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 regula-
tions by Federal agencies based on sound principles, 
and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Sound Regulation Act 
of 2014’’. 
SEC. 2. FINDINGS. 
Congress finds the following: 
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(1) Growing Federal regulation that is highly 
prescriptive in nature burdens American industry 
and impairs its international competitiveness. 
(2) Prescriptive regulation takes away flexi-
bility, is adversarial in nature, leads to unintended 
consequences, and, especially as it proliferates, slows 
economic growth and job creation. 
(3) Despite evidence of increasing regulatory 
costs, Federal agencies hold fast to the presumption 
that their rules are in the public interest. 
(4) Some statutes prohibit consideration of 
costs and benefits in rulemaking, although none pro-
hibit agency analysis of costs and benefits for in-
formative purposes. 
(5) For independent regulatory agencies cost- 
benefit analysis is not institutionalized. Executive 
agencies perform cost-benefit analysis pursuant to 
Executive order and under the purview of the Office 
of Information and Regulatory Affairs (OIRA), 
which takes direction from the President. No peer 
review is required of analyses by either set of agen-
cies. 
(6) There are no statutory standards for cost- 
benefit analysis in Federal rulemaking and there are 
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no consistent, material consequences when rules are 
based on faulty or inadequate analysis. 
(7) Agencies conduct their own regulatory im-
pact analyses largely by methods of their own choos-
ing and only on a small fraction of the rules they 
issue. Agencies use regulatory cost-benefit analysis 
mainly in support of favored, preconceived rules 
rather than as a decision tool. Common deficiencies 
include— 
(A) lack of a coherent theory by which to 
define a problem, determine why it occurs, and 
guide the agency to the most efficient response; 
(B) lack of objective evidence that an ac-
tionable problem actually exists, what its di-
mensions are, and how they differ from accept-
able norms; 
(C) lack of comprehensive analysis to de-
termine whether a market malfunction exists 
and orient rulemaking to its causes, not its 
symptoms; 
(D) failure to set clear and realistic objec-
tives whose benefits justify the cost of achieving 
them; 
(E) objectives that are set disconnected 
from costs and may be expansive and vague so 
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that any regulation can be made to appear ben-
eficial; 
(F) agencies increasingly claiming inci-
dental benefits (so-called co-benefits) that are 
not in furtherance of the stated objective and 
even private (as opposed to public) benefits for 
their rules; 
(G) failure to develop regulatory options in 
light of market analysis and rank them by how 
efficiently they will improve the market process; 
(H) inconsistent assumptions and meth-
odologies across agencies; 
(I) invalid baselines for gauging regulatory 
effects; 
(J) omissions of important impacts, such 
as on employment and international competi-
tiveness of U.S. firms; 
(K) failure to reevaluate regulations after 
implementation; and 
(L) failure to consider the cumulative costs 
of regulation by the various Federal, State, 
local, and tribal agencies. 
(8) Despite continually changing market condi-
tions, agencies do not regularly review their existing 
regulations and regulatory regimes. They also do not 
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review the division of functions among different Fed-
eral agencies or among Federal, State, local, and 
tribal agencies. Regulations lose their purpose, yet 
linger and accumulate, imposing unnecessary costs 
and slowing economic growth to the detriment of 
material living standards and, to some extent, the 
very social conditions that are the objects of regula-
tion. 
(9) Agencies typically do not conduct regulatory 
cost studies proactively and report to Congress un-
necessary costs that are not under the agencies’ con-
trol because of the way laws are written. Agency rec-
ommendations on how to improve the efficiency of 
regulation by modifying an existing statute could be 
helpful to Congress. 
SEC. 3. UNIFORM USE OF COST-BENEFIT ANALYSIS. 
Section 553 of title 5, United States Code, is amend-
ed by adding at the end the following: 
‘‘(f)(1) Prior to any rulemaking under this section, 
an agency shall comply with the following: 
‘‘(A) The agency shall identify, in the con-
text of a coherent conceptual framework and 
supported with objective data— 
‘‘(i) the nature and significance of the 
market failure, regulatory failure, or other 
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problem that necessitates regulatory ac-
tion; 
‘‘(ii) the reasons why national eco-
nomic and income growth, advancing tech-
nology, and other market developments will 
not obviate the need for the rulemaking; 
‘‘(iii) the reasons why regulation at 
the State, local, or tribal level could not 
address the problem better than at the 
Federal level; 
‘‘(iv) the reasons why reducing rather 
than increasing the extent or stringency of 
existing Federal regulation would not ad-
dress the problem better; and 
‘‘(v) the particular authority by which 
the agency may take action. 
