Building standards - verification delivery model consultation: partial business and regulatory impact assessment:

3.3 Business

It is important to seek a wide variety of views from businesses across the construction and building standards sector. Some businesses and organisations were informally consulted through Working Groups on these proposals, others were met with individually.

LABSS have representatives in all relevant WGs and are fully aware of the proposal. LABSS is a not-for-profit membership organisation which represent Scotland's 32 local authority building standards services. The DMDG, consisting of approximately 6 representatives from LABSS, have met 22 times since its inception in early 2022. LABSS also have representatives in both the Verification Delivery Model Working Group and the Futures Board which have met 6 and 15 times respectively, both online and in person.

BSD have met with COSLA officials regularly to discuss the work of the Futures Board and development of the Building Standards Hub with an emphasis on how this will be funded through building warrant fees going forward.

Fife Council are members of the DMDG and are current hosts for the Building Standards Hub Pilot and participated in discussions around building warrant fees. SOLACE are also represented by the Chair of the Futures Board and have been kept updated.

A variety of organisations are represented in various WGs and have been involved in discussions at meetings about the work of the Futures Board and the Verification Delivery Model Workstream. This includes how the Hub will be funded through an increase to building warrant fees. These organisations include, but are not limited to, representatives from the Royal Incorporation of Architects in Scotland (RIAS), Homes for Scotland, the Chartered Institute of Architectural Technologists (CIAT) and SNIPEF.

BSD will continue to meet with the stakeholders listed above as a matter of BAU. It is envisaged that a number of engagement sessions will be held during the consultation process, be it as part of a group or individually with additional organisations and stakeholders in the construction sector to gather their views and opinions on this policy.

4. Options

4.1 Options proposed.

There are two options to be considered.

Option 1 – Do nothing.

Option 2 – Increase building warrant fees to facilitate the strengthening and improvement of the service delivery and compliance within the building standards system in Scotland.

4.2 Sectors and Groups Affected

4.2.1 Option 1

This option will affect the users of the building standards service who, without additional funds for local authority verifiers, will see a decrease in the service they will receive in the years to come due to the budget constraints, cuts in the public sector and the effects of inflation.

Local authority building standards departments will also be affected due to general rising costs and the need to fund additional services being brought forward through the work of the Futures Board to strengthen the building standards system.

Organisations in the construction industry will see a decrease in the level of service provided by local authorities’ due to financial constraints. This reduction in level of service will increase in risk to building safety.

4.2.2 Option 2

This option will affect all customers and users of the building standards system.

It will also affect local authority building standards departments by increasing the income generated by building warrant fees.

Additionally, those affected may include, but is not limited to:

• General public applying for a building warrant.
• Construction sector bodies involved in applying for building warrants.
• Organisations involved in large construction projects such as new shopping centres, hospitals, schools etc.

4.3 Benefits

4.3.1 Option 1

There is no benefit to this option.

4.3.2 Option 2

Users of the building standards system will benefit from a strengthened building standards service with funding available to support the improvements in services being introduced through the work of the Futures Board. These services include, but are not limited to:

• Introduction of a Building Standards Hub to serve all 32 local authority building standards departments and verifiers and support the construction industry.
• A strengthened compliance process for High Risk Buildings and enhanced compliance for all other building warrant projects.
• Introduction of new technical standards to support the Passivhaus standard equivalent.
• Digital transformation of the building standards service.

Local Authority Building Standards teams will have access to a central Building Standards Hub that will provide support across the service and additional resources for specialist activities and tasks.

4.4 Costs

4.4.1 Option 1

There are no implementation costs associated with this option. Some costs may be saved that would otherwise be put towards the consultation process and/or implementing this change.

Construction project costs will continue to rise with inflation, which will result in the increase in the ‘value of works’. As a consequence, this will lead to a small increase in the building warrant fee. However, without significant additional funding, local authority building standards teams may see a decrease in staffing numbers over the years as salaries and costs rise with inflation, reducing the funding available for any additional staff.

Local authorities will see additional cost associated with the additional requirements brought through the work of the Futures Board.

4.4.2 Option 2

Costs to the users of the building standards system who apply for a building warrant will increase. However, they will benefit from a more robust verification service, requiring increased inspections and reasonable inquiry to ensure compliance with building standards.

Development of a new fee model and a review of current funding is ongoing. It is worth noting, these figures and increased costs are still under consideration and are not final. It is not envisaged that these costs will increase beyond what is mentioned here.

