Archive

Improving Regulatory Systems

Recommendations and Actions

REG03: Encourage Consensus-Based Rulemaking

Background

The traditional model for rulemaking is that of agency experts deciding the best way to regulate, offering the public an opportunity to comment on the agency's proposed rule or to object to its adoption, and then issuing binding rules telling regulated entities what to do. Even if the agency experts choose wisely, the traditional model has very little buy-in from outside the agency, which undermines the rule's effectiveness. This traditional process encourages adversarial, uncooperative behavior on the part of private industry or others who might be affected by an agency's decisions, which frequently leads to protracted litigation. Agencies routinely find themselves under attack from various private parties who are unhappy with the rule. This has been particularly true in controversial areas such as environmental regulation or the health and safety of workers.

The traditional process rarely leads to cooperative efforts to resolve problems. On the contrary, a barrage of written critical comments followed by litigation in the federal courts is frequently inevitable, accompanied by long delays and excessive costs. These costs include the direct costs of pursuing or defending the court case and the cost to industry and society of long periods of uncertainty about the final outcome. The expectation of litigation usually sharpens the divisions between parties during the rulemaking process and may eliminate any willingness to recognize others' legitimate views. The parties have little incentive to focus on finding constructive, creative solutions that address differing legitimate needs. [Endnote 1]

NEED FOR CHANGE

A small number of federal agencies have successfully pioneered a consensus-based approach to drafting regulations--negotiated rulemaking (sometimes called regulatory negotiation or "reg neg"). Reg neg brings together representatives of the agency and the various affected interests in a cooperative effort to develop regulations that not only meet statutory requirements, but also are accepted by the people who ultimately will have to live with the regulations[Endnote 2]

Since 1982, approximately 35 federal agency negotiated rulemakings have taken place or are currently under way. Almost half have been at the Environmental Protection Agency (EPA), which is the only federal agency with a small office assigned specifically to assist other parts of the agency in doing reg negs. Other users include the Departments of Agriculture (Animal and Plant Health Inspection Service), Education (required in certain programs by statute), Labor (Occupational Safety and Health Administration), and Transportation (Office of the Secretary, Federal Aviation Administration, Federal Highway Administration, National Highway Traffic Safety Administration, Coast Guard), Farm Credit Administration, Federal Communications Commission, and Nuclear Regulatory Commission[Endnote 3] The Negotiated Rulemaking Act of 1990 establishes a statutory framework for agency use of reg neg.[Endnote 4]

HOW DOES REG NEG WORK?

First, an agency would normally ask one or more "conveners"--either outside contractors or government employees who are not otherwise involved in the proceeding--to determine whether the rule is appropriate for reg neg. (As discussed below, reg neg is not appropriate for all rules.) If the convener recommends reg neg and if the agency head determines that use of reg neg is in the public interest, a reg neg committee would be chartered under the procedures of the Federal Advisory Committee Act.[Endnote 5]

A reg neg committee must be composed of representatives of all affected interests. The agency and the convener must make reasonable efforts to ensure that all relevant interest groups and others affected by the rule are aware of the proceeding. The agency must also publish a notice explaining the proposed reg neg and offering the opportunity to apply for participation by interests not already adequately represented.[Endnote 6]

Meetings of the negotiating committee are conducted by a mediator or facilitator (often the convener), who may be a government employee or an individual from the private sector. The agency should participate fully in the negotiations, making sure that at all times the participants are aware of what action the agency is likely to take if the committee does not reach an agreement.

The goal of the negotiators is to reach consensus on the text of a "proposed" regulation or rule through a process of evaluating their own priorities and making trade-offs to achieve an acceptable result. In this way, the competing interests try to work out a practical solution to the problem necessitating regulatory action. Through the give-and-take of the negotiating process, participants try to obtain a favorable outcome on the issues of greatest importance to them, while recognizing and accommodating the legitimate needs of others. Throughout the process, the agency's function is to protect the public interest by implementing all applicable statutory and other legal requirements. The public may observe the procedure, and public comments are invited before, during, and after the negotiations.

If consensus is reached, the agency ordinarily would publish the consensus draft rule in a notice of proposed rulemaking. If consensus is not reached, the agency ordinarily publishes its own proposal for a rule, often making good use of the information it has obtained through the course of the negotiations.

BENEFITS OF NEGOTIATED RULEMAKING.

The long-term benefits of negotiated rulemaking include:

--more innovative approaches that may reduce compliance costs,

--less time, money, and effort spent on developing and enforcing rules,

--earlier implementation,

--higher compliance rates, and

--more cooperative relationships between the agency and other affected parties.[Endnote 7]

These benefits flow from the broader participation of the parties, the opportunity for creative solutions to regulatory problems, and the potential for avoiding litigation.