‘‘(B) Before the agency increases the ex-
tent or stringency of regulation based on its de-
terminations pursuant to subparagraph (A), it 
shall— 
‘‘(i) set an achievable objective for its 
regulatory action and identify the metrics 
by which the agency will measure progress 
toward the objective; 
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‘‘(ii) issue a notice of inquiry seeking 
public comment on the identification of a 
new objective under clause (i); and 
‘‘(iii) give notice to the committees of 
Congress with jurisdiction over the subject 
matter of the rule. 
‘‘(C) The agency, if the agency is not seek-
ing to repeal a rule, shall develop at least 3 dis-
tinct regulatory options, in addition to not regu-
lating, that the agency estimates will provide 
the greatest benefits for the least cost in meet-
ing the regulatory objective set under subpara-
graph (B) and, in developing such regulatory 
options, shall apply the following principles: 
‘‘(i) The agency shall assume that in-
dividuals are rational and not qualify that 
assumption unless the agency— 
‘‘(I) has conclusive evidence of a 
detrimental 
systematic 
behavioral 
bias; and 
‘‘(II) can devise behavioral regu-
latory options that do not preclude 
any choices of market participants. 
‘‘(ii) The agency shall, to the extent 
practicable, attempt to engage private in-
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centives to solve a problem and not sup-
plant private incentives any more than nec-
essary. 
‘‘(iii) The agency shall consider the 
adverse effects that mandates and prohibi-
tions may have on innovation, economic 
growth, and employment. 
‘‘(iv) An agency’s risk assessment 
shall be confined to its jurisdiction, subject 
to specific regulatory authority. Agency as-
sessments of the risks of adverse health 
and environmental effects shall follow 
standardized parameters, assumptions, and 
methodologies. An agency also shall pro-
vide analyses of increases in risks, what-
ever their nature, produced by the regu-
latory options under consideration. 
‘‘(v) The agency shall avoid incongru-
ities and duplication in regulation at the 
Federal, State, local, and tribal levels. 
‘‘(vi) The agency shall compare and 
contrast the regulatory options developed 
and explain how each would meet the regu-
latory objective set pursuant to subpara-
graph (B). 
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‘‘(D) The agency shall estimate the costs 
and benefits of each regulatory option devel-
oped, notwithstanding any provision of law that 
prohibits the agency from using costs in rule-
making, at least to the extent that the agency 
is able to— 
‘‘(i) exclude options whose costs ex-
ceed their benefits; 
‘‘(ii) rank the options by cost from 
lowest to highest; 
‘‘(iii) estimate the monetary cost of 
any adverse effects on private property 
rights, identify the categories of persons 
who experience a net loss from a regu-
latory option, and explain why the negative 
effects cannot be lessened or avoided; 
‘‘(iv) establish whether the cost of an 
option exceeds $50,000,000 for any 12- 
month period, except that the dollar 
amount shall be adjusted annually for in-
flation based on the GDP deflator, and the 
President may order that a lower dollar 
amount be used for a particular period; 
and 
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‘‘(v) identify the key uncertainties and 
assumptions that drive the results and pro-
vide an analysis of how the ranking of the 
options and the threshold determination 
under clause (iv) may change if key as-
sumptions are changed. 
‘‘(E) The estimates pursuant to subpara-
graph (D) shall— 
‘‘(i) follow the methodology estab-
lished pursuant to paragraph (2)(A); 
‘‘(ii) to the maximum extent prac-
ticable, comply with any guidelines issued 
by the Administrator of the Office of Infor-
mation and Regulatory Affairs pertaining 
to cost-benefit analysis; and 
‘‘(iii) include, at a minimum— 
‘‘(I) agency administrative costs; 
‘‘(II) United States private sector 
compliance costs; 
‘‘(III) Federal, State, local, and 
tribal compliance costs; 
‘‘(IV) Federal, State, local, and 
tribal revenue impacts; 
‘‘(V) impacts from the regulatory 
options developed on United States in-
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dustries in the role of suppliers and 
consumers to each industry substan-
tially affected, especially in terms of 
employment, costs, volume and quality 
of output, and prices; 
‘‘(VI) nationwide impacts on 
overall economic output, productivity, 
consumer and producer prices; 
‘‘(VII) international competitive-
ness of United States companies; and 
‘‘(VIII) distortions in incentives 
and markets, including an estimate of 
the resulting loss to the United States 
economy. 
