This is the accessible text file for GAO report number GAO-03-929 
entitled 'Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules 
and the Transparency of Those Reviews' which was released on September 
22, 2003.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Report to Congressional Requesters:

September 2003:

Rulemaking:

OMB's Role in Reviews of Agencies' Draft Rules and the Transparency of 
Those Reviews:

GAO-03-929:

GAO Highlights:

Highlights of GAO-03-929, a report to congressional requesters

Why GAO Did This Study:

Under Executive Order 12866, the Office of Management and Budget’s 
Office of Information and Regulatory Affairs (OIRA) reviews hundreds 
of agency rules each year before they are published in the Federal 
Register. Those reviews can have a significant effect on a broad array 
of public policies. GAO was asked to (1) describe OIRA’s review 
process and any changes in its policies or processes in recent years, 
(2) provide detailed information about rules submitted by nine health, 
safety, or environmental agencies that were returned, withdrawn, or 
changed at OIRA’s suggestion, and (3) describe how OIRA decided that 
certain existing rules merited high priority review.

What GAO Found:

The formal process by which OIRA reviews agencies’ proposed and final 
rules is essentially unchanged since Executive Order 12866 was issued 
in 1993. However, there have been several changes in OIRA’s policies 
in recent years, including increased use of public letters explaining 
why rules were returned to the agencies and prompting the development 
of new rules, increased emphasis on economic analysis, stricter 
adherence to the 90-day time limit for OIRA review, and improvements 
in the transparency of the OIRA review process (although some elements 
of that process are still unclear). Underlying many of these changes 
is a shift in how recent OIRA administrators view the office’s role in 
the rulemaking process—from “counselor” to “gatekeeper.” OIRA 
sometimes reviews drafts of rules before they are formally submitted, 
and OIRA has said it can have its greatest influence on agencies’ 
rules during this informal review period. However, OIRA contends that 
agencies need only document the changes made to rules during what are 
sometimes very brief formal review periods. 

Because about 400 rules were changed, returned, or withdrawn during 
the 1-year period that GAO examined, the review focused on 85 rules 
from the nine health, safety, or environmental agencies with five or 
more such rules. OIRA significantly affected 25 of those 85 rules. The 
Environmental Protection Agency’s rules were most often significantly 
changed, and almost all of the returned rules were from the Department 
of Transportation. 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. Outside parties 
contacted OIRA before or during its formal review regarding 11 of the 
25 rules that OIRA significantly affected. In 7 of these 11 cases, at 
least some of OIRA’s recommendations were similar to those of the 
outside parties, but we could not determine whether those contacts 
influenced OIRA’s actions. 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. However, some agencies clearly documented these changes, 
sometimes including changes suggested during OIRA’s informal reviews.

OIRA did not publicly disclose how it determined that 23 of the 71 
rules nominated by the public for change or elimination in 2001 
merited high priority review. As explained to GAO, OIRA desk officers 
made the initial determinations regarding issues with which they were 
familiar, subject to the approval by OIRA management. The Mercatus 
Center at George Mason University made most of the nominations overall 
and in the high priority group. Regulatory agencies or OIRA have at 
least begun to address the issues raised in many of the 23 
suggestions. OIRA’s 2002 nomination and review process was different 
from the 2001 process in several respects (e.g., broader request for 
reforms, more responses from more commentors, prioritization of the 
suggestions being made by the agencies, and clearer discussion of 
process and criteria). 

What GAO Recommends:

GAO recommends that the OMB Director build on recent improvements that 
have been made in the transparency of the OIRA review process. In 
particular, GAO recommends that agencies be instructed to document 
substantive changes made at OIRA’s suggestion to draft rules submitted 
for review whenever they occur, not just changes that OIRA recommended 
during formal reviews. 

OMB said the factual foundations of our report were well grounded but 
disagreed with most of our recommendations, saying that the report had 
not demonstrated the need or desirability of changing the agency’s 
existing level of transparency. 

[End of section]

Contents:

Letter: 

Executive Summary:

Purpose: 

Background: 

Results in Brief: 

Principal Findings: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Chapter 1:

Background: 

Objectives, Scope, and Methodology: 

Chapter 2: Some of OIRA's Regulatory Review Policies Have Changed: 

OIRA Regulatory Review Process: 

Changes in Regulatory Review Policies: 

Chapter 3: OIRA's Effects on Rules Submitted for Executive Order 
Review Varied: 

OIRA Significantly Affected About One-Third of the Rules That the 
Selected Agencies Submitted for Review: 

OIRA Affected the Costs and Benefits or Estimates in Some Rules: 

Outside Parties Contacted OIRA Regarding about Half of the Rules OIRA 
Significantly Affected: 

Documentation of OIRA's Reviews Varied, but Some Agencies' Practices 
Improved Transparency: 

Chapter 4: Many Rules Nominated for Reform Are Being Changed: 

Mercatus Center Nominated Most Rules Selected for High Priority Review 
in 2001 Report: 

How High Priority Review Selections Were Made: 

Status of Rules Selected for High Priority Review: 

Second Round of Nominations Was Different: 

Chapter 5: Conclusions and Recommendations: 

Conclusions: 

Recommendations: 

Agency Comments and Our Evaluation: 

Appendixes:

Appendix I: Objectives, Scope, and Methodology: 

Objectives: 

Scope and Methodology: 

Limitations: 

Appendix II: Summary Information on Selected Rules Submitted to OIRA 
for Executive Order Review between July 2001 and June 2002: 

Explanation of Table Contents: 

Appendix III: Case Studies on Significantly Affected Rules With 
Evidence That OIRA Was Contacted by External Parties: 

Control of Emissions from Nonroad Large Spark Engines: 

Proposed Nonconformance Penalties for 2004 and Later Model Year 
Emission Standards for Heavy-duty Diesel Engines and Heavy-duty Diesel 
Vehicles: 

Identification and Listing of Hazardous Waste (Manganese): 

Minimizing Adverse Environmental Impact from Cooling Water Intake 
Structures at New Facilities: 

National Pollutant Discharge Elimination System (Existing Intake 
Structures): 

Effluent Limitation Guidelines and New Source Performance Standards for 
the Construction and Development Category: 

Effluent Limitations Guidelines for the Iron and Steel Manufacturing 
Point Source Category: 

Tire Pressure Monitoring Systems: 

Part 145 Review: Repair Stations: 

Appendix IV: Status of 23 High Priority Review Rules: 

Appendix V: Comments from the Office of the Information and Regulatory 
Affairs: 

Tables: 

Table 1: Selected Agencies' Regulatory Submissions by Outcome: 

Table 2: Nature of Changes Made at the Suggestion or Recommendation of 
OIRA: 

Table 3: Rules from FAA and EPA's Office of Air and Radiation and Office 
of Water Were Most Often Significantly Affected by OIRA Review: 

Table 4: OIRA Was Only Slightly More Likely to Significantly Affect 
Economically Significant Rules: 

Table 5: Agencies' Compliance with Executive Order 12866 Documentation 
Requirements Was Mixed: 

Table 6: The Mercatus Center Suggested Most of the 23 "High-Priority 
Review" Rules: 

Table 7: Findings and Determinations for Rules Changed after Submission 
to OIRA: 

Table 8: Findings and Determinations for Rules Returned to Agency after 
Submission to OIRA: 

Table 9: Findings and Determinations for Rules Withdrawn after 
Submission to OIRA: 

Table 10: Status of the 23 High Priority Review Suggestions Identified 
in OIRA's December 2001 Report on the Costs and Benefits of Federal 
Regulations: 

Figures: 

Figure 1: OIRA Is One of the Statutory Offices within OMB: 

Figure 2: Organization of OIRA: 

Figure 3: Number of Rules That OIRA Reviewed Dropped Under Executive 
Order 12866: 

Figure 4: The OIRA Regulatory Review Process: 

Figure 5: OIRA Returned More Rules to Agencies in Calendar Year 2001 
Than in the 7 Previous Years Combined: 

Figure 6: OIRA Returned Only Two Rules Between February 2002 and May 
2003: 

Figure 7: The Number of OIRA Reviews Lasting More Than 90 Days Dropped 
Sharply in 2002: 

Figure 8: OIRA Recently Reversed a 20-year Decline in Staffing: 

Figure 9: EPA Air and Water Rules Were More Often Significantly Changed 
at the Suggestion of OIRA: 

Figure 10: Outside Parties Most Often Contacted OIRA Regarding EPA 
Rules:

Abbreviations: 

APA: Administrative Procedure Act:

Animal and Plant Health Inspection Service:

ARSA: Aeronautical Repair Station Association:

BLM: Bureau of Land Management:

CEA: Council of Economic Advisors:

CEED: Center for Energy and Economic Development:

CFR: Code of Federal Regulations:

CWD: chronic wasting disease:

DOE: Department of Energy:

DOI: Department of the Interior:

DOL: Department of Labor:

DOT: Department of Transportation:

EEAC: Equal Employment Advisory Council:

EEOC: Equal Employment Opportunity Commission:

EPA: Environmental Protection Agency:

EPF: Employment Policy Foundation:

FAA: Federal Aviation Administration:

FDA: Food and Drug Administration:

FMCSA: Federal Motor Carriers Safety Administration:

FTE: full-time equivalent:

HHS: Department of Health and Human Services:

ICR: information collection request:

MACT: maximum achievable control technology:

MGD: million gallons per day:

MOU: memorandum of understanding:

NCP: nonconformance penalty:

NHTSA: National Highway Traffic Safety Administration:

NMMA: National Marine Manufacturers Association:

OFCCP: Office of Federal Contract Compliance Programs:

OIRA: Office of Information and Regulatory Affairs:

OMB: Office of Management and Budget:

OSHA: Occupational Safety and Health Administration:

PRA: Paperwork Reduction Act:

RCRA: Resource Conservation and Recovery Act:

RFG: reformulated gasoline:

RIN: regulation information number:

SBA: Small Business Administration:

SDWA: Safe Drinking Water Act:

TPMS: tire pressure monitoring system:

TSS: total suspended solids:

USDA: Department of Agriculture:

VSL: value of a statistical life:

VSLY: value of a statistical life year:

WRAP: Western Regional Air Partnership: 

Letter September 22, 2003:

The Honorable Richard J. Durbin 
Ranking Minority Member 
Subcommittee on Oversight of Government Management, Restructuring, and 
the District of Columbia 
Committee on Governmental Affairs 
United States Senate:

The Honorable Joseph I. Lieberman 
Ranking Minority Member 
Committee on Governmental Affairs 
United States Senate:

In response to your request, this report on the regulatory review 
process of the Office of Management and Budget's (OMB) Office of 
Information and Regulatory Affairs (OIRA) (1) describes OIRA's review 
process and any changes in its policies or processes in recent years, 
(2) provides detailed information about rules submitted by nine health, 
safety, or environmental agencies that were returned, withdrawn, or 
changed at OIRA's suggestion, and (3) describes how OIRA decided that 
certain rules merited "high priority" review. We include 
recommendations to the Director of OMB to improve the transparency of 
the OIRA review process.

As we agreed with your office, unless you publicly announce the 
contents of this report earlier, we will not distribute it until 30 
days from the date of this letter. We will then send copies to the 
Director of OMB and will provide copies to others on request. It will 
also be available at no charge on GAO's Web site at [Hyperlink, http:/
/www.gao.gov] http://www.gao.gov.

If you have any questions concerning this report, please call me or 
Curtis Copeland at (202) 512-6806. Key contributors to this report were 
Ben Atwater, Tim Bober, and Joseph Santiago.

Signed by:

Victor S. Rezendes 

Managing Director, Strategic Issues:

[End of section]

Executive Summary:

Purpose:

The Office of Information and Regulatory Affairs (OIRA) within the 
Office of Management and Budget (OMB) is a relatively small office 
(currently, 55 full-time equivalents), but it can have a significant--
if not determinative--effect on a broad array of federal regulations 
that agencies issue to enact statutes and establish specific 
requirements. Under Executive Order 12866, OIRA reviews hundreds of 
significant proposed and final rules from all federal agencies (other 
than independent regulatory agencies) before they are published in the 
Federal Register. As a result of OIRA's review, many draft rules are 
changed before publication, withdrawn before a review is completed, or 
returned to the agencies because, in OIRA's opinion, certain aspects of 
the rule need to be reconsidered.

Despite its importance, OIRA's regulatory review function generally is 
not well documented or well understood. Therefore, the Ranking Minority 
Members of the Senate Committee on Governmental Affairs and its 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia requested that we examine and 
report on certain aspects of OIRA's operations. Specifically, we were 
asked to (1) describe OIRA's current regulatory review policies and 
processes and determine whether, and if so how, those policies have 
changed in recent years, (2) provide detailed information about the 
effects of OIRA's reviews of rules submitted by nine health, safety, 
and environmental agencies that were returned to the agencies for 
reconsideration, withdrawn at OIRA's request, or significantly changed 
in response to OIRA's reviews during a 1-year period, and (3) describe 
how OIRA determined that certain existing rules listed in its reports 
to Congress on the costs and benefits of federal regulations merited 
high priority review for potential modification or rescission. We also 
examined the transparency of the OIRA's review process. To address 
these objectives, we interviewed OIRA representatives, former OIRA 
officials, agency officials, and others knowledgeable about the OIRA 
review process. We also examined documentation at both OIRA and 
regulatory agencies to determine the effect of OIRA's reviews. Specific 
elements of our methodology are discussed in the sections below.

