The Small Business Watchdog

On January 17, 2013, the Office of Advocacy held a roundtable for small business stakeholders that gave them the opportunity to talk directly with Food and Drug Administration (FDA) officials about their concerns with the Food Safety Modernization Act rules, as well as FDA guidance on fees associated with the re-inspection of food facilities.

A diverse group of stakeholders participated: food importers and suppliers, produce farmers, and agents and brokers who facilitate importation of foreign food products into the United States. The discussion of potential impacts associated with the FSMA rules was enlightening for Advocacy and the FDA. In one instance, agent-brokers voiced concern with the liability they face under the new rules even when they are unsure if they have been listed as a broker of record with the FDA by a foreign food producer.

In another example, an Asian food representative asked the FDA to be more sensitive to language differences and cultural holidays that drive seasonal demand for specialized goods. As an example, a small business owner noted that a delay in the release of detained mooncakes just prior to, or during, the Harvest Moon Festival could lead to substantial financial losses since the product loses most of its value once the holiday passes.

The roundtable let officials from the FDA and Advocacy understand the complexity of individual products and niche markets affected by the regulatory proposals.

— Linwood Rayford, Assistant Chief Counsel

The Food Safety and Modernization Act (FSMA), which was signed into law on January 4, 2011, directs the Food and Drug Administration (FDA) to draft rules to better protect public health by helping ensure the safety and security of the U.S. food supply. The first four significant FSMA rules have either been published in the Federal Register, or will be soon. These rules include:

• Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventative Controls for Human Food (published January 16, 2013; 78 Fed. Reg. 3646);
• Standards for the Growing, Harvesting, Packing and Holding of Produce for Human Consumption (published January 16, 2013; 78 Fed. Reg. 3503);
• Foreign Supplier Verification Programs for Importers of Food for Humans and Animals; and
• Accreditation of Third Parties to Conduct Food Safety Audits.

The preventative control rule has two major features. First, it contains new provisions requiring each owner, operator, or agent to comply with hazard analysis and risk-based preventative controls. Second, it would revise existing Current Good Manufacturing Practice (CGMPs) requirements by clarifying that certain existing CGMP provisions would also require protection against cross-contact of food by allergens. The proposed rule provides many small business exemptions. The rule takes effect 60 days after the final rule is published in the Federal Register; however, small businesses (defined as having less than 500 employees) have two additional years to comply, and very small businesses have three additional years to comply. (Three possible definitions of small businesses are proposed: entities having less than $250,000, $500,000, or $1 million in total food sales.)

In the produce rule, the FDA proposes to set standards associated with the identified routes of microbial contamination of produce, including:

• agricultural water;
• biological soil amendments of animal origin;
• health and hygiene;
• animals in the growing area; and
• equipment, tools and buildings.

The rule would become final 60 days after final publication in the Federal Register. There are numerous small business exemptions. Small businesses (defined as entities with average annual food sales over the previous three years of no more than $500,000) would have three years to comply; very small businesses (average annual food sales over the previous three years of no more than $250,000) would have four years to comply.

The comment deadline for both rules is May 16, 2013. Submit electronic comments through the Federal eRulemaking Portal: www.regulations.gov.

—Linwood Rayford, Assistant Chief Counsel

Spend a day in the greater Kansas City area and you can’t help but catch the vibe. Kansas City is intent on transforming itself into America’s most entrepreneurial city. Kansas City is drawing from a rich entrepreneurial heritage. Names like Bloch, Kauffman, and Stowers—a past generation of entrepreneurs—grew their business fortunes here, employed thousands, and generously gave back to their community. The Bloch School of Management, The Kauffman Foundation, and Stowers Institute for Medical Research are outstanding examples of the lasting impact these early entrepreneurs made on their hometown.  

Today Kansas City is leveraging its entrepreneurial roots and focusing on ways to make the two-state greater Kansas City area “the” place to be for entrepreneurs.  An economic development shift is underway, working to attract intellectual capital and talent from other regions, so the next new “Big Thing” might call Kansas City home.  Creating an environment that makes life easier for entrepreneurs is one of the Big Five, a set of transformational initiatives espoused by the Greater Kansas City Chamber of Commerce in September 2011. Each initiative is spearheaded by a champion. The guiding forces behind The Entrepreneurial City initiative are UMB Bank Chairman and CEO Peter deSilva and Cerner Corporation co-founder Cliff Illig, two area business leaders who know how to get things done.

The advent of Google Fiber is one of the exciting ways in which Kansas City has separated itself from the pack and is transforming itself into a destination for entrepreneurs.

