The Small Business Administration’s Office of Advocacy (“Advocacy”) is a little known corner of the executive branch that wields a surprising amount of power, particularly in the regulatory process. This research memo explores the powers Advocacy possesses, how the office gained this power, and the potential Advocacy may have in a progressive administration to be a strong anti-consolidation voice in the regulatory process.
The Office of Advocacy is run by the Chief Counsel for Advocacy, a position that is appointed by the President and confirmed by the Senate. The Chief Counsel and the Office of Advocacy produce economic research reports on small businesses, work with federal agencies to factor in the effects of regulations on the small business community, and meet with members of the small business community in order to better advocate on their behalf. From the Office of Advocacy’s website:
“The Office of Advocacy of the U.S. Small Business Administration is the independent voice for small business within the federal government, the watchdog of the Regulatory Flexibility Act, and a source of small business statistics and research. Advocacy advances the views and concerns of small business before Congress, the White House, federal agencies, federal courts, and state policymakers.”
In 1973, several small business organizations, including the Smaller Business Association of New England (SBANE) and the National Federation of Independent Business (NFIB), pushed to strengthen the SBA’s advocacy role. This pressure led to the adoption of Public Law 93-386, which established the position of Chief Counsel for Advocacy. The SBA’s Chief Counsel for Advocacy had the following duties: 1) develop proposals for policy and regulatory changes in other federal agencies and 2) represent small business interests during other federal agencies’ policy considerations and activities. In 1976, the SBA Office of Advocacy was created to support the Chief Counsel in his efforts to advocate on behalf of small business interests.
The Office of Advocacy was “deeply involved” with the organization of the 1980 White House Conference on Small Business under President Carter, which spurred the enactment of the Regulatory Flexibility Act (RFA) of 1980. The RFA arose from businesses’ “years of frustration with ever-increasing federal regulation.” The legislation required government agencies to consider the effects of proposed regulations on small entities and submit their regulatory agendas to the Chief Counsel for review. The RFA also tasked the Chief Counsel with submitting an annual report on agency compliance with the RFA to the President and Congress.
In 1996, President Clinton signed into law the Small Business Regulatory Enforcement Fairness Act (SBREFA), which gave Advocacy the power to enforce federal agencies’ RFA compliance. The SBREFA also specifically required both the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) to notify Advocacy prior to the normal notice and comment periods for these rules.
In 2010, President Obama signed into law the Small Business Jobs Act, which required that Advocacy have its own budget, office space, and operational support. This gave Advocacy significant independence from the SBA.
ADVOCACY’S MAIN ROLES
Advocacy’s Office of Economic Research prepares research reports on the role of small businesses in the American economy. Reports include analyses of the following information: the number of small businesses; job creation by small firms; employment by firm size; and information on women, minority, and veteran entrepreneurs. Advocacy also uses this data analysis to determine which businesses are categorized as “small.”
Economic Research is mandated to review the following topics:
- “examine the role of small business in the American economy and the contribution which small business can make in improving competition;
- “measure the direct costs and other effects of government regulation on small business;
- “determine the impact of the tax structure on small businesses;
- “study the ability of financial markets and institutions to meet small business credit needs
- “determine the availability of financial resources and alternative means to deliver financial assistance to minority enterprises;
- “identify and describe those measures that create an environment in which all businesses will have the opportunity to compete effectively;
- “provide information on the status and the potential for development and strengthening of minority and other small business enterprises, including firms owned by veterans and service disabled veterans; and
- “ascertain the common reasons for small business successes and failures.”
Beyond economic research, the Office of Advocacy is tasked with representing small business interests in the federal regulatory process, which it carries out through its Office of Interagency Affairs. The Office of Interagency Affairs is the largest division of Advocacy, and its specific duties include:
- “serve as a focal point for the receipt of complaints, criticisms, and suggestions concerning the policies and activities of federal agencies that affect small entities and businesses;
- “develop proposals for changes in the policies and activities of any agency of the federal government that will better fulfill the purposes of the Small Business Act (inter alia, to aid, counsel, assist and protect the interests of small business concerns) and to communicate such proposals to the appropriate federal agencies; and
- “represent the views and interests of small entities and businesses before other federal agencies whose policies and activities may affect small business.”
Interagency Affairs employs a legal team that monitors federal regulatory activity and works with agencies to consider small business interests when drafting regulations. The team also works to analyze the cost of regulations on the small business community.
Advocacy hosts roundtable discussions with members of the small business community to better understand the issues they care about, as well as conferences and symposia to discuss the latest research, regulatory activity, and small business concerns.
- Advocacy is often engaged in “ideological and partisan disputes” concerning regulatory outcomes.
- Advocacy’s limited budgetary resources contain its ability to produce and promote economic research.
- Many point out that Advocacy’s main goal is to attack federal regulation “under the guide of ‘pro-small business rhetoric[.]’”
- In 2013, government watchdog groups, including the Center for Progressive Reform and the Center for Effective Government, urged Congress to ramp up oversight of the Office of Advocacy over concerns that it was attempting to block or narrow EPA regulations to help industry groups. The groups argued that Advocacy was not actually representing small business interests, but representing the interests of large corporations, in their efforts to block these regulations.
- In 2014, a GAO report found that: 1) Advocacy did not have sufficient peer review policies to ensure the quality of their research; 2) Advocacy failed to document its regulatory activities or make its roundtable information publicly available.
- In 2017, Advocacy petitioned to have EPA’s Clean Water Act weakened.
The RFA gave Advocacy a powerful role in the regulatory process. The law requires federal agencies to consider the effects of their regulatory proposals on small businesses and send their regulatory agendas and draft rules to Advocacy, who then has the power to make comments on these drafts.
As detailed in the section above, it is clear what happens when Advocacy is not staffed with those who have small business interests in mind. The office can easily become a political tool to push a pro-corporate anti-regulatory agenda.
But with Advocacy’s power comes potential. The anti-monopoly movement should, of course, focus on the FTC and DOJ, but they should also think about the executive branch more broadly. If staffed with an energetic and competent team that is dedicated to supporting small business interests and competitive markets, then Advocacy could be a new anti-consolidation voice that stands up to big businesses across the government.
 Ibid. 9-10, 13.
 Ibid. 15-16.
 Ibid. 18.
 Ibid. 27.
 Ibid. 23-24.
 Ibid. 39.
 Ibid. 39-40.
 Ibid. 65.
 Sidney Shapiro and James Goodwin, “Distorting the Interests of Small Business: How the Small Business Administration Office of Advocacy’s Politicization of Small Business Concerns Undermines Public Health and Safety,” Center for Progressive Reform (January 2013).