Background:

The Paperwork Reduction Act of 1980 established OIRA to provide central 
agency leadership and oversight of governmentwide efforts to reduce 
unnecessary paperwork burden and manage information resources. In 1981, 
OIRA's responsibilities expanded when Executive Order 12291 authorized 
it to review all proposed and final regulations from nonindependent 
regulatory agencies--between 2,000 and 3,000 rules each year. OIRA's 
regulatory review function under this executive order was highly 
controversial, with concerns raised about its effects on separation of 
powers, public participation, transparency, and the timeliness of 
agencies' rulemaking efforts. In September 1993, Executive Order 12866 
replaced Executive Order 12291 and made several changes to OIRA's 
regulatory review function. For example, Executive Order 12866 limits 
OIRA's regulatory reviews to nonindependent agencies' "significant 
regulatory actions" (e.g., rules expected to have an annual effect of 
$100 million or more on the economy or raising other coordination, 
budgetary, or policy issues). As a result, the number of OIRA reviews 
declined to about 500 to 700 each year. The executive order also 
generally requires OIRA to complete its review within 90 days after an 
agency formally submits a draft regulation, and contains several 
"transparency" provisions that require both OIRA and the agencies to 
disclose certain information about the review process. For example, 
section 6 of the order requires agencies to publicly identify the 
substantive changes made to rules during OIRA's review and at OIRA's 
suggestion or recommendation. It also requires OIRA to disclose all of 
the documents exchanged between the agencies and OIRA during the review 
process. The executive order and related OIRA guidance also identify 
some regulatory principles and analytical practices (e.g., considering 
the costs and benefits of a proposed regulation and assessing 
alternative approaches) that help to guide OIRA's reviews of agencies' 
draft regulatory actions.

In January 1998, we reported on the implementation of the transparency 
requirements in Executive Order 12866 that are applicable to rulemaking 
agencies.[Footnote 1] We concluded that complete documentation of all 
substantive changes made in the rules, and of all the changes that OIRA 
had suggested, was available to the public for only about one-quarter 
of the 122 rules that we reviewed. The agencies' rulemaking dockets had 
only some or no documentation for the remaining rules, and we could not 
always determine whether OIRA had made available all relevant documents 
exchanged between the agencies and OIRA. We recommended that the 
Director of OMB provide the agencies with guidance on how to implement 
these transparency requirements. OMB disagreed with our recommendations 
in this area and did not implement them.

Results in Brief:

OIRA's formal review process is essentially unchanged since Executive 
Order 12866 was issued in 1993. However, there have been several 
changes in OIRA policies and practices in recent years, particularly 
since the current OIRA Administrator took office in July 2001. Those 
changes, some of which the Administrator said would "have a long-
lasting impact on the regulatory state," include increased use of 
public letters explaining why OIRA returned rules to the agencies for 
their reconsideration (return letters) and suggesting regulatory action 
(prompt letters), increased emphasis on benefit-cost analysis and peer 
review, stricter adherence to the 90-day time limit for OIRA review, 
improvements in the transparency of the OIRA review process, and an 
increase in the size and skills of OIRA's staff. However, some of these 
changes are not as significant a departure from previous practice as 
they initially appear. Underlying many of the changes in OIRA's 
policies is a shift in how the Administrator (and, ultimately, the 
President) views OIRA's role in the regulatory process--less of a 
"counselor" to the agencies and more of a "gatekeeper." Prior to the 
formal executive order review process, OIRA sometimes informally 
reviews agencies' draft rules, and OIRA has said it can have a 
significant influence on the rules during this informal review period.

OIRA's database indicated that about 400 draft rules were changed, 
returned, or withdrawn from OIRA during the 1-year period from July 
2001 through June 2002. Therefore, we focused our examination of the 
effects of OIRA's review on 85 changed, returned, or withdrawn rules 
that had been submitted by the nine health, safety, or environmental 
agencies with 5 or more such rules.[Footnote 2] We concluded that OIRA 
had significantly affected 25 of the 85 rules by suggesting changes 
that revised the scope, impact, or costs and benefits of the rules, 
returning the rules for reconsideration by the agency, or, in one case, 
requesting that the agency withdraw the rule from review. The 
Environmental Protection Agency's (EPA) rules were most often 
significantly changed, and almost all of the returned rules were from 
the Department of Transportation (DOT), as was the rule withdrawn at 
OIRA's request. Many of OIRA's actions in these cases appeared to have 
been prompted by concerns about the cost and cost effectiveness of the 
regulatory options that agencies selected, in keeping with general 
principles established by Executive Order 12866 and related OIRA 
guidance. In almost all of the 25 rules that were significantly 
affected, OIRA's actions appeared to have at least some effect on the 
potential costs and benefits associated with the rule or prompted 
revisions to the agency's estimates of those costs and benefits. As 
permitted by the executive order, outside parties contacted OIRA before 
or during the formal review period regarding 11 of these 25 
rules.[Footnote 3] Although OIRA's positions regarding 7 of the 11 
rules were similar in some respects to those expressed by the outside 
parties, it is impossible to determine the extent to which those 
contacts might have influenced OIRA's actions, if at all. OIRA might 
have reached the same conclusions in the absence of those contacts. The 
transparency of the agencies' and OIRA's actions during these 85 
reviews varied, with the docket files for between 45 percent and 62 
percent of the rules providing clear and complete documentation of all 
elements expected under the two relevant portions of the executive 
order. However, a few agencies exhibited exemplary transparency 
practices.

In May 2001, OIRA asked the public to nominate rules that it believed 
should be modified or rescinded. OIRA decided that 23 of the 71 
nominations that it received merited high priority review, but did not 
publicly disclose how those determinations were made. Representatives 
of OIRA told us that the agency's desk officers initially determined 
which nominations should be placed in the high priority category, 
subject to the approval by OIRA management, with the final decisions 
made by the Administrator. Forty-four of the 71 nominations were from 
the Mercatus Center at George Mason University, as were 14 of the 23 
high priority nominations.[Footnote 4] As of May 2003, regulatory 
agencies or OIRA had addressed or begun to address the issues raised in 
many of these 23 suggestions. In March 2002 OIRA again solicited public 
comments on regulations in need of reform. However, this effort was 
different from the 2001 process in several respects (e.g., broader 
request for reforms, more responses from more commentors, no ranking of 
the suggestions being made by the agencies, nominations to strengthen 
rules, and clearer discussion of process and criteria).

Although both OIRA and some of the rulemaking agencies have improved 
the transparency of the regulatory review process, our review indicated 
that some elements of the process remain unclear. For example, neither 
OIRA nor the agencies are required to disclose why rules are withdrawn 
from review, and the descriptions that OIRA discloses about its 
contacts with outside parties is often not very helpful. In particular, 
OIRA representatives said neither they nor the rulemaking agencies are 
required to disclose the changes made to rules while they are under 
informal review--the period in which OIRA said it can have its greatest 
effect. This interpretation of this aspect of the executive order's 
transparency requirements restricts those requirements to the formal 
review period, which can be as short as 1 day.

Principal Findings:

:

OIRA's Regulatory Review Process and Changes in Policies/Practices:

OIRA's formal regulatory review process begins when the rulemaking 
agency sends a draft proposed or final rule and other parts of the 
review package to OIRA. OIRA desk officers do not use a standard 
"checklist" in their reviews, but most OIRA regulatory reviews are 
similar in that all rules must be consistent with applicable law, the 
President's priorities, and the principles in Executive Order 12866, 
and must not conflict with the policies or practices of other agencies. 
OIRA regulatory reviews differ somewhat depending on the content of the 
draft rules. For example, if the rule contains a collection of 
information under the Paperwork Reduction Act, the desk officer would 
also review the rule for compliance with that act. If the draft rule is 
"economically significant," the desk officer would review the agency's 
economic analysis. There is usually some form of communication between 
OIRA and the agency during the review, most commonly by e-mail or 
telephone. OIRA desk officers always consult with and obtain the 
consent of the appropriate resource management officer on the budget 
side of OMB before approving a rule. OIRA may also consult with others 
within the Executive Office of the President or other agencies, 
managing an interagency review process.

In some cases, OIRA also reviews drafts of agencies' rules before 
formal submission (e.g., large rules with statutory or judicial 
deadlines and/or that require discussions with other agencies). OIRA 
indicated that these informal reviews are increasing, and that reviews 
before formal submission can have a substantial effect on the agencies' 
regulatory analysis and the substance of the rules--before the 
agencies' positions become too entrenched. OIRA also informally 
consulted with agencies and reviewed agencies' draft rules before 
formal submission during previous administrations.

OIRA representatives told us that the formal process the office uses to 
review draft rules has been essentially the same since Executive Order 
12866 was established in 1993. However, several notable changes in 
OIRA's policies and practices have occurred since the current 
Administrator took office in July 2001, including (1) an overall 
resurgence in the "gatekeeper" role that OIRA played shortly after it 
was established, (2) increased use of return letters, (3) greater 
emphasis on economic analysis and the issuance of new draft guidelines 
on economic analysis, (4), fewer reviews extending beyond the 90-day 
limit, (5) the use of "prompt" letters that suggest regulatory 
priorities to the agencies, (6) improvements in the transparency of 
OIRA's regulatory review process (e.g., electronic access to 
information about rules under review and fuller disclosure of OIRA's 
contacts with outside parties), and (7) expansion of the size and 
expertise of OIRA staff. In some cases, though, the changes are less 
different from previous practices than they initially appear. For 
example, in the first 8 months after the Administrator took office, 
OIRA returned 21 of the nearly 400 rules it reviewed to the agencies--
more returns than in the previous 7 years combined. However, in the 
subsequent 15 months OIRA returned only 2 of the more than 850 rules 
that it reviewed. Also, OIRA prompted agencies to initiate rulemaking 
in particular areas during previous administrations--albeit not through 
public letters.

OIRA's Effect on Changed, Withdrawn, and Returned Rules:

Because of the large number of draft rules that had been changed, 
withdrawn, or returned to the agencies from July 1, 2001, through June 
30, 2002, we focused our analysis on the rules that were submitted by 
health, safety, or environmental agencies or offices with five or more 
rules that were changed, withdrawn, or returned during this 1-year 
period.[Footnote 5] This resulted in the selection of 85 rules from 9 
agencies: the Animal and Plant Health Inspection Service (APHIS) within 
the Department of Agriculture; 
the Food and Drug Administration (FDA) within the Department of Health 
and Human Services; the Occupational Safety and Health Administration 
(OSHA) within the Department of Labor; the Federal Aviation 
Administration (FAA), Federal Motor Carrier Safety Administration 
(FMCSA), and National Highway Traffic Safety Administration (NHTSA) 
within DOT; and the Offices of Air and Radiation, Solid Waste and 
Emergency Response, and Water within EPA.

We concluded that OIRA's review had a significant effect on 25 of the 
85 draft rules. In 17 of the 25 rules, OIRA recommended the revision, 
elimination, or delay of certain provisions in the draft regulatory 
text, the addition or revision of regulatory alternatives that provided 
more flexible and/or less costly compliance options, or the revision of 
agencies' cost and/or benefit estimates for the rules. EPA submitted 14 
of the 17 rules that were significantly changed at OIRA's suggestion. 
For example, at OIRA's suggestion, EPA took the following actions:

* Eliminated manganese from a list of hazardous constituents in a final 
rule on the identification and listing of hazardous wastes (see app. 
II, ID 56).

* Delayed the compliance date for states to report two types of 
emissions in a final rule on consolidated emissions reporting (ID 50).

* Made compliance requirements more flexible in a proposed rule on 
pollutant discharge elimination systems for large cooling water intake 
structures at existing power generating facilities by allowing options 
for a site-specific approach to minimizing environmental harm (ID 68).

* Revised the benefit-cost and cost-effectiveness estimates in a 
proposed rule on emissions from spark ignition marine vessels and 
highway motorcycles (ID 54).

OIRA returned 7 of the 25 rules to the agencies for reconsideration (6 
of which had been submitted by DOT). For example, OIRA returned a NHTSA 
final rule on tire pressure monitoring systems because, in the office's 
opinion, the agency's analysis did not adequately demonstrate that 
NHTSA 
had selected the best available regulatory alternative (ID 
78).[Footnote 6] OIRA returned a proposed FAA rule on certification of 
pilots, aircraft, and repairmen for the operation of light sport 
aircraft because it believed that the agency's regulatory analysis did 
not sufficiently justify the rule (ID 73). OIRA also requested that an 
FAA rule be withdrawn by the agency. Overall, we determined that rules 
submitted by three of the agencies (FAA, EPA's Office of Air and 
Radiation, and EPA's Office of Water) were much more often 
significantly affected by OIRA's review than rules submitted by the 
other six agencies in our study.

