Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

Governmental Management

[April 18, 2001]

William Funk

Section of Administrative Law and Regulatory Practice

American Bar Association

This draft expresses the views of its author. The positions contained herein have not been approved by the council of the section of administrative law and regulatory practice, and they should not be ascribed to the american bar association, the section, or its officers.

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

Governmental Management


The APA Project focuses on the Administrative Procedure Act and the procedures governing rulemaking , adjudication, and related matters. The section on Government Management covers procedures relating to the management of those functions across agencies. Specifically, it covers requirements whether imposed by statute or executive order for agencies to submit their proposed agency actions to some entity that is supposed to review or supervise those actions.

The Administrative Procedure Act

The original APA did not contain any provision for governmental management. Under the conception of the APA, each agency adopted rules or issued orders, granted licenses, set rates, imposed sanctions, and gathered information as an autonomous entity. Moreover, because the original APA has been little modified over the years, its provisions do not involve interagency coordination or supervision.

Presidential Oversight of Agency Rulemaking

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

Starting with President Nixons Quality of Life Review, Presidents have imposed requirements that agencies make certain studies and submit proposed rules to an office in the Executive Office of the President for its review. President Fords review mechanism required agencies to make economic impact statements[1] for major rules, which were reviewed by the Council on Wage and Price Stability (COWPS). COWPS adopted criteria for determining major rules, which included rules having an impact of over $100 million in one year. COWPS could then jawbone the agency if it believed the rule would have too great an economic impact. President Carter built on this system in his Executive Order 12044, issued in 1978.[2] In addition to performing what were now called regulatory analyses of major rules, agencies also were required to identify significant rules, evaluate their need, and identify the least burdensome alternative. In place of COWPS, President Carter established the Regulatory Analysis Review Group to review the regulatory analyses of certain major rules. RARG would submit public comments during the notice-and-comment period, as COWPS had before it, as well as jawbone. The membership of RARG consisted of members of the major economic and regulatory agencies, but its four member executive committee, which in fact directed RARGs activities, consisted of representatives from OMB, the Council of Economic Advisors, and two positions that rotated among cabinet departments and EPA. Staff was drawn from the CEA and COWPS. RARG only reviewed a very limited number of rules under E.O. 12044. In addition, President Carter established the Regulatory Council, charged with coordinating agency rulemaking to avoid duplication or conflict. Finally, President Carter required agencies to publish semi-annual agendas of their current and future rulemaking activities.

Shortly after entering office President Reagan issued Executive Order 12291, rescinding Executive Order 12044,[3] but building upon the previous order. Whereas, however, each of the preceding orders had left to the agencies the primary responsibility for implementing the regulatory reform measures in the orders, with COWPS and RARG having only peripheral influence except on a very limited number of rules, E.O. 12291 placed significant responsibility in the Office of Management and Budget. There was initial consideration given to applying the order to independent regulatory agencies as well as executive agencies, and the Department of Justice opined that such an extension would be lawful. Nevertheless, President Reagan limited the orders effects to executive branch agencies.

The order charged agencies with certain substantive requirements to the extent authorized by law. These included requirements that a regulation should not be adopted unless unless the potential benefits to society for the regulation outweigh the potential costs to society and among regulatory alternatives the alternative with the least net costs to society should be chosen.

In addition, there were procedural requirements. Agencies were required first to conduct preliminary regulatory impact analyses of all proposed major rules, still defined largely by their $100 million impact. An analysis was to include a description of the costs and benefits of the proposed rule, a determination of the net benefits of the proposed rule, a description of alternative regulatory approaches that could achieve the same goal at lower cost, and the identification of any legal requirements that would preclude adoption of the rule that would maximize net benefits for society. All proposed rules (including interpretive rules and statements of policy that would not be subject to notice-and-comment rulemaking) and any associated preliminary regulatory impact analyses were to be submitted to OMB prior to their public proposal -- 60 days before publication of the notice of proposed rulemaking for major rules and 10 days before publication of the notice of proposed rulemaking for other rules. During this period, OMB would review the rule and any analysis, but OMB could (and in fact often did) extend the period of review and delay publication of the proposed rule indefinitely in order to study the rule fully and communicate with the agency. Essentially the same drill applied to preparation of the final rule, with the agency submitting the proposed final rule to OMB together with any associated final regulatory impact analysis prior to publication. Again, OMB was provided time to review the final rule and analysis prior to publication, which time OMB could extend in order to further discuss the rule with the agency.

