Expand The Use of Waivers to Encourage Innovation

Expand the Use of Waivers to Encourage Innovation

Background

While law and regulation are essential to good government, their uniform
application can stifle innovation, waste resources, and stymie rather
than fulfill program objectives. State and local governments are often
frustrated by federal requirements that offer little or no benefit to
communities that do not "fit the mold" for which the requirement was
created.(1) Categorical grants from the federal government may require
activities or levels of expenditure for specific purposes (e.g., special
education, drug rehabilitation) in every state regardless of need or
community priorities. The enabling legislation usually prohibits federal
agencies or state or local governments from reprogramming scarce funds
to meet the goals of the program. Or overly detailed legislation may
undermine implementation. For example, agencies administering any of the
federal government's programs for the poor must verify many details
about people's lives. They must verify that a family receiving funds
under the Aid to Families with Dependent Children program does not own a
car worth more than $1,500 in equity value. To give the same family food
stamps, it must verify that the family doesn't own a car worth more than
$4,500 in market value. Medicaid specifies a range that it allows for
the value of a recipient's car. There are exceptions for each
program."Why can't we talk about the same car in all three programs?"
queried Vice President Gore.(2) With a system of waivers, it could be
done.

Federal agencies encounter similar frustrations with the dictates of
central management agencies, such as the Office of Management and Budget
(OMB), the Office of Personnel Management (OPM), and the General
Services Administration (GSA). These agencies are responsible for
implementing governmentwide policies. Like state and local governments,
federal line managers often find these rules and regulations
inapplicable to their needs. A frequent example expressed in the Vice
President's Town Hall meetings is the use of staffing ceilings that
restrict civil service hiring and therefore force agencies to contract
for services that would be more economically performed in-house.

A few agencies (Department of Health and Human Services, Department of
Defense (DOD), Internal Revenue Service) have been granted some latitude
under research and demonstration authorities to waive non- statutory
requirements--largely with positive results. One success is the
Management Efficiency Pilot Program (MEPP) at the Department of Veterans
Affairs. Established in 1987, MEPP approved over 1,000 waivers resulting
in improved veterans service, better resource utilization, millions in
cost savings, and improved employee morale.(3) Unfortunately this
increased discretion has not spread widely throughout government.

Each of the numerous laws, regulations, rules, and policies was
motivated by rational, well-intended, and fair-minded desires to serve a
specific public purpose or to solve a particular problem.  Taken
together, however, they can create more problems than they solve.
Solutions to isolated problems often have unintended consequences, often
making a situation worse than the original problem.

One Size Fits All.

Our system of laws and regulations can never be perfect. First, it is
exceedingly difficult to create laws and regulations that fit the wide
range of conditions found across America. Those requirements that fit
"on average" may be dysfunctional in situations that are not typical.
Second, laws and regulations from different parts of the government can
and do result in conflicting or incompatible requirements. For example,
food industries may have difficulty meeting both the Food and Drug
Administration's requirement for equipment that is easily cleaned and
the Occupational Safety and Health Administration's requirement for
equipment with noise suppression. Third, as conditions, circumstances,
and public needs change, laws and regulations become less effective and
appropriate, even if they were initially well-drafted. As societal
change accelerates, this becomes an increasing problem.

Exceptions? Change the Law.

The formal legal mechanisms to resolve these problems are changes in the
laws and regulations or the pursuit of judicial relief. These processes,
however, are time consuming, expensive, and uncertain.  Major statutory
or regulatory changes can take years, and will not be undertaken unless
and until the authorities are truly convinced of the need for change.
Successful challenges to existing laws and regulations require
resources, expertise, and stamina to endure lengthy and often
frustrating appeals. Many potential petitioners are intimidated by the
high costs and slim chances of a successful challenge. Instead, a state
or local government may choose not to apply for a federal program, or a
federal manager may give only minimal compliance or lip service to
irrational restrictions. In the end, the results sought by the Congress
are only achieved at the cost of decreased efficiency and effectiveness,
or are not achieved at all. The solution is waiver authority, which has
the potential to alert authors of laws or regulations to the need for
change.

Experience with DOD's Model Installation Program, the reinvention labs
of the Department of Veterans Affairs, and the Forest Service indicates
that the returns from more liberal waiver approval are substantial and
the risks of abuse and evasion are low.

