Federal Rulemaking: Opportunities Remain for OMB to Improve the Transparency of Rulemaking Processes
Released: 2016-03-15T00:00:00

Letter

Aspects of the OIRA Regulatory Review Process Could Be More Transparent

Our reports on cost-benefit analysis in the rulemaking process, rule development and regulatory reviews, and OMB’s role in reviews of agencies’ rules under Executive Order 12866 illustrate specific actions that, if taken, would increase the transparency of the rulemaking process.

Cost-benefit Analysis

In our 2014 report on cost-benefit analysis in agencies’ rulemaking processes, we found that OIRA’s reviews of agencies’ rules sometimes resulted in changes, but also concluded that the transparency of the review process could be improved. We found that in the majority of the 109 significant rules that we reviewed, the rulemaking process was not as transparent as it could be. For example, in 72 percent of these rules, there was no explanation for why the rule was designated as significant, thus triggering additional oversight required by Executive Order 12866. We made two recommendations based on our review of the cost benefit analyses included in selected rules. We recommended that (1) OMB work with agencies to clearly communicate the reasons for designating a regulation as a significant regulatory action, and explain its reason for any changes to an agency’s initial assessment of a regulation’s significance; and (2) OMB encourage agencies to clearly state in the preamble of significant regulations the section of Executive Order 12866’s definition of a significant regulatory action that applies to the regulation. While OMB staff did not state whether they agreed or disagreed with the recommendations, they took action in 2015 to implement the first recommendation.

Rules Development and Regulatory Reviews

In our 2009 report on the regulatory review process, we found that OIRA’s reviews of agencies’ draft rules often resulted in changes. Of the 12 case-study rules subject to OIRA review that we examined, 10 reviews resulted in changes, about half of which included changes to the regulatory text. Agencies used various methods to document OIRA’s reviews which generally met disclosure requirements. However, we found that the transparency of this documentation could be improved. In particular, there was uneven attribution of changes made during the OIRA review period and differing interpretations regarding which changes were “substantive” and thus required documentation. Both of these issues had been identified in our earlier work. We made four recommendations that OMB provide guidance to agencies to improve transparency and documentation of the OIRA review process, specifically that OIRA (1) define what types of changes made as a result of the review process are substantive and need to be publicly identified; (2) direct agencies to clearly state in final rules whether they made substantive changes as a result of OIRA reviews; (3) standardize how agencies label documentation of these changes in public rulemaking dockets; and (4) instruct agencies to clearly attribute those changes made at the suggestion or recommendation of OIRA. While OMB staff generally agreed with these four recommendations, to date, they have not implemented them.

OMB’s Role in Reviews of Agencies’ Draft Rules

In 2003, we examined 85 rules from nine health, safety, or environmental agencies and found that the OIRA review process had significantly affected 25 of those 85 rules. OIRA’s suggestions appeared to have at least some effect on almost all of the 25 rules’ potential costs and benefits or the agencies’ estimates of those costs and benefits. The agencies’ docket files did not always provide clear and complete documentation of the changes made during OIRA’s review or at OIRA’s suggestion, as required by the executive order, even though a few agencies exhibited exemplary transparency practices. We made eight recommendations in 2003 targeting aspects of the OIRA review process that remained unclear and where improvements could allow the public to better understand the effects of OIRA’s review, including that the Director of OMB: 1. instruct agencies to document the changes made to rules submitted for OIRA review in public rulemaking dockets and within a reasonable time after the rules have been published; 2. define the types of substantive changes made during the review process that agencies should disclose; 3. disclose the reasons for withdrawal of a rule from OIRA review; 4. reexamine OIRA policy that only documents exchanged by agencies with OIRA branch chiefs and above during the review process need to be disclosed; 5. differentiate in OIRA’s database which rules were substantively changed at OIRA’s suggestion or recommendation and which were changed in other ways and for other reasons; 6. define transparency requirements to also include the informal review period when OIRA says it can have its most important impact on agencies’ rules; 7. encourage agencies to use best practice methods of documentation that clearly describe changes; and 8. disclose in OIRA’s logs of meetings with outside parties which regulatory action was being discussed and the affiliation of the meeting participants.

OMB staff disagreed with the first seven of these eight recommendations but did implement the eighth.

