Legislative and Regulatory Underpinnings of US Government use of Standards in Technical Regulations and Procurements and the development by Government of voluntary  standards 

George T. Willingmyre, P.E.

Revised, January, 2004

This report  presents the underlying legislative and regulatory foundation applicable to government  "setting" of standards in the United States. The first portions of the paper discuss  use or reference of "standards" as elements of mandatory technical regulations. The treatment of government use or reference to development of "voluntary  standards"  follows separately.  

Certain legislation; regulation and administrative policy applies generally to the setting of  regulations. These generic requirements generally focus on openness transparency and due process considerations. Discussed first are  The role of the Office of Management & Budget;  The Administrative Procedures Act;  The Regulatory Flexibility Act,   and Executive Order 12866 Regulatory Planning and Review  October 1993 

Other legislation; regulation and administrative policy applies specifically to the reference and federal use of voluntary standards.  Discussed here are The National Technology Transfer and Advancement Act of 1995;  US OMB Policy A119 Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities;       Circular A-4  September 17, 2003  TO THE HEADS OF EXECUTIVE AGENCIES AND ESTABLISHMENTS Subject: Regulatory Analysis The Presumption Against Economic Regulation  and the standards-relevant texts of the Agreement on Technical Barriers to Trade,  the Agreement on Government Procurement and the North American Free Trade Agreement 

See also  Regulatory Adoption by Reference of standards Copyright Considerations and  a summary of relevant  Anti Trust  Law applicable to standards setting activity  and the National Cooperative Research and Production Act   

The Role of the Office of Management & Budget

John D. Graham, Ph.D., Administrator, Office of Information and Regulatory Affairs Office of Management and Budget presented  AN OVERVIEW OF THE U.S. REGULATORY SYSTEM at a Conference on Regulatory Reform in  Brussels, Belgium January 15, 2002. The office of OMB exerts a powerful influence on regulatory and procurement agencies development of regulations.  Many regulations in the United States "adopt"  or "reference" voluntary standards developed in the private sector to become mandatory requirements. In other instances the existence of a voluntary standard addressing a regulatory question may eliminate the need for a mandatory regulations

The responsibility of my office is to oversee and coordinate regulatory policy in our Federal government. The scope of our authority is broad, covering agriculture, energy, transportation, information technology, housing, manufacturing, immigration, food safety, health care, public health, occupational safety and health, environmental protection and criminal justice. Before a new regulation in the U.S. is adopted, it must be:

1. published in the Federal Register in proposed form, with an opportunity for public comment and, in some cases, a formal public hearing,
2. published again in the Federal Register in final form, with written explanation of any important revisions that have been made and the official response to public comments.

If a proposed or final regulation is significant, it must be cleared by my office before it is published in the Federal Register.

The Administrative Procedures Act    

The Administrative Procedures Act (APA) applies to any  process used by an agency to develop  a "rule." 

§ 551. Definitions ''rule'' means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency ...

Thus the APA applies to many instances of government proposing standards as a technical regulation. The opportunity for public participation and review of "rules" is a key component of the APA. 

Section 552 within the APA addresses Public information; agency rules, opinions, orders, records, and proceedings General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law...

Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so published. For the purpose of this paragraph, matter reasonably available to the class of persons affected thereby is deemed published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal Register...

After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose

Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the Board finds that notice and public comment are unnecessary. 

Section 553 within the APA addresses Rule Making  5 U.S.C. 553(b)(3)(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

The Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA) also sets forth a number of requirements for agency rulemaking. Among other things, the RFA requires that, semiannually, each agency shall publish in the Federal Register a regulatory flexibility agenda, which shall contain: (1) A brief description of the subject area of any rule that the agency expects to propose or promulgate, which is likely to have a significant economic impact on a substantial number of small entities; (2) A summary of the nature of any such rule under consideration for each subject area listed in the agenda pursuant to paragraph (1), the objectives and legal basis for the issuance of the rule, and an approximate schedule for completing action on any rule for which the agency has issued a general notice of proposed rulemaking; and (3) The name and telephone number of an agency official knowledgeable concerning the items listed in paragraph (1). 

Executive Order 12866 Regulatory Planning and Review

Executive Order 12866 Regulatory Planning and Review  October 1993 is a strategic statement of US Government policy . Federal agencies should promulgate  only such regulations as are required by law, are necessary to    interpret the law, or are made necessary by compelling public need,    such as material failures of private markets to protect or improve    the health and safety of the public, the environment, or the    well-being of the American people.  In deciding whether and how to    regulate, agencies should assess all costs and benefits of    available regulatory alternatives, including the alternative of not    regulating. 

