THE ADMINISTRATION'S REGULATORY REFORM PROGRAM

President Carter has pointed out that the regulatory process needs well-considered statutes, sound management in the executive branch and the independent commissions, and effective interagency coordination. The process needs to be freed from excessive delays, unnecessary paperwork and redtape, and the process has to be accessible and understandable not only to lawyers, but also to the individuals, businesses, and other organizations that are subject to it. Regulation is important, indeed vital to protect the quality of our lives. As the President said in his regulatory reform message, "Goals such as equal opportunity, a healthy environment, a safe workplace, and a competitive and truthful marketplace cannot be achieved through market forces alone." It is precisely because the regulatory process is so important that it must be conducted well and in a manner that wins and retains public confidence.

The President's program is designed to achieve two strategic goals; elimination or substantial reduction of outdated or otherwise unneeded programs, and management of needed programs in a commonsense fashion that cuts out waste and unnecessary burdens. This effort begins with the statutes that create regulatory programs. Last year's Airline Deregulation Act was a major achievement ment that has won universal acclaim. This year, the administration is working with the Congress on a number of statutory reforms, in such areas as surface transportation, communications, and as you know, Mr. Chairman, human drugs. Once the Congress has done its part by enacting legislation, the focus of responsibility shifts to the agency that administers it. Regulations issued by an agency should carry out the statutory mandate effectively, efficiently, fairly, and without unnecessary costs, paperwork, or the stifling of innovation. To achieve these objectives, agencies need to make sure that all relevant views are obtained and considered. Therefore, agencies should encourage and facilitate broad public participation in the regulatory process, and should manage that process so that priorities are set and respected, resources are used efficiently, and delay is minimized. Above all, the regulatory process must be characterized by intelligence the clear identification of problems, a thorough survey of alternative approaches and their advantages and disadvantages, and the thoughtful selection of the best approach to advance the public interest.

A little more than a year ago, President Carter promulgated Executive Order 12044 to guide the regulatory process within the executive branch. The major features of the executive order are the core of title I of S. 755 and S. 262. There are three primary objections of the order: To strengthen internal agency management of the regulatory process; to expand public participation in it, particularly at the early stages; and to assure adequate consideration of alternative approaches and economic factors during the process of developing regulations that have a major impact on the economy.

Under the order, internal agency management is strengthened by two principal requirements: That agency heads approve a semiannual agenda of significant regulations under development, and that they personally approve all significant regulations issued by their agencies. These two provisions are designed to assure that agency heads will have an overall picture of their agencies' regulatory programs, and that they make the critical decisions presented by significant regulatory proposals.

Public participation is promoted by the requirement for the semiannual agenda, which provides the public with advance notice of agency regulatory plans, by the encouragement given by the order for agencies to "give the public an early and meaningful opportunity to participate in the development of agency regulations," and by a requirement that the public comment period on significant regulations be at least 60 days. The executive order encourages the use of advance notices of proposed rulemaking, open conferences and public hearings, the sending of regulatory proposals to publications likely to be read by those affected, and the notifying of interested parties directly.

The executive order also requires that agencies prepare economic analysescalled "regulatory analyses"-early in the process of developing regulations that will have a major economic impact. These analyses are subject to public comment, but are not judicially reviewable. Because the requirement for regulatory analyses is limited to regulations that have major impacts, it is taken seriously; an appropriate level of resources can be devoted to the analyses, and they command the attention of agency heads. Had the requirement been more broadly phrased,

I suspect that the regulatory analysis would have become just one more piece of the regulatory routine and would not have commanded the attention from agency heads it receives today. Moreover, doing a regulatory analysis for every regulation would involve a huge paperwork burden and would waste large sums of tax

revenues.

Finally, the executive order requires agencies to review periodically their existing regulations to determine whether they are still sound.

In addition to issuing the executive order, President Carter has established two processes for reviewing the economic impact of major regulations and for ensuring that problems of duplication, overlap, and inconsistency are avoided to the extent possible. The interagency Regulatory Analysis Review Group reviews 10 to 20 of the most important regulations proposed each year. The group assists agencies in analyzing the economic consequencies of rules and in exploring alternative approaches. It also submits formal comments into the rulemaking record. The Regulatory Council, composed of the heads of executive branch agencies and some independent commissions that have agreed to join, publishes a semi-annual government-wide calendar of major upcoming rulemakings. The Council uses the calendar to identify overlapping rules and situations where the actions of several agencies would have a multiple impact on a single sector of the economy. The Council organizes interagency groups to address the problems identified.

