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Strategizing Expert Involvement In Rulemaking

Introduction

This article explores the conditions under which federal agency personnel resort to outside groups to assist them in making regulatory decisions. I argue that agency officials take into account contingent and institutional variables when making such decisions. The contingency variables I consider are the relative complexity and salience of the proposed rules, the organizational structure and capacity of the agency involved and the alternative strategies that it could employ to enforce a rule under development. The principal institutional variable I consider is the agency leaders’ perceptions of their institution’s legitimacy or standing with the general public. I argue that leaders seek strategically to exercise their discretion in rulemaking, including, particularly, choosing to obtain outside assistance in those efforts, so as to retain public standing over the long run. Rulemaking is often used by executive agencies when implementing law to prevent and/or to mitigate market failures. This responsibility requires consideration of the views of lawmakers and interest groups, including businesses, as well as nongovernmental organization (NGO) and public group perspectives on the potential implications of such actions. Federal agencies generally rely on the substantive expertise of their employees to understand policy issues and to propose rules that effectively, equitably and efficiently implement relevant law. In addition to its role in crafting rules, agency expertise also lends legitimacy to executive organizations, especially when some lawmakers and a share of the body politic disagree with the choices adopted. Given this context, it is important to understand the incentives personnel confront during rulemaking.

Influence of Process, Substance and Structure

Federal regulations or rules are shaped by three basic elements or forces. The first is the Administrative Procedure Act (APA), which governs the process by which such efforts are developed and promulgated, including how interested publics may become involved in those deliberations. A second factor that shapes rulemaking is the organizational structure and capacity of the agency involved. Finally, the complexity and salience of proposed regulatory initiatives is also a very important factor in shaping the context in which a rulemaking effort proceeds (Gormley Jr, 1986).

Experts lend value and legitimacy to the substantive choices that agencies must make when developing a rule. Nevertheless, democratic representation and deliberation require that the general public has opportunities to voice its views and concerns on matters under consideration even if, or when, ensuring that possibility comes at the cost of some measure of efficiency for the public institutions involved. Moreover, while agency officials may gauge public opinion through such efforts, Congress anticipated that they would remain impartial and seek to make choices on behalf of all citizens, irrespective of the particular feedback they may receive from specific groups or individuals. So, regulatory staff solicit views on possible courses of action, but are not expected simply to adopt one of those. As a result, in practice, the rulemaking process finds federal agency staffers issuing a notice of proposed rulemaking to the general public to gather salient information and to help to understand the range of possible impacts of various actions they might take.

Analysts have explored the dynamics and advantages and disadvantages of this “notice and comment” form of public participation in rulemaking in the agenda setting and “attitude bias” literatures (Golden, 2003; Kerwin and Furlong, 2019; Rinfret and Furlong, 2012; West, 2009; Yackee, 2005). With some exceptions, which I note below, federal law prohibits ex parte communication with interest group representatives during agency rulemaking and during notice and comment periods for proposed rules. While this requirement is well-intentioned to prevent capture of agencies by interest groups, it also leaves little private space for interest group staff to communicate with agencies. They must generally do so “on the record.”

Alternatives to formal notice and comment rulemaking include negotiated regulation or RegNeg. Unlike the notice and comment process, with this strategy, agency personnel meet with interested stakeholders during the early-stages of rule development and attempt to forge consensus on a possible way forward with them. This process is difficult to manage because it requires regulators to balance ensuring the transparency of the choice process to the public and preserving space for the free expression of views by interested parties. More, agency legitimacy can come into question when the arguments offered by external participating parties contradict prevailing public views of the matters under consideration.

In addition to the rulemaking process, the organizational capacity of an agency also influences how and what kind of outside involvement its staff may seek. When external expertise is requested, regulatory officials must balance the diversity of viewpoints they receive with their capacity to process them efficiently. In addition, staff members have to be cognizant of their ability to respond to public comments concerning a draft rule. Even after a final rule is published, agency personnel must ensure their capacity to face a judicial challenge. The costs of defending a rule in court include direct expenditures as well as a potential diminution in the perceived standing or legitimacy of an agency if the judgments of its staff are successfully attacked or overturned. The broad umbrella of organizational capacity also includes cultural norms, leadership attitude and staff capabilities (Bolton, Potter, and Thrower, 2016; Sanchez and McKinley, 1998). Agency legitimacy can be strengthened by the expertise of executives heading them. The opposite can occur if those leaders are perceived as too close to industry, unfairly willing to favor corporate interests in rulemaking choices or simply unsuited or ill-prepared for their responsibilities.

Another factor that affects the form of engagement with external expertise that an agency may seek or require arises from the relative complexity of the concern(s) a rule seeks to address. Rulemaking efforts often treat scientifically thorny concerns when the full array of their potential consequences cannot be known with certainty. Also, when such rules are targets of conflicting perspectives or are perceived as addressing significant social or material concerns about which important differences exist in the general population, they typically garner public attention. In such cases, agency leaders may choose to involve one or more third-parties more directly in its rulemaking efforts than informal rulemaking normally involves. This step may also help responsible staff focus on other rules while alleviating accountability concerns that might arise with especially complex or salient issues (Mattli and Büthe, 2005); Weimer, 2006). When agencies anticipate pushbacks from, and conflict among, interested parties due to the substance of a rule, there is a similar incentive to resort to third-party engagement in rulemaking (Beierle, 2002). Some scholars have viewed such efforts as adding to their perceived legitimacy by building consensus (Langbein and Kerwin, 2000) while others have viewed such steps as de-legitimizing agency action by de facto abandoning their legal responsibility (Carpenter, Chattopadhyay, Moffitt and Nall, 2012).