If the parties reach consensus, the resulting rule is likely to be easier to implement and the probability of subsequent litigation is diminished. Negotiations that do not result in consensus on a draft rule can still be very useful to the agency by:

--narrowing the issues in dispute,

--identifying information necessary to resolve issues,

--ranking priorities,

--finding potentially acceptable solutions, and

--improving the agency's understanding of the real-world impact of alternative regulatory options.

Negotiation sessions provide all participants with an opportunity to have their assumptions and data questioned and tested by parties with other perspectives. The dynamic nature of negotiating forces each party to participate in crafting solutions to issues that are on the table for resolution. In short, the process fosters creative activity by a broad spectrum of interested persons, targeted at producing better, more acceptable rules.

In regulatory programs with a history of adversarial rulemaking, it is not unusual for parties to negotiate a settlement under the supervision of a court after the rule has been published. Particularly in such programs, negotiation of a rule prior to the agency's publication of a proposed rule can save the agency and other parties both time and resources. By avoiding litigation, programs become effective sooner and regulated businesses can plan capital expenditures or production changes earlier than if they faced years of litigation and uncertainty about the outcome. Moreover, at EPA (which is the most frequent user of the technique) regulatory negotiations, on average, take less time than other rulemakings.[Endnote 8]

Time savings can translate into both monetary savings for industry and greater satisfaction all around. For example, because of a reg neg, EPA's wood-stove emission standards went into effect as much as two years earlier than expected. The participant from the Natural Resources Defense Council was quoted as expressing satisfaction on behalf of environmental interests that over 1.5 million wood-stoves sold during the 2-year period would be covered by the new regulation. Manufacturers were spared 2 years of uncertainty and could begin re-tooling for the new standards.[Endnote 9]

There can also be important intangible benefits. Even in programs with no history of adversarial rulemaking, the agency may obtain a better factual basis for the regulation and a better understanding of the practical consequences of different regulatory choices--whether or not consensus is attained. Regulatory negotiations can help enfranchise parties with important interests at stake, who may otherwise feel relatively powerless. Rules drafted with assistance of persons who must ultimately be governed by them are more likely to be practical, and therefore more acceptable.

LIMITS ON REG NEG.

Negotiated rulemaking is not appropriate for all rules. Certain characteristics of rulemaking proceedings favor using reg neg.

--The number of distinct interests concerned with the proposed rule, including any relevant government agencies, must be small enough so that they can be fairly represented by not more than 20 to 25 negotiators.

--There should be a number of diverse issues that participants can rank according to their own priorities, so that there will be room for compromise on some of the issues as an agreement is sought.

--It is essential that the issues to be negotiated not require compromise of principles so fundamental to the parties that productive negotiations are unrealistic.

--Parties must be willing to negotiate in good faith, and no single interest should be able to dominate the negotiations.

--The parties cannot have an incentive to stall; therefore, they must believe that the agency itself will issue a rule if consensus is not reached. A statutory requirement that the agency issue some type of rule is often helpful.

In rulemakings where reg neg is inappropriate for these or other reasons, agencies should consider using policy discussion groups.

The most significant deterrent to using negotiated rulemaking is its up-front cost.The process can be resource-intensive in the short term for both the agency and the other participants. While there are likely to be considerable long-term savings in total resources required, the concentrated investment of effort and expense in the short term may be a serious obstacle. This is particularly true if the savings and the costs appear in the budgets of different operating components of the agency. Additional costs may include services of mediators and conveners, research conducted on behalf of the negotiating committee, administrative support for the committee, expenses of participation for some of the negotiators, and some training costs.

Action

Increase the use of negotiated rulemaking. (1)

The President should encourage agencies to use reg neg. This is consistent with the new regulatory review executive order. Regulatory agencies that have not used reg neg since enactment of the Negotiated Rulemaking Act of 1990 should identify at least one candidate for using reg neg during the coming year or explain why it would not be feasible to do so.[Endnote 10] The administration should facilitate efforts to use reg neg by identifying and removing any administrative barriers to its use.

Reg neg should rarely, if ever, be required by statute for particular rulemakings because its success depends on the voluntary participation of all participants, including the agency.[Endnote 11] Moreover, Congress should recognize that short statutory deadlines to issue proposed or final rules, especially if they are shorter than two years, may preclude the use of negotiated rulemaking.

CROSS-REFERENCES TO OTHER NPR ACCOMPANYING REPORTS

Department of Labor, DOL03: Expand Negotiated Rulemaking and Improve Up-front Teamwork on Regulations.