‘‘(F) The agency shall publish for public 
comment all analyses, documentation, and data 
under subparagraphs (A) through (D) for a 
public comment period of at least 30 days (sub-
ject to applicable limitations under law, includ-
ing laws protecting privacy, trade secrets, and 
intellectual property) and correct deficiencies or 
omissions that the agency becomes aware of be-
fore choosing a rule to propose. 
‘‘(2)(A) Beginning not later than the date that 
is 180 days after the effective date of this section— 
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‘‘(i) each agency shall, by rule, estab-
lish and maintain the specific cost-benefit 
analysis methodology appropriate to the 
functions and responsibilities of that agen-
cy and establish an appropriate period for 
review of new rules to assess the cost effec-
tiveness of each such new rule at achieving 
the objective identified under paragraph 
(1)(B)(i) the new rule was intended to ad-
dress; 
‘‘(ii) the methodology so established 
shall— 
‘‘(I) include the standardized pa-
rameters, assumptions, and meth-
odologies for agency assessments of 
risk under paragraph (1)(C)(iv); 
‘‘(II) comply, to the maximum 
extent 
practicable, 
with 
technical 
standards for methodologies and as-
sumptions issued by the Adminis-
trator for the Office of Information 
and Regulatory Affairs; 
‘‘(III) include the scope of bene-
fits and costs consistent with the 
framework used and the metrics iden-
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tified in the establishment of the regu-
latory objective under paragraph (1); 
‘‘(IV) not include consideration 
of incidental benefits but only those 
benefits that were considered in the 
establishment of the regulatory objec-
tive; 
‘‘(V) limit consideration of costs 
and benefits to costs and benefits that 
accrue to the population of the United 
States; 
‘‘(VI) constrain the agency from 
presuming that continued augmenta-
tion or tightening of mandates and 
additional prohibitions cause benefits 
and costs to change linearly but deter-
mine at what point benefits will rise 
less than, and costs will rise more 
than, proportionally; 
‘‘(VII) include comparison of in-
cremental 
benefits 
to 
incremental 
costs from any action the agency con-
siders taking and refrain from actions 
whose incremental benefits do not ex-
ceed their incremental costs; and 
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‘‘(VIII) include analysis of effects 
on private incentives and possible un-
intended consequences; and 
‘‘(iii) the agency shall adhere to the 
methodology 
so 
established 
in 
all 
rulemakings. 
‘‘(B) If the agency does not select the 
least-cost regulatory option as its proposed rule, 
the agency shall justify its selection, explain-
ing— 
‘‘(i) how that selection furthers other 
goals or requirements relevant to regu-
lating matters within the agency’s jurisdic-
tion and why these should override cost 
savings; and 
‘‘(ii) why each of the other regulatory 
options not chosen would not sufficiently 
further such other goals or requirements. 