Additional Opportunities Exist to Enhance Transparency and Congressional Oversight of Federal Regulations and the Rulemaking Process

Improvements made to the transparency of the regulatory process benefit the public and aid congressional oversight. Four relevant reports covering the topics of regulatory guidance, retrospective regulatory review processes, and exceptions for expediting the rulemaking process illustrate additional opportunities to enhance transparency of federal regulations. OMB plays an important role in these activities through oversight and by providing guidance to regulatory agencies about how to comply with various requirements.

Regulatory Guidance

Regulatory guidance, while not legally binding, provides agencies with flexibility to interpret their regulations, clarify policies, and address new issues more quickly than may be possible using rulemaking. However, concerns have been raised about the level of oversight for agencies’ guidance, whether agencies seek feedback from affected parties on guidance, and how to ensure that agencies do not issue guidance when they should undertake rulemaking. Given both the importance of guidance and the concerns about its use, in 2007 OMB recognized the need for good guidance practices. OMB established review processes for the guidance documents with the broadest and most substantial impact.

In 2015, we reviewed guidance development processes at four departments—Agriculture (USDA), Education (Education), Health and Human Services (HHS), and Labor (DOL)—and 25 of their components. All four departments identified standard practices to follow when developing guidance and addressed OMB’s requirements for significant guidance to varying degrees. Education and USDA had written departmental procedures for approval of significant guidance as required by OMB. DOL’s procedures were not available to staff and required updating. HHS had no written procedures. Ensuring these procedures are available could better ensure that components consistently follow OMB’s requirements.

Retrospective Review

We have long advocated the potential usefulness to Congress, agencies, and the public of conducting retrospective regulatory analyses. Retrospective analysis can help agencies evaluate how well existing regulations work in practice and determine whether they should be modified or repealed. In 2007, we found that agencies had conducted more retrospective reviews of the costs and benefits of existing regulation than was readily apparent, especially to the public. We made seven recommendations to improve the effectiveness and transparency of retrospective regulatory review. These included that OMB develop guidance to regulatory agencies to consider or incorporate into their policies, procedures, or agency guidance that govern regulatory review activities the following elements: 1. consideration of whether and how they will measure the performance 2. prioritization of review activities based upon defined selection criteria; 3. specific review factors to be applied to the conduct of agencies’ analyses that include, but are not limited to, public input; 4. minimum standards for documenting and reporting all completed review results and, for reviews that included analysis, making the analysis publicly available; 5. mechanisms to assess their current means of communicating review results to the public and identifying steps that could improve this communication; and 6. steps to promote sustained management attention and support to help ensure progress in institutionalizing agency regulatory review initiatives.

We also recommended that OMB 7. work with regulatory agencies to identify opportunities for Congress to revise the timing and scope of existing regulatory review requirements and/or consolidate existing requirements.

In 2011 and 2012, the administration issued new directives to agencies on how they should plan and conduct analyses of existing regulations that addressed each of our seven recommendations.

In a 2014 report on reexamining regulations, we found that agencies often changed regulations in response to completed retrospective analyses, but could improve the reporting of progress and strengthen links between those analyses and the agencies’ performance goals. We also concluded that OMB could do more to enhance the transparency and usefulness of the information provided to the public. Although we found that agencies posted their retrospective review plans online, obtaining a comprehensive picture of the agencies’ progress was difficult because results were spread across multiple web sites. In addition, consistently providing links or citations to the supporting analyses and data, and including more detail on the methodologies and key assumptions used to estimate savings, would help Congress and the public to better understand the basis for projected results. We made three recommendations to OMB to (1) improve reporting on the outcomes of retrospective regulatory reviews, (2) improve how these reviews can be used to help agencies achieve their priority goals, and (3) ensure that OIRA, as part of its oversight role, monitors the extent to which agencies have implemented guidance on retrospective regulatory review requirements and confirm that agencies have identified how they will assess the performance of regulations in the future. Staff from OIRA generally agreed with the three recommendations, and the OIRA Administrator indicated last year that his agency was taking actions to address them.

