Recently it seems that regardless of where you look, costs are rising. Compliance is no exception, and the costs to Building Owners continue to rise at an unprecedented rate. Like most other fields, these rises are being driven by a range of external factors.
Two major factors which converge to create a “perfect storm” are inflation, and increased compliance requirements being instituted by MBIE under the Building Act.
Inflationary pressures increase the cost of:
- skilled, Independent Qualified Person’s (IQP’s), Compliance Specialists, services, and trades people
- materials for maintenance and repair needed to keep or gain compliance
- fuel, vehicles, and new government levies (Clean Car) and taxes, and
- Territorial Authority (TA) fees and charges associated with the issue of a Building Warrant of Fitness (BWoF) and IQP registration.
Evolving Compliance inspection, testing, auditing, and registration requirements have:
- increased the level of detail and TA specific inspection requirements on Compliance Schedules for a building, increasing the amount of time needed by an IQP to complete the inspection
- increased the number and scope of TA audits, assessments, resulting in higher fees and costs associated with the preparation, assistance and remediation of any issues identified
- significantly increased the time required to manage disputed outcomes from inspections, including negotiation with IQP, Building Owner and TA. There are now very few straightforward BWoF’s
- significantly increased the issue of infringements and fines by TA’s for even minor issues
- increased the risk awareness for IQP’s associated with Health and Safety at Work and Building Acts requiring mitigation and management resulting in additional inspection elements that take longer, and need more detailed testing and record management to complete, and
- increased the IQP registration requirements, which now need higher levels of qualification, refresher training, peer reviews and TA assessment.
These rising costs alongside legislation that requires increasing complexity, creates longer times to obtain compliance, and which involves less tolerance for non-compliance along with higher penalties has created an environment where compliance is both more costly and harder to obtain.
Now, more than ever before, it is crucial to plan ahead, and budget for your compliance costs.
Let’s translate those words into numbers
To put the financial impact of those changes into context, here are some numbers which may help with budgeting and planning for the management of your compliance.
Labour Costs – 13% up year on year (Construction PPI Labour Index Sept 2022)
Demand for a small pool of qualified individuals has put additional pressure on wages and salaries of inspectors, testers and compliance management staff competing in the same space as the construction industry.
Travel and Fuel Costs – 30% increase in travel costs in 2022
The past year has seen a dramatic rise in the cost of fuel, insurances, and maintenance charges – resulting in a 30%+ increase in expenses associated with travel to site. Most IQP’s and testers require larger vehicles for the required test and safety equipment, so their new vehicles are impacted by the Clean Car Program.
Tools and Materials – 8.4% increase in Producer Output Prices year on year (Sept 2022)
Inflationary pressures and international supply chain costs have created continued increases in parts, tool maintenance, calibration and consumable charges in the testing and inspection sector.
Increased cost of Registration Requirements for Independent Qualified Persons (IQP’s)
To retain IQP and testing status, Territorial Authorities are requiring more comprehensive qualifications and evidence of continual learning. Whilst some training is fees free under Government initiatives, there is an expectation that specialist courses, attendance at seminars and industry events is carried out. This has created additional overhead to testing and compliance companies. Subscriptions to mandated industry bodies, attendance at seminars and refresher courses and quality certification programs continue to increase in price aligned to the CPI and PPI.
Cost of BWoF – TA Fees
Territorial Authorities have been revising their fees for the processing of a BWoF acceptance, base audit fees and hourly rates. This is in line with projected expenditure increases seen across all TA’s.
Evolving and increased scrutiny of Building Compliance
More detailed information required on Compliance Schedules
The Ministry of Business, Innovation and Employment (MBIE) has released an exemplar of a Compliance Schedule Territorial Authorities are expected to use. For some TAs this requires them to provide more detailed information than currently available. The TAs have put the requirement to find information and update the Compliance Schedule back on to the building owner. This could include the commission of fire design reports, validation of consents, site audits on installed Specified Systems and lodgement of requests to update the Compliance Schedule. This process is time consuming and expensive and has the potential to uncover issues and older unconsented works. Additional systems identified will then need to have their own inspection, testing and potentially maintenance services, further increasing the cost of compliance.
More detailed inspection processes and check sheets
To lessen the chance of compliance items being missed, additional checks, including inspection of accessible roof and underfloor spaces, are being included in IQP inspections. This increases the time spent completing the inspection, the added cost of equipment such as ladders, cones, Personal Protection Equipment as well as additional health and safety training and audits. The additional time, supply of equipment and training adds to the costs recovered in compliance pricing pushing prices higher.
Significant increase in TA audits
As a result of direction from MBIE, and assessment by IANZ, TA’s have significantly increased compliance resourcing to increase audits and quality assurance. We have seen the number of audits, that are chargeable by the TA, dramatically increase both to allow the TA to meet their obligations but also as a revenue stream to support the additional resource.
A TA fee for an audit can start at $200 as a base fee with additional hourly rates of $200-225 per hour (all excluding GST). If you have multiple buildings and compliance schedules this can become a significant annual cost.
Increased focus and scrutiny on building compliance by TA’s
Additionally, MBIE is requiring TA’s to raise the bar on what is expected from building owners, owner’s agents and IQP’s. This creates little or no leeway on what is acceptable, regardless of what may have been consented or signed off previously. As a response to these higher levels of assessment, there is a corresponding increase in the level of proof required to sign-off fixes, along with additional requirements to validate consents for new, modified or decommissioned Specified Systems. This has seen a significant increase in the number of items requiring remediation, a higher cost of repair and sign-off, along with sizable charges associated with any retroactive consents.
“Zero Tolerance” now being applied for overdue BWoF’s and incomplete Compliance Records by Councils
With the increased scrutiny and awareness of risks associated with noncompliance, TA’s have dramatically increased the number of Notices to Fix being issued. These cost between $110 to $200 for the initial issue, with some Councils issuing them within 10 working days of a BWoF falling overdue. Some of the timeframes given to rectify the defect or concern can be very short and there is an increasing number of Infringements/Fines being issued with $1000 being the norm.
Increase in Health and Safety at Work Risk Management
Specified Systems installed in ceiling spaces and or service pits are increasingly being classified as a health and safety risk. Some systems may be accessed using special equipment, such as scissor lifts, or require two people to be present. This adds to the cost of inspection and testing. Some systems are installed in spaces no longer deemed to be safe to access, like in deep pits or confined spaces too hard to easily escape. These systems will be required to be moved, incurring labour and material costs, which can be significant.
Argest are here to help
Our team are experts in compliance, and can help your team to plan ahead and schedule the management of all your compliance requirements. With experience since 1986, you can be sure that we know the most efficient and most effective way to handle your needs.