Do the Right Thing
Regulators are more effective in partnership with industry
Good or Evil?
To many Americans in regulated industries, it must have seemed that government thought they were evil.
Consider this quote from a manual for federal regulators: "All regulatory processes are designed to discover and develop evidence of violations."
Far too often, regulatory agencies focused only on finding violators, rather than preventing problems. This attitude was reinforced by the incentive system. "Success" in the regulatory world meant finding the most violations and issuing the highest fines. Government told business exactly what to do, and how to do it -- all specified in thousands of detailed, often incomprehensible rules and regulations. Then regulatory agencies spent their time trying to catch companies when they made a mistake. One agency even referred to those it monitored as "suspects."
These federal regulatory systems were merely a reflection of the times. American society was organized around top-down, command-and-control models. It had worked well for Henry Ford, after all. And in many ways it had worked well for regulators. Strong enforcement woke business up. The air is cleaner than it was before the Environmental Protection Agency (EPA) came on the scene, and workers are safer since the Occupational Health and Safety Administration (OSHA) opened in the 1970s. Smart employers now accept that they have a responsibility to keep the environment clean, to keep their workers safe, and to produce safe and healthy products.
Partnership Works Best
For employers that accept these responsibilities, the role of regulators is changing. The best way to protect the public is by preventing violations, not just punishing them. Regulators can help industry achieve compliance through training and education, by sharing best practices, and by developing consensual approaches and encouraging innovation. Regulators need to work in partnership with industry and communities to design regulatory processes to get clean air and water, healthy food, and safe workers.
And working with good players allows regulatory agencies to put more people to work catching those who do intentionally violate and disregard the law.
Companies know their own business. They often have the best ideas for solving problems. Many are willing to help government develop new regulatory approaches that leverage their corporate intelligence and resources and require them to take responsibility and be held accountable.
When business, labor, and government work in partnership, everybody wins, including the American people. When regulators focus on what really matters -- prevention, not punishment -- business can do business, customers are better served, and regulators get the results they seek. That's much more than can be achieved under a strictly command-and-control approach.
Cooperation Pays Off
In case after case, regulatory agencies are discovering they can do better with partnerships than without them. Seventy percent of companies that formed a partnership with OSHA in the Maine 200 program saw worker illness and injury rates drop substantially. The partnership between the Coast Guard and the towing and barge industry is so effective that, without a single new regulation, crew fatalities have dropped by half. When EPA challenged industry in its 33/50 program to commit voluntarily to reduced emissions, 750 million pounds of toxic chemicals were kept out of our environment. By working with the pharmaceutical industry, the Food and Drug Administration (FDA) has improved public health by reducing the time to approve safe and effective drugs from 23 months to 15.
So partnership can work -- the results speak for themselves.
Reinvention Zone Interview
Consider the case of Wendell Gardner, Senior Vice President at COBE, a Denver-based manufacturer of medical devices. Gardner -- while leading an FDA/industry task force -- has seen regulatory reinvention work first-hand.
Q: What does your company make?
Q: What's it like dealing with the FDA?
Q: How so?
Q: What sort of things went on?
They inspected paperwork instead of the product. You could have virtually a perfect product in the field, and the FDA would give you a violation like this: "You said you would inspect 1 out of 10 devices, and write down the serial number, the date, the time, and the name and initials of the inspector. We checked 100 of the records and found 5 without initials. Therefore you have an adulterated product in the field."
And the law included criminal penalties for violations. The FDA came to our plant, gave us a list of violations, and then sent me a letter saying I should show cause why I shouldn't be indicted. When I showed up at the hearing, the regional compliance officer who had sent me the letter was sitting as judge and jury, too. I just about left the industry over that.
Q: But we need a sure way to protect the public, don't we?
Q: But now things are getting better stateside?
Q: Like what?
And they used to keep everything a secret from us until the end of the inspection, then write us a formal letter. Now, during the inspection, they let companies know what they think we are doing wrong. That gives us a chance to correct any misperceptions they might have and to fix some of the real problems on the spot.
Q: Are you happy now?
But we're going to be able to solve these problems because FDA and industry now have common objectives: Better patient outcomes and a strong U.S.-based medical device industry. And we are working through the grass-roots partnership to achieve those objectives.
