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Offshore Charging Review Group (OCRG)

Minutes of the First Meeting on Monday 15 November 1999


Ms Anne Sharp - HSE SPDC (Chair)
Mr I Whewell - HSE OSD
Mr N Stone - HSE PEFD
Mr V Isenwater - HSE PEFD
Mr R Church - HSE SPDC
Mr K McFadyen - HSE OSD
Mr J Petrie - UKOOA
Mr P Holman - BROA
Ms J Bugler - IMCA
Mr D Krahn - IADC
Ms P Cohen - CBI
Mr P Wyatt - Shell
Mr D Taylor - Kerr-McGee

1 Welcome, Introduction and Apologies

The Chair welcomed everyone to the first meeting of the OCRG and introductions were made around the table.

Apologies were recorded for Mr R Spiller (MSF), Mr R Wilson (AEEU), Mr J Taylor (TGWU) and Mr I Bell (OCA). It was agreed that when sending out the minutes, the Secretary would draw their attention to decisions made at the meeting, inviting them to raise any concerns. Formal agreement of the decisions was subject to no major objections from the Trade Union representatives.

It was agreed that the minutes of a meeting held with the industry on 15 September 1999 should be added to the agenda as a new item 2, as there had been some correspondence regarding them.

2 Industry meeting 15 September - minutes

The Chair said that points had arisen in correspondence with IMCA regarding the accuracy of the minutes and the guidance on the boundaries of charging in relation to the activities of contractors. The matter of guidance on boundaries could be discussed more fully under the agenda item covering the guide.

IMCA considered that para 2.23 of the minutes did not properly reflect the point made by Tony Read about charging for inspection of contractors. HSE agreed that, for accuracy this should be recorded, as should the HSE response to the effect that the criterion set out in para. 3.15 of the Offshore Charging Guide applied to only diving activities. It was agreed that the minutes should be amended to provide an accurate record of comments from both IMCA and HSE, and that the substantive point on boundaries of charging for inspection of contractors should be discussed under the agenda item relating to the Guide. As regards the detail of the redraft, the amendments should replace the first sentence of paragraph 2.23, with a new paragraph to start at 'Mr Petrie was concerned .....'.

IADC then raised a question in relation to paragraph 3.2, saying that they needed to give further consideration to the position in relation to stacked installations. As this was an operational issue, the matter would best be dealt with in the Senior Managers Forum (SMF), not OCRG. It was agreed to amend the word 'operator' in this paragraph to read 'owner'; to add a final sentence 'the detail of this was appropriate for discussion at the Senior Managers' Forum (SMF)'; and to add 'and the SMF' at the end of paragraph 3.3.

3 OCRG Terms of Reference

A draft had been circulated before the meeting. HSE said that it was looking for consistency in the terms of reference of the four review groups being set up. Having reviewed the draft, HSE proposed that the first bullet point in paragraph 2 should be amended so that the last line read '......and the consequences of these arrangements.' This was to make it clear that the OCRG was primarily concerned with the financial and administrative arrangements for charging. It would not however inhibit the group from raising other relevant matters, such as any change in the relationship between OSD and the industry as a result of charging. It was stressed that the Group would consider the consequences of charging, and ensure that all issues were taken forward to the appropriate forum. The amendment was agreed.

HSE also proposed that the timing of meetings be altered to April and September. These times would align better with the planning and review processes in HSE. In April it should be possible to provide projections for the coming year. A September meeting would enable the group the review the previous year of operation, as the accounts should be ready by then. This amendment was agreed, with next meeting to take place in early April 2000.

4 Industry-wide Charging Review Group (ICRG)

HSE apologised for presenting the draft terms of reference at the meeting. The aim of the industry-wide group was to ensure consistency across the charging regimes, and to share best practice between them. The group would meet annually in October and would receive reports from the sector groups. Whilst not wishing to constrain the industry and trade union associations, HSE wished to try and keep the membership of the ICRG to a manageable level. Even with only two industry and two union representatives from each group, the ICRG group could total twenty-nine people. HSE sought comments (to Mr Stone, Finance Unit) on the draft terms of reference, and nominations to the group by 17 December.
ACTION: members

The CBI thought the practicality of the timing of meetings needed to be considered further, as the four individual industry groups and the ICRG were all required to report annually to the HSE/HSC. These arrangements needed to be tested in practice.

The meeting accepted that the ICRG needed to be a manageable size. IADC said that the industry representatives from the offshore group split fairly conveniently into owners and contractors. IADC suggested that the CBI, who were represented on all four sector groups, could co-ordinate the industry representation to the ICRG. It should be clear though that, whoever the representatives were, they represented the group, not their association. CBI agreed to co-ordinate. HSE would seek the TUC comments on the handling of trade union nominations to this group.