In 22 of the 25 rules that OIRA significantly affected, the changes 
appeared to have an effect on either the costs and/or benefits of the 
rules or the agencies' estimates of those costs and/or benefits. For 
example, in the above-mentioned EPA rule on cooling water intake 
structures, the approach that OIRA recommended was expected to have 
somewhat lower benefits than the approach EPA proposed but was 
estimated to cost significantly less, thereby yielding much larger net 
benefits. In the tire pressure monitoring system rule, NHTSA inserted 
(at OIRA's suggestion) additional estimates of some costs and benefits 
of regulatory alternatives and added information about benefits that 
might be realized with different regulatory alternatives.

In 34 of the 60 rules that OIRA did not significantly affect, the 
changes that OIRA suggested primarily involved revisions to the 
language in the preambles of the draft rules (e.g., expanding or 
clarifying agencies explanations of certain issues) or suggestions that 
the agencies request public comments on particular issues. Although we 
did not consider these types of changes to be "significant," they were 
substantive in that they made the rules easier to understand and/or 
could affect the final versions of the rules. OIRA suggested only minor 
editorial changes or no changes to 20 rules and returned 2 others for 
procedural rather than substantive reasons. Four rules were withdrawn 
from OIRA's review solely at the agencies' initiative or because of a 
"mutual decision" made by the agencies and OIRA.

Materials in the OIRA docket or the rulemaking agencies' dockets 
indicated that outside parties (most commonly representatives of 
regulated entities) had contacted OIRA regarding 11 of the 25 rules 
that OIRA significantly affected (including 8 of the 15 rules submitted 
by EPA that were significantly affected). In 7 of the 11 rules, at 
least some of the actions that OIRA recommended were similar to those 
suggested to OIRA by outside parties. For example:

* In the above-mentioned rule on cooling water intake structures, 
OIRA's suggested revisions of the regulatory language regarding the use 
of a site-specific approach to minimizing environmental harm were 
similar to those previously recommended by representatives of the 
electric industry during their contacts with OIRA (ID 68).

* In letters and meetings with OIRA, representatives from steel 
manufacturers and a chemical company opposed the listing of manganese 
as a hazardous waste constituent in an EPA final rule (ID 56). 
Subsequently, the main focus of OIRA's suggested changes to this rule 
was the deferral of final action on all parts of the rule identifying 
manganese as a hazardous constituent.

However, it is impossible to determine whether OIRA's contacts with 
those outside parties affected its conclusions; OIRA may have reached 
the same conclusions without those contacts. In the four other cases, 
OIRA's recommended actions did not appear to be similar to those 
suggested by outside parties. OIRA generally disclosed its contacts 
with outside parties; we identified only four such contacts regarding 
the rules in our review that OIRA had not disclosed. However, because 
our knowledge of such contacts is generally limited to what OIRA or the 
agencies disclose, we cannot be sure that there were not other contacts 
that did not come to our attention.

Rules and Regulatory Programs Selected for High Priority Review:

Congress has required OMB to submit "recommendations for reform" with 
its recent reports on the costs and benefits of federal regulations. In 
May 2001, OIRA asked the public to suggest "specific regulations that 
could be rescinded or changed that would increase net benefits to the 
public." Of the 71 nominations that OIRA received, 44 were from the 
Mercatus Center at George Mason University. OIRA reviewed the 
suggestions and selected 23 of them for high priority review--including 
14 of the 44 Mercatus nominations. In its December 2001 final report, 
OIRA said the high priority designation indicated that it was inclined 
to agree with the recommendation. However, OIRA did not indicate in the 
report how it made that determination. OIRA representatives described 
the process to us as a "bottom up" exercise, with desk officers making 
the initial determinations and the final decisions being made by the 
OIRA Administrator. Five of the 23 rules designated for high priority 
review had been issued at the end of the Clinton Administration, and 13 
had been issued by EPA or were environmental in nature.

As of May 2003, most of these 23 high-priority review items were at 
least in the process of being addressed by either the rulemaking 
agencies or OIRA. For example:

* One of the nominations focused on a Department of Energy (DOE) rule 
issued in January 2001 that would have raised the energy efficiency of 
new central air conditioners by 30 percent. In May 2002, DOE withdrew 
the rule and issued a new rule raising the efficiency level by 20 
percent.

* An EPA July 2000 final rule regarding allowable amounts of pollution 
in water ("total maximum daily load") was also the subject of a 
suggested change. In March 2003, EPA published a final rule withdrawing 
the July 2000 rule. By May 2003, a draft of a new proposed rule was 
undergoing informal interagency review.

However, in a few cases the agencies and/or OIRA decided not to take 
any action or had not made a decision regarding the rules in question.

In March 2002, OIRA again asked the public to nominate rules for 
reform, and received suggestions involving 267 regulations and 49 
guidance documents from approximately 1,700 individuals, trade 
associations, nonprofit organizations, and others. In contrast to the 
first round, OIRA asked the public to nominate not only regulations 
that could be rescinded or changed, but also rules that could be 
expanded. Also, OIRA did not designate certain nominated rules for high 
priority review. Instead, OIRA forwarded the nominations to the 
appropriate agencies for their review and prioritization, and suggested 
that the agencies rely on three criteria: efficiency, fairness, and 
practicality. Although most of the nominations sought modifications 
that would increase regulatory flexibility or rescind rules, more than 
a quarter of them suggested making rules more stringent or developing 
new rules.

Improvements Notwithstanding, OIRA's Review Process Is Still Not Well 
Documented or Clear:

OIRA and some of the agencies whose rules we examined have taken 
several steps to improve the transparency of the regulatory review 
process and its outcomes since our last review. For example, OIRA's 
disclosure of its contacts with outside parties is now triggered by the 
start of informal review, not just formal reviews, and OIRA is now 
providing electronic access to review information. Also, some agencies' 
dockets now more clearly indicated the changes made to their rules than 
was the case during our previous review 5 years ago, and some agencies' 
practices in this area were exemplary (FDA, FMCSA, and EPA's Office of 
Water).

However, the agencies still varied in the extent to which the 
transparency requirements in Executive Order 12866 were satisfied. 
Where the requirements were applicable, the agencies clearly identified 
the substantive changes made between the draft submitted for review and 
the action subsequently announced in only about 45 percent of the 
rules. The agencies clearly identified the changes made at OIRA's 
suggestion or recommendation in about 62 percent of these rules. FAA 
had no such documentation available, and OSHA said it did not keep the 
information in its docket to ensure that it is not part of the official 
rulemaking record if a lawsuit is filed. Other agencies had copies of 
e-mails between them and OIRA discussing changes that had been made to 
the rules, but we could not tell whether these e-mails represented all 
or just some of the changes that had been made.

Also, several aspects of the OIRA review process remain unclear, and 
could be improved to better allow the public to understand the effects 
of OIRA's reviews. For example:

* There is no requirement that either OIRA or the agencies explain why 
rules are withdrawn before OIRA completes its review.

* Although the executive order requires OIRA to disclose its contacts 
with outside parties regarding rules under review, the information that 
OIRA provides in its publicly available meeting log often does not 
allow the public to know what rule is being discussed or what parties 
were represented.

* The executive order requires OIRA to disclose "all documents 
exchanged" between the office and the rulemaking agency during the 
review, but OIRA said it would not do so regarding exchanges between 
the agencies and OIRA staff at the level where most such exchanges 
occur.

* The "consistent with change" category in OIRA's public database does 
not indicate whether the changes made to agencies' rules during the 
formal review process had been suggested by OIRA or the agencies, or 
whether the changes were substantive or editorial in nature.

* The agencies differed considerably regarding what types of changes 
made to their rules were "substantive" and therefore needed to be 
documented. For example, documentation for some rules included changes 
made to both the regulatory text and the agencies' explanations of 
their rules, while other documentation only included changes to the 
regulatory text.

* OIRA said informal submission of a draft rule for review triggers the 
office's disclosure requirements regarding its contacts with outside 
parties, but OIRA representatives said it does not trigger the 
requirements that the office and the rulemaking agency disclose the 
changes made during the review--even though OIRA has said it can have a 
significant influence on agencies' draft rules during this informal 
review period. OIRA indicated that the transparency requirements only 
apply to the formal review period--which can be as short as 1 day--even 
though OIRA may have been reviewing substantive drafts of agencies' 
rule weeks or even months in advance of the formal review period.

In some cases, the agencies or OIRA included materials in their files 
(e.g., substantive changes made during OIRA's informal review) that, 
while not required by the executive order as interpreted by OIRA, 
provided valuable insights regarding OIRA's effect on the development 
of those rules. Although OIRA indicated that disclosure of substantive 
changes made to agencies rules during informal review could have a 
"chilling effect" on OIRA-agency interactions, we saw no evidence of 
that effect in those instances where the substantive changes were 
already being disclosed. However, we recognize that OIRA and the 
agencies should be able to discuss regulatory matters in general 
without having to document and disclose those communications.

Recommendations for Executive Action:

We recommend that the Director of the Office of Management and Budget:

* Define the transparency requirements applicable to the agencies and 
OIRA in section 6 of Executive Order 12866 in such a way that they 
include not only the formal review period, but also the informal review 
period when OIRA says it can have its most important impact on 
agencies' rules. Doing so would make the trigger for the transparency 
requirements applicable to OIRA's and the agencies' interaction 
consistent with the trigger for the transparency requirements 
applicable to OIRA regarding its communications with outside parties.

* Change OIRA's database to clearly differentiate within the 
"consistent with change" outcome category which rules were 
substantively changed at OIRA's suggestion or recommendation and which 
were changed in other ways and for other reasons.

* Improve the implementation of the transparency requirements in the 
executive order that are applicable to OIRA. Specifically, the 
Administrator should take the following actions:

* More clearly indicate in the meeting log which regulatory action was 
being discussed and the affiliations of the participants in those 
meetings.

* Because most of the documents that are exchanged while rules are 
under review at OIRA are exchanged between agency staff and OIRA desk 
officers, OIRA should reexamine its current policy that only documents 
exchanged by OIRA branch chiefs and above need to be disclosed.

* Establish procedures whereby either OIRA or the agencies disclose the 
reasons why rules are withdrawn from OIRA review.

* Improve the implementation of the transparency requirements in the 
executive order that are applicable to rulemaking agencies. 
Specifically, the Administrator should take the following actions:

* Define the types of "substantive" changes during the OIRA review 
process that agencies should disclose as including not only changes 
made to the regulatory text but also other, noneditorial changes that 
could ultimately affect the rules' application (e.g., explanations 
supporting the choice of one alternative over another and solicitations 
of comments on the estimated benefits and costs of regulatory options).

* Instruct agencies to put information about changes made in a rule 
after submission for OIRA's review and those made at OIRA's suggestion 
or recommendation in the agencies' public rulemaking dockets, and to do 
so within a reasonable period after the rules have been published.

* Encourage agencies to use "best practice" methods of documentation 
that clearly describe those changes (e.g., like those used by FDA, 
EPA's Office of Water, or FMCSA).

Agency Comments and Our Evaluation:

On August 8, 2003, we provided a draft of this report to the Director 
of the Office of Management and Budget for his review and comment. On 
September 2, 2003, the Administrator of OIRA provided written comments 
on the draft report. (See app. V for a copy of these comments.) The 
Administrator said OIRA believed the "factual foundations of the report 
are well grounded," and was pleased that the report noted improvements 
in the timeliness of OIRA's reviews and the transparency of the review 
process. He indicated that OIRA agreed with our recommendation to 
improve the clarity of the office's meeting log, but said OIRA did not 
agree with all of the recommendations in the draft report. He said the 
report had not demonstrated the need or desirability of changing the 
agency's existing "unprecedented" level of transparency, and cited 
several specific examples. However, we continue to believe that 
improvements can and should be made to improve the transparency of the 
OIRA review process. The difficulties that we experienced during this 
review clearly demonstrated that OIRA's reviews are not always 
transparent to the public. (See chapter 5 for a fuller description of 
OMB's comments and our evaluation.):


[End of section]

Chapter 1: 


Introduction:

Federal regulation, like taxing and spending, is one of the basic tools 
of government used to implement public policy. Regulations generally 
start with an act of Congress and are the means by which statutes are 
enacted in specific requirements are established. Federal agencies 
issue more than 4,000 regulatory actions each year on topics ranging 
from the timing of bridge openings to the permissible levels of 
contaminants in drinking water. The costs and benefits associated with 
all federal regulations has been a subject of great controversy, with 
the costs estimated in the hundreds of billions of dollars and the 
benefits estimates even higher. During the past 50 to 60 years, 
Congress and various presidents have developed an elaborate set of 
procedures and requirements to guide the federal rulemaking process. 
One of the most important yet least understood of these requirements is 
the provision that federal agencies (other than independent regulatory 
agencies) submit their draft rules to the Office of Information and 
Regulatory Affairs (OIRA) within the Office of Management and Budget 
(OMB) for review before being published in the Federal Register. 
Although a relatively small office (about 55 full-time equivalent or 
"FTE" positions), OIRA reviews can have a significant--if not 
determinative--effect on federal rulemaking and, therefore, public 
policy.