Exceptions to Proposed Rules

The Administrative Procedure Act (APA), which spells out the basic rulemaking process, generally requires agencies to publish a notice of proposed rulemaking (NPRM) in the Federal Register and solicit public comments before finalizing regulations. However, the APA and other statutes permit exceptions to proposed rules to expedite rulemaking in certain circumstances, such as for an emergency or other “good cause” or when issuing rules about an agency’s organization or management. In 2012, we reviewed a generalizable random sample of 1,338 final rules published over 8 years (from 2003 through 2010) to provide information on the frequency, reasons for, and potential effects of agencies issuing final rules without NPRMs. We found that agencies frequently used available exceptions to issue final rules without prior NPRMs.

We also found that agencies, though not required, often requested comments on major final rules issued without an NPRM. However, they did not always respond to the comments received. This is a missed opportunity because we found that agencies often made changes to improve the rules when they did respond to public comments. To better balance the benefits of expedited rulemaking procedures with the benefits of public comments, and to improve the quality and transparency of rulemaking records, we recommended that OMB issue guidance to encourage agencies to respond to comments on final major rules issued without a prior notice of proposed rulemaking. OMB stated that it did not believe it necessary to issue guidance at that time and has not, to date, taken any action to implement our recommendation. We continue to believe that the recommendation has merit and urge OMB to reconsider its prior position.

In summary, OIRA to date has implemented 9 of the 25 recommendations we made to improve transparency and effectiveness of the Executive Order review process and other aspects of federal rulemaking. We believe that the other 16 related recommendations cited in this statement that have not been implemented still have merit and, if acted upon, would improve the transparency of federal rulemaking. In a step in that direction, the OIRA Administrator in 2015 noted that OIRA has worked with agencies to help them with their Executive Order disclosure requirements.

Chairman Meadows, Ranking Member Connolly, and Members of the Subcommittee, 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 subcommittee might have at this time.

GAO Contact and Staff Acknowledgments

If you or your staff have any questions about this testimony, please contact Michelle Sager, Director, Strategic Issues, at (202) 512-6806 or sagerm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Tim Bober, Tara Carter, Andrea Levine, and Joseph Santiago.

Related GAO Products

Regulatory Guidance Processes: Selected Departments Could Strengthen Internal Control and Dissemination Practices. GAO-15-368. Washington, D.C.: April 16, 2015.

Federal Rulemaking: Agencies Included Key Elements of Cost-Benefit Analysis, but Explanations of Regulations’ Significance Could Be More Transparent. GAO-14-714. Washington, D.C.: September 11, 2014.

Reexamining Regulations: Agencies Often Made Regulatory Changes, but Could Strengthen Linkages to Performance Goals. GAO-14-268. Washington, D.C.: April 11, 2014.

Federal Rulemaking: Regulatory Review Processes Could Be Enhanced. GAO-14-423T. Washington, D.C.: March 11, 2014.

Federal Rulemaking: Agencies Could Take Additional Steps to Respond to Public Comments. GAO-13-21. Washington, D.C.: December 20, 2012.

Federal Rulemaking: Improvements Needed to Monitoring and Evaluation of Rules Development as Well as to the Transparency of OMB Regulatory Reviews. GAO-09-205. Washington, D.C.: April 20, 2009.

Reexamining Regulations: Opportunities Exist to Improve Effectiveness and Transparency of Retrospective Reviews. GAO-07-791. Washington, D.C.: July 16, 2007.

Federal Rulemaking: Past Reviews and Emerging Trends Suggest Issues That Merit Congressional Attention. GAO-06-228T. Washington, D.C.: November 1, 2005.

Rulemaking: OMB’s Role in Reviews of Agencies’ Draft Rules and the Transparency of Those Reviews. GAO-03-929. Washington, D.C.: September 22, 2003.

Regulatory Reform: Procedural and Analytical Requirements in Federal Rulemaking. GAO/T-GGD/OGC-00-157. Washington, D.C.: June 8, 2000.

Regulatory Reform: Changes Made to Agencies’ Rules Are Not Always Clearly Documented. GAO/GGD-98-31. Washington, D.C.: January 8, 1998.

Regulatory Reform: Agencies’ Efforts to Eliminate and Revise Rules Yield Mixed Results. GAO/GGD-98-3. Washington, D.C.: October 2, 1997.

Regulatory Reform: Implementation of the Regulatory Review Executive Order. GAO/T-GGD-96-185. Washington, D.C.: September 25, 1996.

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