Tales From the Reinvention Zone
In Miami, the trade community and three federal agencies are working together to clear cargo faster and intercept more drugs.
In Miami, the three agencies most involved with the flow of international commerce -- Customs, Immigration and Naturalization Service, and USDA -- streamlined their business procedures to improve service to business and travelers.
"Everyone was frustrated when I first got here," says Lynn Gordon, the director of Customs in Miami. "Historically, Customs had focused on enforcement, and as a result we were delaying, damaging, or seizing lots of cargo and writing lots of tickets. Business owners didn't like paying violations; we didn't like processing them." Meanwhile, legitimate cargo was held up from entering U.S. commerce. Imported flowers were left for days to wilt on the tarmac. And international passengers were kept waiting in the terminal for up to three hours.
"What I really wanted was compliance, not penalties," Gordon said. She made it her job to talk to the trade community: "I spent countless hours meeting with industry and airport representatives to talk about their business needs and the frustration caused by regulatory red tape.
Business leaders told me something they'd been trying to tell us for years. They said: "Every time we see you it's because there's a problem, and the conversation is always unpleasant. If you would just talk to us and tell us what you want, we'll do it. Don't keep us in the dark, then show up unexpectedly and try to catch us in the wrong. Help us help you. And by the way, we've got some ideas about how to be helpful. ' "
So Gordon revamped the way Miami Customs did its work. She formed a partnership with the trade community and with the Immigration and Naturalization Service and USDA to work on mutual goals, like promoting legitimate trade and stopping drug shipments. Customs held weekly seminars for the business community on how to comply with federal requirements and succeed in international trade. By pooling resources and using information technology, Customs and its partners could target their interdiction efforts toward the small percentage of shipments and passengers that were in violation of federal laws. As a result, legitimate cargo was cleared quickly, drug seizures doubled, and international passengers' waiting time dropped to as little as 20 minutes.
This approach led the way for other innovations as well. Companies that used to file a form for every import/export transaction (which in one case resulted in one company filing 700,000 forms in a single year) now file one consolidated form per month. Gordon learned about the 700,000 forms at a local business meeting. "You don't find out about this stuff if you don't get out and talk to people."
Gordon's approach has been a raging success, and members of the Miami business community are her biggest fans. But she also has fans sprinkled throughout the federal government -- regulators from other agencies who were also tired of the fighting and knew there must be a better way. OSHA, among others, has sent its own regulators down to Miami to learn from Gordon's team. And her model is being replicated.
Safety, Plain and Simple
OSHA provides expert workplace safety advice in plain English on the World Wide Web; no lawyers needed to interpret.
Most business people want to do what's right by keeping the environment clean and protecting their workers. Often, companies have to hire lawyers just to understand what the regulations require. The Occupational Safety and Health Administration heard the frustrations of the business community and responded in two ways. It began a plain English initiative, rewriting the rule book to make the regulations easy to understand. And it's established "expert advisors" on the Internet to answer important business questions.
If a small business contractor has a question about working with asbestos, for example, she can download OSHA's Asbestos Advisor at the public library, at home, or anywhere with Internet access. She can tell the advisor all the specific details of the job she's doing, and the advisor will give her safety information, permit requirements, and other sources of information, all free. The advisor might even tell her that she isn't covered by these requirements.
There are automated expert advisors on the same Web site that will answer questions about cadmium safety and working in confined spaces. Eventually, there will be advisors for additional topics. OSHA didn't develop these advisors in a vacuum, but invited representatives of interested trade associations, small businesses, and labor to comment on the early versions.
The advisors can be reached at http:// www.osha.gov/oshasoft. And they are getting rave reviews. According to Frank Livingston, Senior Vice President of Draper & Kramer Inc., a property management company, "The Asbestos Advisor is a wonderful example of making the government more attuned to the needs of its clients, the regulated community."
Taken together, OSHA's plain English initiatives and the advisors allow businesses to focus on getting the job done, instead of spending time and legal fees trying to figure out just what the rules require them to do.