Because OIRA's regulatory review function is not well understood, the 
Ranking Minority Members of the Senate Committee on Governmental 
Affairs and its Subcommittee on Oversight of Government Management, the 
Federal Workforce, and the District of Columbia requested that we 
examine and report on certain aspects of its operation. Specifically, 
they requested that we (1) describe OIRA's current regulatory review 
policies and processes and determine whether, and if so how, those 
policies have changed in recent years, (2) provide information about 
health, safety, and environmental rules from nine selected agencies 
that were returned to the agencies for reconsideration, withdrawn at 
OIRA's request, or significantly changed in response to OIRA's reviews 
during a 1-year period, and (3) describe how OIRA determined that 
certain existing rules listed in its reports to Congress on the costs 
and benefits of federal regulations merited high priority review for 
potential modification or rescission.

Background:

OMB is part of the Executive Office of the President, along with such 
agencies as the Council of Economic Advisors (CEA), the Council on 
Environmental Quality, and the Office of Science and Technology Policy. 
These agencies help develop and implement the policies and programs of 
the President. As figure 1 shows, OIRA is one of the statutory offices 
within OMB--which are sometimes collectively referred to as the 
"management" side of OMB. Other OMB offices include the resource 
management offices, which review agencies' budget submissions and are 
sometimes collectively referred to as OMB's "budget" side.[Footnote 7]

Figure 1: OIRA Is One of the Statutory Offices within OMB:

[See PDF for image]

[End of figure]

The Administrator of OIRA is appointed by the President, subject to the 
advice and consent of the Senate. As figure 2 illustrates, OIRA 
currently has four branches: (1) Information Policy and Technology, (2) 
Statistical and Science Policy, (3) Health, Transportation, and General 
Government, and (4) Natural Resources, Energy, and Agriculture. Of 
these, the last two branches are primarily responsible for reviewing 
agencies' draft proposed and final regulations under Executive Order 
12866. However, as discussed later in this report, the other branches 
as well as other parts of OMB and the Executive Office of the President 
may be consulted during their reviews.

Figure 2: Organization of OIRA:

[See PDF for image]

[End of figure]

The Rulemaking Process and Presidential Review:

The basic process by which federal agencies develop and issue 
regulations is spelled out in the Administrative Procedure Act of 1946, 
as amended (APA), codified at 5 U.S.C. section 553. Among other things, 
the APA generally requires agencies to (1) publish a notice of proposed 
rulemaking in the Federal Register, (2) allow interested persons an 
opportunity to participate in the rulemaking process by providing 
"written data, views, or arguments," and (3) publish the final rule 30 
days before it becomes effective. However, the APA allows agencies to 
issue final rules without a previous notice of proposed rulemaking in 
certain cases.[Footnote 8]

The Paperwork Reduction Act (PRA) of 1980 established OIRA to provide 
central agency leadership and oversight of governmentwide efforts to 
reduce unnecessary paperwork burden and improve the management of 
information resources. Specifically, the act required OIRA to review 
and approve agencies' proposed collections of information before the 
agencies could collect information from the public. In recent years, 
OIRA has reviewed between 3,000 and 5,000 proposed collections of 
information each year under the PRA. Although many federal regulations 
have an information collection component, the PRA did not specifically 
authorize OIRA to review or comment on the substance of those 
regulations.

Nevertheless, centralized review of agencies' regulations within the 
Executive Office of the President has been part of the rulemaking 
process for more than 30 years. For example:

* In 1971, President Nixon established a "Quality of Life Review" 
program in which agencies submitted all significant draft proposed and 
final rules to OMB, which then circulated them to other agencies for 
comment. In their submissions, agencies provided a summary of their 
proposals, a description of the alternatives that they considered, and 
the cost of those alternatives.

* In 1974, President Ford issued Executive Order 11821, which required 
agencies to prepare an "inflation impact statement" for each "major" 
proposed rule before publication in the Federal Register, and to send a 
summary of those statements to the Council on Wage and Price Stability 
when the rule was published. The council would then review the 
statement and either provide comments to the agency or participate in 
the comment process.

* In 1978, President Carter issued Executive Order 12044, which (among 
other things) required agencies to publish semiannual agendas of any 
significant rules under development and to prepare a regulatory 
analysis that examined the cost-effectiveness (i.e., the least cost of 
achieving the objective) of alternative regulatory approaches for major 
rules. President Carter also established (1) a "regulatory analysis 
review group" to review the analyses prepared for certain major rules 
and to submit comments during the comment period, and (2) a "regulatory 
council" to coordinate agencies' actions to avoid conflicting 
requirements and duplication of effort.

Perhaps the most significant development in this evolution of 
presidential review of rulemaking occurred in 1981 when President 
Reagan issued 
Executive Order 12291.[Footnote 9] The executive order replaced 
Executive Order 12044 and established a set of general requirements for 
rulemaking--e.g., that (to the extent permitted by law) (1) the 
potential benefits of a regulatory action must outweigh the potential 
costs to society, (2) regulatory objectives should maximize net 
benefits to society, and (3) agencies should select the regulatory 
alternative involving the least net cost to society. The order also 
required federal agencies (other than independent regulatory agencies) 
to send a copy of each draft proposed and final rule to OMB before 
publication in the Federal Register. In addition, it required covered 
agencies to prepare a regulatory impact analysis for each "major" rule, 
and authorized OMB to review "any preliminary or final Regulatory 
Impact Analysis, notice of proposed rulemaking, or final rule based on 
the requirements of this Order."[Footnote 10] As a result of this 
order, OIRA's responsibilities were greatly expanded from paperwork 
reviews to examinations of the substance of covered agencies' proposed 
and final rules--between 2,000 and 3,000 reviews per year.[Footnote 11] 
In 1985, President Reagan extended OIRA's influence even further by 
issuing Executive Order 12498, which required nonindependent agencies 
to submit a regulatory plan to OMB for review each year that covered 
all of their significant regulatory actions underway or planned.

The expansion of OIRA's role in the rulemaking process as a result of 
these executive orders was not without controversy. Concerns were 
raised by members of Congress, public interest groups, and others 
regarding a variety of issues, including whether OIRA's role violated 
constitutional separation of powers, and the effect that OIRA's review 
had on public participation under the APA and the timeliness of 
agencies' rulemaking. (Neither the order nor OIRA guidance placed any 
time limits on OIRA's reviews.) Concerns were also raised regarding the 
transparency of OIRA's reviews, specifically whether OIRA had become a 
clandestine conduit for outside influence in the rulemaking process. In 
response to those criticisms, in June 1986, the OIRA Administrator 
issued a memorandum for the heads of departments and agencies subject 
to the executive orders describing OIRA procedures to improve the 
transparency of the process. For example, the memorandum said that only 
the Administrator or the Deputy Administrator could communicate with 
outside parties regarding rules submitted for review, and that OIRA 
would make available to the public all written materials received from 
outside parties. OIRA also said that it would, upon written request, 
make available all written correspondence between OIRA and the agency 
head regarding a draft submitted for review.

In 1987 the National Academy of Public Administration published a 
report on presidential management of agency rulemaking that summarized 
the criticisms of the OIRA regulatory review effort as well as the 
positions of its proponents.[Footnote 12] The report also described a 
number of issues in regulatory review and offered recommendations for 
improvement. For example, the report recommended that "regulatory 
management be accepted as an essential element of presidential 
management." It also recommended that regulatory agencies "log, 
summarize, and include in the rulemaking record all communications from 
outside parties, OMB, or other executive or legislative branch 
officials concerning the merits of proposed regulations.":

In 1988 the Administrative Conference of the United States also 
examined the issue of presidential review of agency rulemaking and 
concluded that the reviews could improve coordination and resolve 
conflicts among agencies. However, the conference also said 
presidential review "does not displace responsibilities placed in the 
agency by law nor authorize the use of factors not otherwise permitted 
by law." The Conference recommended public disclosure of proposed and 
final agency rules submitted to OIRA under the executive order, 
communications from OMB relating to the substance of rules, and 
communications with outside parties, and also recommended that the 
reviews be completed in a "timely fashion."[Footnote 13]

Executive Order 12866:

On September 30, 1993, President Clinton issued Executive Order 12866 
on "Regulatory Planning and Review," which revoked Executive Orders 
12291 and 12498 and established a new regulatory philosophy and set of 
principles, as well as a new process for OIRA review. In its statement 
of regulatory philosophy, the executive order states, among other 
things, that agencies should assess all costs and benefits of available 
regulatory alternatives, including both quantitative and qualitative 
measures. It also provides that agencies should select regulatory 
approaches that maximize net benefits (unless a statute requires 
another approach). Where permissible and applicable, the order states 
agencies should adhere to a set of principles, including (1) 
consideration of the degree and nature of risk posed when setting 
regulatory priorities, (2) adoption of regulations only upon a 
"reasoned determination that the benefits of the intended regulation 
justify its costs," and (3) tailoring regulations to impose the least 
burden on society needed to achieve the regulatory objectives. Some of 
the stated objectives of the order are "to reaffirm the primacy of 
Federal agencies in the regulatory decision-making process; to restore 
the integrity and legitimacy of regulatory review and oversight; and to 
make the process more accessible and open to the public." Section 2(b) 
of the order assigns responsibility for review of agency rulemaking to 
OMB, and specifically names OIRA as "the repository of expertise 
concerning regulatory issues." The order also named the Vice President 
as principle advisor to the President on regulatory policy, planning, 
and review.

Section 6 of Executive Order 12866 established agency and OIRA 
responsibilities in the centralized review of regulations. Like its 
predecessor, the new executive order limits OIRA reviews to rules 
published by agencies other than independent regulatory agencies. 
However, in contrast to the broad scope of review under Executive Order 
11291, the new order limits OIRA reviews to actions identified by the 
rulemaking agency or OIRA as "significant" regulatory actions, which 
are defined in section 3(f) of the order as the following:

"Any regulatory action that is likely to result in a rule that may (1) 
have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
order.":

As figure 3 shows, by focusing OIRA's reviews on significant rules, the 
number of draft proposed and final rules that OIRA examined fell from 
between 2,000 and 3,000 per year under the Executive Order 12291 to 
between 500 and 700 rules per year under Executive Order 12866.

Figure 3: Number of Rules That OIRA Reviewed Dropped Under Executive 
Order 12866:

[See PDF for image]

[End of figure]

Executive Order 12866 also differs from its predecessor in other 
respects. For example, the order required that OIRA generally complete 
its review of proposed and final rules within 90 calendar days. It also 
requires both the agencies and OIRA to disclose certain information 
about how the regulatory reviews were conducted. For example, agencies 
are required to identify for the public (1) the substantive changes 
made to rules between the draft submitted to OIRA for review and the 
action subsequently announced and (2) changes made at the suggestion or 
recommendation of OIRA. OIRA is required to provide agencies with a 
copy of all written communications between OIRA personnel and parties 
outside of the executive branch, and a list of the dates and names of 
individuals involved in substantive oral communications. OIRA is also 
instructed to maintain a 
public log of all regulatory actions under review and of all of the 
above-mentioned documents provided to the agencies.[Footnote 14]

In October 1993, the OIRA Administrator issued guidance to the heads of 
executive department and agencies regarding the implementation of 
Executive Order 12866. The section of that guidance on "Openness and 
Public Accountability" that discussed the order's transparency 
requirements indicated that the requirement that agencies identify for 
the public the changes made at the suggestion or recommendation of OIRA 
only applies to changes made after draft rules are formally submitted 
to OIRA for review. In January 1996, OIRA published a document that 
described "best practices" for preparing the economic analysis of 
significant regulatory actions called for by the executive order. This 
document was revised and issued as guidance in 2000, and is described 
in greater detail in chapter 2 of this report.

Prior Report on Transparency Requirements:

In January 1998, we reported on the implementation of some of the 
transparency requirements in Executive Order 12866 within selected 
agencies.[Footnote 15] We concluded that the agencies had complete 
documentation of changes made during OIRA's review for only about 26 
percent of the 122 regulatory actions that we reviewed. The agencies 
had complete documentation of the changes that OIRA suggested or 
recommended for only about 24 percent of the rules. In other cases the 
agencies had some documentation that changes had been made, but it was 
not clear whether all such changes had been documented. In addition, 
the documentation that we were able to locate was sometimes not 
available to the public or hard to find. In our report, we recommended 
that OIRA provide agencies with guidance on how to implement the 
transparency requirements in the executive order. Specifically, we said 
the guidance should require the agencies to include a single document 
in the public rulemaking docket for each regulatory action that (1) 
identified all substantive changes made during OIRA's review and at the 
suggestion or recommendation of OIRA or (2) states that no changes were 
made.[Footnote 16] We also said that the guidance should point to best 
practices in some agencies to suggest how other agencies could organize 
their dockets to best facilitate public access and disclosure. OIRA 
disagreed with our recommendations and did not implement them.

Objectives, Scope, and Methodology:

The overall objective of this assignment was to determine how OIRA 
conducts its regulatory reviews. The requesters indicated that little 
was known about those reviews, the effects that outside parties have on 
OIRA decision making, or the impact of OIRA decisions on the American 
public. Our specific objectives were the following:

* Describe OIRA's current regulatory review policies and processes and 
determine whether, and if so how, those policies and processes have 
changed in recent years.