I would like to turn now to FDA's experience under the executive order. We have lived with it now for nearly 14 months; and I can tell you that it has improved the regulatory process.

FDA'S PERFORMANCE UNDER EXECUTIVE ORDER 12044

Internal Management.-In October, 1977-even before the promulgation of Executive Order 12055--I determined that the top management of FDA needed to become involved in the process of developing regulations at a very early stage before substantial agency resources were expended and before a proposal developed significant momentum. Accordingly, I instituted a requirement that before any substantial resources could be devoted to a regulatory project, the responsible bureau had to obtain my approval of a “strategy document." A strategy document is several pages in length, and it discusses :

The objectives of the proposed regulation;

The need for a regulation in order to achieve the objectives [evidence of a problem; consideration of alternative approaches];

Legal authority;

Major issues to be resolved;

Any forcing events;

Expected impacts of the proposed regulation;

Plans for public involvement in the development of the regulation;

Anticipated coordination with other offices in the agency and the Department of HEW, and with other agencies;

Planned date for publication in the Federal Register;

An estimate of the resources needed to develop the regulation; and
Specific policy recommendations.

Since the requirement was imposed, 60 strategy documents have been processed within the Agency. The process includes an opportunity for offices in the Agency to comment on the document, and a staff meeting at which it is considered and at which I make a decision to approve or disapprove it. This process has saved time and resources by preventing false starts, has avoided unnecessary regulations, and has accelerated the resolution of critical issues. Most important, the strategy document approval procedure has involved me personally at the critical decisionmaking stage of every significant FDA regulation. It has reinforced my role as the Agency head, and made it appropriate in fact as well as theory to hold me accountable for what FDA does with its regulatory authority.

Our Office of Regulatory Affairs manages FDA's compliance with the executive order. It organizes the semiannual agenda that we publish in the Federal Register. It coordinates the review of draft regulations by the various offices within the Agency and monitors adherence to Agency priorities. It also manages FDA's participation in "operation common sense," a Department of HEW program for making regulations clearer and easier to understand.

Finally, we prepare for each bureau in the Agency an annual regulations plan establishing priorities and schedules; and our Office of Policy Coordination tracks

draft regulations as they move through the Agency. In addition, significant regulatory projects are reviewed periodically at staff meetings, at which I receive reports on their progress.

In sum, I believe that I as an Agency head have a handle on the regulatory process in my Agency; and that the management tools established, mainly under the influence of the executive order, have significantly improved the efficiency of that process.

Public Participation.—Since the promulgation of the executive order, FDA has expanded its use of procedures to increase public participation in our regulatory processes. (The numbers I am about to give are rough approximations based on surveys made in the few days available to prepare this testimony.) In 1977, FDA published only two advance notices of proposed rulemaking. In 1978, we published three. But already in 1979, we have published 18. We have made increased use of legislative-type public hearings in connection with notice-and-comment rulemaking and the development of legislation. In 1977, we held 4 such hearings; in 1978, 17; and already in 1979, 8. We have made increased use of tentative final orders, which provide for a second round of public comments after the first round of comments has been analyzed and responded to by the agency. In 1977 we issued two tentative final orders: in 1978, seven; and already in 1979, three.

We make special efforts to involve consumers in our proceedings. Our national consumer awareness and access project trains consumers around the country in how to participate in FDA proceedings. We hold consumer exchange meetings, at which consumers and leaders of consumer organizations meet with me or other agency officials to discuss pending matters, most of which involve regulation in one form or another. Six such meetings are held each year in Washington, D.C. and at least four others are held in each of FDA's 22 district offices across the country. FDA annually conducts a priority-setting process. In 1976, the process was opened to outside involvement; and now some 800 consumer organizations and individuals participate in it. FDA also regularly sends to some 11,000 consumer organizations and individuals a publication called "consumer update," which contains summaries of significant Federal Register announcements, a listing of vacancies on FDA's public advisory committees, and notices of important meetings, conferences, workshops, and hearings. Finally, last month we published a proposal to fund public interest and small business participants in Agency proceedings.