The tension between agency efforts to ensure public legitimacy and organization capacity is not a new subject. Carpenter (2001) was concerned with assessing the bureaucratic autonomy that agencies could only demonstrate via organizational and political legitimacy. Verwaal, Stienstra and Verdu (2012) argued that agencies strategize during the rulemaking process by trading off external legitimacy and organizational effectiveness. That is, in this view, staff balance organizational efficiency and external legitimacy as they make rule-related choices (Donaldson, 2008; Meyer and Rowan, 1977). However, this literature does not account for incentives available through the Administrative Procedures Act (APA) that might mask actual pubic official willingness to make tradeoffs. For example, if leaders want to process public comments efficiently, their units can do so under the APA either by invoking that statute’s interim-final rule clause, if applicable, or by resorting to a narrowing of the comment period. While the former might attract judicial challenges and threaten the legitimacy of the agency, the latter might go unnoticed.

Proposition based on Federal Agency Strategy

Potter (2019) has shown that public agency regulatory staff carefully consider the timing, the length and language of rules and opportunities for external participants to become involved in rulemaking. Jokipii (2010) has highlighted the importance such personnel give to internal contingencies when faced with external uncertainty. Hult (2000) has shown that an overemphasis on institutional legitimacy can ignore contingency variables leading to inefficiency. These scholars have pointed to agency efforts to balance in-house and external expertise to fit either contingency or institutional goals. I propose that in cases when agency personnel find themselves grappling with a rule that could diminish their legitimacy and general public standing, they are more likely to choose a regulatory strategy that involves outside engagement and expertise in a form other than, or as a replacement for, the traditional notice and comment process. This could take various guises depending on the substance of the rule in play, including advisory panels, negotiated or private rulemaking. Involving such actors and their perceived expertise can serve at least two primary purposes. First, such stakeholders can provide relevant information to decisionmakers concerning the substance as well as possible consequences of implementing a rule. Second, engaging such groups can highlight an agency’s concern for the scientific validity and impact of its efforts.

However, in cases when the effects of such involvement for agency legitimacy are uncertain, regulatory staff are more likely to seek such counsel during the early-stages of rulemaking through a public hearing or perhaps via permissible ex parte consultations with relevant interests. Since information exchanged in a public hearing is always in the public domain, agency decision-makers may rely on reaction to such information to help determine the final character of a proposed (or final) rule. The other option public officials can employ is ex parte consultation. When staff consult representatives of interested publics in the early-stages of the informal rulemaking process, they are not subject to restrictions concerning the character or formality of those contacts. As such, such exchanges can provide a safe space for agencies in which to ascertain the perceived potential impacts of a rule for affected businesses as well as the general public.

Finally, when contemplated rules do not appear likely to affect an agency’s reputation, their staffs are more likely to focus on the contingent goal of ensuring efficient realization of that aim and not to seek or to engage external counsel, except on the formal record. Less controversial rules are less likely to undergo judicial challenges and this incentivizes agencies to focus on efficiency in such cases.

Conclusion

The character and perceived costs of rulemaking has been the focus of executive orders in every presidential administration for more than 40 years (Kerwin and Furlong, 2019). Whether addressing Carter’s regulatory council, George H.W. Bush’s Council on Competitiveness, Bill Clinton’s regulatory policy officer, George W. Bush’s science advisory group, or Barack Obama’s E-rulemaking initiative, each of these executive orders has also stressed the importance of justifying rulemaking activity to the public. The legitimacy of the process is achieved by ensuring that it is informed by various forms of information and expertise including, technical, economic and legal considerations. This article has addressed the tensions implicit in rulemaking among agency legitimacy, stakeholder engagement and the relative efficient, effectiveness and equity of rulemaking processes. Public officials develop strategies to address these concerns as they draft rules. Learning more about how they do so will help researchers understand both  how those decision-makers make choices concerning  when to use forms of rulemaking rather than the traditional notice and comment variety as they address these several aims.

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Aditya (Adi) Sai Phutane

Aditya (Adi) Sai Phutane is a Ph.D. student in Public Administration and Public Affairs at Virginia Tech. Adi has a background in engineering. Prior to pursuing his Ph.D., he completed his master’s degree in Electrical and Electronic Engineering at the University of Wisconsin-Madison. Thereafter, he worked at a materials testing company in Minneapolis. His abiding interest in ethics and technology brought him eventually to pursue an interest in public policy and, more particularly, in  technology policy. Within that subfield, he is especially interested in early-stage consultations with industry experts and how public agencies view them in relation to their public standing in rulemaking processes. In his free time, when not reading, Adi bikes, cooks and enjoys photography.