Developing Regulatory Alternatives Through Early Input

Report for the Administrative Conference of the United States
April 2, 2021

Download this Report (PDF)

Executive Summary

Agencies face a multitude of requirements instituted by Congress and the president to guide their rulemaking procedures. In some cases, these laws and orders, such as Executive Order 12866 and the Regulatory Flexibility Act, mandate that the agency consider a variety of regulatory approaches when developing a rule. Moreover, in certain instances, agencies themselves have developed internal guidance, which builds upon these executive and legislative requirements, to encourage rulemaking personnel to examine alternatives to a potentially preferred approach. Yet the limited research that analyzes the extent to which agencies, in practice, consider alternatives when developing rules offers only mixed support that they do so. Further, some of the scholarship on the topic questions whether agency incentives support their consideration and disclosure of any serious examination of alternatives.

This report offers evidence on whether and, if so, how agencies consider and disclose their review of alternative regulatory approaches as part of their rulemaking processes. Moreover, it provides information on when in the regulatory process agencies are most apt to concern themselves with alternative regulatory options. To do so, the evidence discussed in the report derives from an in-depth examination of 25 economically significant rules finalized during the Obama and Trump Administrations as well as a series of semi-structured interviews with current and former personnel from multiple agencies within five executive departments.

In combination, the evidence reveals four themes that describe how agencies vet various regulatory approaches as well as the degree to which they disclose both these alternatives and how they came to consider them. First, in practice, agencies almost universally engage in developing and considering alternatives, particularly for complex and novel rulemakings. Second, although the preferred approach to gathering information on alternatives varies substantially between agencies ranging from more formal mechanisms such as issuing an advance notice of proposed rulemaking to less formal approaches like convening monthly stakeholder meetings, nevertheless, those outside the agency remain the key source for generating alternatives and information about them. To the extent to which alternatives are developed internally, economists play an important role, including documenting those alternatives in regulatory impact analyses (RIAs).

Third, agency deliberations surrounding alternative regulatory approaches largely occur early in the process of developing the rule, long before the agency issues a notice of proposed rulemaking (NPRM). As a result, agencies will rarely receive comments during the NPRM stage that would introduce an alternative approach that they had not already considered. Still, the robust engagement that agencies undertake early in the process is typically not disclosed in either the NPRM or the associated final rule. Further, to the extent alternatives are described in public rulemaking documents, this discussion most often occurs in RIAs, but even there, it may involve only limited assessment of somewhat unrealistic options. Fourth, although the current and former agency personnel interviewed universally indicated that contemplating various regulatory approaches results in better rules, they did acknowledge the tradeoffs in robust consideration of alternatives, especially the corresponding difficulties in issuing the rule in a timely fashion. Moreover, in certain instances, statutory language, potentially in connection with judicial review, and political considerations can limit agencies’ perceptions of the extent to which they can consider certain alternatives.

These themes point to a series of recommendations described in more detail in the body of the report and summarized here. Collectively, they attempt to build on the successful, but sometimes idiosyncratic, practices that agencies currently employ to gather information on regulatory alternatives. Moreover, they recognize that these robust approaches are not always documented in public rulemaking documents. This practice has, in some cases, shifted some of the most desirable aspects of sound policy development that agencies currently employ, including engaging with the affected stakeholders and considering regulatory alternatives, to a part of the regulatory process that is generally not visible to the broader public. The following seven recommendations are, in large part, designed to help mitigate the inconsistency between what agencies do and what they describe in the documents they publicly release:

  1. Any framework instituted to encourage agencies to consider alternative regulatory approaches early in the rulemaking process in a more systematic way should not involve broad mandates, thereby recognizing that consideration of alternatives is not appropriate for every rulemaking situation. Those situations where novel or complex issues are raised in a rulemaking are particularly appropriate for robust consideration of alternatives.
  2. OIRA should consider convening an interagency working group to gather data on approaches agencies use to generate and solicit feedback on alternatives and the effectiveness of these approaches in order to produce a menu of options for agencies on best practices for early engagement with stakeholders and guidance on how different options may be appropriate in different circumstances.
  3. In accordance with ACUS Recommendation 2019-5, agency economists should be involved early in the rulemaking process and encouraged to develop regulatory alternatives as part of this involvement.
  4. Congress should consider making it clear that if an agency includes in the preamble to their proposed rule the consideration of realistic alternatives and documentation of early public involvement in this process, such action would offer evidence that can be used to suggest that agency is not acting in an “arbitrary” or “capricious” manner in reaching its regulatory decision; a specific place in the preamble should be created both for describing communications with stakeholders and for listing regulatory alternatives; and OMB should consider updating Circular A-4 to be more specific about the number of non-trivial alternatives an agency should discuss in the NPRM, assuming consideration of alternatives is warranted for that proposed rule.
  5. Agencies should engage in pilot projects using different modes of soliciting public input on their regulations before issuing NPRMs. The results of these pilot projects should be shared broadly across the government and individually should be described in the NPRMs for which they are used.
  6. OIRA should consider ways to incentivize agencies to engage stakeholders early in the rulemaking process particularly with regard to envisioning and vetting alternatives. Any incentives would need to provide agencies with the opportunity to save time later in the rulemaking process if they have documented such consideration early in the process.
  7. Agencies should not avoid documenting, analyzing, and soliciting public input on reasonable alternatives in their NPRMs simply because they believe those alternatives are precluded by statute. Agencies should still present these alternatives along with an explanation of their views on the legality of those alternative policy choices.