* Identify the rules issued by selected agencies that were reviewed by 
OIRA between July 1, 2001, through June 30, 2002, and that were either 
significantly changed at OIRA's direction, returned by OIRA for further 
consideration by the agencies, or withdrawn by the agencies at OIRA's 
suggestion. For each such rule, (a) describe the changes made by OIRA, 
the reasons why the rule was returned or withdrawn, and any subsequent 
activity regarding the rule, (b) describe, to the extent possible, the 
effects of the changes, returns, and withdrawals on the rule's original 
benefits and costs, and (c) determine whether there are any indications 
that the actions OIRA took were traceable to suggestions offered by 
regulated entities or outside parties and, if so, whether OIRA publicly 
disclosed their involvement. We also examined OIRA's and the agencies' 
application of the transparency requirements in the executive order and 
related guidance.

* Describe how OIRA determined that certain existing rules listed in 
its reports to Congress on the costs and benefits of federal 
regulations merited high priority review. Specifically, determine (a) 
which organizations or persons suggested that these rules be reviewed, 
(b) what process OIRA used to select and prioritize the rules, (c) the 
extent to which OIRA publicly disclosed its selection and priority-
setting process, and (d) the current status of those rules.

A detailed discussion of our methodology and scope limitations is 
provided in appendix I. In brief, we defined OIRA's "current" 
regulatory review policies and processes as those in place as of June 
2002 or later. To describe those policies and processes and any changes 
in recent years, we reviewed relevant documents (e.g., executive 
orders, legislation, and OMB guidance) and interviewed current OIRA and 
agency staff, two former OIRA Administrators, and knowledgeable 
officials and staff from external groups that are actively involved in 
observing and commenting on the federal regulatory process.

We focused our efforts in the second objective on those rules submitted 
for OIRA review that met the following criteria: (a) the rule was 
submitted to OIRA as a proposed, interim final, or final rule, (b) OMB 
completed its review of the rule between July 1, 2001, and June 30, 
2002, (c) the rule was returned to the rulemaking agency by OIRA, 
withdrawn from OIRA's review by the agency, or changed after submission 
for OIRA's review, and (d) it was included among the set of health, 
safety, or environmental rules from those agencies or subagencies that 
OIRA's Executive Order Review database indicated had five or more rules 
returned, withdrawn, or changed during the period in scope for this 
objective. A total of 85 rules from nine agencies--the Animal Plant and 
Health Inspection Service (APHIS); Food and Drug Administration (FDA); 
Occupational Safety and Health Administration (OSHA); Department of 
Transportation's (DOT) Federal Aviation Administration (FAA); Federal 
Motor Carrier Safety Administration (FMCSA); and National Highway 
Traffic Safety Administration (NHTSA); and the Environmental Protection 
Agency's (EPA) Office of Air and Radiation, Office of Solid Waste and 
Emergency Response, and Office of Water--met these criteria.[Footnote 
17] We also reviewed documents in both agencies' and OIRA's rulemaking 
dockets, and interviewed OIRA and agency officials to obtain 
information about the regulatory review process for the individual 
rules included in our scope.

Our work to address the third objective focused on the particular rules 
identified for high priority review in the 2001 and 2002 versions of 
OMB's annual report to Congress on the costs and benefits of federal 
regulations. We reviewed any available documentation describing the 
process that OIRA used to select certain rules for high priority 
review. We also interviewed OIRA representatives and representatives of 
other relevant agencies and organizations to determine how the 
classifications were made and why the particular selected rules were 
designated as high priority.

The specific limitations to our engagement are identified with each of 
our findings. In general, our findings were sometimes limited to the 
documentation that was available. Some types of OIRA's influence on 
rules may not be reflected in the documentation we relied on in this 
review. For example, in a previous review DOT officials told us that 
they will not even propose certain regulatory provisions because they 
know that OIRA will not find them acceptable.[Footnote 18] Also, we 
cannot be sure that we have identified all changes to the selected 
rules that were made at the direction or suggestion of OIRA (e.g., 
changes made during informal OIRA reviews that were not documented), 
nor can we be sure that we identified all the effects of such changes 
on the rules or all instances in which an outside party may have 
influenced OIRA's actions. We conducted our review from July 2002 
through May 2003 at the headquarters offices of the above-mentioned 
agencies in accordance with generally accepted government auditing 
standards. We verified data elements that we used from OIRA's database 
and found only minor differences between that database and information 
in OIRA's and agencies' files. Therefore, we concluded that the data 
were sufficiently reliable for purposes of our report. We provided a 
draft of this report to OMB for comment. The comments that we received, 
and our evaluation of those comments, are reflected in the "Agency 
Comments and Our Evaluation" section of chapter 5 of this report.

[End of section]

Chapter 2: Some of OIRA's Regulatory Review Policies Have Changed:


Our first objective was to describe OIRA's current regulatory review 
policies and processes and determine whether, and if so how, those 
policies and processes have changed in recent years. We determined that 
OIRA's formal regulatory review process under Executive Order 12866 
sometimes also includes informal reviews before the official submission 
of draft rules by the agencies. Both types of reviews focus on the 
draft rules' adherence to applicable laws, executive orders, guidance 
documents, and the President's policies. The OIRA review process is 
essentially unchanged since the office began reviewing rules in 1981. 
The most significant changes occurred in 1993 with the issuance of 
Executive Order 12866. However, there have been several other changes 
in policies and emphasis in recent years, particularly since the 
current OIRA Administrator took office in July 2001. Those changes 
include increased use of return letters and the advent of "prompt" 
letters, increased emphasis on benefit-cost analysis and peer review, 
stricter adherence to the 90-day period for OIRA review, improvements 
in the transparency of the OIRA review process, and an increase in the 
size and skills of OIRA staff. However, some of these changes are not 
as significant a departure from previous practice as they initially 
appear. Underlying many of these changes is a shift in how the 
Administrator views OIRA's role in the regulatory process.

OIRA Regulatory Review Process:

As noted in chapter 1 of this report, Executive Order 12866 limits 
OIRA's regulatory reviews to significant rules that are initiated by 
agencies other than independent regulatory agencies.[Footnote 19] The 
executive order also establishes certain requirements regarding how 
those reviews are conducted (e.g., generally requiring the reviews to 
be completed within 90 calendar days after the rule is submitted to 
OIRA). Although the overall process that OIRA uses to review covered 
agencies' draft rules is described in the executive order or other OIRA 
publications, the specific details about how the office conducts its 
reviews are not well understood. One rulemaking agency official 
described the review process to us as a "black box" into which agencies 
submit rules that later come out intact, changed, withdrawn, or 
returned.

As figure 4 shows, OIRA reviews agencies' draft rules at both the 
proposed and final stages of rulemaking.[Footnote 20] In each phase, 
the rulemaking agency formally submits a regulatory review package to 
OIRA (consisting of the rule, any supporting materials, and a 
transmittal form) and OIRA initiates a review. During the review 
process, OIRA analyzes the draft rule in light of the principles of 
Executive Order 12866, and discusses the package with staff and 
officials at the rulemaking agency, and, if the occasion warrants, with 
other agencies with whom interagency coordination will be necessary. In 
the course of that process, the draft rule that is submitted by the 
agency often changes. In some cases, agencies withdraw the draft rule 
from OIRA during the review period and the rule may or may not be 
subsequently resubmitted to OIRA.

Figure 4: The OIRA Regulatory Review Process:

[See PDF for image]

[End of figure]

At the end of the review period, OIRA either concludes that the draft 
rule is consistent with the principles of the executive order (which 
occurs in the vast majority of cases) or returns the rule to the agency 
"for further consideration."[Footnote 21] If a draft rule that was 
determined to be consistent with the executive order had been modified 
in the course of the review, the rule is coded in the OIRA database as 
"consistent with change" (regardless of the source or extent of the 
change). If no changes have been made to the draft rule during the 
review, the rule is coded as "consistent without change." OIRA only 
codes rules as "consistent with no change" if they are exactly the same 
at the end of the review period as the original submission. Even 
editorial changes made at the rulemaking agency's initiative can cause 
a rule to be coded "consistent with change.":

If the draft is a proposed rule, upon completion of OIRA's review the 
agency may then publish a notice of proposed rulemaking and, in 
accordance with the APA, obtain comments during the specified period 
(usually at least 30 days), review the comments received, and make any 
changes to the rule that it believes are necessary to respond to those 
comments. If the draft is a final rule, the agency may publish the 
final rule after OIRA concludes its review and the rule will take 
effect either at that point or at some later date specified by the 
agency. OIRA representatives emphasized that the office does not 
"approve" or "disapprove" draft rules. They noted that the rulemaking 
agency has been vested with authority by Congress to issue regulations, 
and said OIRA's review of draft rules under Executive Order 12866 does 
not displace that authority. They said any changes that are made to 
draft rules as a result of that review are made by the rulemaking 
agency, not OIRA.

Figure 4 also illustrates that for some rules there are two distinct 
phases of OIRA's review: (1) a formal review period after the rule is 
officially submitted to OIRA and (2) an informal review period before 
submission of the rule.

Formal Review:

According to OIRA representatives, the formal regulatory review process 
begins when the rulemaking agency sends the draft rule to the OIRA 
docket librarian (either electronically or hand carried), who logs the 
receipt of the rule and forwards it to the appropriate desk officer. 
The representatives said that OIRA desk officers do not use a standard 
"checklist" to review agencies' rules, but indicated that most reviews 
are similar in certain respects. Section 6 of Executive Order 12866 
states that the OIRA Administrator is to provide meaningful guidance 
and oversight "so that each agency's regulatory actions are consistent 
with applicable law, the President's priorities, and the principles set 
forth in this Executive order, and do not conflict with the policies or 
actions of another agency." The laws applicable to specific regulations 
vary, but always include the specific statutory authority under which 
each regulation is being developed (e.g., the Clean Air Act or the 
Occupational Safety and Health Act) as well as a variety of 
crosscutting regulatory statutes (e.g., the APA and the Regulatory 
Flexibility Act).

The principles in Executive Order 12866 that are intended to guide 
covered agencies' rulemaking practices (and therefore guide OIRA's 
review practices as well) include the following:

* Identify and assess available alternatives to direct regulation;

* design regulations in the most cost-effective manner to achieve the 
regulatory objective;

* assess both the costs and benefits of the intended regulation, and 
propose or adopt a regulation only upon a reasoned determination that 
the benefits of the intended regulation justify its costs;

* base decisions on the best reasonably obtainable scientific, 
technical, economic, and other information;

* identify and assess alternative forms of regulation; and:

* tailor regulations to impose the least burden on society.

In addition, the executive order's "regulatory philosophy" provides 
that "in deciding whether and how to regulate, agencies should assess 
all costs and benefits of available regulatory alternatives, including 
the alternative of not regulating." It goes on to state that, unless a 
statute requires another regulatory approach, "in choosing among 
alternative regulatory approaches, agencies should select those 
approaches that maximize net benefits.":

The type of review that OIRA conducts sometimes depends on the type of 
draft rule submitted. For example, if the draft rule contains a 
collection of information covered by the Paperwork Reduction Act, OIRA 
representatives said that the desk officer would also review it for 
compliance with the act. (They indicated that conducting both reviews 
simultaneously can be more difficult if different offices within the 
rulemaking agencies are responsible for the rule and the information 
collection.) If the draft rule is "economically significant" (e.g., has 
an annual impact on the economy of at least $100 million), the 
executive order requires agencies to prepare an economic analysis 
describing, among other things, the alternatives that the agency 
considered and the costs and benefits of those alternatives. For those 
economically significant rules, the desk officers review the economic 
analyses using the "best practices" document developed in January 1996 
and the related guidance document issued in 2000. (These documents are 
described in more detail later in this report.):

In addition to Executive Order 12866, there are several memoranda and 
guidance documents from OMB and/or the OIRA Administrator that provide 
additional details regarding the content of OIRA's regulatory reviews. 
For example, on September 20, 2001, the OIRA Administrator sent a 
memorandum to the President's Management Council on "Presidential 
Review of Agency Rulemaking by OIRA." An attachment to the memorandum 
described "the general principles and procedures that will be applied 
by OMB in the implementation of E.O. 12866 and related statutory and 
executive authority." For example, the attachment indicated that the 
office would, where appropriate, (1) include an evaluation of whether 
the agency has, in assessing exposure to a risk or environmental 
hazard, conducted an adequate risk assessment, (2) give "a measure of 
deference" to regulatory impact analyses and other supporting technical 
documents that have been peer reviewed in accordance with specified 
procedures,[Footnote 22] (3) ensure that regulatory clearance packages 
satisfy the requirements in other executive orders (e.g., include the 
certifications required by Executive Order 13132 on "Federalism" and 
Executive Order 13175 on "Consultation and Coordination with Indian 
Tribal Governments"), (4) consult with the Small Business 
Administration (SBA) and the SBA Chief Counsel for Advocacy, and (5) 
evaluate the possible impact of the draft rule on the programs of other 
federal agencies. (Several of these elements are discussed more fully 
later in this chapter, including OMB's guidance on economic analysis.):

OIRA representatives said that there is usually some type of 
communication (often via e-mail or telephone) between the desk officer 
and the rulemaking agency regarding specific issues in the draft rule. 
The representatives said briefings and meetings are sometimes held 
between OIRA and the agency during the review process, with branch 
chiefs, the Deputy Administrator, and/or the Administrator involved in 
some of these meetings.[Footnote 23] They also said that the desk 
officers always consult with the resource management officers on the 
budget side of OMB as part of their reviews, and reviews of draft rules 
are not completed until those resource management officers sign off. 
(In fact, they said that the resource management offices might take the 
lead in the review for rules involving the "transfer" of federal funds 
within society.) If the draft rule is economically significant, they 
said the desk officer would also consult with an economist to help 
review the required economic analysis. For other rules the OIRA 
representatives said the desk officer might consult with other OIRA 
staff on issues involving statistics and surveys, information 
technology and systems, or privacy issues. In certain cases, OIRA may 
circulate a draft rule to other parts of the Executive Office of the 
President (e.g., the Office of Science and Technology Policy or the 
Council on Environmental Quality) or other agencies (e.g. SBA for rules 
having an impact on small businesses, or DOE, DOT, the Department of 
Agriculture, and the Department of the Interior for certain EPA rules). 
In those cases, OIRA may not only review the rule itself, but also 
manage an interagency review process.

