Senators question government decision to hire research firm that used flawed data to estimate cost of regulations

Sens. Jeanne Shaheen (D-NH) and Heidi Heitkamp (D-ND) want to know why the federal government hired an analytics and research firm that they claim once used flawed data to estimate the cost burdens of regulations on small businesses.

The government recently awarded a federal research contract to Interaction Analytics, owned by Nicole Crain and W. Mark Crain. The company was hired to examine 26 major rules from the 2016 Office of Management and Budget’s (OMB) report on regulatory costs and benefits. Further, the firm was tasked to draft a plan to evaluate the relative burden on small businesses.

However, the senators take issue with that fact that the Congressional Research Service and the Government Accountability Office criticized a 2010 survey by the firm “for using unreliable methodology and flawed data to estimate the overall cost of federal regulations.”

In a letter to Major Clark, III, acting chief counsel of the Small Business Administration’s Office of Advocacy, the senators asked for more clarity regarding the agency’s decision to hire this company. They asked Clark to answer specific questions about the hire.

According to the Congressional Research Office, the report — called “The Impact of Regulatory Costs on Small Firms” — based most of their estimates on a methodology that relied on the World Bank’s regulatory index.

“One of the authors of that index said that the Crains ‘misinterpreted and misused the data, resulting in an erroneous and overstated cost estimate.’ For another part of their estimate, the Crains used the highest cost estimates from OMB reports because they believed ‘government agencies tend to be conservative in estimating regulatory costs,’” the senators wrote in the letter.

As the SBA’s Office of Advocacy is tasked with conducting research on issues important to small businesses, the senators said it is imperative that the office has the proper protocols in place to ensure that the research and information disseminated to policymakers and the public is credible.