• Fixed fees for activities such as conversion or demolition are being considered to be increased in line with the Building Cost Index. For example, this would result in an increase in fee of £150 (set in 2017) to £184 (in 2022), and for an extension to warrant 2017 set fee of £100 would increase to £123 in 2022.
• An additional fee is being considered for building warrants for High Risk Building (HRB) where additional work will be undertaken by the verifier through the introduction of the Compliance Plan Approach. HRBs represent a small portion of total projects and a small fee increase compared with the value of project.
• A percentage increase in building warrant fees across all ‘value of work’ bands to fund the future projected cost of the verification service taking into account the additional demand placed on verifiers by the changes being supported by the Futures Board work.

5. Regulatory and EU Alignments Impacts

This policy is not likely to impact on intra-UK trade.

6. International Trade

This policy is not likely to impact on international trade and investment.

7. EU Alignment

This policy is not likely to impact on the Scottish government’s policy to maintain alignment with the EU.

8. Scottish Firms Impact Test

Engagement with Scottish Government Officials and stakeholders such as COSLA, LABSS, Homes for Scotland, Construction Scotland, Chartered Institute of Building (CIOB), SOLACE and RICS has taken place through various Working Groups and Futures Board meetings. Discussions on a potential increase in building warrant fees were covered at these meetings, any feedback has fed back into the development of this proposal.

9. Competition Assessment

As the proposals will form part of the national building standards system, they will be implemented uniformly throughout the country. It is not envisaged that this proposal will impact on competition between companies.

Having reviewed the four competition filter questions provided within the Competition & Markets Authority (CMA) guidelines for policy makers on competition assessment we are satisfied that the proposed changes to the building standards and guidance will not impact on competition within the marketplace.

10. Consumer Assessment

The proposals may have an adverse impact on consumers as it will result in increased cost of applying for a building warrant within their local authority. The fee is proportional to the ‘value of works’ of any resulting construction work and is used to fund the local authority verifier delivering the building warrant service.

It will have a positive impact by providing the additional staff and funds needed to strengthen the service provided by local authority verifiers through the introduction of a more robust compliance process with increased checks and inspections on site and with pre-application discussions for high risk building warrant applications. Funding will also be used to fund the proposed Building Standards Hub, a support Hub for local authorities and construction sector bodies to access for advice, specialist support and assistance.

Costs incurred during the construction of buildings as a result of rework will be reduced by these strengthened compliance measures that include the introduction of a Compliance Plan Manager (CPM) for high risk projects; a role being developed through the work of the Futures Board Compliance Plan Approach workstream. Direct rework costs are estimated to be in the range 1.71% to 9.3% of the contract value. This is quite a large range and a figure of 5% is often quoted as a “widely accepted figure”. Studies suggest that the cost of rework is reduced to below 1% when quality systems controls are introduced.

11. Test Run of Business Forms

It is unlikely that additional business forms will need to be completed however local authorities may take it upon themselves to introduce additional forms as part of this development. If additional forms are created nationally, we will test run these forms with those who will be using them.

12. Digital Impact Test

To apply for a building warrant in the respective local authority, customers can access the eBuilding standards Portal from the local authority website or through a Google search. Customers are then directed to a national building standards portal where they will be able to submit their building warrant application.

This is a digital process, accessible to all users of the building standards system. This online process will not inherently change however it may be updated in areas to reflect the increased fees. Where users cannot access the online platform, local authorities can be contacted for further assistance. Downloadable versions of building standards forms are also available from the Scottish Government website. They can be downloaded, completed and submitted in paper format to local authorities if required.

13. Legal Aid Impact Test

It is not expected that there will be any greater demands placed on the legal system by this proposal. Accordingly, it is not considered that there will be any effect on individuals’ right of access to justice through availability of legal aid or possible expenditure from the legal aid fund.

14. Enforcement, Sanctions and Monitoring

The Building (Fees)(Scotland) Regulations 2004 stipulates a fee shall be payable by the applicant to the verifier for a building warrant application and the submission of a completion certificate. Exemptions apply for applications to alter or extend the dwelling for a disabled person. The Schedule of Fees, shown in Part 1 of the Regulation, provides a complete breakdown of the chargeable fees for the application of a warrant. The Building (Miscellaneous Amendments) (Scotland) Regulations 2017 amended the Schedule of Fees to reflect increased fees.

Building warrant application fees are set nationally and will be the same in whatever local authority you submit an application. Unless exempt, a fee is payable for applications for the construction of a building, or the provision of services, fittings or equipment in connection with a building.

Local authority verifiers are responsible for monitoring and verifying an applicant’s submission of a warrant application to ensure it is compliant with current building regulations and that the correct fee has been paid. Local authorities can also carry out reasonable inquiry to ensure work has not started before the issue of a building warrant to an applicant. It is the responsibility of the local authority to carry out any enforcement actions in relation to non-compliance of buildings and where work has started before a building warrant application is submitted, a fee 200% of the fee calculated is payable by the applicant.

