In the big shuffle of federal regulation, small business is often in danger of getting lost. It's Tom Sullivan's job to see that doesn't happen.
As chief counsel for the Small Business Administration's Office of Advocacy, Sullivan is responsible for making sure that dozens of federal agencies do a special review of their proposed regulations to see what their impact will be on about 22 million small-business owners, and whether there are alternative ways to regulate them.
The office has been around since 1976. Four years later, the small-business lobby persuaded Congress to pass the Regulatory Flexibility Act (RFA), which for the first time required regulators to calculate the effect of their rules on small business.
A major player in creating this structure was the National Federation of Independent Business, Sullivan's former employer. The federation has often convinced lawmakers that the cause of small business is important to the economy and to their reelection prospects. Often, that cause involved regulatory issues.
"When you wanted to pass a regulatory relief initiative, it would be easier to get bipartisan support if it was a small-business initiative," said former Rep. David McIntosh (R-Ind.), who was chairman of the House Government Reform subcommittee on regulatory relief. "We consciously tried to frame things as small-business initiatives." McIntosh said the small-business lobby was focused and persistent.
But even with a $10 million budget, the advocacy office has faced an uphill battle in getting the agencies to do a small-business regulatory review. "It's been a long struggle," said Jere Glover, Sullivan's predecessor in the Clinton administration. "The issue is the agency learning curve. We did education and outreach, and we got varying degrees of support and participation."
"The problem is what's on the radar screen of the regulator," Sullivan said. More often than not it's impending deadlines, a heavy workload and trying to comply with the wishes of whatever administration is in power. Scant attention sometimes is paid to how a rule will affect a small entrepreneur. A recent study funded by Sullivan's office showed that firms with fewer than 20 employees spend about twice as much on regulatory compliance per employee as their bigger counterparts.
The Office of Advocacy documented the problem in its 2001 report: "The general purpose of the RFA is clear. However, in monitoring agency compliance, the Office of Advocacy has found over the years . . . that federal agencies often failed to conduct the proper analyses as required by the law. Some agencies ignored the RFA altogether, while others asserted that the RFA did not apply to them. Other agencies recognized the RFA's applicability to their regulations, yet failed to comply with its requirements."
Agencies got more mindful after the Small Business Regulatory Enforcement Fairness Act was passed in 1996. The act allowed small businesses to seek judicial review of an agency's compliance with the 1980 law. The 1996 law created special small-business panels to take part in rulemaking at the Environmental Protection Agency and the Occupational Safety and Health Administration. From 1997 to 2001, there were 23 small-business involvements in EPA rulemakings.
Sullivan's office now has additional clout: an executive order from the Bush White House and assurances that the Office of Management and Budget's regulatory review office will require agencies to pay attention to effects of rules on small business.
Until now, Sullivan's office has used public embarrassment, the public-comment process, congressional oversight and judicial review to try to get agencies to do their parts. And it claims sizable victories, despite the hurdles. Sullivan said the office's review of various regulatory proposals caused agencies to modify rules that have resulted in billions of dollars in savings for small businesses.
For example, the Bureau of Land Management had to revise its hard-rock-mining reclamation rule after a court ordered it to consider the regulation's effect on small business. The Internal Revenue Service, which used to escape all small-business reviews by categorizing its rules as "interpretive," has begun consulting with the SBA office.
Sullivan says his goal is to not have to wrestle agencies to the mat to do the review. At present, only about half of the rule writers ever come up with the analysis. He looks forward to the day when the Office of Advocacy doesn't have to intervene in the regulatory process at all. He calls it "getting agencies to do what we told them to do by themselves."
In the meantime, he can call on the network he has built in Washington. Sullivan, 36, cut his lobbying teeth on small-business issues during his tenure as regulatory policy counsel at the National Federation of Independent Business. He later became founder of its legal foundation. He worked for the Bush campaign in Kentucky, and after the election his name came up on the short list for the advocacy job.
Sullivan expects that the executive order issued last August will put official muscle into the oversight that his office already is doing. The order requires agencies to establish policies for how they will measure small-business impact, submit their proposals as early as possible to the Office of Advocacy and consider the office's comments on rules before they are finalized.
"You can have the perch of the big watchdog, but if you don't have teeth, all you can do is bark," said Jack Faris, the National Federation of Independent Business's president and chief executive, who had been Sullivan's boss.