Executive Order 12866 generally requires OIRA to complete its 
regulatory reviews within certain time frames--(1) within 10 working 
days of submission for any preliminary actions prior to a notice of 
proposed rulemaking (e.g., a notice of inquiry or an advance notice of 
proposed rulemaking) or (2) within 90 calendar days of submission for 
all other regulatory actions (or 45 days if OIRA had previously 
reviewed the material and there had been no material changes in the 
facts or circumstances upon which the regulatory action was based). At 
the conclusion of its review, they said OIRA notifies the issuing 
agency by telephone. At that point, the agency may publish the rule in 
the Federal Register.

As noted previously, a draft rule that has been reviewed and judged 
consistent with the executive order may be coded in the office's 
database as "consistent with no change" (meaning that OIRA considered 
the draft rule as submitted to be consistent with all applicable 
requirements) or "consistent with change" (which means that the draft 
rule was changed at either the issuing agency's initiation or at the 
suggestion of OIRA, and that OIRA then considered the changed rule to 
be consistent with all applicable requirements). If the rule is 
returned to the issuing agency for reconsideration, the executive order 
requires OIRA to provide a written explanation for the return. Section 
7 of Executive Order 12866 originally required the President or the 
Vice President to resolve any disagreements or conflicts between or 
among agency heads or between OMB and any agency that cannot be 
resolved by the OIRA Administrator. However, in February 2002, 
Executive Order 13258 reassigned the Vice President's responsibilities 
in this area to the President's chief of staff.

Executive Order 12866 also requires OIRA to take certain actions to 
ensure greater openness, accessibility, and accountability in the 
regulatory review process. For example, the order says that a 
representative from the agency issuing the regulation must be invited 
to any meeting between OIRA personnel and persons not employed by the 
executive branch of the federal government regarding a rule under 
executive order review.[Footnote 24] It also requires OIRA to forward 
to the issuing agency within 10 working days any written communications 
between such outside contacts and OIRA personnel, as well as the dates 
and names of such outside contacts involved in substantive oral 
communications with OIRA staff. Other requirements include public 
disclosure of such written and oral communications, and the maintenance 
of a publicly available log containing, among other things, the status 
of all regulatory actions. After the regulatory action has been 
published in the Federal Register or otherwise issued (or after the 
agency announces it will not publish or issue the action), the 
executive order requires OIRA to make available to the public "all 
documents exchanged between OIRA and the agency during the review." The 
executive order established other transparency requirements for 
rulemaking agencies (e.g., requiring them to identify substantive 
changes made to draft rules during OIRA's review and at the suggestion 
or recommendation of OIRA).

Informal Review:

In its December 2001 report on the costs and benefits of federal 
regulations, OIRA stated that the office's original review process "was 
designed as an end-of-the-pipeline check against poorly conceived 
regulations."[Footnote 25] However, OIRA also stated that by the time 
an agency formally submits a rule to OIRA for review there may be 
"strong institutional momentum" behind the proposal and, as a result, 
the agency may be reluctant to address certain issues that OIRA 
analysts might raise. Therefore, OIRA indicated "there is value in 
promoting a role for OIRA's analytic perspective earlier in the 
process, before the agency becomes too entrenched." OIRA went on to 
state the following:

"A common yet informal practice is for agencies to share preliminary 
drafts of rules and/or analyses with OIRA desk officers prior to final 
decision making at the agency. This practice is useful for agencies 
since they have the opportunity to educate OIRA desk officers in a more 
patient way, before the formal 90-day review clock at OMB begins to 
tick. The practice is also useful for OIRA analysts because they have 
the opportunity to flag serious problems early enough to facilitate 
correction before the agency's position is irreversible.":

However, because of its size, OIRA cannot informally review each of the 
hundreds of significant proposed and final rules that are submitted to 
the office each year. OIRA representatives told us that a variety of 
factors could trigger informal discussions about a forthcoming rule. 
For example, they said informal reviews are sometimes used when there 
is a statutory or legal deadline for a rule or when the rule has a 
large impact on society and requires discussion with not only OMB but 
also other federal agencies. Therefore, they said informal review is 
more likely regarding rules issued by certain agencies (e.g., EPA, DOT, 
the Department of Agriculture, and the Department of Health and Human 
Services) that issue those types of rules. OIRA representatives also 
said there is an important distinction between informal consultations 
between OIRA and agency staff that may occur at any time and informal 
reviews that occur when OIRA is provided a substantive draft of a rule.

There have been some indications that OIRA has increased its use of 
informal reviews in recent years. For example, in its March 2002 draft 
report to Congress on the costs and benefits of federal regulation, 
OIRA said "agencies are beginning to invite OIRA staff into earlier 
phases of regulatory development in order to prevent returns late in 
the rulemaking process. It is at these early stages where OIRA's 
analytic approach can most improve on the quality of regulatory 
analyses and the substance of rules." Similarly, the Administrator said 
"we are trying to transform OIRA from an end-of-the-pipeline 
organization to one that also engages in early promotion of good 
policies and prevention of bad ones." He also said "an increasing 
number of agencies are becoming more receptive to early discussions 
with OMB, at least on highly significant rulemakings." As OIRA noted, 
that receptivity may be enhanced by the threat of a returned rule. In 
early 2002, the Administrator said OIRA was trying "to create an 
incentive for agencies to come to us when they know they have something 
that in the final analysis is going to be something we're going to be 
looking at carefully. And I think that agencies that wait until the 
last minute and then come to us--well, in a sense, they're rolling the 
dice."[Footnote 26] Perhaps the clearest manifestation of OIRA's early 
involvement in rulemaking occurred in 2002, when OIRA and EPA began 
what EPA described as an "unusual collaboration," working closely 
together to develop a rule curbing pollution from diesel-powered 
nonroad vehicles. EPA also indicated that it would collaborate with 
OIRA on the design of an "innovative regulatory analysis" for the rule.

However, OIRA informally consulted with agencies and reviewed agencies' 
draft rules before formal submission during previous administrations as 
well. For example, in September 1996, the then-OIRA Administrator 
testified that her office is sometimes "involved earlier and more 
deeply in an agency rulemaking--before the agency has completed all of 
its own evaluation and its internal and/or interagency coordination, 
and has become invested in its decision." An OIRA representative told 
us that informal reviews probably had been conducted since OIRA began 
reviewing rules, but became more common when Executive Order 12866 was 
adopted in 1993 and OIRA's reviews were focused on "significant" rules. 
He said because these more complex rules can take years to develop, it 
makes sense for agencies to involve OMB earlier in the process so that 
policy disagreements can be discussed before substantial amounts of 
staff work is conducted.

Changes in Regulatory Review Policies:

According to OIRA representatives, the process that OIRA uses to review 
draft rules has been essentially the same since that process was 
established in 1981. OIRA representatives indicated that the review 
process had changed less in recent years than the changes that occurred 
with the advent of Executive Order 12866 in 1993 (e.g., the focus on 
"significant" rules, the 90-day clock, and the transparency 
requirements). In presentations before various groups, the OIRA 
Administrator has said that the office is "pursuing the agenda of 
quality regulation under the terms of the Clinton-Gore executive order, 
which we believe…is based on sound principles and procedures.":

However, there have been several subtle yet notable changes in OIRA 
policies and practices in recent years--particularly since the current 
OIRA Administrator took office in July 2001. In October 2002, the 
Administrator said "the changes we are making at OMB in pursuit of 
smarter regulation are not headline grabbers: No far-reaching 
legislative initiatives, no rhetoric-laden executive orders, and no 
campaigns of regulatory relief. Yet we are making some changes that we 
believe will have a long-lasting impact on the regulatory state.":

Some of OIRA's review policies and practices that the Administrator and 
others have identified as significant changes are clear departures from 
the policies evident in previous administrations. However, other recent 
OIRA policies and practices are only incrementally different from those 
evident in previous administrations or have caveats that must be 
recognized in their implementation.

OIRA as Regulatory "Gatekeeper":

Overall, there has been a notable change in how recent Administrators 
(and perhaps more generally, how recent administrations) have viewed 
OIRA's role in the rulemaking process and its relationships with 
rulemaking agencies--in essence, whether OIRA should play a more 
collaborative, consultative role in relation to the agencies, or 
whether OIRA should take on more of a "gatekeeper" role. This change in 
philosophy has implications for virtually all of OIRA's 
responsibilities, and may be a precipitating factor for many of the 
other changes identified in this section of our report.

Perhaps the clearest indications of this change in philosophy are in 
the public statements of recent Administrators. For example, in a May 
1994 report to the President on the first 6 months of Executive Order 
12866, the Administrator of OIRA at the time said the relationship 
between OIRA and the agencies had "vastly improved" and that "rule 
writers and rule reviewers were learning to work together as partners 
rather than as adversaries." Officials we spoke with in 1996 at both 
EPA and DOT confirmed this perception. In testimony before the Senate 
Committee on Governmental Affairs in September 1996, the Administrator 
said, "we have consciously changed the way we relate to the agencies" 
and described that change as a "paradigm shift" from the relationship 
during previous administrations. She described OIRA's relationship with 
rulemaking agencies as "collegial" and "constructive," and said OIRA 
was "not in the business of playing 'gotcha' with them."[Footnote 27] 
She cited an article that she said accurately described OIRA's approach 
as a "consensual process," and that said OIRA functioned "more as a 
counselor during the review process than as an enforcer of the 
executive order."[Footnote 28] She also emphasized that this 
collaborative approach yielded better results than a more 
confrontational OIRA-agency relationship.

Another former OIRA Administrator voiced similar sentiments during our 
review. He said that during his and his predecessor's tenure in the 
mid-to-late 1990s OIRA acted in a spirit of partnership with agencies 
submitting regulations for review. He also said that although agencies 
were not allowed to do whatever they wanted, OIRA did not dictate how 
regulations should be written and worked with the agencies to ensure 
transparency and fairness in the rulemaking process.

The current Administrator has characterized OIRA's role and 
relationship with the agencies in quite different terms. For example, 
in its December 2002 report on the costs and benefits of federal 
regulations, OIRA described itself as the "gatekeeper for new 
rulemakings."[Footnote 29] In a speech, the current Administrator 
described OIRA's regulatory review process as "a form of consumer 
protection to protect people from poorly designed rules." He went on to 
say that OMB's process of centralized oversight "is a device to 
strengthen the hands of scientists, engineers and economists within the 
agencies--they now know that regulatory proposals cannot survive OMB 
review without careful supporting analysis." He also said OMB review is 
a device "to combat the tunnel vision that plagues the thinking of 
single-mission regulators." The Administrator has also compared OIRA's 
role in reviewing agencies' proposed regulations to OMB's role in 
reviewing agencies' budget requests:

"Now, no one would suggest that agencies should be permitted to 
negotiate their 'on-budget' resources from Congress, without any OMB 
review. Likewise, Presidents realize that regulatory expenditures, 
while off budget, require fiscal restraint for the same reasons that 
the size of public budgets need to be restrained. If the President 
restrains the federal budget without restraining regulation, regulatory 
advocates may simply respond by urging Congress to shift regulatory 
costs from the federal budget to states and the private sector. In 
other words, the President cannot manage the Nation's fiscal health 
without managing the regulatory state.":

Comments from both the current and former OIRA Administrators suggest 
that the change in the philosophy underlying OIRA's regulatory review 
function may be, at least in part, a function of the change in the 
presidency that the office serves. A previous Administrator emphasized 
that OIRA is part of the Executive Office of the President, and the 
President is the office's chief client. Therefore, she said, a change 
in the presidency has a profound effect on how OIRA operates. She also 
said each new Administrator of OIRA--and ultimately each new 
administration--represents a reaction to the previous Administrator and 
administration. Just as the Clinton administration's OIRA was a 
reaction to the administrations that preceded it, she said the current 
Bush administration's OIRA is a reaction to the Clinton period. 
Similarly, in March 2002, the current OIRA Administrator said 
"Presidents use the powers of OMB regarding agency action to advance 
Administration priorities and policy objectives… We should remember 
that OMB is an office within the 
Executive Office of the President and its actions necessarily reflect 
Presidential priorities."[Footnote 30]

Increased Use of Return Letters:

One clear indication of the emergence of OIRA's "gatekeeper" role is 
the office's increased use of return letters since 2001. During the 
first 7 full calendar years that Executive Order 12866 was in place 
(1994 through 2000), OIRA generally reviewed between 500 and 700 rules 
each year but returned very few of them to the agencies--three rules in 
1995 and four in 1997. (See fig. 5.) However, although the total number 
of rules reviewed each year remained about the same, the number of 
rules returned to the agencies increased dramatically in 2001. In fact, 
OIRA returned almost three times as many rules that year (18 rules) 
than in the 7 previous years combined. All of the returns during 
calendar year 2001 occurred after the current Administrator took office 
in July 2001. In calendar years 2001 and 2002 combined, OIRA returned a 
total of 23 rules to the agencies.