Bare Knuckles to Brass Tacks
EPA is applying business solutions to environmental issues -- they work better and cost less. Sound familiar? "The rivers had stopped burning -- and that was good," said John DeVillars, Regional Administrator of the Environmental Protection Agency in New England. "The Cuyahoga Rive@r catching fire in 1969 in Cleveland was part of what we call the first generation of environmental issues -- the alarming things that woke people up and gave the EPA such a strong regulatory mandate when it was created back in 1970."
When DeVillars was Secretary of Environmental Affairs in Massachusetts in the late 1980s, he was known as a bare-knuckle environmental enforcer. Then he spent several years working for Coopers and Lybrand and developed a broader perspective. As DeVillars describes it, "When I took this job in 1994, I recognized there was a need for a more standardized approach if we were to tackle the more complex and subtle second generation of environmental issues. Issues like particulate emission levels in the air and watershed protection. These issues aren't visible and frightening enough to get much public attention, but they have a huge impact on the quality of life in New England. To tackle this second generation effectively, EPA was going to have to undergo a major cultural shift. In addition to providing strong enforcement, we had to shift our focus from violations to increasing compliance."
It started with a major restructuring. Traditionally, EPA organized at the national and regional levels into "stovepipes" that didn't always relate well to one another -- one division for water, one for ai"r, etc. This was incredibly rustrating to industry. "One factory might find itself dealing with th"ree or four dfferent divisions and sets of rules just from our office," says DeVillars. So he based his reorganization, in part, on being easily accessible to industry, following the lead of EPA Administrator Carol Browner and her Common Sense Initiative. Now there are teams organized along industry lines: a printing team, a metal finishing team, an electronics team, and so on.
"That was the easy part. Then we started to privatize parts of our regulatory function, and things got really exciting," he says.
"We were finding that most businesses are in compliance with regulations, and that many of our enforcement efforts were pursuing marginal, low-risk infractions. And again, we weren't focused enough on resolving the second generation of risks. Issues like the danger we face from polluted indoor air or from agricultural and storm-water runoff were getting too little attention."
DeVillars knew from his private-sector experience that business has long employed certified financial auditors to review companies' financial statements, and he reasoned that this approach could work for the EPA as well. DeVillars established StarTrack, designed to develop a class of certified, independent professionals who assess compliance with environmental laws. These environmental auditors are proving that independent professionals can monitor performance as well as or better than government inspectors -- and at less cost to the taxpayers. At the same time, EPA has focused its enforcement efforts on the worst violators -- and with positive results. Last year the regional office broke all records for prosecution of criminal violations.
William Sweetman, manager of Environmental Engineering at Spalding Sports Worldwide in Chicopee, Massachusetts, represents one of the companie's volunteering to work with DeVillars. The group also includes Gillette, Texas Instruments, and International Paper. "The rigorous third-party environmental audit performed as part of the StarTrack program has allowed Spalding to recognize and realize valuable improvements in operation," Sweetman explained. "The continued development of these tools will enhance the quality of Spalding's environmental program, while minimizing the federal and state resources needed to ensure Spalding's conti"ued compliance on a permanent basis."
"In a few years," says DeVillars, "the public may be able to judge a company by reviewing two certified reports, one for financial performance and one for environmental performance. EPA will audit a percentage of the companies and the certifiers, to maintain the integrity of the system. At the same time, we will be able to redeploy lots of people from the general compliance monitoring to aggressive enforcement against dangerous violators. StarTrack lets everybody win -- except the bad guys."
FDA is helping a small company get faster approval of replacement skin that speeds recovery and alleviates pain and suffering for burn victims.
Advanced Tissue Sciences (ATS), a small biotech company in southern California, makes things that not long ago were science fiction -- like replacement skin for burn patients. These products are regulated by the Food and Drug Administration. Together their goal is to get these new products to the people who need them as quickly as possible.
"In the past there was an adversarial relationship between the FDA and the manufacturers -- not much in the way of trust in either direction," recalls Doug Christian, ATS's Director of Quality Assurance. "I've worked for companies that were on the receiving end of that attitude and I've personally been stung by it. For example, in one company I worked for, FDA came out for a regularly scheduled inspection -- there hadn't been "ny problems, just a routine inspection. But without letting us in on it, the FDA had raised the standard on software design. They just beat us up -- it cost the company thousands. Overnight, we went from being good guys to bad guys, and we didn't even know what had happened."
