• Federal, State & Local Government Law
  • Public Financing
    • Federal Financing
    • State Financing
    • Local Financing
  • Government Contracts and Technical Assistance
  • Lobbying
  • Administrative Agencies
    • Limited Role of Administrative Agencies
    • Administrative Process
    • The Role of Courts
    • Freedom of Information Act
  • Resources

Some businesses have frequent contact with government, but deal exclusively with one or more branches of government. Other businesses only have to deal with the government to get permission to embark on certain projects. This chapter focuses on areas in which businesses frequently come into contact with federal, state, and local governments, such as public financing, government contracts, lobbying, and dealing with administrative agencies. The Environmental Law Chapter examines issues relating to business interaction with agencies protecting the environment. The Intellectual Property and Computer Law Chapter discusses how a business registers a trademark with federal and state authorities. The Commercial Real Estate Law Chapter covers zoning and land use variances.

One of the government's primary interests is to expand the economy and increase opportunities for a wider cross-section of the population to participate in the economy. A variety of government programs aim to promote the interests of businesses. One of the most important means by which the government seeks to help businesses is by making available various forms of public financing so that businesses can expand and grow. Public financing is available from federal, state, and local sources.

Federal Financing

The federal government offers a number of assistance programs primarily through an agency called the Small Business Administration (SBA). Created by Congress in 1953 to help small businesses, the SBA provides financial, procurement, advocacy, and management assistance. Every year, the SBA guarantees bank loans totaling over three billion dollars for small businesses. For small businesses that qualify, SBA loans usually offer far more favorable terms than other types of loans. Most SBA loans are for a long period of time and have a relatively low interest rate. Despite their advantages, however, SBA loans are not right for all businesses: the SBA loan process usually takes longer than the conventional loan process, the SBA can require more personal guarantees and collateral, and the SBA sometimes restricts a business' ability to get additional financing as a pre-condition to the SBA loan.

State Financing

The California Trade and Commerce Agency is the state's lead agency for promoting economic development, job creation, and business retention in California. Various sources of public finance information and assistance may be obtained through this office. Other sources of public financing include California Small Business Financial Development Corporations, California's Enterprise Zone Program, the Office of Strategic Technology, the Office of Export Finance, and the California Small Business Development Center. Each of these programs or agencies has its own standards for determining who qualifies for economic assistance and how much money is available for which ventures. The California Trade and Commerce Agency has information available about many of these programs.

Local Financing

Many local government units provide various forms of assistance to new businesses. Some offer technical assistance or financial services, while others offer tax credits or loan packaging assistance. The Office of Business Development offers a wide range of programs and services designed to assist local governments in their business retention, expansion, and attraction efforts. California Main Street is a training and technical assistance program that helps communities revitalize their downtowns and neighborhood commercial business districts. A businessperson interested in programs offered in a given area should contact the business services or planning unit of the county or city in which the business is or will be located.

Of all the corporations in the United States, the single largest is the federal government. Similarly, California's state government is one of the largest corporations in the state. Despite these figures, government entities frequently are overlooked by business managers as a source of business opportunities. There are a number of ways a business can secure government contracts at the federal, state, and local levels.

On the federal level, each individual federal agency receives requests for bids from small businesses. Many of these federal agencies have special programs specifically designed to assist small and minority-owned businesses. Federal regulations require that a certain percentage of all government contracts be reserved for small or minority-owned businesses. The SBA provides assistance to small businesses in this regard by publishing a list called the Small Business Subcontracting Directory. The directory lists the major contractors to the federal government and which are most likely to be in need of subcontracting.

One of the missions the SBA takes most seriously is its goal of management assistance. To this end, the SBA offers a number of different programs from which businesses can obtain advice in such areas as marketing, buying, financial management and administration. Among these programs is the Service Corps of Retired Executives (SCORE), which connects small businesses with retired executive volunteers who offer counseling and advice. The SBA's Office of Procurement Assistance helps businesses get information about and develop strategies for selling to the federal government. The SBA also lobbies Congress and other federal organizations on behalf of small businesses.

