[Federal Register Volume 61, Number 47 (Friday, March 8, 1996)]
[Proposed Rules]
[Pages 9420-9422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5484]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 260
[Docket No. 950915231-6051-02; I.D. 120195B]
RIN 0648-AI45
Privatization of In-plant Seafood Inspections and Related
Services
AGENCY: National Marine Fisheries Service, National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Notice of availability; public meetings.
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SUMMARY: On September 22, 1995, NOAA published a notice of inquiry in
the Federal Register regarding in-plant seafood inspections and related
services under the Agricultural Marketing Act of 1946 (the Act). It
outlined an action NOAA was considering to provide direct inspection
services by a private, for-profit entity, with continued NOAA
oversight, and invited written recommendations and comments. The
document also noted that NOAA had contracted for a study to determine
the feasibility of implementing the plan. This document provides a
summary of the comments and recommendations, the results of the study,
describes NOAA's future actions, and announces meetings.
DATES: See SUPPLEMENTARY INFORMATION for meeting dates.
ADDRESSES: For copies of the feasibility study, contact the Director,
Office of Industry Services, 1315 East-West Highway, Room 12553, Silver
Spring, MD 20910. See SUPPLEMENTARY INFORMATION for meeting locations.
FOR FURTHER INFORMATION CONTACT: Sam McKeen, Director, Office of
Industry Services at (301) 713-2355.
SUPPLEMENTARY INFORMATION: On September 22, 1995, NOAA published a
notice of inquiry in the Federal Register (60 FR 49242), regarding the
way it delivers in-plant seafood inspections and related services under
the Act. The inquiry outlined an option NOAA was considering and
invited written comments and suggestions. Under that option, direct
inspection services would be provided by private parties with continued
NOAA oversight. The inquiry recommended that comments take into account
the following criteria that would fundamentally affect the viability of
a privatized inspection program: (1) fair treatment of Government
inspectors currently providing the services; (2) minimum modification
of relationships with customers subscribing to the current program, and
assurance that the internal operations of these customers need not be
changed to accommodate a privatized system; (3) continued recognition
by foreign governments of official indicia as indicating safety,
wholesomeness and acceptability of products to which the indicia are
affixed or to which they relate; (4) acceptance of the integrity of the
privatized inspection program by harvesters, processors, wholesalers,
retailers and consumers; and (5) likelihood of the continued economic
viability of the private entity (or entities) providing the services
into the indefinite future.
The approach that NOAA described in some detail involved the
establishment of a private, employee-owned Corporation (the
Corporation) that would acquire the voluntary seafood inspection
program (the Program) and operate it subject to the oversight of NOAA.
NOAA employees could become employees of the Corporation if they so
elected, and would acquire an ownership interest therein by means of an
Employee Stock Ownership Plan (ESOP). The Corporation would not
necessarily be the only authorized entity to provide privatized
inspection services. Other entities could apply to the Secretary of
Commerce for authorization, and if they met applicable requirements
(e.g., number of certified inspectors, percent of income from one
source), they would also be authorized to conduct the services.
The inquiry also mentioned NOAA's plan to contract for a study to
determine the feasibility of establishing an ESOP. It stated that if
the study, discussions with affected or interested persons, or comments
resulting from the inquiry indicate that the five criteria essential
for the success of a privatized system are not likely to be met by the
preferred option, NOAA will pursue other options for reinventing the
way it delivers the service to the public.
Under NOAA Administrative Order 205-11, 7.01, dated December 17,
1990, the Under Secretary for Oceans and Atmosphere has delegated
authority to sign material for publication in the Federal Register to
the Assistant Administrator for Fisheries, NOAA.
This document has been determined to be not significant for
purposes of E.O. 12866.
Comments
The inquiry generated 88 responses during the formal comment
period, most of which addressed the general concept of privatization.