Google must have recognized something special when the company selected Kansas City, Kansas, from over 1,100 cities vying to be the site of its Google Fiber pilot project. The project promised to equip an area with high-capacity fiber-optic cable delivering super fast connectivity, up to 1 gigabyte a second. With the Google announcement came pledges by both Kansas City governments to work with them, clearing the way—and rights of way—for laying the fiber. Sly James, mayor of Kansas City, Missouri, and Joe Reardon, mayor of Kansas City and Wyandotte County, Kansas, formed the Mayors’ Bi-state Innovation Team to work together to leverage Google Fiber’s presence.

Since its selection in 2011, Kansas City’s Hanover Heights “fiberhood” is now up and running, and it is fast becoming a proving ground for new ideas and entrepreneurs.

The opportunity presented by Google Fiber got local web developer Ben Barreth thinking about how he could bring new talent to town and help grow jobs. Ben and his wife Meredith came up with the idea of Homes for Hackers (H4H), whose stated goal is “to further the business community in Kansas City by offering 3 months of rent-free, Google Fiber-connected startup space to entrepreneurs.” Ben and Meredith have now launched the first of what they hope will be many Kansas City-area houses dedicated to startups and which are fully outfitted with Google Fiber. Ben is inviting out-of-town entrepreneurs to relocate to H4H to take advantage of the fiberhood.  Selected entrepreneurs live rent-free for three months; groceries are their only expense. 

I had the good fortune to visit the State Line Road H4H with entrepreneur/resident Synthia Payne, who is the third entrepreneur to live in the house. Synthia was drawn to Kansas City from Denver and is developing her startup, Cyberjammer. I also got to meet H4H residents number 4 and 5: Nick Budidharma, from South Carolina who is perfecting his business, Leetnode, and Phil Jaycox, who moved over from St. Louis to develop  Dealivr. In addition to space for three entrepreneurs there is a fourth bedroom reserved for a short term “fiber traveler.” For a nominal rental fee, a fiber traveler can stay for a week and get a taste of the possibilities of 1 gigabyte connection speeds. 

While I was visiting the H4H,  fiber traveler Chris Baran arrived from the East Coast, anxious to get started working at high speed on his FiberRV business. These diverse startup entrepreneurs were coexisting peacefully and fruitfully, living by H4H house rules and concentrating on developing their products with the benefit of Google Fiber.

HRH is a great idea that bears replication, and already others are getting in on the idea of an ultra-high-speed home for entrepreneurs. Brad Feld, author of the book Startup Communities, has also started his own Kansas City Fiberhouse next door to H4H, and is offering residencies to selected entrepreneurs.

Who knows which next Kansas City “Big Thing” will hatch from this adventure?

—Becky Greenwald, Region 7 Advocate

Becky Greenwald is the Office of Advocacy’s regional advocate for Iowa, Kansas, Nebraska, and Missouri. She can be reached at rebecca.greenwald@sba.gov

Cyberjammer owner Synthia Payne and the Google Fiber Bunny logo.

H4H co-owner Ben Barreth and Synthia Payne.

The three current H4H entrepreneur/residents Nick Budidharma, Synthia Payne, Phil Jaycox and their guest entrepreneur Chris Baran

Small businesses were spared $2.4 billion in first-year regulatory costs in FY 2012 through the Office of Advocacy’s work with federal agencies to ensure that regulations complied with the Regulatory Flexibility Act (RFA). The act requires federal agencies to examine proposed regulations for their impact on small entities, and to consider alternatives that minimize the regulatory burden yet still achieve the rules’ purpose.

These cost savings are found in the Office of Advocacy’s Report on the Regulatory Flexibility Act FY 2012. The congressionally mandated report details agencies’ compliance with the RFA over the past fiscal year.

“I am proud that Advocacy is living up to its reputation as the small business watchdog within the federal government,” said Dr. Winslow Sargeant, chief counsel for advocacy.  “As a former small business owner myself, I know small businesses don’t have the time or resources to keep track of all the proposed federal rules and regulations.  So, our job is to monitor that process for small businesses.  Advocacy’s guiding purpose is to work with federal agencies to get the results they want, while easing the burden of those regulations on small businesses.”

Advocacy’s Report on the Regulatory Flexibility Act FY 2012, shows the office’s work helping federal agencies comply with the RFA.  In addition to regulatory review, the report summarizes agencies’ progress in complying with Executive Order 13272, which requires them to create a systematic rule review process geared toward reducing the regulatory burden.

From holding roundtable discussions around the country, to issuing comment letters on proposed regulations, to training federal agencies on RFA compliance, the report outlines Advocacy’s work voicing the concerns of small businesses throughout the federal government. 

“Small businesses deserve a voice in the regulatory process, especially when a proposed rule or regulation will have a significant economic impact on a substantial number of small businesses.  And, Advocacy works hard to serve as that strong voice,” said Sargeant.  “We believe—and our congressional mandate reflects this belief—that regulations are more effective and long-lasting when small businesses are part of the rulemaking process.” 

