify the categories of persons who experience a 

8 net loss from a regulatory option, and explain 

9 why the negative effects cannot be lessened or 

10 avoided; 

11 ‘‘(iv) establish whether the cost of an op12 tion exceeds $50,000,000 for any 12-month pe13 riod, except that the dollar amount shall be ad14 justed annually for inflation based on the GDP 

15 deflator, and the President may order that a 

16 lower dollar amount be used for a particular pe17 riod; 

18 ‘‘(v) identify the key uncertainties and as19 sumptions that drive the results of the analysis 

20 under clause (iv); and 

21 ‘‘(vi) provide an analysis of how the rank22 ing of the options and the threshold determina23 tion under clause (iv) may change if key as24 sumptions are changed. 


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1 ‘‘(E) The estimates pursuant to subparagraph 

2 (D) shall— 

3 ‘‘(i) follow the methodology established 

4 pursuant to paragraph (2)(A); 

5 ‘‘(ii) to the maximum extent practicable, 

6 comply with any guidelines issued by the Ad7 ministrator of the Office of Information and 

8 Regulatory Affairs pertaining to cost-benefit 

9 analysis; and 

10 ‘‘(iii) include, at a minimum— 

11 ‘‘(I) agency administrative costs; 

12 ‘‘(II) United States private sector 

13 compliance costs; 

14 ‘‘(III) Federal, State, local, and tribal 

15 compliance costs; 

16 ‘‘(IV) Federal, State, local, and tribal 

17 revenue impacts; 

18 ‘‘(V) impacts from the regulatory op19 tions developed on United States industries 

20 in the role of suppliers and consumers to 

21 each industry substantially affected, espe22 cially in terms of employment, costs, vol23 ume and quality of output, and prices; 


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1 ‘‘(VI) nationwide impacts on overall 

2 economic output, productivity, and con3 sumer and producer prices; 

4 ‘‘(VII) international competitiveness 

5 of United States companies; and 

6 ‘‘(VIII) distortions in incentives and 

7 markets, including an estimate of the re8 sulting loss to the United States economy. 

9 ‘‘(F) The agency shall— 

10 ‘‘(i) publish for public comment all anal11 yses, documentation, and data under subpara12 graphs (A) through (D) for a public comment 

13 period of not less than 30 days (subject to ap14 plicable limitations under law, including laws 

15 protecting privacy, trade secrets, and intellec16 tual property); and 

17 ‘‘(ii) correct deficiencies or omissions that 

18 the agency becomes aware of before choosing a 

19 rule to propose. 

20 ‘‘(2)(A)(i) Beginning not later than the date that is 

21 180 days after the date of enactment of the Sound Regula22 tion Act of 2014, each agency shall, by rule— 

23 ‘‘(I) establish and maintain a specific cost-ben24 efit analysis methodology appropriate to the func25 tions and responsibilities of the agency; and 


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1 ‘‘(II) establish an appropriate period for review 

2 of new rules to assess the cost effectiveness of each 

3 such new rule at achieving the objective that the new 

4 rule was intended to address, as identified under 

5 paragraph (1)(B)(i). 

6 ‘‘(ii) The methodology established by an agency under 

7 clause (i) shall— 

8 ‘‘(I) include the standardized parameters, as9 sumptions, and methodologies for agency assess10 ments of risk under paragraph (1)(C)(iii); 

11 ‘‘(II) comply, to the maximum extent prac12 ticable, with technical standards for methodologies 

13 and assumptions issued by the Administrator for the 

14 Office of Information and Regulatory Affairs; 

15 ‘‘(III) include the scope of benefits and costs 

16 consistent with the framework used and the metrics 

17 identified in the establishment of the regulatory ob18 jective under paragraph (1); 

19 ‘‘(IV) not include consideration of incidental 

20 benefits but only those benefits that were considered 

21 in the establishment of the regulatory objective 

22 under paragraph (1); 

23 ‘‘(V) limit consideration of costs and benefits to 

24 costs and benefits that accrue to the population of 

25 the United States; 


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1 ‘‘(VI) constrain the agency from presuming 

2 that continued augmentation or tightening of man3 dates and additional prohibitions cause benefits and 

4 costs to change linearly but instead determine at 

5 what point benefits will rise less than, and costs will 

6 rise more than, proportionally; 

7 ‘‘(VII) include comparison of incremental bene8 fits to incremental costs from any action the agency 

9 considers taking and refrain from actions whose in10 cremental benefits do not exceed their incremental 

11 costs; and 

12 ‘‘(VIII) include analysis of effects on private in13 centives and possible unintended consequences. 