We also make special efforts to keep State officials informed of our proceedings. We commission State officials as special Government employees so that they can receive and comment on advance copies of drafts of significant Federal Register documents. We send to approximately 2,300 State and local officials throughout the country a weekly document advising of significant FDA Federal Register documents published during the preceding week. FDA personnel also participate in the Association of Food and Drug Officials and at least 14 other national and regional organizations of State and local officials.

Regulatory Analysis.-The executive order requires the preparation of a full regulatory analysis for every "major" regulation. We perform a regulatory assessment of every proposed regulation in order to determine whether it meets the criteria for a "major" regulation. When the criteria are met, we make a detailed regulatory analysis. Under our statutes, economic considerations generally are not part of the basis for decision, but I can tell you that the economic analyses have had an influence on me. They create additional motivation to look very hard at the need for a regulation that will have a major economic impact; they create a strong incentive to make very sure that no atlernative approach will be adequate. Consequently, although our economic analyses are not judicially reviewable, we do take them seriously and they do have an impact on our regulatory thinking.

THE REGULATION REFORM ACT OF 1979, S. 755

The administration's proposed Regulation Reform Act builds on our experience with the Executive order. It would strengthen the requirements of the order, apply them to the independent regulatory commissions as well as to the agencies in the executive branch, and make them permanent. Like the order, the bill is designed to strengthen management of the regulatory process and to assure adequate Agency awareness of the economic aspects of major regulations. It moves beyond the executive order in revising major provisions of the Administrative Procedure Act for the first time since it was enacted in 1946.

This bill has five major goals:

to make new rules more cost-effective; to assure periodic review of old rules;

to improve Agency planning and management; to cut needless delay; and

to enhance public participation.

John White will discuss the management provisions of the bill, including its provisions for oversight of administrative law judges. Charlie Schultze will discuss the provisions for economic analysis, and I will address the amendments to the Administrative Procedure Act. As one who has never been a lawyer, much less a law professor, I feel particularly well suited to discuss this topic because I am not encumbered by the lawyer's inbred predilection for procedural niceties, and because I have a real, personal sense of the role that administrative procedure actually plays in the protection of the public interest. I firmly believe that administrative law is much too important to the quality of life of the American people to be left to the administrative lawyers.

Before moving to my allotted subject matter, however, I do want to comment on one very important provision of the management part of the bill. Section 603 of S. 755 provides that the management provisions of the bill do not provide a ground for judicial invalidation of regulations. Compliance with the requirements of those provisions is to be monitored by the Office of Management and Budget and by congressional oversight committees, not by the courts. I believe this provision is crucial to the success of the management side of regulatory reform.

The heart of regulatory reform is to make agency heads responsible and accountable in their capacity as managers. An agency head should be answerable to the courts for his compliance with the substantive and procedural requirements of law. But he should be answerable to the President and the Congress for his management of the regulatory process. He should not share his management responsibility with the courts: his personal accountability-when he meets with the President or with OMB or testifies before the Congress-should not be diluted by judicial participation in the management of his agency, and agency regulations should not be overturned for managerial deficiencies that do not deny substantive or procedural rights.

APA AMENDMENTS

Informal rulemaking.—After 2 years at the helm of FDA, I can say that the simple notice-and-comment procedure of informal rulemaking is essential to the proper functioning of my Agency. I subscribe fully to the appraisal by Professor Kenneth Culp Davis:

"The procedure of administrative rulemaking is one of the greatest inventions of modern government. It can be, when the agency so desires, a virtual duplicate of legislative committee procedure. More often, it is quicker and less expensive. The usual procedure is that prescribed by the Administrative Procedure Act, 5 U.S.C.A. § 553, the central feature of which is publishing proposed rules and inviting interested parties to make written comments. Anyone and everyone is allowed to express himself and to call attention to the impact of various possible policies on his business, activity, or interest. The agency's staff sifts and summarizes the presentations and prepares its own studies. The procedure is both fair and efficient. Much experience proves it usually works beautifully.' Informal rulemaking is one process of Government that works and works well. Senate bill 755 preserves the fundamental character of informal rulemaking, but strengthens its open and public character in several useful ways. The notice of proposed rulemaking must include a statement that the agency seeks proposals from the public for more effective or less burdensome alternative ways to accomplish the regulatory objectives. Under the bill, the public comment period must be at least 60 days; current law does not specify a minimum period. In an emergency, or where otherwise necessary, an agency could dispense with the comment period upon the making of an appropriate finding. Third, the bill