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

E.O. 12291 continued the semi-annual regulatory agenda instituted under President Carters executive order.

Finally, E.O. 12291 authorized the Presidential Task Force on Regulatory Relief, headed by then Vice President Bush, to identify already existing regulations for reconsideration under the procedures of the executive order.

In his second term, President Reagan expanded the oversight program by issuing Executive Order 12498.[4] It was responsive to a concern that by the time that agencies began the rulemaking process they had already invested so much time and effort into the policy behind the rule that it was difficult to turn them from their course. Consequently, E.O. 12498 required agencies to undertake an annual regulatory planning process. Agencies would plan what significant regulatory actions they intended to take during the upcoming year and would submit that draft plan to OMB. OMB then would review the draft plan and discuss it with the agency. In the event of disagreements, the Order provided that the Director of OMB or the agency head could appeal to the President or an appropriate Cabinet Council.[5] Once the administration's Regulatory Program for the year was established, if an agency desired to take a regulatory action that was not previously submitted for review under E.O. 12498 or if an action materially differed from that described in the agency's final Regulatory Program, the agency was required to advise the Director immediately and submit the action to the Director for review. Unless the matter was responsive to an emergency or statutory or judicial deadlines, the agency was required to refrain from taking the proposed regulatory action until OMBs review was complete. Moreover, the Order authorized OMB to return for reconsideration (meaning reject) any such unreviewed action absent unusual circumstances, such as new statutory or judicial requirements or unanticipated emergency situations.

While E.O. 12291 was intended to make regulation more efficient by maximizing the net benefits to society of regulation, it also, together with E.O. 12498 and the Presidential Task Force on Regulatory Relief, reflected a strong skepticism about regulation generally. Thus, the presidential review mechanism tended to reduce regulation and allow for it only when its net benefits were clearly significant or when regulation could not be legally or politically avoided. Observers, whether supportive or critical of the review process, appeared convinced that it had a significant effect on what agencies actually adopted as regulations.

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

A major criticism of the early workings of E.O. 12291 was that the review process was done behind closed doors and OMBs communications with the agency were not on the public record. There was a concern that OMB was being used as a conduit for private communications from regulated parties arguing against various regulations. In 1986, however, the administration agreed to an amendment to the Paperwork Reduction Act that in effect required OMB to make public any written communications between OMB and agencies.

Still later in his administration, President Reagan issued three more executive orders governing agency regulatory activities: E.O. 12606,[6] E.O. 12612,[7] and E.O. 12630.[8] Executive Order 12606 required agencies to assess the effects of proposed regulatory actions on the family in light of a specified series of questions and to submit those assessments to OMB. Executive Order 12612 required agencies to consider federalism issues before taking regulatory actions. This consideration involved applying both substantive requirements and complying with procedural requirements. The substantive requirement was that agency regulations should not preempt state law unless the authorizing statute expressly authorized issuance of preemptive regulations or there was some other firm and palpable evidence compelling the conclusion that the Congress intended [for preemption to be authorized]. The procedural requirement were that before issuing an rule having federalism implications, agencies were to coordinate with state and local governments and agencies were to conduct Federalism Assessments, which would be submitted to OMB with other documents under E.O. 12291. Executive Order 12630 required agencies to assess their regulatory actions in light of possibly implicating the Takings Clause of the Fifth Amendment to the Constitution. The order implied that OMB could reject a proposed action if the action would result in an unbudgeted expenditure of funds to pay for a takings.

As a practical matter, none of these three orders had much impact on agency rulemaking. Each were perceived as having been issued to appeal to particular interest groups, and, once the orders were issued, neither agencies nor OMB seemed to place much importance on furthering their particular objectives. In addition, guidance from the Attorney General implementing E.O. 12360 effectively reduced the order to a nullity, as virtually all regulatory actions were construed as not subject to the requirement for specific takings assessment.

President George Bush did not alter the Reagan orders, although he did create the Council on Competitiveness chaired by Vice President Quayle to effectively replace the Task Force on Regulatory Relief.