Figure 5: OIRA Returned More Rules to Agencies in Calendar Year 2001 
Than in the 7 Previous Years Combined:

[See PDF for image]

[End of figure]

DOT had the most rules returned during 2001 and 2002 (eight), followed 
by the Social Security Administration (five), the Department of 
Veterans Affairs (four), and the Department of Housing and Urban 
Development (two). The Department of Agriculture, the Office of 
Personnel Management, EPA, and SBA each received one return letter. In 
the letters, OIRA commonly said that it returned the rules because of 
concerns about the agencies' analytic approach--such as whether the 
agency had considered all reasonable regulatory alternatives, or had 
selected the alternative that would produce the greatest net benefits. 
In its December 2002 report on the costs and benefits of regulations, 
OIRA reported that 10 of the 22 rules returned by October 2002 had been 
resubmitted and approved for publication.

Recent OIRA Administrators have taken very different positions 
regarding the use of return letters, reflecting the philosophical 
differences between the administrations in OIRA's relationship with the 
agencies and explaining the dramatic change in the use of returns. For 
example, two former OIRA Administrators during the previous 
administration told us that the objective of the review process was to 
achieve an end result that was mutually agreeable, and that they viewed 
return letters as evidence of a failure of the collaborative review 
process. One of the former Administrators noted that the agencies and 
OIRA are parts of the same administration "team," so any public failure 
to agree on how a rule should be written could only be seen as a 
breakdown of that process.

In contrast, the current OIRA Administrator said in one of his speeches 
that the office is using a "carrot and stick" strategy in its efforts 
to encourage better regulatory analysis, and that the "stick" has been 
the revival of the return letter. In its March 2002 draft report on the 
costs and benefits of federal regulations, OIRA noted that no rules had 
been returned to the agencies for reconsideration during the previous 
administration's final 3 years, and said "the degree of OIRA's actual 
effectiveness can be questioned when it declines to use its authority 
to return rules." OIRA noted that under the current administration the 
office had revived the return letter, "making clear that OMB is serious 
about the quality of new rulemakings.":

However, OIRA's increased use of return letters appears to have been 
short lived. As figure 6 shows, the sharp increase in the use of return 
letters was primarily in the current Administrator's first 8 months in 
office (July 2001 through February 2002). During that period, OIRA 
returned 21 of the 415 rules that it reviewed to the agencies. More 
than half (11) of the 21 rules that OIRA returned during this period 
were sent to the agencies in a single month--September 2001. However, 
during the following 15-month period (from March 2002 through May 
2003), OIRA returned to the agencies only 2 of the 863 rules that it 
reviewed--about the same pace as during the previous administration.

Figure 6: OIRA Returned Only Two Rules Between February 2002 and May 
2003:

[See PDF for image]

[End of figure]

In its December 2002 report on the costs and benefits of federal 
regulations, OIRA indicated that the decline in the number of returns 
since February 2002 was a reflection of the improved quality of 
regulatory packages. OIRA also said that an even more important factor 
was the "earlier interaction between OIRA and agency staffs during 
regulatory development in order to prevent returns late in the 
rulemaking process. It is at these early stages where OIRA's analytic 
approach can most improve the quality of regulatory analyses and the 
substance of rules.":

Greater Emphasis on Economic Analysis:

Some of the officials from rulemaking agencies who regularly interact 
with OIRA also told us that there is a greater expectation now than 
several years ago that the agencies' economic analyses (both benefit-
cost and cost-effectiveness) will be thorough. Officials from one 
agency described it as a "more relentless emphasis" on benefit-cost 
analysis, and said OIRA is expecting the agencies to devote more money 
and effort to refining their analyses to develop rules that are more 
cost effective. Officials in another agency said there had been a 
perceptible "stepping up the bar" regarding what is expected in 
agencies' analyses. They also said that OIRA is looking for greater 
quantification of benefits and more justification and breakdown of 
marginal benefits of every line item in the agency's rules, and that 
OIRA now expects agencies to do a benefit-cost analysis for all 
regulatory options, not just for the option that the agency selected.

OIRA representatives pointed out that their office has always pushed 
for agencies to do a better job with their analyses. However, they 
confirmed that the current Administrator is somewhat more interested in 
having the agencies do better analyses than previous Administrators. In 
fact, they said the current Administrator said early in his tenure that 
he would return a rule if the analysis needed work, even if the rule 
itself was acceptable.

Emphasis on 90-day Period for Review:

Another clear change in OIRA regulatory review policy since the current 
OIRA Administrator took office has been a stricter adherence to the 
time frames for OIRA review. As mentioned earlier in this report, 
Executive Order 12866 generally requires OIRA to complete its 
regulatory reviews within 90 calendar days of submission for all draft 
proposed and final rules. The executive order allows the review period 
to be extended once upon the written permission of the OMB Director and 
at the request of the rulemaking agency.[Footnote 31] According to a 
former OIRA Administrator, the 90-day time limit in the executive order 
was put in place because of "strident complaints" about the length of 
reviews during the previous administrations' implementation of 
Executive Order 12291 in the 1980's and early 1990's. However, she said 
the time limit created an unintended "perverse incentive" for the 
agencies to respond to OMB suggestions late in the 90-day period, and 
then suggest that the rule be approved because of the time limit. As a 
result, she said, review periods were often extended beyond the 90-day 
limit.

As figure 7 indicates, during each of the calendar years 1999, 2000, 
and 2001, more than 100 OIRA reviews exceeded the 90-day limit (115, 
159, and 149, respectively). However, during calendar year 2002 (the 
current Administrator's first full year in office) only 9 reviews 
lasted longer than 90 days. According to an OIRA representative, 
virtually all of the extensions of the review periods in each of these 
4 years were done at the request of the agency issuing the rule. 
(However, officials from one agency and a previous OIRA Administrator 
told us that OIRA sometimes asked the agency to request an extension.):

Figure 7: The Number of OIRA Reviews Lasting More Than 90 Days Dropped 
Sharply in 2002:

[See PDF for image]

[End of figure]

The dramatic decline in the number of reviews lasting more than 90 days 
is traceable to clear differences in philosophy between Administrators 
regarding the importance of this requirement. For example, in September 
1997 the OIRA Administrator at the time testified that "when two or 
more agencies are at loggerheads over a regulatory issue, it may well 
take more than 90, or even 120, days to obtain needed data and 
analyses, to conduct the appropriate evaluation, and to arrange for the 
policy officials in the interested agencies to come to agreement." For 
that and other reasons she opposed draft legislation that would have 
imposed a statutory time limit on OIRA reviews. Another OIRA 
Administrator during the previous administration told us during our 
review that he considered it more important to "get the rule right" 
rather than rigidly adhere to a 90-day time limitation. Several of the 
agency officials that we contacted during this review confirmed that 
view, saying that during the previous administration OIRA often worked 
with the agencies after the 90-day deadline had passed in order to 
resolve comments or questions. In contrast, in May 2002 the current 
OIRA Administrator said "agencies have sometimes been forced to wait 6 
months, a year, or even longer to get an answer from OMB. We have 
changed that practice. I have instructed my staff that no rule will 
stay longer than 90 days at OMB without my personal authorization." 
According to OIRA's December 2002 report on the costs and benefits of 
regulations, the office now regards the 90-day review limit as "a 
performance indicator for a strong regulatory gatekeeper." OIRA 
representatives confirmed that close adherence to the 90-day clock is 
new, and said that OIRA management tracks all rules that have been 
under formal review for more than 60 days. They also said that a 
benefit of stricter adherence to the 90-day review limit is that it 
forces officials to make decisions sooner, thereby moving the review 
along more quickly.

Officials from several rulemaking agencies also told us that OIRA staff 
currently seem much more focused on the 90-day clock than during the 
previous administration. In fact, concerns about adherence to this 
fixed review period might have precipitated some of the return letters 
that have been more common during the current administration. For 
example, in the September 14, 2001, return letter to DOT, the OIRA 
Administrator said "(s)ince the resolution of the concerns will take 
some additional time, I am returning the draft final rule on flight 
data recorders to the Department for your reconsideration." The return 
letters for this rule and for one other rule were sent to the agencies 
shortly after the rules' 90-day review periods had ended. An OIRA 
representative told us that the 90-day clock may play a role in some 
returns, but not always.

Officials in other agencies also said that rules are sometimes returned 
or withdrawn at OIRA's request when time is running out on the 90-day 
clock and it is recognized that more time is needed to resolve issues 
"off the clock" or during a separate 90-day period. Representatives of 
OIRA told us they do not request that agencies withdraw rules, and 
emphasized that it is the agencies--not OIRA--that ultimately make 
withdrawal decisions. They also said agencies sometimes withdraw rules 
as a negotiating strategy.

Although an increased emphasis on the 90-day time limit is clearly an 
area of change in recent years, the formal review period itself may be 
somewhat of an artificial construct if OIRA and the agency had been 
substantively discussing the rule and/or exchanging drafts of the rule 
before formal submission. For example, on December 10, 2001, EPA 
formally submitted a draft rule to OIRA on proposed nonconformance 
penalties for heavy-duty diesel engines. OIRA's database indicates that 
it completed its review 10 days later on December 20, 2001. However, 
public documents indicate that EPA and OIRA met with outside parties in 
early October 2001 and mid-November 2001 to discuss the rule, and that 
EPA informally submitted a version of the draft rule and its economic 
analysis to OIRA in late October 2001--weeks before the 10-day formal 
review period began. (See GAO ID 53 in app. II of this report.) OIRA 
records indicate that the formal review period for an EPA Clean Water 
Act rule in which OIRA made significant changes was even shorter--1 
day. (See GAO ID 69 in app. II of this report.):

Use of Prompt Letters:

Another change in OIRA policies and practices has been the development 
of a new form of communication with the agencies--the "prompt letter." 
In its December 2002 report on the costs and benefits of federal 
regulations, OIRA stated that the office had historically been a 
reactive force in the regulatory process, responding to proposed and 
final rules that were generated by federal agencies. However, the 
report went on to say that OIRA had recently begun "taking a more 
proactive role in suggesting regulatory priorities for agency 
consideration," and the prompt letter is the format by which those 
suggestions are brought to the agencies' attention.

By the end of May 2003, OIRA had sent nine prompt letters to regulatory 
agencies.[Footnote 32] Several of the initial prompt letters 
recommended that the agencies consider taking regulatory actions 
regarding particular issues. Notably, the letters did not always 
suggest that the agency publish a rule on the issue, sometimes 
recognized that the agency had already begun taking action, and 
generally left the final decision to the agency regarding what action 
to take. For example:

* In September 2001, OIRA sent a letter to the Department of Health and 
Human Services suggesting that FDA publish a final rule requiring that 
the amount of trans fatty acid present in food be included in a 
product's label. However, OIRA said the agency should review the 
comments received on its proposed rule and proceed to final rulemaking 
"if appropriate.":

* Also in September 2001, OIRA sent a letter to OSHA requesting that 
the agency "consider whether promotion of (automatic external heart 
defibrillators) should be elevated to a priority." However, OIRA said 
it understood that OSHA had limited resources and other constraints, 
and was simply asking the agency to consider the matter.

* In December 2001, OIRA sent a letter to DOT encouraging NHTSA to give 
greater priority to modifying its frontal occupant protection standard 
by establishing a high-speed, frontal offset crash test. OIRA 
recognized that the agency had already signaled its intent to move 
forward with this standard, and also recognized NHTSA's resource 
constraints and other legislative mandates.

* In May 2002, OIRA sent a letter to the Office of Federal Housing 
Enterprise Oversight recommending that the office consider developing a 
rule strengthening the corporate governance of Fannie Mae and Freddie 
Mac, and to require them to make certain public disclosures.

