Building standards fee income and re-investment in service delivery: review

6. Future Changes to the Building Standards System

6.1 Introduction

6.1.1 There are several potential changes to the delivery of the building standards service emerging from the work of the Futures Board. These include the establishment of a central building standards Hub and changes to compliance. The potential compliance changes from the Compliance Plan Approach work stream are expected to impact on the resources of building standards departments. Recommendations from the Cole Report which, with respect to high-risk buildings, includes the need for a site inspection when a staged building warrant is submitted to check if work without approval was underway will also impact on resources. There will also be a need to proactively monitor approved projects to ensure projects are not underway without notification of start of works and that compliance plan inspection/checks and completion certificate submissions are all being notified in line with the details recorded in the compliance plan. This monitoring and, if necessary, enforcing of procedural compliance combined with the expected greater notification of all the planned inspection and checks will lead to increased workload including within the related back-office processes

6.1.2 This study must consider the additional cost of delivering these changes and the potential impact these costs would have on fee income.

6.2 Potential Impact on Workload of Authorities

6.2.1 The online survey sought to gauge the potential impact of changes on workloads from the emerging changes to the delivery of the building standards service. Table 6.1 provides a summary of respondents estimate of the likely increase or decrease in workload for each change.

6.2.2 A majority of respondents felt that all changes (excluding the central hub) would lead to an increase in workload of between 10% and 50%. Points raised about the changes to the service in the survey and case studies are summarised below.

6.2.3 Central hub: this was generally supported and seen as a much-needed resource for both local authorities and the Scottish Government. The extent to which authorities felt they would use it, was very much reflective of their own position in relation to the availability of specialist services. The benefits of the hub taking on some LABSS services were identified (e.g. dispute resolution) and it was felt the hub could be an asset for training, discussions and networking. The financing of the hub is seen as a crucial element of its success, with some respondents suggesting it could be funded through building standards fees and others through central funding. In general, it was not anticipated to have a major impact on workloads.

6.2.4 Pre-application discussions: the extent to which authorities already engage in pre-application discussions varies. Some authorities are involved in these for major projects, some are very rarely involved and one focused on pre-application discussions as an investment in the process. For major projects, they are felt to be valuable and the costs in helping applicants to “get it right first time” can be offset by reduced non-compliances activity and a smoother application process. None of the authorities charge for the discussions and most were not supportive of charging in general. The exception to this was HRBs where it was felt that charging could be appropriate as there would be additional work involved. A number of authorities also felt there should be a means to recover charges if a building warrant application was not made following a series of pre-application discussions. This is expected to add to workload.

6.2.5 Compliance plan: this is an area of work which could potentially have a significant impact on workload, but in advance of its introduction, authorities found it difficult to estimate what could be required in terms of additional workload. Some authorities already undertake more site work on some types of HRBs (e.g. schools) but a concern was raised that the compliance plan manager may want to include more site-work than a verifier would usually undertake under reasonable inquiry. In rural areas, such as Highland, Argyll and Bute or Island councils, the location of the projects is an issue for site work. The extent of work is also influenced by the contractor overseeing the work and the use of other technologies as alternatives to site visits (e.g. remote verification, video submissions). It was also suggested that larger projects tend to be better managed which could counter some of the potential additional workload.

6.2.6 There was substantial variation in the number of CCNP returns received. One authority estimated very low levels of fully satisfied returns (20-30%) while another estimated 60-70%. There was uncertainty as to whether the compliance plan for HRB projects would add more to what is already covered by the CCNP. However, it was felt that more CCNP notices and stricter compliance procedures will lead to increased workload not only directly from carrying out increased checks but also following up the number of defects found by the case officers. There will be a requirement for ‘more boots on the ground’ and site visits.

6.2.7 Compliance Plan Manager: some authorities feel that the compliance plan manager role will have minimal impact on workload as it is the responsibility of the applicant while others see the potential for increased workload for verifiers in liaising with the compliance plan manager on HRB projects.

6.2.8 Pro-active enforcement: the current mechanisms and penalties are not strong and not really a deterrent to a large developer. Most authorities don’t go looking for enforcement work, but there can be a lot of work (reacting to letters/calls from the police, MSPs, members of the public) which doesn’t actually lead to a formal enforcement notice. One authority provides 365 day on-call cover at a cost of approximately £5,000 per annum. One authority is looking to recruit an enforcement officer as they believe there is a significant amount of unauthorised works which they would like to take action on. Another authority suggested that the incentive for enforcement is better compliance and more power to ensure compliance and penalties related to the offence are required. A suggestion was made of introducing a fee for unauthorised works where the application has already been submitted, but not approved i.e. work has commenced prior to approval. This situation does not qualify for the late application fee of 200% and it was felt that there were quite a number of projects in this situation. This could involve additional workload.

6.2.9 Respondents recognised that verification fees do not cover the enforcement function and that enforcement should be covered by the GAE allocation. However, as highlighted in paragraphs 4.2.7 and 4.2.9, the majority of survey respondents (81%) indicated that they do not receive this income from their authorities and that they are expected to fund enforcement activities from their building warrant fee income. Should a more proactive approach towards enforcement be required, it was suggested that there would need to be another funding mechanism introduced.

6.2.10 Monitoring HRBs: it was generally felt that this could lead to increased workload, although it would be tied into the compliance plan and checks may be done anyway.