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

In 1993 President Clinton issued Executive Order 12866, Regulatory Planning and Review, replacing President Reagans Executive Orders 12291 and 12498.[9] Like those orders before it, E.O. 12866 built upon the preceding orders. It begins with a lengthy statement of the principles of regulation, which bear a startling resemblance, given the different political backgrounds of Presidents Clinton and Reagan, although E.O. 12866 makes a particular point of requiring agencies to consider both quantifiable and unquantifiable costs and benefits.[10] It also retains the $100 million trigger level for those rules subject to agency cost/benefit analyses, although now those rules are denominated significant regulatory actions rather than major rules.[11] As had been the case under E.O. 12291, E.O. 12866 requires agencies to conduct cost/benefit analyses for these significant regulatory actions. Despite the similarities to E.O. 12291, E.O. 12866 does make certain changes. First, not all proposed and final rules need be sent to OMB for review before they are published. Interpretive rules and statements of policy are not included within the scope of the Order at all. In addition, each agency provides OMB with a list of its proposed regulatory actions, indicating those it believes are significant. Thereafter, only those listed as significant must be submitted to OMB for review, unless OMB specifically requests to review an action listed as non-significant or the non-significant action materially changes. Second, strict timelines are established to ensure that OMB review is not used to delay a regulatory action indefinitely. Third, the Order itself includes requirements for ensuring that the review process is transparent  limiting those who can communicate with private interests, making public the facts surrounding any such communications, maintaining a public log of the status of all matters under OMB review, and making public (after the regulatory action has occurred) all documents exchanged between OMB and the agency.

E.O. 12866 also includes provisions relating to regulatory planning to replace the similar provisions in E.O. 12498. As with the earlier order, agencies are required to make annual determinations concerning possible or proposed significant regulatory actions, submit them to OMB for review, and to make public the final determinations. Again, however, there are also a few changes. First, E.O. 12866 broadens its reach by extending its planning requirements to independent regulatory agencies, not just to executive branch agencies. Second, there is no comparable suggestion that the failure to include an action in the planning document will interfere with going forward with that action later.

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

In place of Presidents Reagan and Bushs Task Force on Regulatory Relief and Council on Competitiveness, with their mandated reviews of existing regulations, E.O. 12866 requires the establishment of a Regulatory Working Group, chaired by the Administrator of OIRA and consisting of representatives of the heads of each agency having significant domestic regulatory activities, the Vice President, and advisors to the President. The Regulatory Working Group is charged with assisting agencies in analyzing regulatory issues and working with the Administrator of OIRA in identifying existing regulations that impose significant burdens or which have outlived their usefulness. The Vice President is formally named as the Presidents principal advisor on regulatory policy. The Order also institutionalizes previous Presidents directives to agencies to review existing rules with an eye to eliminating unnecessary ones.[12]

None of the reviews provided by the various Presidential orders has been subject to judicial review. The more recent orders have expressly provided that the orders are to improve the internal management of the Federal Government and [do] not create any right or benefit, substantive or procedural, enforceable at law or equity by a party against the United States. . . . Courts have respected this provision or determined independently that the review is not subject to judicial review under existing doctrine.[13] In rare situations where the OMB review interfered with an agencys statutory duties, courts have been willing to enjoin the agency from submitting to the review.[14]

Observers of the review process under E.O. 12866 naturally compare it to the process under E.O. 12291. There appears to be consensus that the E.O. 12866 review process is quicker and less confrontational than the reviews under E.O. 12291. At the same time some observers believe that the reviews under E.O. 12866 have been less effective precisely because they have not been as intrusive or skeptical of the agency. The Office of Information and Regulatory Affairs has issued annual reports attesting to the reductions in burden and increases in net benefits resulting from E.O. 12866 activity, but even a supporter must take these reports with a grain of salt.

Paperwork Reduction Act

Tentative Draft -- April 2001 Do not cite or quote. For internal discussion purposes only.

Even before adoption of the APA, Congress had enacted the Federal Reports Act of 1942,[15] which generally required agencies to obtain the approval of the Bureau of the Budget before they engaged in the collection of information from the public.[16] This review was later placed in the Office of Management and Budget for executive agencies and the General Accounting Office for independent regulatory agencies.[17] Criticism of the adequacy of these reviews led to the passage of the Paperwork Reduction Act in 1980.[18]