(a) Agency Responsibilities. (1) Each agency shall (consistent with its own rules, regulations, or procedures) provide the public    with meaningful participation in the regulatory process.  In    particular, before issuing a notice of proposed rulemaking, each    agency should, where appropriate, seek the involvement of those who    are intended to benefit from and those expected to be burdened by    any regulation (including, specifically, State, local, and tribal    officials).  In addition, each agency should afford the public a    meaningful opportunity to comment on any proposed regulation, which    in most cases should include a comment period of not less than 60    days.  Each agency also is directed to explore and, where    appropriate, use consensual mechanisms for developing regulations, including negotiated rulemaking.

 National Technology Transfer and Advancement Act of 1995

Public Law 104-113, the National Technology Transfer and Advancement Act of 1995, directs federal agencies to use standards developed by voluntary consensus bodies.  The law adds weight to what has long been  government policy codified in the President’s Office of Management and Budget (OMB) administrative circular A-119 for US Federal agencies to use consensus standards.  OMB has been the guardian of the previous policy and is responsible for the more detailed regulations that all agencies will have to follow to meet the new law.  The Department of Commerce’s  National Institute of Standards and Technology (NIST)   plays a coordinating role in standards and conformity assessment activities between the public and private sectors. 

Congress passed and the President signed Public Law 104-113 on March 7, 1996.  Section 12  of the “National Technology Transfer and Advancement Act of 1995”  addresses standards conformity.  Section 12 (a) gives NIST responsibility to compare private sector standards with Federally-adopted or recognized standards and to coordinate Federal agency use of private sector standards, emphasizing those private sector standards developed by consensus organizations.  Section 12(b) gives NIST the role of coordinating Federal, state and local technical standards and conformity assessment activities with private sector activities.  Section 12 (d)  (See Figure 1) requires federal agencies and departments to use standards that are developed or adopted by voluntary consensus bodies except when that would be inconsistent with applicable law or otherwise impractical.   The  rationale for using other than voluntary consensus standards must be transmitted  to the OMB.  Section 12(d)(4) defines technical standards to include related management system practices. 

It has long been administration policy to substitute private sector standards whenever possible for government development and promulgation of regulatory or procurement standards.  In the past, some agencies used the relevant OMB Circular A-119 to justify significant support for voluntary standards activities.  Other agencies largely ignored the policy with no repercussions.  The elevation of the instruction  to use private sector standards from that of an OMB Circular to that of a Public Law will increase the pressure to comply. 

The law requires agencies to submit a performance report each year.  There is  great pressure on procuring agencies such as GSA and DOD to use voluntary  consensus standards for inventory and purchasing cost savings purposes.  This law, taken in combination with the Trade Agreements Act of 1995, will also increase pressure on regulatory agencies to use relevant international and national voluntary consensus standards rather than developing their own.  This law supports and encourages federal participation in  US and international  voluntary standards development.  But   it must be placed in context as just one of many tools the Congress is using to control of costs of US government. The underlying motivation is to encourage standards work outside of government for cost savings purposes.

The NTTA also tasks NIST with coordinating with state and local agencies on standards matters. The Act requires NIST to submit an implementation   plan to Congress by June 1996 for work with other government agencies and the private sector, to build workable systems for standards and conformity assessment that meet the needs of U.S. industry in a global market.

The Technology Subcommittee House Science Committee Hearing  Standards Conformity and the Federal Government: A Review of Section 12 of Public Law: 104-113 - held March 15, 2000  was convened  to evaluate the progress of government agency compliance with the NTTA.  The testimony of Belinda Collins, Director of the Office of Standards Services presented the NIST view of its role in implementation.     NIST is also responsible for coordinating the submission of Agency Annual reports on implementation of the NTTA. 

Section 12(b) of the NTAA gives NIST the role of coordinating Federal, state and local technical standards and conformity assessment activities with private sector activities. OMB Circular A-119 also  recognized the conformity assessment requirements and obligations defined in the Act and the role of the Department of Commerce in this area. The Circular directed the Secretary of Commerce to issue guidance to the agencies to ensure effective coordination of Federal conformity assessment activities. A  November 3, 1999 Federal Register document contains that proposed Conformity Assessment guidance.  NIST  issued final policy guidance on Federal agency use of conformity assessment activities in August 2000 The provisions are solely intended to be used as guidance for agencies in their conformity assessment activities and do not preempt the agencies' authority and responsibility to make regulatory procurement decisions authorized by statute or required to meet programmatic objectives and requirements.

Circular OMB A-119 Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities

In the February 19, 1998 Federal Register, The Office of Management and Budget (OMB) issued their Circular OMB A-119 Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities.