The Office of Advocacy bases its cost savings primarily on agency estimates.  These cost savings for a given rule are captured in the fiscal year in which the agency takes final action on the rule.

The full report is on the Advocacy website.  Interested small business owners can also sign up there for a number of web-based tools, such as e-mail alerts, regulatory alerts, Advocacy’s newsletter, and various social media accounts that serve to keep small business owners updated on proposed federal rules and regulations.

How are small businesses doing in your state? The Office of Advocacy has just published the Small Business Profiles for the States and Territories, to help answer this question. These profiles are brief two-page documents that give policymakers, small business owners, economists, and many others a detailed picture of the economic role of small businesses within their state, or the nation as a whole. They are also a useful tool to track changes and trends in each state’s small business economy.

The profiles offer a glimpse of the small business status in each state, territory, and the nation. The five states with the largest populations—California, Texas, New York, Florida and Illinois—account for roughly 38 percent of the total number of small employers in the country. However, the highest shares of small firm employment are found in the less populous states, the top five being Montana, with 68.4 percent of its jobs provided by small businesses; Wyoming (64.8 percent); South Dakota and North Dakota (tied at 61.9 percent); and Vermont (59.7 percent). From a finance perspective, the average number of business loans under $100,000 for the five largest states was 238,967, with a mean total value of $4.3 million.

Each individual profile contains information pertaining to the growth and decline of that region’s small business economy, comparing the most recent data available with prior years’ data. The information included in the state and U.S. profiles include total number of businesses, both small and large, business owner demographics, workforce breakdown, unemployment rate, lending, revenues, employment and employer firms by industry, net new jobs created, and establishment turnover rates. Please note that only limited data are available for the four U.S. territories.

The Office of Advocacy releases this information with the most recent available data at the time of publication, utilizing data from the U.S. Department of Commerce, Census Bureau and Bureau of Economic Analysis; U.S. Department of Labor, Bureau of Labor Statistics; Administration Office of the U.S. Courts; Federal Deposit Insurance Corporation; and the Small Business Administration, Office of Advocacy. Each profile is available in PDF format on the website, along with the raw data files.

—Shawn Fouladi, Research Assistant

On January 25, a coalition of competitive telecommunications carriers filed a petition with the Federal Communications Commission (FCC) requesting that the FCC propose new regulations governing the retirement of copper communications infrastructure owned by incumbent carriers. (The incumbents are the group of large telcos which resulted from the breakup of the Bell operating companies in the 1980s.) In many cases, small business consumers rely on the broadband services provided by carriers over these copper facilities, and the speed at which retirement is proceeding jeopardizes these services. Advocacy has previously submitted several public comments to the FCC forwarding the concerns of competitive carriers with regard to the effectiveness of its copper retirement regulations. The FCC is now asking the public to submit comments regarding this latest petition.

The Telecommunications Act of 1996 requires incumbent carriers to lease access to elements of the national telephone network to competing providers at wholesale rates, so that competitors can offer consumers a choice in communications providers without a need to duplicate the copper network. In 2003, the FCC determined that these wholesale obligations apply only to the copper network, and not to fiber optic connections. As incumbent carriers move toward building fiber optic connections, they are permitted to disable their existing copper connections; however, FCC regulations govern their retirement of these copper connections, in order to protect consumer choice.

Competitive carriers have requested the FCC revisit these regulations in several instances, arguing that the copper infrastructure should not be able to be retired by incumbents as a means to avoid the requirements of the 1996 Telecommunications Act.  In the January 25 petition, the competitive carriers stress that preserving their ability to offer Ethernet broadband over the copper network is essential to making high-speed broadband service affordable and widespread, as the law requires.  They suggest several changes to the FCC’s current copper retirement regulations.  Notably, they request that the rules be revised to prohibit the physical removal or disabling of copper facilities unless the FCC confirms that customers will continue to have a choice among reasonably priced, similar services and will not have service disrupted. 

The first round of public comments on the petition is due March 5 with the second round of reply comments due March 20. Comments may be submitted electronically by accessing the FCC’s Electronic Comment Filing System. Comments should reference and be submitted under WC Docket No. 12-353 and RM-11358.

—Assistant Chief Counsel Jamie Saloom 

Previous Advocacy Comments on Copper Retirement

The Office of Advocacy has filed comments referencing copper retirement three times since 2007:

• May 22, 2012
• October 15, 2010
• May 5, 2007

 

On Friday, January 25, Jordan Barab, the U.S. Department of Labor’s deputy assistant secretary for occupational safety and health, participated in the Office of Advocacy’s regular small business roundtable on labor safety and health issues. Mr. Barab focused his remarks on the Occupational Safety and Health Administration’s (OSHA’s) regulatory agenda for the coming year and beyond.  Mr. Barab also announced that he would be staying on at OSHA for President Obama’s second term, along with other key OSHA leaders, including Assistant Secretary David Michaels and Chief of Staff Deborah Berkowitz.

