August 16, 2004
SUBMITTED VIA E-DOCKET
The Honorable Marion C. Blakey
Administrator
Federal Aviation Administration
800 Independence Avenue, S.W.
Washington, D.C. 20591
RE: Antidrug and Alcohol Misuse Prevention
Programs for Personnel Engaged in Specified Aviation Activities (FAA-2002-11301);
69 Fed. Reg. 27980 (May 17, 2004)
Dear Administrator Blakey:
The Office of Advocacy
(Advocacy) of the U.S. Small Business Administration
(SBA) submits this comment in response to the above referenced supplemental
notice of proposed rulemaking published by the Federal Aviation
Administration (FAA). The supplemental
notice clarifies that entities performing safety-sensitive functions for an
FAA-certificated
repair station, either directly or by contract, at any tier, would be required
to establish drug and alcohol testing requirements under the proposed rule published
February 28, 2002. In addition, entities that contract
for such work would be required to ensure that the lower tier contractor is
in compliance with the drug and alcohol program requirement.
Advocacy’s comment relays concerns expressed
by small entities regarding the FAA’s certification under
section 605(b) of the Regulatory Flexibility Act (RFA) that the proposed rule
will not have a significant economic impact on a substantial
number of small entities, including small repair stations and contractors serving the
aviation industry. After reviewing the proposed rule and supplemental
notice, Advocacy concludes
that FAA lacks a factual basis to support its decision to certify the proposed
rule under the RFA. Absent information to support
its certification, Advocacy recommends
the FAA should publish an Initial Regulatory Flexibility Analysis for comment.
I. Background on the Office of Advocacy
The Office of Advocacy,
created in 1976, monitors and reports on agency compliance with the Regulatory
Flexibility Act of 1980 (RFA), as amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA). The RFA requires federal agencies to determine
a rule’s economic impact on small entities and consider significant regulatory
alternatives that achieve the agency’s objectives while minimizing the impact
on small entities. Because it is an independent office within the SBA,
the views expressed here by the Office of Advocacy
do not necessarily reflect the views of the SBA or the Administration.
On August 13, 2002, President
George W. Bush signed Executive Order 13272, requiring federal agencies to
implement policies protecting small businesses when writing new rules and
regulations. Executive Order 13272 instructs Advocacy
to provide comment on draft rules to the agency that has proposed a rule,
as well as to the Office of Information and Regulatory Affairs (OIRA) of the
Office of Management and Budget.
Executive Order 13272 also requires agencies to give every appropriate consideration
to any comments provided by Advocacy. Under
the Executive Order, the agency must include, in any explanation or discussion
accompanying publication in the Federal Register of a final rule, the
agency’s response to any written comments submitted by Advocacy
on the proposed rule, unless the agency certifies that the public interest
is not served by doing so.
II. The FAA lacks a factual basis to certify the
proposed rule will not have a significant economic impact on a substantial
number of small entities, and should have performed a full Initial Regulatory
Flexibility Analysis.
Under section 605(b) of the RFA, the head of
an agency may certify that a proposed rule will not have a significant
economic impact on a substantial number of small entities; the certification
must include a statement providing the factual basis for this determination.
Advocacy advises
federal agencies that the factual basis must include an estimate
of the number of affected small entities and an estimate of the economic impacts
stemming from the rule. See A Guide for Government Agencies: How
to Comply With the Regulatory Flexibility Act
(SBA Office of Advocacy,
available for downloading at www.sba.gov/advo/laws/rfaguide.pdf),
pp.10-11.
