2016 Yes, Virginia, there is a Santa Clause

In 1897, a famous newspaper editorial contained a response to an 8-year old girl who raised the question of the validity of Santa Clause (Is there a Santa Clause).   The response and the editorial is considered the most famous newspaper editorial ever published, not only protecting the eight year old, but causing adults to re-think their own beliefs.   In the spirit of accepting that there just might be a Santa Clause, we’ve identified some of the most mythological statements extracted from the Federal Register (regulatory reporting burden) or the Office of Management and Budget (OMB) regarding the annual benefits and costs of Federal Rules and paperwork. No one reconciles the OMB summary with the individual estimates in the Federal Register, which is probably a good thing because believing in government assertions of regulatory benefits or regulatory burdens is analogous to believing in Santa Clause. As illustrated herein, “Yes, Virginia, there is a Santa Clause and he lives in the minds of those providing estimates for regulatory burdens and/or benefits”.

OMB Annual Report to Congress Under the “Right to Know Act”

In its 2015 Report, OMB proudly declared that the estimated annual benefits of major Federal Regulations from October 1, 2004 to September 30, 2014 was between $216 billion and $812 billion while the estimated costs were between $57 billion and $85 billion (in 2001 dollars).   OMB (which is directly linked to the White House) also stated that the estimated net benefits (from 2009-2014, this Administration) were $215 billion).   After providing these overwhelmingly positive numbers, OMB cautions that it is important to emphasize that the estimates used have limitations; i) these ranges reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated (issued) and ii) quantification of various effects is speculative and may not be complete.   Based upon the cautionary statements alone, why bother with any of this?

FAR 52.215-2, Audit and Records – Negotiation

Recently posted (September 9, 2016), the annual reporting burden was 148,300 hours (14,830 respondents, 10 responses or actions annually and 1.0 hour per response).   By implication, all government contractors and subcontractors subject to this clause will spend a grand total of 148,300 hours associate with this “reporting burden”.  Apparently, the FAR Councils are unfamiliar with DCAA (Defense Contract Audit Agency) whose audits and access to contractor records are linked to FAR 52.215-2. Responding to DCAA audit inquiries probably exceeds 148,300 hours for a single large contractor with multiple segments and hundreds of DCAA auditors. Regarding the 1 hour per response, merely completing a lengthy and intrusive DCAA internal control questionnaire will require exponentially more than 1 hour.   In its estimate, the FAR Councils make note of the fact that 52.215-2 does not require contractors to create or maintain any records that the contractor does not normally maintain in its usual course of business; unfortunately, no one at DCAA appears to have read this portion of FAR 52.215-2.

FAR Part 44 Purchasing System Review or CPSR

As posted on April 5, 2016, the FAR Councils estimated that annual reporting burden to be 39,500 hours (1,580 respondents, 25 hours per response; increased from a previous estimate of 17 hours).   There is no explanation for the estimated “per response” hours other than an explanation of the objective of a CPSR.   For anyone who has i) prepared for a CPSR or ii) been evaluated through a CPSR, 25 hours doesn’t even begin to cover the preparatory time, much less the thousands of hours to have developed policies and procedures and self-monitoring to reasonably ensure compliance.   At best, the 25 hours might cover a portion of the time to respond to a DCMA risk and planning survey.

FAR 31.204-46, Travel Costs

Although the referenced cost principle includes numerous documentation requirements, for reasons known only to the FAR Councils, they only address the regulatory burden of preparing a justification whenever a higher (than per diem) actual expense reimbursement method is used. This would apply to lodging (only) in excess of the daily lodging per diem.   Oddly enough, the FAR Councils estimated 25 hours per response and 10 responses per year for an estimated 5,800 contractors.   “Oddly” because this should not involve the equivalent of three full days merely to document unavailability of lodging at government per diem rates. Perhaps the 25-hour estimate was obtained from DCAA whose expectations for documentation could be described as “totally self-explanatory resulting in incontrovertible evidence that the cost is allowable”.   Perhaps more odd, the FAR Council only addresses the regulatory burden of a diminutive slice of FAR 31.205-46 (perhaps not wanting to know the “rest of the story”).

Various Regulations

The following are summarizations of FAR Council estimates for individual actions:

• Regulatory burden (FAR 52.203-13) initially estimated at 3 hours per response, revised to 60 hours per response based upon a public comment which stated that 3 hours was probably too low (yes, there was nothing else stated in the public comment)
• Regulatory burden for submitting a public voucher and for supporting requests for payments, 1 hour and .25 hours, respectively.
• Regulatory burden of .017 hours per response (1 minute) to provide information required by FAR 52.215-1(c(2)(iv).
• Regulatory burden of .08 hours (5 minutes) to review and respond to pre-solicitation notices
• Regulatory burden of 2 hours to prepare and report data for a retroactive price adjustment on applicable fixed-price contracts.

The list of significantly underestimated regulatory burdens is endless, but probably no more believable than: “Yes Virginia, there is a Santa Claus”.