"But there has been a 180-degree cultural shift in FDA," says Christian. "It can't be judged as anything less."
Gail Naughton, Ph.D., the Presid"ent and Chief Operating Officer at ATS, says that FDA's new attitude wil make it possible to put replacement skin on the market a full year earlier. "The difference between getting approval in 12 months rather than 24 months is huge," she says. "While you're waiting, you have to keep all of your people employed and keep your manufacturing area up, but you can't be producing product -- or get it to the people who need it."
How is FDA moving so much faster? "The telephone is a breakthrough," says Naughton. "FDA used to mail formal, dated letters, and you couldn't respond until you actually had the letter in your hands. For them to call and say, 'Let's get together tomorrow at 9:30 and hash this out,' saves weeks every time. They don't even bother with formal letters anymore, they send informal faxes. They work the East Coast-West Coast time very well. They work late in Washington to fax us questions before we go home, so we can get them the answers overnight and call them back first thing in the morning. Sometimes we call Sunday night to leave them a voice mail, and they pick up the phone. Most large businesses don't work that effectively."
Another big change: FDA improved the review process. "They brought in clinicians who understand clinical design and specialists in bioengineering. Now that experts review us, we don't have to spend all our time educating them. We used to have to explain everything."
"Consistency also helps get" these kinds of products to market," says ATS's Chairman and EO, Art Benvenuto. "FDA decided who would review us and stuck to tat d"ecision," he says. "That took the ambiguity out of the process, which is important in raising the capital for innovative product development. The more uncertainty you can cut out of the process, the more capital will flow into the biotech industry, which provides the jobs and, most importantly, the high-quality products that Americans need. This should be a model for other regulatory agencies."
In coming years, many patients will benefit from the new approach. "Our next product coming to clinical trials is cartilage, to repair joints like knees and shoulders damaged in auto accidets or" sports," reports Naughton. "The old FDA would never tell you in advance how to structure your testing or what data they wanted. They'd only tell you"afterwards that what you had done wasn't good enough. Now we are talking with them way up front. That way, we can do the tests right the first time."
FDA's new approach is helping patients worldwide. "FDA has set the trend by expediting the process. Now Canada, South Africa, and Australia are moving faster too."
"You just get tired of hearing people say negative things about government all the time," says Naughton. "It's not like we've had just one good experience. We've been working smoothly together for nearly three years now."
Protecting our food supply from ever-changing microbes is a continuing challenge for regulators and business.
As our understanding of foodborne illness expands, we identify new risks. The recent recall of 25 million pounds of ground beef due to possible contamination with E. coli bacteria points out the need for business and government to work together to develop new approaches -- and to leverage resources -- to ensure food safety.
In 1993, the E. coli strain O157:H7 killed several children who ate tainted hamburgers, and in 1996 it caused the recall of a particular brand of unpasteurized apple cider. Since 1996, E. coli has evolved into newer strains that create additional threats. To cope with both the known and the unknown threats, the U.S. Department of Agriculture developed a package-labeling program that warns consumers to fully cook beef and chicken in order to destroy any pathogens present.
Increased understanding of E. coli and other food-borne pathogens, the expansion of international trade in food, and the growing diversity of our food systems and sources has led to a general recognition that new approaches are necessary. Historically, inspection of food products occurred at the endpoint of the process and was the responsibility of a woefully understaffed federal inspection force. As Business Week said in a recent editorial: "Inspections will never catch more than a fraction of tainted food. That's why every effort must be made to prevent contamination during production."
In partnership with industry and consumer groups, the federal government has developed a new approach called HACCP, which stands for Hazard Analysis and Critical Control Points. This approach builds prevention into food production systems and requires food producers to self-inspect -- taking day-to-day responsibility for food quality.
To meet the food safety challenge, flexible strategies are being developed that allow for tailored approaches to specific problems; both industry and government are adopting better inspection and detection methods; and public information campaigns are spreading the word about proper food preparation and kitchen cleanliness.
Partnership and shared responsibility can fix many of the problems. However, it is an essential role of government to police the marketplace. In food safety as in other areas of federal regulatory responsibility, strong enforcement must remain an option. There will always be times when, as in the ground beef case, the government has to step in and take strong action.