There have long been cries from the business community that excessive federal regulation can strangle a company’s ability to compete and thrive in the market. But currently there seems to be a shift in Washington, D.C., as lawmakers actually pay attention to these concerns.
According to Talbot Gee, executive vice president and COO of Heating, Airconditioning, and Refrigeration Distributors International (HARDI), “There is an overtone in Washington, D.C., with concern about overreaching regulations.”
Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America (ACCA), noted that while the interest in regulations has recently been gaining more attention, this awareness has occurred in D.C. before. In the mid-90s, McCrudden said, the House of Representatives tried to streamline the rulemaking process and remove redundant rules on a weekly basis. “I think this is a similar attempt to make for a more business-friendly environment,” he said.
McCrudden added, the renewed interest on reducing regulations “is not just from Congress.” He explained, “The Obama administration came out at the end of January with an executive order to look at all rulemakings that are pending.” This order, E.O. 13563, directed federal agencies to take into account the cost of cumulative regulations. However, according to McCrudden, this appeared to be an attempt by the Obama administration “to co-opt the issue and show support for small business,” and he noted that the primary force behind regulatory reform is coming from the Republican-controlled House of Representatives.
According to Dave Calabrese, senior vice president of policy for the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), overregulation has traditionally been a top issue for Republicans, but is now also gaining the attention of Democrats. “The economy is not doing well, so if the government is overregulating, that’s not a preferable outcome for either party,” he said. Calabrese noted that one example of the desire to scale back regulations can be seen in the lack of climate change legislation. “It’s not going to happen this year, and many Democrats agree with Republicans that it’s not a good time to do it,” he said.
HVAC is a heavily regulated industry, and each facet of the industry - contractors, distributors, and manufacturers - is engaging with government in different ways to alleviate the effects of regulation on their businesses.
CONTRACTORS BATTLE UNCERTAINTYAccording to McCrudden, one of the biggest problems for contractors in the current regulatory environment is uncertainty. Not knowing which regulations will be enacted, extended, or enforced in the future makes it difficult to plan for the future of their businesses, he explained.
For example, McCrudden pointed to the ever-changing executive orders issuing labor regulations. “There has been a battle of executive orders over the past few years,” he said. “When President Clinton came into office, he signed an executive order that required government contractors to post notices on the project about the employees’ ability to organize and form a union, and he also required Project Labor Agreements [PLAs] for large infrastructure projects.
“When Bush came in, he struck those both down with his own executive order. And when Obama came in, he issued an executive order which, interestingly enough, did not require project labor agreements but recommended the use of project labor agreements.”
Obama’s latest order, E.O. 13502, specifically encourages the use of PLAs in construction projects that cost the federal government $25 million or more. The PLA is an agreement between the government (or owner of the infrastructure) and the workforce that ensures there will not be strikes on the project. According to McCrudden, PLAs are “highly controversial to many folks and tend to prefer the use of union contractors on large-scale projects.”
While this is troubling for contractors, McCrudden also noted that lack of enforcement of regulations can be even more troubling. “On the regulatory side, ironically, one of the things we’ve been concerned about is the lack of enforcement on Section 608,” he said. “Compliance is not cheap, and the noncompliant contractor has a leg up.”
Additionally, McCrudden noted that ACCA was recently asked by the office of Rep. Reid Ribble, R-Wis., to comment on a draft of legislation that he is sponsoring. The bill, H.R. 1281, which Ribble introduced in late March, is titled the Restoring Economic Certainty Act of 2011, and it would put a moratorium on certain rulemaking actions. ACCA has not yet taken a formal position on the bill.
DISTRIBUTORS SUPPORT LEGISLATIONAccording to Gee, HVAC distributors are in a unique situation because they are regulated by so many departments of the federal government, including the Department of Energy (DOE), Environmental Protection Agency (EPA), Department of Labor (DOL), Department of Transportation (DOT), Occupational Safety and Health Administration (OSHA), etc. “It’s almost limitless, so our guys get hit in many different angles from many different directions,” he said.
As a result, HARDI has recently begun to focus more of its efforts on supporting the repeal of burdensome regulations on businesses. At HARDI’s annual legislative fly-in, held in Washington, D.C., in mid-May, the association encouraged its members to seek Congressional support for two bills aimed at curbing regulation.
Specifically, HARDI expressed support for the REINS Act (H.R. 10/S. 299) and the DOE-EPA merger bill (S. 892). (Neither AHRI nor ACCA has taken a formal position on these bills.)
The REINS Act, which stands for “Regulations from the Executive in Need of Scrutiny,” is sponsored by Sen. Rand Paul, R-Ky., and would require congressional approval for major rules created by the executive branch. It defines a major rule as one that is likely to result in an annual effect on the economy of $100 million or more. The DOE-EPA merger is a piece of legislation introduced by Sen. Richard Burr, R-N.C., which would consolidate the DOE and EPA into one federal agency.
Although it is unlikely that either bill will pass with the current Congress and administration, HARDI promoted both bills because “they are of interest to our members,” explained Jon Melchi, HARDI manager of government affairs. “Sen. Burr’s bill is attractive because many of our products are governed by both the DOE and EPA, which can cause confusion when changes are made by either agency. The REINS Act is in the interest of our members because it gives them an opportunity to tell the legislative branch, who is in charge of oversight, exactly how some of these rules and regulations can impact a business.”
Overall, Gee said, “The message that there needs to be some oversight for regulations that are especially burdensome to small businesses resonated very, very well with legislators.”
MANUFACTURERS NEGOTIATE FOR RULE CHANGEAccording to AHRI’s Calabrese, the manufacturers’ association is also opposed to frivolous and unnecessary regulation. He noted that manufacturers are accustomed to federal regulation, but acknowledged that it can create much more of a burden for small businesses. “Smaller manufacturers have a challenge,” he said. “In a large company, they can have an EPA person, an OSHA person, etc. In a small company with a handful of employees, they don’t have that luxury, and so they look to their trade association for assistance.”
Currently, Calabrese said, “AHRI is focused on working with DOE to change a rulemaking that was issued earlier this year.” This rulemaking, which was issued in March, proposed changes to the DOE’s certification, compliance, and enforcement regulations of certain commercial equipment. Calabrese noted that this is a very complex rulemaking, but he explained that, in simple terms, the issue centers around the definition of what a basic model is and what models manufacturers must test for DOE certification. As proposed, the new rule could potentially require manufacturers to test “endless combinations” of their equipment instead of the “most common” combination, Calabrese said.
He added that, for commercial products, the problem is even more acute because there are potentially hundreds of thousands of combinations of refrigeration and air conditioning equipment that DOE could require manufacturers to test. “On the commercial side, they typically test a representative unit,” he said.
According to Calabrese, the DOE has recognized that there is a problem with the rulemaking. “They responded by publishing an extension that delays implementation of the rule until January 2013 so we could sort this out,” he said. “We’re working with them, and we feel this is positive development.”
A NEW MOODFrom supporting anti-regulatory legislation to negotiating with federal agencies, many in the HVAC industry are seeking relief from excessive federal regulation. It remains to be seen if the new mood in the capital will result in actual relief for HVAC businesses, but there are hopeful signs on Capitol Hill.