Although in the regulatory evaluation accompanying
the supplemental notice the FAA provides
a sound methodological basis for determination of regulatory impacts on small
firms, the analysis lacks objective data
on the actual number of small entities affected by the rule. The FAA instead makes assumptions
about the likely number of firms affected. If reliable data on the
number of affected small entities does not exist, Advocacy advises
agencies to state explicitly that it cannot determine from available
data sources the number of affected entities and request further information
from the public. The absence of such data, however, usually also prevents
the agency from being able to determine with certainty if a rule is going
to have a significant economic impact on a substantial number of small entities
or not. The agency should then prepare an Initial Regulatory Flexibility
Analysis in which a specific request is made to the public
for data on the number of small entities. Advocacy recommends
that the FAA carefully review the comments it has received in response to
the proposed rule and the supplemental notice, and if sufficient information
is not provided to support the certification, the
FAA should consider publishing an IRFA for comment before proceeding to a
final rule.
A. The FAA should expand its analysis
of the economic impacts to small entities outside
the aviation industry.
The FAA’s economic analysis is focused
on a “small entity group” consisting of “Part 145
repair stations (SIC Code 4581, 7622, 7629, and 7699),” and that “the proposed
rule would affect, on average, 306 companies.” Advocacy
believes that the total population of small entities affected by this rule
is greater, potentially encompassing 21 North American Industrial Classification
System (NAICS) codes.
The
requirement that lower tier contractors who perform safety sensitive repairs
to components have alcohol and drug testing programs reaches well beyond repair
stations and their contractors to include suppliers, parts refurbishers
and parts brokers within the scope of the rule. Metal
finishers, parts fabricators, interior restorers, machiners, metallurgical
consultants, and rebuilders would be covered. Advocacy recommends
that the FAA further explore the scope of these potential impacts
on these industries and give careful consideration
to performing an Initial Regulatory Flexibility Analysis to identify and analyze
the full impact of the proposed rule.
B. The FAA analysis lacks the
specificity required by the RFA.
Advocacy recommends
that the FAA’s analysis include a discussion of typical entities
in each size category in each of the affected industries. Absent
this information small entities cannot evaluate the accuracy
of the FAA’s conclusion that the rule
would not have a significant economic impact on a substantial number of these
small entities.
In addition, the FAA uses aggregated data,
citing an average of 19 employees per entity across all NAICS codes. This
assumption may be inaccurate with respect to costs per firm
among small entities, because it is unlikely that all firms across
all of the covered NAICS codes have the same average employee size.
In fact, the size per firm, even among small entities, is likely to vary considerably
within the affected industries.
Advocacy also recommends
that the FAA reconsider its determination
that costs of less than one percent of the assumed-median
revenues are not significant. The FAA should further explore data on profit
margins among small entities in the affected industries and provide information in support
of this determination. Profit margins vary greatly across
industries, such that in many industries a cost impact of one
percent of revenues would be significant considering that profit margins may
be five percent of revenues or less.
C. FAA has not provided any criteria by which it can judge
whether the number of businesses absorbing economic impacts in any given industry
will be substantial.
Because FAA did not break out the costs of the rule for each
affected industry, it is not possible to determine if the rule will have a
significant economic impact. FAA does call for comments on its assumptions
and conclusions regarding its regulatory flexibility determinations.
In fact, FAA received such comments from Aeronautical
Repair Station Association, Regional Airlines Association, Pratt & Whitney/United
Technologies, and others during the comment period on the NPRM. Advocacy commends
the FAA for reopening the comment period in response to comments
to the proposed rule that “indicated that the proposed clarification
would impose an economic burden on the aviation industry…” Advocacy recommends
that these same comments suggest the need for preparing and publishing an
IRFA to assess the rule’s impacts on small entities and to analyze and consider
significant alternatives to minimize the impact while meeting the agency’s
objectives.
Thank you for this opportunity to comment on the proposed
rule. If you have any questions about this comment, please do not hesitate
to contact Charles Maresca or Joe Johnson at (202) 205-6533.
Sincerely,
/ s
/
Thomas M. Sullivan
Chief Counsel for Advocacy
/ s /
Charles A. Maresca
Assistant Chief Counsel for Advocacy
cc: Dr. John D. Graham, Administrator,
Office of Information and Regulatory Affairs