• Federal, State & Local Government Law
  • Public Financing
    • Federal Financing
    • State Financing
    • Local Financing
  • Government Contracts and Technical Assistance
  • Lobbying
  • Administrative Agencies
    • The Limited Role of Administrative Agencies
    • The 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 specific government branches. 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 & 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 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. In a poor economy, businesses lay off employees, and people without jobs tend to vote against incumbent politicians. Therefore, politicians have created a variety of government programs that 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 state, local, and federal sources.

Federal Financing

The federal government offers a number of assistance programs primarily through an organization 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 for 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

There are various public sources of financing in Texas under the direction of the Texas Commerce Department, which has domestic business development, international business development, tourism, workforce, and public information divisions to address specific financing needs. Besides having loan programs of its own, the Department is a valuable resource for information on other agencies and their programs.

Other sources of Texas finance and assistance include the Texas Economic Development Commission, Office of Small Business Assistance, Enterprise Zone Board, Small Business Incubators, and the Agriculture Department's Marketing and Agribusiness Development Division. Each of these organizations has its own standards for determining who qualifies for economic assistance and how much money is available for particular ventures.

Local Financing

Many local government units provide assistance in various forms to new businesses. Some offer technical assistance or financial services, while others offer tax credits or loan packaging assistance. Generally, larger cities have the most experience assembling financial packages to encourage businesses to locate within their boundaries, but many other municipalities are amenable to negotiating with potential businesses. 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, Texas' state government is one of the largest corporations in Texas. Despite these figures, government entities frequently are overlooked by business managers as sources 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. To receive copies of various federal agencies' requests for bids, a business files an application with each federal agency with which the business wants to contract. Many of these federal agencies have special programs specifically designed to assist small and minority-owned businesses because regulations require that a certain percentage of all government contracts be reserved for such 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 Small Business Institute, a coalition of college business schools and small business people is another resource; it offers management training seminars and various other services. 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 purchase products.

Lobbying is the business of persuading politicians to pass laws favorable to a particular person or industry 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 in their area of interest.

There are laws governing lobbying at both the state and federal level, including requirements for lobbyists to identify the clients on whose behalf they lobby. 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 Texas State Legislature must register with the Texas Ethics Commission. They also must inform the Commission about themselves and about the party they intend to represent to the legislature, and must provide the Commission with a monthly report following every month the legislature is in session. These monthly reports must detail how much money was spent in efforts to persuade elected officials, how that money was raised, and exactly how that money was spent. Supervision and enforcement of these regulations have 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 are often 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 will ever be asked to testify before Congress or to personally advise the President. Instead, the decisions that most directly affect the average business usually 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 so 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 administrative agencies.

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 Texas State Legislature that makes all state laws. Realistically, it would be impossible for either of these 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 that 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 Procedure Act; state agencies, similarly, must follow state administrative rules. The statutes creating the agency can sometimes be attacked as an overly broad delegation of legislative power or a particular agency action can be attacked as overstepping the proper bounds of the agency's authority. Thus, an important first step in challenging an agency action is to ask whether the agency has been properly delegated power and whether that power is being properly exercised. 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 has unique rules that apply to it, and each offers affected parties a different degree of input into the agency's decision-making process. Thus, the first step for any business wanting input into a particular agency action is to determine into which category the action fits. The determination of what to call the agency action is rarely simple. The category that the particular action fits into determines how many procedural safeguards the agency must observe. 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 done quite informally after a period of notice and comment. An agency gives notice 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 businesses can have a voice in formulating new rules. Unfortunately, an agency is not required to heed comments received. Because the agency is not required to follow any of the comments received, an affected party may try to argue that what the agency is doing is not rulemaking at all, but instead is adjudication. 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 often have minimal procedural protection. For example, an agency might be required only to 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 ever 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 the 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). The FOIA gives unprecedented access to government information. 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 a 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 information

• 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.

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).

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).

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

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).

The United States Small Business Administration (SBA), P.O. Box 15434, Fort Worth, Texas 76119, offers government publications on all aspects of business planning and organization, such as the U.S. Government Purchasing and Sales Directory, which are available by sending a self-addressed stamped envelope to the Small Business Administration Office of Procurement and Technical Assistance.

Texas Commerce Department, Business Development, 1700 Congress North #130, Box 12728, Austin, TX 78711-2728, (512) 936-0222, TDD (512) 936-0555.

General Service Administration, 18th & F Streets N.W., Washington, DC 20405, (202) 501-0705; Region VII Fort Worth, 819 Taylor Street #7A, Fort Worth, TX 76102, (817) 334-2321.