Tag Archives: ICF

Deregulation – It’s Harder Than it Looks

Last month I wrote a post that explained why cutting the federal workforce is much harder than it might appear. That post prompted a discussion with one of my ICF colleagues (Gary Light) regarding President Trump’s Executive Order on deregulation. It should not come as a surprise that deregulation, much like cutting the workforce, is easy in theory and difficult in execution. I asked Gary to write a guest blog post so ChiefHRO readers can take a look into the complex world of federal regulations.  

President Trump’s January 30, 2017 Executive Order, “Reducing Regulation and Controlling Regulatory Costs,” is intended to reduce the number of federal regulations by requiring agencies to identify two regulations to be repealed for each “new” regulation (the “2 for 1” rule) and offset costs from “new” regulations with cost savings (the “net zero” rule).  On February 2, 2017, the Acting Administrator for OMB’s Office of Information and Regulatory Affairs (OIRA) published additional guidance for implementing the Executive Order.  To implement both the “2 for 1” and the “net zero” rules, agencies will be required to navigate several major challenges, some resulting from the Order and related guidance itself, and others inherent to the laws and conventions of the federal regulatory system.

On the face of it, the “2 for 1” rule – repealing 2 regulations for each new regulation — is both clear and significant.  But how do we count “regulations”?  And how do we look at costs? To understand the challenge, let’s review how federal regulations are published and organized. Like many seemingly easy ideas, the transition from concept to execution can be a challenge.

When an agency wants to change a regulation or wants input from the public on a possible change, it must publish a notice of the change in the Federal Register (FR). Whether the change is to make the regulation more restrictive or less restrictive is irrelevant. FR notices typically include background information, such as history and legal authority, various options that were considered or are being considered, a summary of public comments and economic impacts, and the actual regulatory language.  Final regulatory text is officially recorded by the Government Publishing Office in the Federal Code of Federal Regulations (CFR).  Watchdog groups and scholars often cite the number of pages the FR takes up in a given year, but that metric has little to do with the magnitude of regulation because the FR also includes many other agency notices, studies, public filings, and public meeting announcements. The number of words in a regulation is also far less important than what the regulation does.

Within the existing framework, how would an agency start offsetting one (or two) regulations for another?  The January 30 Executive Order defines “regulation” to exempt rules related to national security and to include Agency policy, interpretation, and guidance documents.  The OMB Interim Guidance uses to the term “regulatory action” rather than “regulation” to make it more intuitive that it may include the rollback of guidance.  Additional clarification is sure to follow, but any such “2 for 1” approach without additional guidance is inherently prone to manipulation and mischief, and may distract from the president’s goal of identifying and repealing “outdated, ineffective, or unnecessary regulatory actions.”

The second provision of E.O. 13771 – the “net zero” regulatory burden requirement – is the more substantive provision intended to focus attention on eliminating “unnecessary regulations.”  The OMB Interim Guidance suggests that the Acting OIRA Administrator sees the overall regulatory burden as the core issue and metric.  While the current guidance addresses only pre-September 30, 2017 regulatory actions, the general provisions or something like them are likely to be extended.

The OMB Interim Guidance clarifies that the “2 for 1” and “net zero” provisions apply only to “significant” regulatory actions, which generally means regulatory actions that have an effect of $100 million or more on the annual U.S. economy.  In addition, the OMB Interim Guidance clarifies that the Order applies only to regulatory actions taken by executive departments, and not to independent regulatory agencies (e.g., FTC, NRC, and FCC).   According to the OIRA web site, there were 77 such actions between October 1, 2015 and September 30, 2016.  Given the emphasis on offsetting new significant rules, an agency may need roll back two, three, or more lesser regulatory actions to offset $100 million or more in cost impact of a new significant regulation.  This would likely be the case no matter how we count regulatory actions.  On the other hand, if an agency comes up with a single deregulatory action that would fully offset the impacts of a significant regulatory action, it is hard to imagine that OMB would not exercise its authority to grant a waiver to the “2 for 1” provision.