The OMB Circular A119  interprets the language of the "National Technology Transfer and Advancement Act of 1995"  which in section 12(d) requires federal agencies and departments to use standards that are developed or adopted by voluntary consensus standards bodies except where that would be inconsistent with applicable law or otherwise impractical.

The document defines the nature of standards that government agencies are obligated to consider before developing their own procurement or regulatory standards.  The new  Policy states:

All federal agencies must use voluntary consensus standards in lieu of government-unique standards in their procurement and regulatory activities, except where inconsistent with law or otherwise impractical. In these circumstances, your agency must submit a report describing the reason(s) for its use of government-unique standards in lieu of voluntary consensus standards to the Office of Management and Budget (OMB) through the National Institute of Standards and Technology (NIST)

A new part of the definition for "voluntary consensus standard" contains the requirement that owners of relevant intellectual property have agreed to make that intellectual property available on a non-discriminatory, royalty-free or reasonable royalty basis to all interested parties. 

a. For purposes of this policy, "voluntary consensus standards" are standards developed or adopted by voluntary consensus standards bodies, both domestic and international. These standards include provisions requiring that owners of relevant intellectual property have agreed to make that intellectual property available on a non-discriminatory, royalty-free or reasonable royalty basis to all interested parties. For purposes of this Circular, "technical standards that are developed or adopted by voluntary consensus standard bodies" is an equivalent term.

(1) "Voluntary consensus standards bodies" are domestic or international organizations which plan, develop, establish, or coordinate voluntary consensus standards using agreed-upon procedures. For purposes of this Circular, "voluntary, private sector, consensus standards bodies," as cited in Act, is an equivalent term. The Act and the Circular encourage the participation of federal representatives in these bodies to increase the likelihood that the standards they develop will meet both public and private sector needs. A voluntary consensus standards body is defined by the following attributes:

(i) Openness.

(ii) Balance of interest.

(iii) Due process.

(vi) An appeals process.

(v) Consensus, which is defined as general agreement, but not necessarily unanimity, and includes a process for attempting to resolve objections by interested parties, as long as all comments have been fairly considered, each objector is advised of the disposition of his or her objection(s) and the reasons why, and the consensus body members are given an opportunity to change their votes after reviewing the comments.
 

This definition is generally understood to mean the kind of standards process that can be accredited in the United States under the procedures of the American National Standards Institute (ANSI)

 While the thrust of the OMB proposal is to promote "voluntary consensus standards",  a huge escape clause is provided for any agency to justify use of other than such "voluntary consensus standards,"   Agencies are excused from using voluntary consensus standards when such use would be inconsistent with applicable law or “otherwise impractical.”  “Impractical” is defined to include circumstances when use of the “voluntary consensus standard” would be “less useful, than the use of another standard.”  Consider these excerpts from the Congressional debate on the Bill   

Mr. Brown of California: I would assume…a rule of reason would prevail in the implementation of this section and that new bureaucratic procedures would be inconsistent with the intent of this section.  Mrs. Morella:  That was our intent in beginning the section with the words “To the extent Practical”  For instance we would expect Government procurements of off-the-shelf commercial products to be exempted by regulation from any review under the act.  We also do not intend through this section to limit the right of the Government to write specifications for what it needs to purchase.  Our focus instead is on making sure the Federal government does not reinvent the wheel.  We are merely asking Federal agencies to make all reasonable efforts to use voluntary, private sector consensus standards unless there is a significant reason not to do so…”

This OMB Circular impacts all parties touched by government use and reference to standards.  Relatively speaking, the proposal makes it more difficult for government agencies to create their own regulatory or procurement standards, if a relevant voluntary consensus standard is available. The policy increases the significance of “voluntary consensus standards” as a practical alternative to government regulation.

Circular A-4  September 17, 2003  TO THE HEADS OF EXECUTIVE AGENCIES AND ESTABLISHMENTS Subject: Regulatory Analysis The Presumption Against Economic Regulation

Circular A-4  September 17, 2003  TO THE HEADS OF EXECUTIVE AGENCIES AND ESTABLISHMENTS Subject: Regulatory Analysis The Presumption Against Economic Regulation  contains specific advice in preparing the regulatory analysis required by the circular and provides the Office of Management and Budget’s (OMB’s) guidance to Federal agencies on the development of regulatory analysis as required under Section 6(a)(3)(c) of Executive Order 12866,  Regulatory Planning and Review  (discussed above) 

Government actions can be unintentionally harmful, and even useful regulations can impede market efficiency. For this reason, there is a presumption against certain types of regulatory action. In light of both economic theory and actual experience, a particularly demanding burden of proof is required to demonstrate the need for any of the following types of regulations:

Performance Standards Rather than Design Standards Performance standards express requirements in terms of outcomes rather than specifying the means to those ends. They are generally superior to engineering or design standards because performance standards give the regulated parties the flexibility to achieve regulatory objectives in the most cost-effective way. In general, you should take into account both the cost savings to the regulated parties of the greater flexibility and the costs of assuring compliance through monitoring or some other means.