Mr. Barab laid out an ambitious agenda for the coming year which includes three Small Business Advocacy Review panels. The panels will allow small business representatives to provide input to agency officials before the rule is developed. The topics of the three panels will be Injury and Illness Prevention Plans (I2P2), Infectious Diseases, and Combustible Dust.  He also stated that OSHA planned to publish its proposed rule on Occupational Exposure to Crystalline Silica, which has been pending under review at the Office of Management and Budget for nearly two years. Mr. Barab fielded a host of questions from attendees on such topics as OSHA enforcement policy, workplace injury and illness rates, and implementation of OSHA’s new rules on hazard communication.  It was a collegial and wide-ranging discussion.

Advocacy’s roundtable was well-attended, with nearly 100 participants from across a variety of sectors.  The roundtable meets every other month and focuses on regulatory activity by OSHA, the Mine Safety and Health Administration (MSHA), and other agencies.  If you would like to attend or be added to the email distribution list, please contact Assistant Chief Counsel Bruce Lundegren.

Advocacy January 25 roundtable on labor safety and health issues. Photo by Kyle W. Kempf.

In December, Region VII Advocate Becky Greenwald was a special guest speaker at the Women in Business Small Business Conference and Expo. The event was sponsored by the Nebraska Business Development Center/Procurement Technical Assistance Center at the University of Nebraska at Omaha. Hosting the event was Nebraska Congressman Lee Terry, who recognized 12 women business owners making a difference in his district (pictured below).

Click on the photo to jump to Congressman Terry’s speech recognizing each of these business owners in the Federal Register on December 18, 2012.

Front row, from left: Connie Martin, SpecPro; Danielle Zoz, GovDirect, represented by Paige Zoz; Tracie Malesa, Du-Rite Electric; Nancy Sempek, Christensen Drywall.
Middle row: Lee Pankowski, LP Custodial Services; Tina Diaz-Ciechomski, Future Construction Specialties;  Jennifer Maassen, McCallie Associates.
Back row: BC Clark, Metro Omaha Women’s Business Center; Diane Bruce, Charv’s Contracting; Felicia Rogers, Congressman Lee Terry’s Office; Shayne Fili, Auction Solutions; and Lisa Wolford, CSSS.net, represented by an employee.
Not pictured: Julie Kaup, Boss Electric.

The Office of Advocacy applauds yesterday’s decision by the Internal Revenue Service to offer a simplified version of the home office deduction. Advocacy has been engaged with the small business community and the IRS on this issue for decades, including a formal request to the White House in 2009. The new option allows a deduction of up to $1,500 based on a formula of $5 per square foot of home office spaced used and will take effect for the 2013 tax year. The IRS estimates that this change in the rule will reduce the paperwork burden on small businesses by 1.6 million hours annually. An estimated 14.4 million, or 52 percent of America’s 27.8 million small businesses, are home based.

“Simplifying the home office deduction for America’s small businesses has been a longstanding priority of the Office of Advocacy; we welcome the IRS’s actions,” said Chief Counsel for Advocacy Winslow Sargeant.  “I would also like to commend the steadfast advocacy of numerous small business organizations who have championed this issue.”

Over the years, Advocacy has worked with the IRS to encourage the simplification of the home office business deduction. In 2009, Advocacy sent a letter to the Presidential Economic Recovery Advisory Board’s Tax Reform Subcommittee, identifying the simplification of the home office business deduction as its top recommendation and suggesting that the IRS offer a standard deduction option. Advocacy will continue to pursue straightforward solutions for small business through tax reform. 

The deadline for submitting proposals for small business research for the Office of Advocacy has been extended to February 8. The original announcement with the revised deadline follows.

The Office of Advocacy examines the role of small business in the economy and publishes research on a wide range of topics each year. These studies educate policymakers and small business advocates, and they expand knowledge of small business challenges and contributions. Advocacy recently issued a Request for Quotations (RFQ) seeking proposals for new research in four areas. To view the complete solicitations, visit FedBizOpps and search for the solicitation numbers next to each topic. Research is to be conducted in the year following the contract award. These RFQs are for competitive contracts and are not research grants.  The deadline for submitting proposals is Friday, February 8, at 4 p.m. Eastern standard time.

The Office of Advocacy of the U.S. Small Business Administration is an independent voice for small business within the federal government.  The presidentially appointed and Senate-confirmed Chief Counsel for Advocacy advances the views, concerns, and interests of small business before Congress, the White House and federal agencies. To learn more about Advocacy, visit our website or call (202) 205-6533, and follow us on Twitter and Facebook.