14 ‘‘(iii) Each agency shall adhere to the methodology 

15 established by the agency under this subparagraph in all 

16 rulemakings. 

17 ‘‘(B) If an agency does not select the least-cost regu18 latory option as its proposed rule, the agency shall justify 

19 its selection, explaining— 

20 ‘‘(i) how that selection furthers other goals or 

21 requirements relevant to regulating matters within 

22 the jurisdiction of the agency and why these should 

23 override cost savings; and 


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1 ‘‘(ii) why each of the other regulatory options 

2 not chosen would not sufficiently further such other 

3 goals or requirements. 

4 ‘‘(C) Any person may petition an agency to amend 

5 an existing rule made prior to the establishment of meth6 odology under this paragraph, and, if the agency denies 

7 such a petition, that denial shall be subject to review under 

8 chapter 7 of this title. 

9 ‘‘(3) If an agency makes a determination under para10 graph (1)(D) that the monetized cost of a rule exceeds 

11 the applicable monetary limit under clause (iv) of such 

12 paragraph for any 12-month period— 

13 ‘‘(A) the head of the agency shall— 

14 ‘‘(i) first issue an advanced notice of pro15 posed rulemaking; 

16 ‘‘(ii) provide notice to the appropriate Con17 gressional committees; and 

18 ‘‘(iii) keep the committees described in 

19 clause (ii) informed of the status of the rule20 making; 

21 ‘‘(B) the agency shall— 

22 ‘‘(i) notify— 

23 ‘‘(I) the Administrator of the Small 

24 Business Administration (referred to in 

25 this paragraph as the ‘Administrator’); 


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1 ‘‘(II) the Director of the Office of 

2 Management and Budget (referred to in 

3 this paragraph as the ‘Director’); and 

4 ‘‘(III) affected parties; and 

5 ‘‘(ii) provide each person described in 

6 clause (i) with information on— 

7 ‘‘(I) the potential effects of the pro8 posed rule on affected parties; and 

9 ‘‘(II) the type of affected parties that 

10 might be affected; 

11 ‘‘(C) not later than 15 days after the date of 

12 receipt of the information described in subparagraph 

13 (B)(ii), the Director, in consultation with the Ad14 ministrator, shall— 

15 ‘‘(i) identify representatives of affected 

16 parties, not less than 25 percent of which shall, 

17 when possible, represent small business con18 cerns (as such term is defined in section 3(a) 

19 of the Small Business Act (15 U.S.C. 623(a))); 

20 and 

21 ‘‘(ii) provide each major stakeholder with 

22 the opportunity to obtain advice and rec23 ommendations about the potential effects of the 

24 proposed rule; 


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1 ‘‘(D) the agency shall convene a review panel 

2 that consists wholly of— 

3 ‘‘(i) full-time Federal officers, employees, 

4 and contractors in the agency; 

5 ‘‘(ii) the Director; 

6 ‘‘(iii) the Administrator; and 

7 ‘‘(iv) the representatives of affected parties 

8 identified under subparagraph (C)(i); 

9 ‘‘(E) the agency shall— 

10 ‘‘(i) conduct a detailed analysis of the costs 

11 and benefits of the regulatory option that the 

12 agency is advancing; and 

13 ‘‘(ii) in conducting the detailed analysis 

14 under clause (i)— 

15 ‘‘(I) consider the cumulative and 

16 interactive costs of regulatory requirements 

17 of Federal, State, local, tribal, and, where 

18 applicable, international regulations; 

19 ‘‘(II) identify the key uncertainties 

20 and assumptions that drive the results of 

21 the analysis; and 

22 ‘‘(III) provide an analysis of how the 

23 ranking of the regulatory options changes 

24 if the key assumptions identified under 

25 subclause (II) are changed; 


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1 ‘‘(F) the review panel convened under subpara2 graph (D) shall review— 

3 ‘‘(i) all agency material prepared in con4 nection with this subsection, including any draft 

5 proposed rule; and 

6 ‘‘(ii) the advice and recommendations of 

7 each representative of an affected party identi8 fied under subparagraph (C)(i); 

