Building control: partnerships

12 February 2016

Tracy Aarons discusses the benefits and difficulties in developing partnerships to supply services

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For local authorities, the pressures of the competitive market and economic recession have seen income reducing, yet the corporate burden they have to bear as a public body has limited their ability to reduce overheads.

Add to this mix the fact that councils cannot turn business away, while most private suppliers actively target the less resource heavy, more financially beneficial major projects. The result is that to cut costs, single authorities have little option other than cut staff numbers.

In local government the governance process can be interminably long

Many authorities now find themselves at a point where ongoing resilience is threatened and the long-term ability of their organisation to provide a safe and effective service is questionable.

The government view is that councils will need to join forces to make efficiencies through economies of scale and develop wider skills to compete against the private sector, or face an increasing burden on the public purse.

Taking this message on board, Mendip District Council began discussions with neighbouring authorities with a view to developing a partnership. The medium-sized rural local authority has seen its building control staff numbers reduce over the years.

The business case developed underlined the benefits of such an approach, with financial savings to trading accounts, efficiencies in service delivery providing an improved service and better career development, and opportunities for staff. It also showed there were minimal additional risks to those already carried by each partner alone, and these could be addressed through effective legal agreements between partners.

Six authorities were involved in the initial discussions, although this dropped to 4 despite the identified business benefits. However, even with an agreement in principle, 2 years on the partnership is still not up and running, with full transition expected from 1 April 2016.

Reviewing why this has taken so long, a number of factors stand out.

Risk aversion

The Localism Act 2011 was intended to free local authorities to become more businesslike in their activities and allow them to make decisions they believe to be beneficial to their residents. This should have enabled the formation of building control partnerships, the creation of arm's-length companies to support these and allowed for quicker development of such concepts.

However, the Act did not account for the innate risk aversion of many councils and the fear of accountability. The nature of Building Regulation fee income puts councils at the mercy of the economy, approved inspectors and clients' view of the council, which is generally contact with planning officers. Since this is sometimes perceived as a bad experience, it can lead to a knock on negative view of building control.

The building control team has limited influence on these 3 areas and when a service is in house councils generally accept that it is difficult to manage these risks to fee income. Interestingly though, the moment a partnership is mooted, officials want assurances that in a partnership fee income will be controlled.

In my own experience of such discussions, officers have cited a partnership as being too risky in case an economic downturn sees fee income drop and it sustains a loss. At the same time, officers have ignored the possibility that the same downturn would see the individual council's fee income dropping and having to bear any loss without resilience to address the matter.

Governance processes

In the commercial world, a decision on the formation of a new business is based on the viability of the business case produced. If the potential is demonstrated, the company board will support implementation and look for prompt action.

The nature of Building Regulation fee income puts councils at the mercy of the economy

In local government, the governance process can be interminably long and require approval from myriad committees within each partner organisation. Critically, decisions to support or refuse the creation of the partnership can be made on a wide range of reasons that have nothing to do with the business benefits.

It may be that they do not like other councils that are part of the partnership. It could be that they want their own council officers to run services in their own buildings and see a new partnership as something they will have less control over. It can even be that some have not read the business case and therefore make a decision based on the loudest assertions made by others on the committee, regardless of their accuracy.

In truth, to be approved, any proposed partnership has to run the full length of each council's democratic process. Their actions need to be open, inclusive and transparent so that taxpayers can be sure their money is being used correctly, but this does mean that decision making can take a long time and be open to random influences.

In most circumstances, I would argue that the difference between this democratic decision-making process and businesses' commercial imperative is appropriate because they have different organisational drivers.

In the case of building control though, the Building Act 1984 changed its role, meaning it functions like a commercial business but, in the case of local authority building control, it does so within an organisation whose drivers are not commercial. This does not always lead to smooth and effective decision making.

Support services

The nature of local authority building control is that it must carry out specific duties that the private sector is not required to fund. These include matters such as dangerous structures and demolitions, as well as enforcement activities. These cannot be funded from fees, and are known as 'non fee earning' costs.

Under Chartered Institute of Public Finance and Accountancy (CIPFA) guidance, the costs of these duties must be recorded separately to 'trading account' activities. But in practical terms the resources and systems supporting these activities will be the same as those supporting the trading account as well as other services within the council.

The nature of local authority building control is that it must carry out specific duties that the private sector is not required to fund

Under CIPFA rules, the resources being carried out for the trading account will be paid by fees, thus reducing the amount the council has to corporately fund. As a consequence, when a partnership is formed and the need to provide support services is centralised, each council loses a significant external contribution to its corporate services that it then has to fund internally if it cannot release the unused resources.

Because the resource is people (e.g. 0.3 full time equivalent (fte) of an accountant, 0.2 fte of a personnel officer) they are not easily released and so the council has to be willing to 'carry' the loss until it can be redeployed or released through natural wastage.

In less financially pressured times, councils were able to make these decisions, recognising the benefits that would be gained for customers, and had the ability to take the financial hit in the short term. In the current climate, every penny counts and rapidly shrinking budgets mean that this loss of support service can be seen as an unacceptable barrier by the key finance officer.

Mendip is actively working to navigate ways through these and other difficulties, but the pace can be frustrating. Talking to other partnerships, there is no magic bullet and as a consequence every one has been created slightly differently. Perhaps we need to look at developing a replicable model for partnership that can be easily applied in the future.

Tracy Aarons is Corporate Manager for Built Environment at Mendip District Council

Further information

• Related competencies include Business planning
• This feature is taken from the RICS Building control journal (November/December 2015)