6.2.11 Post Completion Enforcement: a few authorities raised the issue of post completion enforcement which was felt could lead to a major impact on workload.

6.3 Costs Associated with Potential Changes to Building Standards Delivery

6.3.1 The future needs of the building standard service fall into two main delivery categories:

• Central: Building Standards Hub.
• Local:
  • Pre-application discussions for high-risk buildings (HRBs).
  • Monitoring procedural compliance including the introduction of the compliance plan and compliance plan manager.
  • Monitoring HRBs.
  • A more proactive approach to enforcement.

6.3.2 All the changes described in paragraph 6.3.1 under local are expected to lead to an increased workload for building standards teams. As they are directly related to verification, they should be paid for through a change in fees.

6.3.3 There are likely to be costs associated with additional training needs arising from the implementation of the competency assessment system (CAS). As this is already being implemented, this analysis does not include the additional costs associated with training delivery.

6.3.4 There is also an identified workforce gap of 46^[24] as at July 2021 which, if filled, would represent an increase in the current workforce of 8%. Using average staff costs per authority would imply that the cost of the additional staff to fill the “gap” would be £2.3 million. This cost would increase total verification costs (£26.2 million in 2021/22)m by almost 9% to £28.5 million. The analysis assumes that as this cost is not related to a change in the delivery of the building standards service, it would not need to be met from any future fee increase.

Central: Building Standards Hub

6.3.5 The building standards Hub - Pilot has recently started with 2 FTE seconded staff and a 0.5 FTE technical assistant. The Hub - Pilot will run for 18 months at a cost of approximately £250,000 per annum. The Hub - Pilot is essentially an administrative hub, but it is hoped that it will develop the role of the hub to include a range of activities including education and training, digital support and expert support on specialist services such as fire engineering, structures and energy.

6.3.6 For this analysis, it is assumed that the annual costs of the hub would be £750,000, allowing for 5.5 FTE senior staff^[25], 2 FTE admin staff and a project/research budget of approximately £200,000. Hence, as a working assumption, it is assumed that the cost of the hub will be £750,000.

6.3.7 A key issue is whether the work carried out by the hub will be fully additional to the existing local authority funded work. In advance of the hub, the following points can be made:

• Administrative/LABSS services: some of the current LABSS services are likely to transfer to the hub (e.g. STAS, dispute resolution process) and therefore are activities currently undertaken by LABSS. These activities may therefore remove some work from the workload of authorities.
• Education/training services: the workforce strategy and new CAS framework will generate new opportunities for the coordination and delivery of training. While authorities are currently involved in training, the hub should be able to provide a more co-ordinated and tailored approach to training delivery. Much of this work is expected to be additional.
• Digital services: the digital strategy is exploring how technology can support and enhance building standards. Much of this work is expected to be additional.
• Specialist services: should the hub provide access to specialist services, it will enable authorities without specialist services to use the hub instead of other local authorities or the private sector. This could reduce the cost of specialist services to some authorities and reduce income and workload for some authorities who undertake work for others. It is too early in the hub development process to know whether/how these services would attract a fee for use, so this analysis assumes that the cost will be met by the hub although it is expected that local authorities would pay to use the services.

6.3.8 There are detailed points to address for the development of the hub, but this analysis assumes that £750,000 of funding will be required per annum and it will need to be raised through fees. An additional £750,000 to be raised by fees alone, would imply an increase on overall current fee income of just over 2%. It is expected that the funding for the hub would be “top sliced” from the General Revenue Grant received by local authorities from the Scottish Government.

Local Delivery Changes

6.3.9 The changes described in paragraph 6.3.1 under local are expected to lead to an increased workload for building standards teams which should be paid for through a change in fees. Table 6.2 above shows that there are a range of potential impacts, but for most changes (excluding the central hub) the majority of respondents anticipate an increase in current workload of 10 to 50%.

6.3.10 From the evidence gathered and, as a central case, an uplift of 30% of workload is assumed to cover all of the proposed changes.

6.3.11 One of the key considerations is what unit of cost the 30% uplift should be applied to. Options include:

• Verification staff costs only (from KPO5) - £23.36 million in 2021/22.
• Verification staff costs plus other verification costs from KPO5 - £26.2 million in 2021/22.
• Total building standards costs (all verification costs^[26] from KPO5 plus staff costs for non-verification work) - £29.43 million in 2021/22.
• Verification staff costs plus 30% contribution to overheads - £30.37 million in 2021/22.

6.3.12 Table 6.2 provides a summary of the additional cost associated with various percentage uplifts in workload. For consistency with KPO5, the preferred unit cost measure is verification staff costs plus 30% contribution to overheads.

6.3.13 Table 6.3 provides a summary of the implied percentage increase in fees to achieve the additional costs identified in Table 6.2 above at the different percentage uplift levels.

6.3.14 Given that KPO5 targets building warrant fee income to be 130% of verification staff costs, we have adopted this as the cost base to apply the 30% workload uplift. This yields an increase in cost of £9.11 million (Table 6.2). This level of additional cost would imply an increase in fees of almost 26% (Table 6.3).

6.4 Total Additional Funding Required

6.4.1 Combining the central (£750,000) and local (£9.11 million) proposed changes yields an additional funding total of £9.86 million. This is equivalent to an increase in fees of almost 28%.