Need for Change

There is an overwhelming need for appreciable relief from ineffective
and unnecessary requirements, whether too general, ill-considered--
counterproductive in some instances--or obsolete. Cases in which strict
adherence to law or regulation would result in unintended and
undesirable consequences should be of immediate interest to lawmakers
and regulators. Such circumstances provide opportunities for fruitful
reforms. A proposed waiver in furtherance of the statutory intent,
limited in scope and duration, and with measurable results is an
excellent means for testing an alternative regulatory scheme. It is in
the interest of lawmakers and regulators, as well as affected parties,
to encourage carefully crafted waivers and an expeditious review
process. In the best sense, such waivers are experiments for
government's reinvention, not its wholesale abdication.

Improve Ways to Meet Program Goals.

In the recently enacted Government Performance and Results Act (GPRA),
Congress recognized this need and instituted a process for "granting of
managerial accountability and flexibility waivers; that is, the
opportunity to be exempt from specific types of non-statutory
administrative procedural requirements, in return for achieving greater
program results than would otherwise occur."(4) This provision of the
GPRA applies to agencies in the executive branch with specific
limitations. "The requirements eligible for waiver are exclusively those
regarding the internal allocation and use of resources. They do not
include any requirements that directly affect persons or activities
outside the agency."(5)

While the Congress "believes that the Act provides an important first
step in a direction that may pay significant dividends,"(6) realizing
the full potential of waivers requires a greater effort by both the
executive and legislative branches to extend the waiver process beyond
the administrative activities of Federal agencies. In addition to the
GPRA, other examples of current legislation providing waivers include
the Economic Enterprise Zone bill with broad, general waiver authority
and the Goals 2000: Educate America bill with tighter limits on the
granting of waivers.(7)

A controlled waiver process must be based on the legal authority being
waived. Except when the courts intervene, only Congress can legislate
the conditions under which a statutory requirement can be waived.
Consideration of legislative requirements should include the conditions
under which waivers and exemptions would be appropriate; such provisions
should be incorporated into the statute. Generally, it should encourage
variations that improve chances for achieving intended program results.
Similar consideration should go into the design of regulatory programs.
A process that encourages waivers in furtherance of the statutory
intent, limited in scope and duration, and with measurable results, can
only foster the potential effectiveness and efficiency of regulation.

The controlling process for the waiver, however, should not in itself
become a bureaucratic nightmare. For example, the two-year waiver
process for certain state Medicaid grants requires 18 months of work.
So state officials have to reapply after only six months. As a result,
timeliness and the volume of paperwork required need to also be factors
in designing such a process.

Cross References to Other NPR Accompanying Reports

Strengthening the Partnership in Intergovernmental Service Delivery,
FSL02: Reduce Red Tape Through Regulatory and Mandate Relief.

Mission-Driven, Results-Oriented Budgeting, BGT05: Provide Line Managers
With Greater Flexibility to Achieve Results.

Rethinking Program Design, DES: Preamble.

Executive Office of the President, EOP02: Modify the OMB Circular
System.

Department of Health and Human Services, HHS02: Reengineer The HHS
Process for Issuing Regulations.

Department of Veterans Affairs, DVA08: Decentralize Decisionmaking
Authority to Promote Management Effectiveness.

Endnotes

1. See the discussion on federal mandates and regulatory relief in the
NPR Accompanying Report Strengthening the Partnership in
Intergovernmental Service Delivery.

2. Vice President Al Gore, From Red Tape to Results: Creating a
Government That Works Better and Costs Less (Washington, D.C.: U.S.
Government Printing Office, September 1993), p. 38.

3. See recommendation on decentralized decisionmaking in the NPR
Accompanying Report Department of Veterans Affairs. See also U. S.
Department of Veterans Affairs, Management Efficiency Pilot Program
Final Report (Washington, D.C., 1991).

4. U.S. Congress, Senate, Government Performance and Results Act of
1993, Report of the Committee on Governmental Affairs, Report No.
103-58 (Washington, D.C., undated), p. 17.

5. Ibid.

6. Ibid.

7. Economic Enterprise Zone Act of 1993 (H. R. 850) and the Goals 2000:
Educate America Act (S. 846).

8. See the NPR Accompanying Report Department of Health and Human
Services, HHS02: Reengineer the HHS Process for Issuing Regulations.