The responses included comments from seafood processors, seafood trade
organizations, food marketing organizations, consumer advocacy groups,
and interested agencies of the Federal Government. Responders
categorized themselves as follows:
Seafood processors/wholesalers/distributors - 32
Employees - 29
State and Federal Government agencies - 7
Seafood retailers - 6
Trade associations - 4
Consumer groups - 2
Members of congress - 2
Private consultants - 2
Private citizens - 2
A total of 86 comments opposed privatization (whether by ESOP or
other, related means). Several responders who are current participants
in the program stated that if the program were privatized, they would
drop out of the program and hire their own inspectors. Comments that
specifically addressed the ESOP proposal opposed it. Of the comments
opposing transfer of the inspection function to the private sector, 59
did not discuss other options that might be preferable to the current
situation. A further 13 of the negative comments recommended
transferring the program to the U.S. Department of Agriculture or the
U.S. Food and Drug Administration. Discussions with those agencies
regarding transfer of the program were conducted prior to publication
of the notice of inquiry in the Federal Register. Neither agency was
interested in taking over the
[[Page 9421]]
program. NOAA has, therefore, concluded that attempting to pursue that
option further would not be useful. An additional 14 commenters who
opposed transferring the program to a for-profit entity suggested
formation of a ``government enterprise'' as a mechanism to ensure that
the criteria outlined in the inquiry could be met while allowing a
change in program structure to increase its efficiency.
Two comments supporting privatization were received from private
inspection entities, one of which was a not-for-profit organization
currently involved in standards-setting and inspection activities
pursuant to government programs throughout the world. That organization
expressed interest in assuming administration and operation of the
entire voluntary seafood program.
Generally, each response opposing the proposal addressed concerns
categorized and quantified as follows along with some of the comments:
(1) The integrity of the program would be in jeopardy--44 comments
Concerns revolve around the integrity of a private company funded
by the very industry it inspects. This may be a conflict of interests.
Federal inspectors are perceived to be objective.
(2) Acceptance by foreign markets either would not occur or was
doubtful--38 comments
``Failure to maintain foreign confidence in our U.S. inspection
program could result in serious economic problems for U.S. industry * *
*this puts nearly 500 jobs and approximately $200 million of annual
business [of the commenter] unnecessarily at risk.''
(3) The cost of the service would increase--34 comments
Commenters feel that Commerce fees have been based on a realistic
non-profit basis and that private inspection is bound to cost more. The
felt that seafood is already expensive; it would be impossible to
absorb the extra costs and difficult to pass these additional costs
along to the public.
(4) The proposal is contrary to the purpose of reinventing
government--53 comments
One of the commenters stated that the proposal is not consistent
with the clear intent of the Federal Workforce Restructure Act of 1994,
H.R. 3345, that was signed into law with the clear mandate of promising
``the American people that we would create a Government that works
better and costs less.'' (Bill Clinton, March 30, 1994)
(5) A private entity conducting inspection services would not be
accepted by consumers--23 comments
Commenters are concerned about losing the ability to use the
Federal inspection marks. They feel that it is the best way to
communicate to their customers that their products meet Federal quality
standards.
(6) The proposal would result in unfair treatment of inspectors and
their livelihood may be compromised--23 comments
Commenters are concerned whether employee wages and total benefits
would be equal to their current wages and benefits; inspectors would
receive credit for seniority; privatization would offer equal pay and
benefits; and whether employees would be treated fairly. They felt that
failure to provide equal pay and benefits would lead to disruption in
the work place.
(7) The economic viability of the program would be lost--20
comments
One commenter stated that if privatization of the inspection
services occurs, their USDC inspection programs, or equivalent would
have to be discontinued.
The Feasibility Study
The feasibility study analyzed seven options based on the degree to
which they satisfied several criteria which, by NOAA's instruction,
were unweighted in terms of importance. These criteria were based on
those identified in the Federal Register document published on
September 22, 1995. The study then summarized the feasibility of
implementing these options. The options were devolution (turning
inspection services over to the states), government corporation,
contracting out, turning the program over to a non-profit corporation
or to one of three types of private for-profit corporations. The study
contractor researched existing ESOPs and other corporations and
reviewed the program's legislative authorities and requirements. The
study contractor interviewed inspectors, industry members who
participate in the voluntary inspection program, and trade
associations. The final report was formally presented to NOAA on
November 30, 1995.