There are several other government agencies of which a small business should be aware. For example, the various branches of the armed services offer assistance to businesses in securing defense-related contracts. The United States Army maintains an office known as the Defense Logistics Agency to assist small businesses with contracts. Also, the General Services Administration helps businesses that want to sell their products directly to the government by providing information on which government agencies wish to purchase products.

Lobbying is the business of persuading politicians to pass laws favorable to a particular person or agency and to defeat potential laws that are unfavorable to lobbyists or their clients. Despite the negative image that some lobbyists have, lobbying government on behalf of business is a long- respected tradition in this country. Many government agencies and departments rely on lobbyists to provide them with information necessary to make decisions and set policy. The government is not the large, faceless machine it sometimes appears to be. There are people behind every decision and every regulation, and many of these people are sincerely concerned about staying abreast of changes in the law and industry and in promoting the economic vitality of the area they oversee.

There are laws governing lobbying at both the state and federal levels, including requirements for lobbyists to identify their clients. Lobbyists who lobby the United States Congress are governed by federal lobbyist registration statutes. These laws require lobbyists to register with the Clerk of the House of Representatives and to maintain and periodically file detailed records of major contributors and all expenditures made by the lobbyist or lobbying organization. Lobbyists also are required to register with the Secretary of the Senate.

Lobbyists who lobby the California State Legislature must register with the California Secretary of State and provide information about themselves and about the party they intend to represent to the legislature. The registration includes a photo of the lobbyist and authorization from the party or group he or she is representing. Other information required details how much money was spent in efforts to persuade elected officials. Lobbyists must provide reports for each legislative session. Supervision and enforcement of these regulations has become tighter in recent years.

Many law firms have attorneys who specialize in lobbying. In addition, there are non-legal political consulting firms available to perform lobbying services. Their employees often are experts at influencing government.

When the average person imagines how the government makes decisions, he or she may envision the elected officials deliberating in session or the Chief Executive sitting in his or her office poring over papers. While it might be nice to have direct input into these decisions, few business managers are ever asked to testify before Congress or to personally advise the President. Instead, the decisions that most directly affect the average business are made by government administrative agencies set up to formulate rules and oversee their implementation. Because administrative agencies deal with a wide variety of substantive problems, it would be impossible to summarize in this Guide all the work they do. However, because administrative procedures are similar from agency to agency, a business manager should have a basic grasp of how agencies make decisions and the role he or she can play in dealing with the administrative process.

The Limited Role of Administrative Agencies

It is easier to understand the role of administrative agencies if one understands their constitutional limitations. Theoretically, Congress makes all federal laws and the California State Legislature makes all state laws. Realistically, however, it would be impossible for either of these two legislative bodies to handle every detail of the laws they create. Legislatures are forced to rely heavily on the advice of numerous administrative agencies in suggesting new laws and implementing existing laws. Frequently, Congress or the state legislature establishes an agency, gives it broad outlines to follow in regulating an industry, then delegates to that agency the power to make rules the industry must follow.

There are limits on how much authority Congress or the state legislature can delegate to administrative agencies. Once they are created, federal agencies must follow the federal Administrative Procedures Act; state agencies, similarly, must follow state administrative rules. The statutes creating an agency sometimes are attacked as an overly broad delegation of legislative power. A particular agency action may be attacked as overstepping the proper bounds of the agency's authority. Thus, an important first step if a business wants to challenge an agency action is to ask whether the agency has been delegated power properly and whether that power is being exercised properly. The next step in challenging an administrative action is to ask whether the agency has followed the requisite procedures.

The Administrative Process

Understanding how agencies work is easier if one understands that all agency actions must fit into one of three broad categories--rulemaking, adjudication, or informal agency action. Each of these categories of action has unique rules that apply to it, and each allows a different degree of input by the public into the agency's decision making process. Thus, the first step for any business wanting input into a particular agency action is to determine what kind of action it is, which is rarely simple. An agency may try to avoid the cumbersome procedure required for one type of action by trying to fit it into another category of administrative action that requires less formal procedure. Many legal disputes over agency action have centered around how to characterize what the agency is doing, rather than the actions themselves.