‘‘(C) If the agency makes a determination 
under paragraph (1)(D) that the monetized cost 
of a rule exceeds the applicable monetary limit 
under clause (iv) of such paragraph for any 12- 
month period, the agency head shall— 
‘‘(i) first issue an advanced notice of 
proposed rulemaking; 
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‘‘(ii) provide notice to the appropriate 
Congressional committees and keep such 
committees informed of the status of the 
rulemaking; and 
‘‘(iii) ensure that— 
‘‘(I) the agency shall notify the 
Administrator of the Small Business 
Administration, the Director of the 
Office of Management and Budget, 
and affected parties, and provide each 
such person with information on the 
potential effects of the proposed rule 
on affected parties and the type of af-
fected parties that might be affected; 
‘‘(II) not later than 15 days after 
the date of receipt of the materials de-
scribed in subclause (I), the Director, 
in consultation with the Adminis-
trator, shall identify representatives of 
affected parties, 25 percent of which 
shall represent small business con-
cerns (as such term is defined in sec-
tion 3(a) of the Small Business Act), 
when possible, and all the major 
stakeholders shall have the oppor-
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the ranking of the regulatory op-
tions changes if the key assump-
tions are changed; 
‘‘(V) the panel shall review agen-
cy material prepared in connection 
with this subsection, including any 
draft proposed rule, and review the 
advice and recommendations of each 
affected party representative identi-
fied; 
‘‘(VI) not later than 60 days 
after the date the agency convenes a 
review panel pursuant to subclause 
(III), the review panel shall report on 
the comments of the affected party 
representatives and its findings as to 
issues related to the provisions of this 
subsection, and such report shall be 
made public as part of the rulemaking 
record; 
‘‘(VII) where appropriate, the 
agency shall modify the proposed rule 
or the cost-benefit analysis under sub-
clause (IV) based on the report under 
subclause (VI); 
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‘‘(VIII) subject to applicable limi-
tations under law, including laws pro-
tecting privacy, trade secrets, and in-
tellectual property, the agency shall 
publish for comment all analyses, doc-
umentation, and data under this para-
graph for a public comment period of 
at least 30 days and correct defi-
ciencies or omissions that the agency 
becomes aware of before adopting a 
proposed rule; and 
‘‘(IX) affected parties, including 
State, local, or tribal governments, 
and other stakeholders may partici-
pate in the rulemaking by means such 
as— 
‘‘(aa) the publication of ad-
vanced and general notices of 
proposed rulemaking in publica-
tions likely to be obtained by af-
fected parties; 
‘‘(bb) the direct notification 
of interested affected parties; 
‘‘(cc) the conduct of open 
conferences or public hearings in-
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cluding soliciting and receiving 
comments over computer net-
works; and 
‘‘(dd) reducing the cost or 
complexity of procedural rules to 
ease participation in the rule-
making. 
‘‘(D) Every 4 years the agency shall con-
duct a review of all rules of the agency in effect 
and determine based on objective data whether 
its rules are working as intended, furthering 
their objectives, imposing unanticipated costs, 
and generating a net benefit or not, and shall 
amend such rules if appropriate. The agency 
shall report to Congress the findings of each 
such review. 
‘‘(E) Any person may petition an agency to 
amend an existing rule made prior to the estab-
lishment of methodology under this paragraph, 
and, if the agency denies such a petition, that 
denial shall be subject to review under chapter 
7 of this title. 
‘‘(F) Notwithstanding any other provision 
of law, including any provision of law that ex-
plicitly prohibits the use of cost-benefit analysis 
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in rulemaking, an agency shall conduct cost- 
benefit analyses and report to Congress the 
findings with specific recommendations for how 
to lower regulatory costs by amending the stat-
utes prohibiting the use thereof. 
‘‘(3) For purposes of this subsection— 
‘‘(A) the term ‘regulatory options’ means 
any action an agency may take to address an 
objective identified under paragraph (1)(B)(i), 
including the option not to act; 
‘‘(B) the term ‘private incentives’ means fi-
nancial gains or losses that motivate actions by 
private individuals and businesses, and does not 
include any law or regulation that prescribes 
private actions or outcomes; and 
‘‘(C) the term ‘incidental benefit’ means a 
claimed benefit outside the specific regulatory 
objective or objectives identified under para-
graph (1)(B)(i) a rule is intended to address as 
identified in paragraph (1)(A). 
‘‘(4) All determinations made under this sub-
section shall be subject to review under chapter 7.’’. 
SEC. 4. CONGRESSIONAL REVIEW. 
Section 801(a)(2) of title 5, United States Code, is 
amended by adding at the end the following: 
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‘‘(C) The Comptroller General shall exam-
ine the cost-benefit analysis for compliance with 
the requirements of section 553(f), including 
the agency methodology established under sec-
tion 553(f)(2)(A). 
‘‘(D) The Comptroller General shall exam-
ine 
any 
risk 
analysis 
under 
section 
553(f)(1)(C)(iv) pertaining to the cost-benefit 
analysis for compliance with the requirements 
of section 553(f). 
‘‘(E) The Comptroller General also shall 
examine the agencies’ quadrennial regulatory 
reviews for consistency with the requirements of 
section 553(f) and report to Congress on the re-
sults.’’. 
Æ 
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