1 K. Davis, Administrative Law Treatise § 6.15 at 283-84 (1970 Supp.). In his 1976 supplement to the Treatise, Professor Davis said of notice-and-comment rulemaking: “The system is simple and overwhelmingly successful. Procedural problems about the system have given rise to very little litigation." K. Davis, Administrative Law of the Seventies 6.01.1 at 170 (1976).

codifies the requirement of case law that an agency include in the preamble to a final rule responses to substantive comments made during the comment period. The preamble shows the courts, the Congress, and the public that the agency has seriously considered the comments on its proposal. At FDA, there is a tradition of lengthy, detailed responses to comments, which require a great real of effort to prepare. We believe the effort is worthwhile because our preambles are analogous to legislative history: They provide useful insight into the agency's thought processes, they provide narrative explanations unsuitable for inclusion in the texts of a rule, and they move misunderstandings about the meaning and intent of rules. I am advised that the industries we regulate find them very useful aids to compliance.

Finally, the administration bill would narrow the so-called proprietary exemption from the requirement for notice-and-comment rulemaking. Under the bill, the exemption would apply only to Federal procurement. Rules concerning grants, loans, contracts or other benefits, which now can be issued without public participation, would become subject to the requirements of notice and opportunity for public comment.

A draft bill prepared by the staff of the Judiciary Committee contains several other provisions worthy of careful consideration. The administration has not yet had an opportunity to obtain the Agency comments and consequently is not yet ready to take formal positions on the various provisions of the draft bill. I will, however, make some personal suggestions. One provision of the draft would require an agency to issue an advance notice of proposed rulemaking in connection with every "significant" rulemaking. A "significant" rulemaking under the draft is the same as a "major" rulemaking under S. 755. I fully agree that advance notice of major rulemakings is desirable. I would merely ask whether an ANPRM would add much to the device used in S. 755, a published semiannual agenda.

I think it is also desirable that an agency invite suggestions with respect to a developing major proposal, and I understand that the intent of the draft is that the agency is not required to respond to suggestions received. That intent is sound. A requirement of responses to suggestions at that stage would encumber the process, make it more expensive for the agency, and slow it down. Any suggestion that the agency appears to have ignored or not considered adequately or misunderstood can be resubmitted as a comment on the agency's proposal, and then the agency is required to respond to it and its response is judicially reviewable.

The staff draft expressly provides that in connection with the issuance of major rules agencies may, in their discretion, provide additional procedures— beyond simply notice-and-comment-to resolve significant controversies over material factual issues.

Under current law, agencies already have authority to provide such procedures in all informal rulemakings, not merely in those that may have a large impact on the economy. I suggest that the draft be clarified to avoid any implication that it is intended to limit this existing authority. We all agree that greater public participation in rulemaking is desirable. As I have noted, FDA already promotes such participation through a variety of means; and Executive Order 12044, S. 755 and S. 262 all provide specific encouragement for the use of such

means.

I understand that the intent of the provision in the staff draft is to commit the selection of additional procedures to agency discretion, and thereby to exclude judicial second-guessing of an agency's selection of procedures. I think that intent is terribly important.

Agencies should be encouraged to provide additional procedures in those relatively few cases where such procedures would be useful, and avoids encumbering notice-and-comment rulemaking with any inflexible requirements for such procedures. But the courts should not be given a roving commission to require additional procedures beyond those specified by Congress and those voluntarily provided by agencies.

It is my judgment as an Agency head that such a roving commission would make the regulatory process almost impossible to manage. I could have very little confidence that our judgment about what procedures to provide would satisfy every court that might be asked to review a rule. Because I could not foresee all the factual issues might be raised by comments and therefore could not foresee what additional procedures it might be necessary to provide, I could not plan intelligently, could not allocate Agency resources with any confidence,