Department of Transportation, DOT03: Use a Consensus- Building Approach to Expedite Transportation and Environmental Decisionmaking.

ENDNOTES

1. See Harter, Philip J., "Negotiating Regulations: A Cure for Malaise," Georgetown Law Journal, vol. 71 (1982), p. 1.

2. Administrative Conference of the United States, Recommendations 82-4 and 85-5, "Procedures for Negotiating Proposed Regulations," 1 C.F.R. 305.82-4 and 305.85-5 (1993); and Pritzker, David M., and Deborah S. Dalton, eds., ACUS, Negotiated Rulemaking Sourcebook (Washington, D.C., 1990).

3. Administrative Conference of the United States, "Federal Agency Experience with Negotiated Rulemaking," (March 1, 1993), staff paper updating Chapter 10 of Pritzker and Dalton, Negotiated Rulemaking Sourcebook.

4. 5 U.S.C.A. 561-570 (1993 Supp.).

5. 5 U.S.C. App. (1988).

6. For a recent notice, see Environmental Protection Agency, Notice of Wood Furniture Manufacturing Negotiated Rulemaking Committee, 58 FR 34011 (June 23, 1993).

7. It is difficult to obtain reliable data about the costs of regulatory proceedings. However, some information is available that may give an indication of potential savings from using regulatory negotiations. Speaking in 1984, former EPA Administrator William Ruckelshaus estimated that more than 80 percent of EPA's major rules were challenged in court and that approximately 30 percent of the rules were changed significantly as a consequence. Ruckelshaus, W., "Environmental Negotiation: A New Way of Winning," address to the Conservation Foundation's Second National Conference on Environmental Dispute Resolution 3, October 1, 1984, cited in Susskind and McMahon, "The Theory and Practice of Negotiated Rulemaking," vol. 3, Yale Journal on Regulation (1985), p. 133. Ruckelshaus also estimated that the annual effort to handle this litigation took 50 person-years from EPA's Office of General Counsel, 75 person-years from EPA program offices, 25 person-years from the Department of Justice, and 175 person-years on the part of plaintiffs' counsel.

Administrator Lee Thomas, in a 1987 address to a colloquium of the Administrative Conference of the United States, pegged the level of litigation at more than 75 percent. Thomas, Lee, "The Successful Use of Regulatory Negotiations by EPA," vol. 13, Admin Law News (Fall, 1987), p. 1. By contrast, of the first 10 negotiated rulemaking proceedings brought to completion by EPA, only two were challenged in court, and both rules were essentially upheld. See Safe Buildings Alliance v. EPA, 846 F.2d 79 (D.C. Cir. 1988); and Natural Resources Defense Council v. EPA, 907 F.2d 1146 (D.C. Cir. 1990). Reduction of litigation rates from 75 percent to 20 percent obviously would produce great savings if this level of improvement were maintained.

8. Kerwin, Cornelius M. and Scott R. Furlong, "Time and Rulemaking: An Empirical Test of Theory," Journal of Public Administration Research and Theory, vol. 2 (1992), p. 124. In a study of 150 rules completed between October 1, 1986, and September 30, 1989, the rulemaking process (from development of the proposal to issuance of the final rule) took an average of 26 months for the four negotiated rulemakings in the sample and 37 months for all rules in the sample. The article does not contain sufficient information to determine whether regulatory negotiations would be quicker for rules with similar resources, complexity and prioritization. Based on a sample of seven reg negs, EPA estimates a saving of 6 to 18 months as compared to the normal rulemaking process. Telephone interview with Chris Kirtz, Director, Consensus and Dispute Resolution Program, EPA, August 13, 1993.

9. McClintock, Mike, "Regulating Wood-Stove Emissions," Washington Post (September 25, 1986), Home Section, p.5.

10. In this and all other recommendations in this report, "regulatory agencies" are those agencies that are named to the Regulatory Coordinating Group (see REG01) and subagencies (or subdepartments) that are designated by department or agency heads as engaging in significant regulatory activities. Generally, this should include those subagencies that are listed in the most recent Unified Agenda of Federal Regulations as having over 40 regulatory issuances. The Negotiated Rulemaking Act of 1990, Pub. L. No. 101- 648 was enacted on November 29, 1990.

11. Three statutes have mandated that the Department of Education use reg neg for specific rulemakings and another statute required the Nuclear Regulatory Commission (NRC) to do so. All were subject to relatively short statutory deadlines and these deadlines constrained the negotiation process. In addition, the NRC was required to convene a regulatory negotiation on issues that most observers felt were non-negotiable.

Return To Report Index