The contractor noted in its letter transmitting the final report
that if preserving program integrity and minimizing negative impact on
the inspection program customers are priorities, the analysis suggests
that the Government Corporation option would be preferred. If, on the
other hand, Commerce/NOAA's priority is to the maximize the financial
access of the new organization and achieve the target employee
reduction (the original impetus for the privatization analysis), the
ESOP/Strategic Investor option (described in the document published in
the Federal Register on September 22, 1995) best satisfies this
combination of criteria. The report recommended that NOAA further
analyze these two preferred options to determine which best satisfies
the outlined criteria. Copies of the report are available from this
office (see ADDRESSES).
NOAA's Future Action
In light of the comments received on the proposal to transfer
inspection responsibilities under the voluntary seafood inspection
program to a private, for-profit entity, NOAA has decided that it would
be more in keeping with the spirit of the National Performance Review
(NPR) and the interests of seafood producers and consumers to look to a
different type of enterprise to continue this important work. The range
of acceptable options has shifted as a result of the comments received.
A for-profit, private enterprise is no longer under consideration.
Possible options now appear to range from Government enterprise to a
not-for-profit, private enterprise combining recognized experience and
integrity with the technical and financial ability to assume
responsibility for the entire program. The Government enterprise could
take the form of a Government corporation or a ``performance- based,
consumer-oriented'' agency extracted from NMFS supervision, directly
responsible to the Administrator of NOAA or his/her designee and
relieved from unnecessary bureaucratic constraints.
The Government corporation would be a separate, legal entity,
created by Congress pursuant to the Government Corporation Control Act
of 1945. The Government Corporation Control Act is not a general
incorporation statute, so that each Government corporation possesses
only those powers set forth in its charter, which itself must be an Act
of Congress. The feasibility study recommended some charter provisions
for a Government corporation that would be useful. These included
authority to retain and use revenues without fiscal year limitation,
exemption from the Federal Property and Administrative Services Act,
and exemption from employee limitations without changing the Federal
status of the employees.
The NPR is developing a series of initiatives in the context of
constrained resources where good customer service will be an
imperative. Creating performance-based agencies is one of these
initiatives. The NPR is assisting agencies to change their internal
cultures to create these performance-based, customer-oriented
organizations.
[[Page 9422]]
The performance-based, customer-oriented organization would no longer
be a component of the National Marine Fisheries Service, but would
remain a Government agency within NOAA, providing services to the
public under the policy oversight of the Administrator or his/her
designee. It would be headed by a chief executive officer who would be
accountable for achieving results. The new agency would have statutory
authority to vary the rules for procurement, employees, etc., that
ordinarily apply to federal agencies. Creation of a performance-based
agency, like the creation of a Government corporation, would require
Congressional action.
Implementation of the not-for-profit option, would require
legislation authorizing NOAA to enter into a binding, long-term
arrangement with a selected, private entity. The legislation would also
establish conditions relating to the qualifications of the private
sector partner, the rights of employees to transfer to the private
entity, the legal acceptability of the examinations and certifications
of the private entity, measures to ensure the integrity of the system,
etc.
As indicated in the inquiry, the support of current customers and
other interested persons is essential to the ``reinvention'' of the
seafood inspection program in the time frame planned. NOAA desires to
accomplish this ``reinvention'' in the simplest possible way that is
acceptable to industry and consumers. Therefore, it will conduct
additional meetings with interested persons and organizations at
various locations in the United States according to the following
schedule to provide all interested persons an opportunity to present
further views on the remaining options. Prior to these meetings, a
draft discussion paper detailing one of the Government enterprise
options, this document and information about the specific meeting
locations will be mailed to those who attended earlier meetings or
received earlier correspondence from this agency on this issue. Other
interested parties may obtain this information by contacting this
office (see ADDRESSES).
The meeting dates and locations are as follows:
March 25, 1996--St. Petersburg, FL; March 26--Miami, FL; March 27--
Mobile, AL; March 28--Indianola, MS; April 1--Boston, MA; April 3--
Chicago, IL; April 4--Norfolk, VA; April 5-- Philadelphia, PA; April
9--Los Angeles, CA; April 10--Seattle, WA.
Dated: February 29, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
[FR Doc. 96-5484 Filed 3-7-96; 8:45 am]
BILLING CODE 3510-22-F