5 The Offshore Charging Guide

  1. Fitness for purpose

    HSE stated that it had been necessary to strike a balance in getting the guide out on time and taking all industry comments on board, and apologised if some were not incorporated. A wide-ranging discussion on the guide took place.

    In general the industry wanted more information in the guide, including more detail in the illustrative examples and more information concerning those functions not being charged for. Specific points made were:

    1. the guidance should highlight the criterion that chargeable activities were relevant to the health and safety of the installation;
    2. the guidance should expand the definition of 'in connection with', particularly in relation to the inspection of contractors, and boundaries with marine activities;
    3. guidance material for inspectors should be available to industry;
    4. it would be helpful if inspectors could be specific about what was chargeable when arriving on an installation;
    5. the estimated costs of charging to industry set out in the Guide varied from those contained in the Consultative Document.

    HSE commented that:

    1. The guidance could not be used to limit the charging regime further than the scope defined in the regulations. HSE had provided further clarification of the criteria for charging in relation to the particularly tricky issue of diving work remote from an installation, and was happy to consider what more could be done to clarify the position in relation to Diving Support Vessels. It would also try to set out in writing the position in relation to boundaries with other regulatory agencies, such as MSA and CAA. However, it would be going beyond the regulations to extend any additional criteria to other issues.
    2. Offshore work differed from inspection of COMAH sites, in that most work on an installation was chargeable. At pre-meetings with operators/owners, inspectors could explain the purpose of the inspection, how many inspectors would be involved; what their roles would be; and how long the inspection would take. it might also be possible to provide a simple multiplier to cost non-site work.
    3. Issues concerning OSD's performance of its regulatory functions were for the SMF to address. HSC/E was committed to ensuring that inspector/inspection levels were determined by health and safety goals, and not by the need to generate revenue. Charging was more akin to a tax on the industry than to the purchase of a service from a contractor.
    4. The Guide had been issued to all duty holders, and was available for contractors from OSD's Aberdeen office. HSE would be getting it on their web site as soon as possible.
    5. OSD's inspection methodology was laid down in the Inspection Manual which was a public document; other guidance to inspectors was publicly available.
    6. The estimated costs of charging to the industry in the Guide reflected the availability of harder information concerning the resources likely to be expended on chargeable activity.
      ACTION: HSE (paras i, iv)

    The meeting agreed that, while these points were relevant to amendment of the guide, changes to the document also needed to reflect experience with the charging arrangements. The timing of the next issue of the guide was discussed. HSE requested comments on the guide in writing by 17 December, so that if necessary a subgroup of the OCRG could meet to discuss them in February, with a redraft tabled at the April meeting of the Group.
    ACTION: Members

  2. Disputes procedure

HSE explained that the procedures for dealing with invoice queries and disputes fell into three stages. Initial queries should be raised with the HSE Finance Unit in Bootle who sent out the invoices. They would try to resolve matters with the divisional staff who provided charging data. If this was not possible, the matter would be referred to the relevant OSD Unit Manager. If the matter was still not resolved, the final stage was reference to a Disputes Panel. The dispute panel process was likely to be time consuming for both industry and HSE , but was felt necessary to assure duty holders that their concerns about the appropriateness of charges were properly addressed, and to resolve those disputes not cleared at stage one or two.

The composition and remit of the Disputes Panel was still being developed. It was expected that there would be one panel for all four groups. Clive Norris, Head of SPD, would chair the panel, with HSE representation appropriate to the charging regime concerned and probably some independent element. The panel would be regarded as the last resort before recourse to the law by either side. UKOOA suggested that the procedure used in the rejection of safety cases might provide some useful pointers for the panel's operation. HSE agreed to consider this. HSE apologised for not having a first draft of the panel proposals and undertook to circulate one with the minutes.

HSE reported on the experience of the first batch of COMAH invoices. Of the 130 issued, at 12 November only three were outstanding and two of those had agreed to pay. There had been a number of queries but these were dealt with by CHID and Finance Unit.