Consideration will also be given where work starts before a building warrant has been issued, but after it has been submitted, this option proposes to introduce a payable fee by the applicant to the verifier. Local authorities also have the power to stop all construction work if deemed applicable or where work is non-compliant and/or dangerous.

Verifiers are required to submit quarterly data on the Key Performance Outcomes (KPO), as set out in the building standards Performance Framework, to the Scottish Governments Building Standards Division. KPO 5 reports on income and expenditure by verifiers. Scottish Ministers can reappoint local authorities as verifiers for a number of years depending on their performance informed by these KPOs.

As part of this option, it is proposed to introduce additional monitoring and reporting of income and expenditure by verifiers. The allocation of income generated by building warrant fees is not ring fenced within local authority verifiers and local authorities can allocate any income as they see best. To ensure income generated by increased fees is allocated to the services they are intended for, additional monitoring and reporting is being considered.

15. Implementation and Delivery Plan

15.1 Implementation

The proposal will be implemented by a change in legislation to the Building (Fees)(Scotland) Regulations 2004 in a similar manner to that which occurred in 2017 with the Building (Miscellaneous Amendments) (Scotland) Regulations 2017.

The proposal will be subject to a public consultation and the new fee table will be signed off by Scottish Ministers. As fees are payable through a national portal, this portal will need to be updated to reflect the proposed changes.

The Scottish Government will publicise the changes on the Building Standards section of the Scottish Government website by issuing a building standards eNewsletter/alert to stakeholders. Changes will also be advertised through building standards social media accounts. The Scottish Government will notify all local authorities and relevant parties of the changes. Local authorities should inform customers of changes through their websites and the e-Development portal.

15.2 Implementation Period

It is intended to increase fees for the financial year 2024/25. This allows approximately 9 months to carry out a public consultation and changing of the necessary legislation.

Changes to the national eBuilding standards portal to reflect the increase in fees will be carried out alongside this to ensure the portal is updated.

15.3 Post-Implementation Review

There will be continuous monitoring of the implementation of the proposals through feedback from the local authority verifiers, designers, manufacturers and building owners. These stakeholders are in regular contact with Building Standards Division, and any issues identified will offer a broad view of how proposals are being implemented, if the objective is being achieved and how it is working in practice. Issues raised in this manner become a matter of record and are used to inform any future review.

As part of the delivery plan a formal post-implementation review will take place within 3 years of these provisions being applied. It is envisaged a yearly review will take place with reports to Ministers.

16. Summary

16.1 Summary Costs and Benefits Table

Following the completion of research on fees and the public consultation, a more detailed cost/benefit analysis will be carried out.

Option

Option 1 – Do nothing

Total benefit per annum:

No additional benefits accrue

Total cost per annum:

No cost associated with action

Option

Option 2 – Increase building warrant and associated fees to facilitate the identified necessary strengthening and improvement of the service delivery within the building standards system in Scotland.

Total benefit per annum:

Users will benefit from a strengthened building standards service with funding available to support the improvements in services being introduced through the work of the Futures Board.

An increase in fees will strengthen the building standards system by providing local authority building standards services the capacity to take on additional verification staff and increase the robustness of the verifications service.

Costs for users of the building standards system who apply for a building warrant will increase. However, they will benefit from a more robust verification service.

• Introduction of Building Standards Hub to serve all 32 local authority building standards departments and verifiers and support the construction industry.
• Strengthened compliance process for High Risk Buildings
• Digital transformation of the building standards service

Total cost per annum:

Economic:

Fixed fees for activities such as conversion or demolition are being considered to be increased in line with inflation.

Environmental:

Increase in investment from local authorities in Remote Verification Inspection will reduce unnecessary travel, lowering costs and lowering authorities carbon footprint.

Introduction of new technical standards to support the Passivhaus standard equivalent.

Societal:

Increased funding will allow local authorities to invest in a better verification service increasing compliance with building regulations, creating safer buildings for citizens.

Policy:

With increased funding, a revision to the KPO framework will be needed to ensure money is reinvested appropriately increasing the cost to change this monitoring and reporting framework within each local authority.

Administrative:

Increase in funding to improve and strengthen and building standards system will inherently increase the administration costs.

17. Declaration and Publication

I have read the partial Business and Regulatory Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options. I am satisfied that business impact has been assessed with the support of businesses in Scotland.

Patrick Harvie

Minister for Zero-Carbon Buildings, Active Travel and Tenant Rights

Scottish Government Contact point:

Cameron Murdoch, Building Standards Division

Cameron.Murdoch@gov.scot