Another interesting and important aspect of the OMB Interim Guidance is the emphasis on and suggestions for conducting new cost analyses to account for savings from deregulation.  The guidance essentially disallows reliance on past Regulatory Impact Analyses (RIAs) (i.e., cost-benefit analyses) that would have been required at the time of the original rule (assuming that the original regulation was considered a significant regulatory action).  The guidance implies – and it is reasonable to assume – that the data in past RIAs may be outdated.  However, one might expect a reference in this area to the provisions of Executive Order 12866 or OMB Circular A-4, which are the documents that require and specify the details of how agencies must analyze the costs and benefits in an RIA for a proposed significant regulation. Both of these documents remain in force according to the guidance.   In the OMB Interim Guidance, instead of referring to previously conducted cost-benefit analyses, agencies are “strongly encouraged to use program evaluation and similar techniques to determine the actual costs and other effects of eliminating regulatory actions.” The potential implication of these provisions is that, although retrospective reviews and cost analysis methodology are relatively well established, new and different forms of analysis will be needed to support deregulation.

But why focus on program evaluation and not mention cost-benefit analysis?  The guidance never mentions the societal benefits that might be accruing due to existing regulations (such as improved health associated with cleaner air or lives saved by safety standards).  Perhaps consideration of such benefits is implied within the framework of “program evaluation and similar techniques”, but it is difficult to see how the Administration intends for agencies to address potential benefits from past regulations that might be foregone to achieve regulatory cost savings.  Could the Administration consider only the cost savings and not the loss of benefits that would be associated with deregulation?

Probably not – at least without additional changes to the broader law, policies, and guidance that comprise the federal regulatory system.  Most significant federal regulations are adopted by agencies under the authority or direction of laws enacted by Congress directing agencies to engage in evidence-based rulemaking. This statutory authority provides the basis for any rulemaking, and it typically articulates the societal benefits that Congress hoped to achieve through regulation.  One way or another, this new “2 for 1” regulatory system is likely to require full consideration of costs and benefits for each regulatory action that is part of the package required to maintain the “net zero” cost impact.

Most federal regulatory actions are governed by the Administrative Procedure Act (5 U.S.C. §§ 551-559), which requires agencies to provide ample notice and opportunity for public comment on proposed regulations, and that regulatory decisions be well-reasoned rather than arbitrary and capricious.  Judicial review of regulatory actions generally requires that agencies build a case for regulatory actions, and once having done so courts review an agency decision as it is reflected in the administrative record, which consists of all the information the agency had before it when making the decision.  According to the Supreme Court, an agency must defend and provide a detailed justification for a policy change to the same extent as if the agency were promulgating a new rule.[1]   So while it may not be good enough to rely on past RIAs when Agencies consider “undoing” a regulatory action, federal courts may want to look beyond just the cost savings to consider a full cost-benefit analysis or Cost Effectiveness Analysis (if one was prepared) for the original action now being considered for repeal.

Another way that the well-established federal rulemaking process compels a comprehensive analysis of costs and benefits of each component of the overall “net zero” regulatory burden requirement is through the RIA that will be required of the new significant regulatory action that is to be offset by repealing 2 past regulatory actions.  OMB Circular A-4 directs Agencies to select an appropriate baseline against which to compare costs and benefits of regulatory actions.  Such a baseline needs to reflect how the world would likely look absent the regulatory action.  If the new regulatory action is bundled with deregulatory or streamlining actions in the same regulatory program, then the costs and benefits of the repealed or streamlined regulation would need to be considered either as part of the new regulatory action or as a change to the regulatory baseline for the new regulatory action.

The new Executive Order and related guidance, particularly the “net zero” cost impact provision, further complicate and add uncertainty to the regulatory process.   The administration has clearly raised the bar for getting new regulations through OMB.  However, because of the Administrative Procedure Act and the rules for justifying all regulatory actions (both regulatory and deregulatory), efforts to repeal regulations should consider both the costs and the benefits of past rules, despite the cost emphasis in the January 30 Executive Order and OMB Interim Guidance.  While many uncertainties remain about how this will play out, it is clear that agencies are being encouraged to think big and broadly about how to achieve regulatory objectives most efficiently, and to take a hard look at past regulations for opportunities to make them more efficient and effective.