* In May 2003, OIRA sent a letter to the Departments of Agriculture and 
Health and Human Services requesting them to "further incorporate the 
large body of recent public health evidence linking food consumption 
patterns to health and disease" as the departments revise their dietary 
guidelines and update the "Food Guide Pyramid." Specifically, OIRA 
recommended that the revisions "emphasize the benefits of reducing 
foods high in trans fatty acids and increasing consumption of foods 
rich in omega-3 fatty acid.":

Other OIRA prompt letters were even less focused on rulemaking or 
guidance, instead recommending that the agencies better focus certain 
research or programs. For example, in December 2001 OIRA sent a letter 
to EPA highlighting "some critical research needs that can help target 
environmental-protection investments to the most important sources of 
(fine particulate matter) and thereby better inform cost-benefit 
studies of future air pollution control policies." OIRA recognized that 
EPA already devoted a substantial share of its research budget on 
particulate matter, but suggested that the research focus on three 
particular issues. Similarly, in February 2003, OIRA sent a letter to 
the Department of Energy raising several issues regarding a particular 
energy modeling system, and suggested changes in that system that 
would, in OIRA's view, better enable the agency to assess the potential 
of hybrid-electric and diesel powered vehicles.

In March 2002 the OIRA Administrator said that the prompt letters 
issued as of that date "have emerged primarily from discussions with my 
professional staff," but encouraged the public to submit ideas for 
prompts. In another speech he said the use of prompt letters "enables 
OMB to publicly identify areas where agencies might improve regulatory 
policies." He also said that prompt letters differ from the more 
definitive presidential directive in that the letters represent a 
"public request that is intended to stimulate agency and public 
deliberation," and emphasized that "final decisions about priorities 
remain with the agencies.":

Although OIRA's use of public prompt letters is new, the concept of 
OIRA (or, more generally, the President) making regulatory suggestions 
to the agencies is not.[Footnote 33] One former OIRA Administrator told 
us that every administration has had certain areas of regulatory 
emphasis and has communicated those ideas to rulemaking agencies in a 
variety of ways. She said that if OIRA wanted the agencies to initiate 
rulemaking in a particular area, "we could get the agencies' attention 
without using a letter." Similarly, another former OIRA Administrator 
said that during his tenure if OIRA thought an agency should regulate 
in a particular area, he would call an agency official and talk about 
the issue rather than sending a public prompt letter than could 
embarrass the agency. Officials in one agency also indicated that these 
types of communications had existed previously--albeit not publicly. As 
indicated in the following quote from its December 2002 report on the 
costs and benefits of federal regulation, OIRA identified the public 
nature of the prompt letter as a distinguishing feature:

"An important feature of the prompt letter can be its public nature, 
aimed at stimulating agency, public and congressional interest in a 
potential regulatory or informational priority. Although prompt letters 
could be treated as confidential pre-decisional communications, OIRA 
believes that it was wiser to make these prompt letters publicly 
available in order to focus congressional and public scrutiny on the 
important underlying issues.":

An OIRA branch chief told us that the office still does, on occasion, 
call an agency on the telephone and suggest areas for regulation. He 
said the strategy used (telephone versus prompt letter) depends on a 
variety of circumstances, but noted that prompt letters are more 
"transparent" and may have more impact than a telephone call.

Several of the agencies have taken some type of action in response to 
the OIRA prompt letters, and other actions were planned. For example, 
in December 2001 OSHA issued a technical information bulletin regarding 
the use of defibrillators in the workplace. In July 2003, FDA published 
a final rule on trans-fatty acids. NHTSA said that it planned to issue 
a notice of proposed rulemaking on offset crash testing in 2003.

Post-Review Letters:

In 2001 and 2002, OIRA sent a total of five "post-review letters" to 
rulemaking agencies and posted those letters on its Web site. As of May 
2003, no post-review letters had been sent since August 2002. OIRA 
representatives said that although individual branch chiefs or desk 
officers had previously provided staff-level comments to rulemaking 
agencies at the conclusion of reviews, the use of a public letter 
signed by the Administrator to convey those comments represented a 
change in OIRA policy.

In some of the post-review letters, OIRA expressed concerns about the 
rulemaking agencies' analyses and the cost-effectiveness of the rules 
that were similar in many respects to the concerns that the office had 
expressed in the previously mentioned return letters. For example, 
after OIRA completed its review of EPA's draft proposed rule on 
"Control of Emissions from Nonroad Large Spark-Ignition Engines and 
Recreational Engines (Marine and Land-Based)" in September 2001, the 
OIRA Administrator sent a letter to EPA noting that he was "concerned 
that the regulatory analysis is not sufficient to support a reasoned 
determination on the appropriate regulation of these sources." 
Specifically, he said that the analysis did not "provide a benefit/cost 
analysis integral to the decision-making process" and did not evaluate 
any alternatives as required by the Unfunded Mandates Reform Act of 
1995 and Executive Order 12866. The Administrator said he expected 
improvements to the analysis to be submitted before the final rule was 
submitted, and said EPA and OIRA should schedule "quarterly meetings to 
review the progress in developing a refined analysis.":

However, in other post-review letters, OIRA expressed other types of 
comments. For example:

* In an October 2001 letter regarding an FAA draft proposed rule on 
"Traffic Alert and Collision Avoidance Systems," the OIRA Administrator 
recognized that despite the rule's high cost compared to its benefits, 
the agency had "limited alternatives available under the statute." In 
that regard, he indicated that the department and the agency should 
share with Congress "any information made available by the public that 
bears on the reasonableness of implementing the statute." He also 
encouraged FAA to carefully assess the impact of the rule on small 
entities and the financial health of the industry "in light of recent 
events.":

* In a June 2002 letter regarding a NHTSA final rule on tire pressure 
monitoring systems, the OIRA Administrator expressed his appreciation 
for the "significant improvements NHTSA made in the regulatory 
analysis," and encouraged the agency to conduct a study examining the 
relative frequency of different causes of crashes.

* In an August 2002 letter regarding a Department of Housing and Urban 
Development rule on improving the process for obtaining mortgages, the 
OIRA Administrator encouraged the department to continue its work to 
improve and simplify the proposed forms, and suggested that the 
department "further strengthen the economic and regulatory flexibility 
analyses.":

A former OIRA Administrator told us that the office's current use of 
public post-review letters represents a change in policy from the 
previous administration. She said that during the previous 
administration OIRA might have spoken with an agency about what it 
should be doing before a proposed rule was resubmitted, but OIRA would 
not have put those comments in writing. She described the previous 
process as "non-public post review comments," and said written material 
was too confrontational.

Transparency Improvements:

On numerous occasions, the current OIRA Administrator has identified 
improvements in the transparency of the office's regulatory review 
process as a key area of change, and has described the establishment of 
a climate of openness at OIRA as his "first priority." The 
Administrator said the information that OIRA discloses about its 
reviews is intended to "diminish the culture of secrecy and mystery 
that has surrounded my Office since it was launched early in the Reagan 
Administration," and said that "more openness at OMB about regulatory 
review will enhance public appreciation of the value and legitimacy of 
a centralized analytical approach to regulatory policy." He also 
described the transparency of OIRA's regulatory review process as 
"critical to our ability to improve the nation's regulatory system," 
and said "only if it is clear how the OMB review process works and what 
it does will Congress and the public understand our role and the 
reasons behind our decisions." He also said "we see openness not simply 
as a canon of good government but as a strategy to transform the public 
debate about regulation to one of substance…rather than process." 
Similarly, in May 2002 the OMB Director said that one way to establish 
public confidence in the "consumer protection" mission of OMB is 
"maximum openness.":

Disclosure of Contacts with Outside Parties:

In October 2001, the OIRA Administrator sent a memorandum to OIRA staff 
(and published it on the office's Web site) that, among other things, 
delineated OIRA's disclosure procedures regarding substantive 
communications with outside parties (i.e., persons not employed by the 
executive branch) while rules were under review. Many of the procedures 
listed were the same as or clarifications of the disclosure 
requirements in Executive Order 12866. For example, like the executive 
order, the memorandum said that (1) only the Administrator or a 
particular designee can receive substantive telephone calls from 
outside parties, (2) a representative from the issuing agency must be 
invited to any meeting between OIRA personnel and outside parties, and 
(3) OIRA must send to the regulatory agency all written communications 
between OIRA personnel and outside parties within 10 days.

However, the Administrator's October 2001 memorandum also extended the 
executive order's disclosure requirements in certain areas. For 
example, the memorandum said that OIRA would disclose substantive 
telephone calls with outside parties about a rule under review if the 
calls are initiated by the Administrator, not just the calls that the 
Administrator receives from outside parties. Also, the memorandum said 
that OIRA considers a rule to be under review for purposes of OIRA's 
disclosure requirements regarding outside parties not just during the 
formal review process, but before formal submission of the review 
package (i.e., during the previously mentioned informal review period) 
if OIRA has started a "substantive discussion with the agency 
concerning the provisions of a draft rule or OIRA has received the rule 
in draft." As a result of this change in policy, for the first time 
OIRA began disclosing letters, telephone conversations, and meetings 
that occurred during the informal review period. In its 2001 report on 
the costs and benefits of federal regulations, OIRA described why the 
office believed that these outside contacts before a rule is formally 
submitted should be disclosed.

"Interested outside parties have gradually learned about this informal 
process of agency-OIRA discussion and thus attempts are made to provide 
information to agency and OIRA analysts. In order to protect the 
integrity of OIRA and the administrative record, an informal practice 
has developed that communications between OIRA and outside parties are 
treated as 'covered by E.O. 12866' as soon as a rulemaking has 
proceeded to a point where OIRA desk officers have received from 
agencies copies of preliminary draft regulatory text or analysis.":

However, OIRA representatives that we contacted during this review 
emphasized that a rule is not considered under review with regard to 
these disclosure requirements if OIRA and an agency are in general 
consultation about an issue, but the consultation has not become 
"substantive" and/or the agency has not submitted a substantive draft 
of a rule for informal review. Therefore, at that "preinformal review" 
stage of the process, OIRA can communicate with outside parties about 
the issue and not have to disclose those communications.

The October 2001 memorandum also announced that much of the information 
generated through the disclosure requirements would be available to the 
public on the agency's Web site, including summary information on 
meetings, phone calls, and other oral communications with outside 
parties and a list of the written correspondence that OIRA had received 
from outside parties. The memorandum said that other information 
previously available in hard copy and/or in the OIRA docket library 
would also be posted to the Web site (e.g., monthly regulatory review 
lists and statistics and the text of written outside 
communications).[Footnote 34] Improving access to information about 
OIRA's review process by putting the information on the office's Web 
site has been widely hailed as a significant improvement in the 
transparency of the regulatory review process.[Footnote 35]

However, we concluded that some of the information that OIRA provides 
on its Web site regarding its communications with outside parties is 
not very informative. As a result, it is sometimes difficult to 
understand what rule a meeting was about or the affiliations of the 
meeting participants. For example, during our review the OIRA Web site 
provided the following descriptions:

* On February 3, 2003, an OIRA desk officer had a meeting with a person 
whose affiliation was listed as "Albemarle" regarding an EPA issue 
identified as "N-Propyl Bromid (nPB).":

* On October 24, 2002, OIRA leadership and staff met with four 
individuals regarding a Centers for Medicare and Medicaid Services 
issue identified as "Outpatient.":

* On June 27, 2002, the Administrator and other OIRA staff met with 
several individuals whose affiliations were listed as "TPLG," "American 
Association," "Powell Golstein," and "Hunton & Williams" regarding a 
Centers for Medicare and Medicaid Services issue identified as 
"Inherent Reasonableness.":

* On April 26, 2002, OIRA and OMB leadership and staff met with several 
individuals regarding a General Services Administration issue 
identified as "DOT Gov Rule: 3090-AH41." Two of the non-OMB 
participants' affiliations were listed as "NASCIO" and "PTI.":

The OIRA Web site included a column for each meeting in which the 
client being represented by an outside party could be identified. 
However, we found that this column was usually blank. An OIRA 
representative told us that he recognized that OIRA could sometimes do 
a better job describing the rule being discussed at meetings as well as 
the affiliations of the meeting participants, and said that he had 
already notified OIRA staff that the information posted on executive 
order meetings should be clearer regarding these issues (e.g., no 
abbreviations when identifying the affiliations of outside parties).

OIRA's practice of providing minimal information to the public about 
its meetings with outside parties stands in contrast to the more 
formal, APA-driven practices of certain agencies that we reviewed. For 
example, on October 26, 2001, the OIRA Administrator and three OIRA 
staff members met with representatives of the automobile industry 
regarding a NHTSA tire pressure monitoring proposed rule. Two 
representatives from NHTSA were also present. The OIRA web page listed 
the names and affiliations of those present. However, the DOT 
electronic docket contained a memorandum providing that information and 
also described the positions taken by the various parties at the 
meeting. The memorandum indicated it was prepared pursuant to DOT Order 
2100.2, which requires that DOT agencies prepare a report on meetings 
with outside parties for the rulemaking docket. The DOT order also says 
"a mere recitation that on X day a meeting was held with listed persons 
to discuss a named general subject is inadequate.":

Disclosure of OIRA-Agency Interactions:

The Administrator's October 2001 memorandum also briefly discussed the 
requirements in Executive Order 12866 regarding disclosure of OIRA's 
interactions with the rulemaking agencies. For example, it stated that 
OIRA would, upon request, provide certain materials to the public after 
a reviewed rule had been published, including the draft as origi