9 ‘‘(G) not later than 60 days after the date on 

10 which the agency convenes the review panel under 

11 subparagraph (D)— 

12 ‘‘(i) the review panel shall report on— 

13 ‘‘(I) the comments of each representa14 tive of an affected party identified under 

15 subparagraph (C)(i); and 

16 ‘‘(II) the findings of the review panel 

17 as to issues related to the provisions of this 

18 subsection; and 

19 ‘‘(ii) the report under clause (i) shall be 

20 made public as part of the rulemaking record; 

21 ‘‘(H) if appropriate, the agency shall modify the 

22 proposed rule or the cost-benefit analysis under sub23 paragraph (E) based on the report under subpara24 graph (G); 


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1 ‘‘(I) subject to applicable limitations under law, 

2 including laws protecting privacy, trade secrets, and 

3 intellectual property, the agency shall— 

4 ‘‘(i) publish for comment all analyses, doc5 umentation, and data under this subsection for 

6 a public comment period of not less than 30 

7 days; and 

8 ‘‘(ii) correct deficiencies or omissions that 

9 the agency becomes aware of before adopting a 

10 proposed rule; and 

11 ‘‘(J) the agency shall ensure that affected par12 ties, including State, local, or tribal governments, 

13 and other stakeholders, may participate in the rule14 making, by means such as— 

15 ‘‘(i) the publication of advanced and gen16 eral notices of proposed rulemaking in publica17 tions likely to be obtained by affected parties; 

18 ‘‘(ii) the direct notification of interested af19 fected parties; 

20 ‘‘(iii) the conduct of open conferences or 

21 public hearings, including soliciting and receiv22 ing comments over computer networks; and 

23 ‘‘(iv) reducing the cost or complexity of 

24 procedural rules to ease participation in the 

25 rulemaking. 


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1 ‘‘(4) Every 4 years, each agency shall— 

2 ‘‘(A) conduct a review of all rules of the agency 

3 that are in effect; and 

4 ‘‘(B) determine based on objective data whether 

5 the rules are— 

6 ‘‘(i) working as intended; 

7 ‘‘(ii) furthering their objectives; 

8 ‘‘(iii) imposing unanticipated costs; or 

9 ‘‘(iv) generating a net benefit or not; 

10 ‘‘(C) amend the rules if appropriate; and 

11 ‘‘(D) report to Congress the findings of the re12 view conducted under this paragraph. 

13 ‘‘(5) Notwithstanding any other provision of law, in14 cluding any provision of law that explicitly prohibits the 

15 use of cost-benefit analysis in rulemaking, an agency shall 

16 conduct cost-benefit analyses and report to Congress the 

17 findings with specific recommendations for how to lower 

18 regulatory costs by amending the statutes prohibiting the 

19 use thereof. 

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

21 ‘‘(A) the term ‘regulatory options’ means any 

22 action an agency may take to address an objective 

23 identified under paragraph (1)(B)(i), including the 

24 option not to act; 

25 ‘‘(B) the term ‘private incentives’— 


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1 ‘‘(i) means financial gains or losses that 

2 motivate actions by private individuals and 

3 businesses; and 

4 ‘‘(ii) does not include any law or regulation 

5 that prescribes private actions or outcomes; and 

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

7 claimed benefit outside the specific regulatory objec8 tive or objectives that a rule is intended to address, 

9 as identified under paragraph (1)(B)(i). 

10 ‘‘(7) All determinations made under this subsection 

11 shall be subject to review under chapter 7.’’. 

12 SEC. 4. CONGRESSIONAL REVIEW. 

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

14 amended by adding at the end the following: 

15 ‘‘(C) The Comptroller General shall— 

16 ‘‘(i) examine the cost-benefit analysis for com17 pliance with the requirements of section 553(f), in18 cluding the agency methodology established under 

19 section 553(f)(2)(A); 

20 ‘‘(ii) examine any risk analysis under section 

21 553(f)(1)(C)(iii) pertaining to the cost-benefit anal22 ysis for compliance with the requirements under sec23 tion 553(f); and 

24 ‘‘(iii)(I) examine the agencies’ quadrennial reg25 ulatory reviews conducted under section 553(f)(4) 


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1 for consistency with the requirements under section 

2 553(f); and 

3 ‘‘(II) report to Congress on the results of the 

4 examination under subclause (I).’’. 

Æ 


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