Rulemaking usually is quite informal, requiring only a period of notice and comment. An agency gives notice to the public that it is considering adopting a proposed rule and gives notice to interested parties that may want to comment on the rule. The agency considers the comments and then promulgates a final rule. Commenting on a proposed rule is one of the most direct ways in which a business can have input in formulating new rules. Unfortunately, an agency is not required to heed the comments received. For this reason, an affected party may try to argue that what the agency is doing is adjudication, not rulemaking. Under some circumstances, a new rule may be made only after the agency follows detailed procedures known as formal rulemaking.

Adjudication is a procedure very much like a civil court trial. Court rules and agency rules are not identical, but agency adjudication allows for direct examination of witnesses, testimony under oath before an administrative law judge, and the development of a substantial written record upon which the agency's decision must be based.

Informal agency action is a very broad category in which the procedures vary considerably. Parties to informal agency action have minimal procedural protection. For example, an agency might be required to do nothing more than give the reason for taking a particular action; it need not allow for public comments or other input into the process.

The Role of Courts

Although most administrative decisions are subject to judicial review, few are overturned on review. At the federal level, the United States Supreme Court has sent very strong signals to lower courts that they are not to overturn agency decisions absent very strong evidence that an agency acted erroneously. A business manager would be foolish to treat administrative agencies lightly because he or she assumes that a reviewing court will correct any mistakes the agency might make. The ability of reviewing courts to overturn agency action is so limited that the only sensible strategy is to assume that a case must be won at the agency level or not at all.

Freedom of Information Act

The Federal Administrative Procedures Act gives individuals, businesses, and organizations a very powerful tool to use in obtaining information from government agencies--the Federal Freedom of Information Act (FOIA). Under the FOIA, an agency must make available to the public:

• Final opinions, including concurring and dissenting opinions, as well as orders made in the adjudication of cases

• Statements of policy and interpretation adopted by the agency but not published in the Federal Register

• Administrative staff manuals and instructions to staff that affect any member of the public

This general list is only a starting point, however, as there are a number of specific exceptions to what agencies must provide to the public. An agency is not required to disclose:

• National security information

• Internal personnel rules and files

• Information specifically exempted by another statute

• Commercial or financial information

• Trade secrets

• Inter- or intra-agency memoranda

• Personnel, medical, or other files, the disclosure of which would violate personal privacy

• Law enforcement and investigation files

• Data about financial institutions

• Geological and geophysical information on oil and natural gas wells

The definition of agencies subject to the FOIA is quite broad and includes independent regulatory commissions, the executive office of the President, other executive departments, all government corporations, the Central Intelligence Agency, and the Federal Bureau of Investigation.

FOIA requests are usually made in writing to the agency. Most agencies process so many FOIA requests that they have designated an officer to process the requests. The Code of Federal Regulations publishes the names and addresses of FOIA contacts in many agencies. Procedures for seeing these documents are very informal and no written request is necessary. The party making the request is obligated to describe the records reasonably well and to pay photocopying and search fees. Frequently requested documents may be made available at established Information Reading Rooms.

These resources can provide information about public financing and doing business with the government.

California Trade and Commerce Agency, 801 K Street #1700, Sacramento, CA 95814, (916) 322-1394.

General Services Administration, 17th and D Streets S.W., Washington DC 20407; Region IX--San Francisco, 525 Market Street, San Francisco, CA 94105-2799.

Small Business Administration, San Francisco Regional Office, 71 Stevenson Street, 20th Floor, San Francisco, CA 94105-2939, (415) 744-6404.

Charles R. Bevers et al., The Entrepreneur's Guide to Doing Business with the Federal Government: A Source Book for Small and Growing Businesses (Prentice Hall, New York, NY 1989).

Barry L. McVay, Proposals that Win Federal Contracts: How to Plan, Price, Write, and Negotiate to Get Your Fair Share of Government Business (Panoptic Enterprises, Woodbridge, VA 1989).

Barry L. McVay, Getting Started in Federal Contracting: A Guide through the Federal Procurement Maze (Panoptic Enterprises, Woodbridge, VA, 3d ed., 1995).

Susan A. McManus, Doing Business with Government: Federal, State, Local & Foreign Government Purchasing Practices for Every Business & Public Institution, (Paragon House, New York, NY 1992).