Gary Light is Senior Vice President for ICF and an expert in developing and evaluating regulatory and policy options and programs. His expertise centers on integrating engineering, economic, and legal principles with information technology to solve complex public policy challenges. In addition to providing project, program management, and advisory services, Gary is a cocreator of CommentWorks®, ICF’s commercial Web-based application for managing public comments. 

 

[1] Motor Vehicles Manufacturers Association v. State Farm Mutual Automobile Insurance Co, 463 U.S. 29 (1983); Federal Communication Commission v. Fox Television Stations Inc., 556 U.S. 502 (2009).

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Average Time to Fill: Possibly the Worst HR Measure Ever

imageMost of us in the HR world have worshipped at the altar of “time to fill” for many years. We use/d it as a proxy for everything we wanted to make better in HR, particularly the hiring process. The idea was that getting the average time to fill down to a good number (whatever that was arbitrarily determined to be) would mean we were doing a good job with hiring. It would make applicants more interested in applying for jobs in our agencies, send the message to HR staff and customers that HR was responsive, and generally raise the level of performance in HR. I have to admit I used it for years.

Looking at it as someone who is not in the HR trenches anymore, I have concluded that it started out as a good idea, but like many things good ideas in government, over time it has become a caricature of itself. Rather than driving real performance, it often provides an excuse for just the opposite.

Let’s look at the typical 80–day hiring model as an example. Is 80 days a good target for filling jobs? No. For most jobs it is far too slow. For some jobs it is far too fast. There may be a few jobs for which it makes sense. The fact that the target is the same for every job is a big part of the problem. The truth is that the time it takes to fill a job varies from one position to another. The use of average fill times is another part of the problem. If I fill three jobs in an average of 80 days, you do not know how long it really took. I could be that one took 160 days and two took 40 days. If you are the hiring manager or applicant involved in the 160 day case, you are probably unimpressed when I tout my 80–day average.

If we really want to improve the hiring process, we need to move away from one-size-fits-all metrics into measures that are tailored to the type of jobs we are filling. Tailored metrics can tell us how we are really doing – metrics like the 80–day measure tell us nothing. If the job is simple, is filled often, has an abundance of candidates, and does not require a security clearance, it should be filled within 30 days or less. If it is a Secret Service Agent who requires a TS-SCI clearance and has to go through an Academy training program (that is scheduled well in advance), it may be that 9 months is a reasonable time. If we are filling one job, it may take much less time than when we fill 100 jobs. If we are hiring newly graduated students, we might make an offer 6 months to a year in advance. Does the HR office fail when it makes an offer a year in advance and adds 365 days to its time-to-fill? Of course not.

Once we get rid of generic time-to-fill metrics, we can determine how well the hiring process meets targets that make sense. It is critical to remember though that time-to fill measures responsiveness, but it does not say anything about the quality of the hiring process. We could be hiring great candidates or bad ones. When we hire great candidates, we could be misrepresenting the job in the vacancy announcement and turning them off because what they applied and were selected for is not what they thought they were getting. Unless we add a quality measure to the mix, we have no clue whether we get good results or not. That means every agency needs a quality of hires metric as well. Such a metric can be determined by a post-hiring survey that goes to the hiring manager and the selectee a few months after the employee reports to the new job. The hiring manager can be asked how the process went and how the new employee is doing. The new employee is asked how the job matches up to the vacancy announcement and their satisfaction with it. Both can be asked about improvements to the process.

A combination of job-specific time-to-fill targets and post-hiring quality metrics is absolutely essential if we want to improve the hiring process. Absent that, we are left with meaningless targets that tell us nothing, enable nothing, and change nothing. Making this type of change does not require legislation, new regulations, or any other bureaucratic steps. It is simply good management and can be implemented now.

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