6 Evaluation of offshore charging

HSE said HSC and Ministers had agreed that the regulations were to be formally reviewed in two years' time. However, this meant that work needed to start now to ensure collection of the necessary baseline data for the formal review. HSE wanted industry to consider and comment on the issues that evaluation might address, and to be fully involved in the review process. A draft list of possible issues for evaluation was circulated to the meeting. Written comments on this should be sent to Mr Stone, Finance Unit by 17 December.
ACTION: Members

7 Alternative charging schemes - feasibility project

The Chair reminded members that the industry had at one stage favoured a banding scheme, and said that the meeting needed to consider whether to set in train a project to examine the feasibility of such alternative arrangements. She pointed out that any alternative scheme would not change the overall level of cost recovery, it would simply alter how the cake was cut up. A feasibility study of alternative schemes would, however, demand considerable HSE and industry input.

IMCA reminded the meeting that at one stage HSE had advised that primary legislation would be needed to introduce an alternative system of charging. HSE said that more recent legal advice was that primary legislation might not now be necessary. UKOOA said that they would want to explore alternative schemes in order to assess the relative advantages and disadvantages. HSE replied that a component or banded scheme would provide a degree of predictability for industry that was not provided through an actuals scheme. The CBI was keen to look at alternative schemes, but recognised that different approaches might suit different industries.

The meeting agreed that it would be better to gain some experience of the current scheme before exploring alternatives, and to discuss the issue again at the next meeting.
ACTION: Secretariat

8 Practical issues

  1. Accounting

    Mr Isenwater said that charging was not a new activity for HSE, and that its published accounts showed income from a range of sources. Each year HSE would compile a Memorandum Trading Account (MTA) detailing the costs and income from the previous fiscal year and provide a forward look to the coming year. The charge out rate for offshore inspection was calculated according to Treasury rules on fees and charges, and had been verified by a private sector firm of chartered accountants. For the next fiscal year the charge out rate would be frozen. At the time the rate for 01/02 has to be calculated and set, we will have more operational experience and better information provided by system enhancements to feed into the costing exercise.

  2. Work recording

    Mr Whewell said that OSD was attaching great importance to accurate time recording of its activities. Inputs to the work recording database were actively monitored for both quality and timeliness at all levels of the management chain. The quality checks were set up to ensure that work was allocated to the right category and that the time was realistic etc.

  3. Invoicing

    Mr McFadyen said that he was responsible for a Charging Finance Team that had been set up in Aberdeen to extract time recording data from the system and submit invoice requests to the Finance Unit. The Finance Unit was responsible for issuing invoices, initial receipt of queries and debt collection. His team also ran random data quality checks to supplement those by line management. He said that invoices would simply quote the regulations and a total charge for the period in question, this would be supplemented by an invoice statement breaking the charge down into four categories by installation. He circulated a sample dummy statement to members. The four categories of Inspection, Assessment, Investigation and Other aggregated various types of chargeable work . The category of Other would be used, for example, if HSE had to back charge for any testing work carried out on failed equipment by its own or another laboratory.

    In discussion, HSE accepted that it had to justify the charges raised. However, there were difficulties and limitations to the amount of detail that could be provided from the work recording system. It would aim to provide further clarification in the revised guide. . The CBI suggested an explanatory note be issued with the invoice statement. HSE said it would endeavour to respond to requests for clarification as best it could; experience with the first round of invoices would help identify any problem areas.

9 Making the system work

In response to a query from the CBI, regarding the inclusion of efficiency improvements in the evaluation of charging, HSE said that making efficiency savings was part of its normal management processes. There was a requirement to demonstrate proposed savings in all divisions' plans, and these could relate to reducing overheads or to getting more work from the same resources. They did not necessarily have to involve reducing resources. Charging was not introduced to effect efficiency savings, they have to be made year on year. However, if charging did result in efficiency savings they would be taken into account.

The CBI enquired whether commitments made at the COMAH Charging Review Group would apply to the offshore group. These included bench marking, plans for efficiency savings and the publication of the charge out rate methodology. HSE said that the ways of working were different under COMAH, but agreed to provide a general indication of how HSE went about generating efficiencies, the findings of the benchmarking exercise of charging schemes operated by other public service regulators and a detailed explanation of methodology underlying the charge out rate.

10 Draft Press Release

A draft press release had been circulated with the agenda for the meeting. The following amendments to it were agreed:

  1. Para 5, line 3: Amend 'Diving' to read 'Drilling'
  2. Para 5, line 7: Amend 'members of' to read 'officials from'
  3. Para 6, line 1: delete from 'how' to 'October'; insert 'the terms of reference of the group; the development of'
  4. Item 3 in the Notes to Editors: Amend 'September and February' to read 'April and September'

11 Any Other Business

HSE said, in line with open government practice, it intended to put the minutes of the group's meetings on the Internet. The meeting supported this.

12 Date of next meeting

The next meeting would be held in Aberdeen in April 2000. The date to be confirmed.

Updated 2008-12-05