Informational Measures Rather than Regulation If intervention is contemplated to address a market failure that arises from inadequate or asymmetric information, informational remedies will often be preferred. Measures to improve the availability of information include government establishment of a standardized testing and rating system (the use of which could be mandatory or voluntary), mandatory disclosure requirements (e.g., by advertising, labeling, or enclosures), and government provision of information (e.g., by government publications, telephone hotlines, or public interest broadcast announcements). A regulatory measure to improve the availability of information, particularly about the concealed characteristics of products, provides consumers a greater choice than a mandatory product standard or ban.

Where information on the benefits and costs of alternative informational measures is insufficient to provide a clear choice between them, you should consider the least intrusive informational alternative sufficient to accomplish the regulatory objective. To correct an informational market failure it may be sufficient for government to establish a standardized testing and rating system without mandating its use, because competing firms that score well according to the system should thereby have an incentive to publicize the fact.     

The Agreement on Technical Barriers to Trade (TBT)

North American Free Trade Agreement (NAFTA)

The underlying goal of the The Agreement on Technical Barriers to Trade (TBT)  (See Figure 2) and the Agreement on Government Procurement (AGP)  (See Figure 3)  is to promote trade through international agreements on rules for how the marketplace should and should not work. A basic principle running throughout the agreements is that of "National Treatment." "National Treatment" is the concept that governments and markets should treat products and services produced or supplied from other parts of the world no differently than products and services offered to the government or market from local industries. Standards can be very effective "Non-Tariff Barriers to Trade (NTBTs)." Bureaucrats can devise laws or regulations more easily met by local producers than by foreign firms; markets can depend upon "voluntary" standards that are controlled by the local industries; governments can issue procurement specifications that favor individual suppliers. The TBT and the AGP are the international attempts to remove "unfairly discriminatory" standards as a factor in free trade. These agreements are the results of many years of multilateral government negotiations known as the "Uruguay Round" of trade negotiations. The Office of the US Trade Representative has the responsibility to negotiate these agreements on behalf of the United States and Congress must vote them "up" or "down" with no changes at the conclusion of the negotiations.

Agreement on Government Procurement

Both the TBT and AGP encourage  governments and private organizations to utilize international standards as the basis for technical rules, marketplace standards and government procurement.   As true in the case of the OMB Circular A119 there are of  course "escape clauses" for issues of national defense, health, safety and environment, but these exceptions to the general rule must be justified if the requirements are different than those in an agreed-upon international standard. There is an extensive "notification" system whereby governments report any new technical regulations that differ from an international standard and agree to consider comments from other countries on the proposed rules. One of the key new elements in the 1994 TBT is the expansion of  certain reporting obligations of the 1979 TBT from just central governments to include regional standards groups such as CEN/CENELEC/ETSI, local governments such as individual states in the US and private organizations such as ANSI.  

The Uruguay Round text  included a "Code of Good Practice" (See Figure 4)  for standards developers describes rules for openness, notification of work in progress, utilization of international standards and consideration of comments received.  

In i998  ANSI  accepted  the WTO TBT Code of Good Practice on behalf of more than 200 standards developing organizations in the United States.  At the  TBT Committee meeting of 9 September 1998 the representative of the United States stated that with respect to the acceptance of the Code of Good Practice for the Preparation, Adoption and Application of Standards by the American National Standards Institute, Inc. (ANSI) the acceptance was on behalf of approximately 200 standardizing bodies in the United States accredited by ANSI.   It is a noteworthy to observe the ANSI acceptance of the Code of Good  Practice,  while not explicitly stated in the notification  (G/TBT/CS/N/83)  or the supplement  (G/TBT/CS/N/83A1)   was no doubt predicated on the extensive and comprehensive standards process requirements found in the ANSI Essential Requirements: Due Process Requirements for American National Standards.   A link in the  (G/TBT/CS/N/83A1)  ANSI  footnote to observe that while the United States voluntary standards community   ANSI Accredited Standards Developers  contains a listing of all ANSI-Accredited Standards Developers (as of January 5, 2004). Included is each developer's stated scope of standards activity