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3/30/2003

Regulation a pain in businesses’ backsides

By B.J. Plasket
The Daily Times-Call

DENVER — Owners of small businesses have long listed federal regulation as a major thorn — and often an expensive one — in their collective side.

Even the government agrees.

Government figures say regulatory costs borne by small businesses are 60 percent higher — reaching nearly $7,000 per year for each employee — than those absorbed by companies with more than 500 employees.

Last week, a handful of Metro-area small business owners got a chance to level the regulatory playing field and air grievances against any number of federal agencies as

part of a program created by Congress in 1996 and designed to protect the small business owner from excessive or arbitrary regulation.

The Small Business Administration’s Regulatory Fairness Hearing — one of 20 to be held around the country this year — featured more dark-suited bureaucrats than disgruntled business owners, but the entrepreneurs seemed happy to have a place to air their frustrations.

“I’ve been waiting nine months to get the SBA in Denver to respond to a decision in Washington that overruled them,” said John McSweeney, the owner of an Englewood insurance business. “Maybe this will get them going.”

Manuel Rosales, a deputy ombudsman for the SBA, said the regulatory fairness hearings are more than just a chance for business owners to vent steam.

“We do two things,” he said. “We ensure an equitable and fair hearing and a fair resolution to the dispute.”

Rosales, who conducted the Denver hearing in the absence of SBA Ombudsman Michael Barrera, said while the SBA doesn’t have the power to order agencies to take specific actions, it can be of great help in cutting through red tape.

“We bring the concerns to the top of the agencies,” he said. “It speeds up resolution of the problems.”

The obudsman’s office, which was created in 1996 as part of the Small Business Regulatory Fairness Act, reports to Congress each year with a report card on the responsiveness of each of several dozen federal regulatory agencies.

“We have to report back to Congress,” Rosales said. “If an agency hasn’t been responding to complaints, Congress will hear about it. Those agencies have to answer to Congress also.”

McSweeney, who has a contract to manage several agencies for Farmers Insurance but is not a part of that company, took full advantage of his five-minute presentation to the SBA’s ombudsman, telling the bureaucrats that an attorney with the local SBA office is still trying to deny him a loan to buy a building in spite of an SBA judge’s ruling that the local office erred in denying the loan. The local office determined that McSweeney’s relationship with Farmers, a large company, precluded him from benefits afforded to smaller businesses.

McSweeney said his business was erroneously determined to “not be a small business,” but that an administrative judge ruled that the local office used the wrong criteria in determining the size of the business.

The judge ordered the Denver office to re-figure the business size, but it hasn’t been done, McSweeney said.

“I already bought the building,” he said. “I have the private lenders in place for that portion of the cost and I’ve arranged bridge financing until the SBA loan comes through. We still haven’t closed on the building because on an SBA attorney in Denver. I have a big investment at risk.”

The SBA wasn’t the only agency targeted in the hearing.

James F. Wilson, the owner of a small medical-device manufacturing company, said the Food and Drug Administration discriminated against small businesses when it determined that companies which “re-process” disposable medical supplies must conduct the same clinical trials on humans as those producing the original equipment. Wilson’s company, Medi-Staff, re-processes a small device known a pulsoximeter — a sensor placed on a patient’s finger while reading a pulse.

Wilson said the FDA’s decision to require human trials on a re-built device that has already been approved as original equipment is helping drive up medical costs. “A 300-bed hospital can save over $250,000 a year by using the re-processed pulsoximeter,” he said.

Wilson’s delays in dealing with the FDA have also cost him money and put his company in jeopardy. “If they continue to require human trials, we will be out of business,” he said.

In Wilson’s case, the hearing at least got him an audience with an FDA official. The two spent the remainder of the afternoon huddled at a table outside the hearing room in an attempt to resolve the problem.

Patricia Barela Rivera, the director of the SBA Colorado District, said the ombudsman program was created to protect the nation’s 25 million small business from “over-regulation, repetitive audits or investigations, excessive or unfair fines and threats or retaliation” by federal agencies.

“We want to hear about regulatory problems,” she said. “Small business is the backbone of America.”