HSE/Competent Authority Response
1.1 When charging was introduced in April 1999 for work under the Control of Major Accident Hazards (COMAH), Ministers agreed with the Health and Safety Commission (HSC) that the charging scheme would be evaluated and reviewed after two years of operation. Reports on the COMAH charging scheme, the efficiency of administrative processes, the effectiveness of the queries and disputes procedure and the reasonableness of charge-out rates have been completed. These can be found on the HSE Charging webssite.
1.2 This document sets out HSE's or, in appropriate instances the Competent Authority's, response to the four reports by Deloitte & Touche. These formed the basis of the evaluation of the impact of charging in COMAH industries and aspects of HSE's administration of charging. The Competent Authority (CA) is HSE and the Environment Agency in England and Wales and HSE and the Scottish Environment Protection Agency in Scotland.
1.3 Deloitte & Touche were appointed as independent consultants to evaluate:
- the four charging schemes (COMAH, gas transportation, offshore and railways);
- the efficiency of administrative processes;
- the effectiveness of the queries and disputes procedure; and
- the reasonableness of charge-out rates.
2 Evaluation of COMAH Report
2.1 Deloitte & Touche were asked to report on the impact of charging on certain aspects. The CA's response is given under these headings. For ease of reference, the appropriate section in the COMAH report is given. Questionnaires were sent to 314 duty holders who had been invoiced at least twice. There were 109 respondents (35%).
The effect charging has had on the relationship between HSE as regulator and industry [section 5.3]
2.2 Impact: Evidence that both duty holders and inspectors are uncertain about whether advice is chargeable. Inconsistency of application of charges . Duty holder concerns about the number of hours spent on non-contact time in proportion to those on-site. Inspectors and duty holders were much better prepared for visits and discussion was more focused.
The CA's response:
2.3 Chargeable advice: Duty holders perceive that advice is chargeable whereas the policy for COMAH is that it is not (specific advice is chargeable under the gas transportation, offshore and railways charging schemes but general advice continues to be given free of charge). This is set out in several sections of the COMAH charging guide. It is possible that duty holders are not seeking advice, not because they perceive it as chargeable but that regulatory action may follow a request for advice and a charge made for that action. Where the dividing line falls between chargeable and non-chargeable activities is complex and may lead to inconsistency of application of charges. Improvements have been made in both the charging guide for duty holders and the internal charging manuals prepared by each part of the CA to clarify those activities which are/are not chargeable.
2.4 Application of charges: Considerable effort has been put into communicating with duty holders, for example, producing and updating charging guides, setting up Charging Review Groups (CRGs), and publishing information on the internet. However, more could be done. In particular, the CA will target the issue about charges for advice. However, it needs to be recognised that COMAH is only part of the regulatory activity at major hazard sites; it is therefore difficult to specify in advance about every aspect of what is chargeable - frequently, a fine distinction has to be drawn by inspectors.
2.5Contact/non-contact time: Before charging, this was not an issue for duty holders as long as their needs were met. Charging changed this: duty holders have become more aware of the work HSE does 'behind the scenes' as an essential part of its front line contact. Discussion on this issue at COMAH CRG meetings has focused on helping the industry to understand the work that is necessary to support the time spent on site. The COMAH CRG has been provided with actual ratios for inspection work but each case depends on its own circumstances. To date, there has been a high rejection rate of COMAH safety reports and this has prevented the CA from developing a good quality database for estimating the onsite/offsite ratio. Charging has led to improvements in preparation for visits by both duty holders and the CA. This inevitably lessens the amount of time taken on visits which may result in higher ratios of off- to on-site time.
2.6 Arrangements are in place to ensure consistency, so far as possible. This has been achieved through the lead Unit system for multi-site operators and by detailed guidance and procedures for COMAH. However, as set out in the Commission's and Agencies' Enforcement Policies, this does not mean uniformity. There are variations between sites of a similar nature and on the level of compliance achieved at those sites. Inevitably, this leads to differing enforcement action.
The effect of charging on the Competent Authority's regulatory performance [section 5.7]
2.7 Impact: Duty holders suspect that some inspectors, when faced with a choice of two activities, one chargeable and one not, might give priority to the chargeable activity simply because it would count towards chargeable hour targets.
2.8 Making a choice between two activities: The CA's policy is that an inspection should be proportionate to the hazard on site. Therefore, major hazard risks coming within the scope of COMAH would normally take priority over general health and safety or environmental risks when an inspection is carried out. However, inspectors sometimes have to make a judgement dependent on the severity of the risk; if, for example, a HSE inspector identified a hazard at a COMAH site covered by other regulations which would lead to a severe accident, it would be very unlikely that the inspector would ignore an obvious general health and safety failure in favour of inspecting whether a major accident risk was adequately prevented. This is because the inspector, in making a judgement, will be adhering to the framework of the Commision's Enforcement Policy. There is no evidence to suggest that decisions have been taken outwith that policy. On COMAH establishments the Agencies often include the costs of charging for enforcement of other legislation within banded or component schemes.
Cost to industry and HSE incurred in complying with and administering the new charging schemes [section 5.5]
2.9 Impact: Duty holders find budgeting difficult.
2.10 Inspectors discuss safety report assessment and inspection plans with duty holders at an early stage. However, it is not possible to forecast the number of hours likely to be charged as this depends on what is found in a safety report and on an inspection.
2.11 When COMAH was introduced and to respond to industry's concerns about the difficulties of budgeting, illustrative examples of likely costs, based on the pilot schemes, were included in the COMAH Guide to Charging. Over time, the 'actuals' scheme provides individual duty holders with more reliable information on expected costs. The examples in the Guide have been updated and will be refined as further information becomes available on the time needed for chargeable work (as transitional arrangements allowed duty holders until February 2001 to submit COMAH safety reports, completing assessments is still in the early stages as there has been a higher than expected failure rate). However, guidance can only give an indication of the amount chargeable; the actual amount will depend on what an inspector finds in a safety report or on an inspection. A revised guide giving updated illustrative examples has been agreed with the COMAH CRG and this is available on the HSE Charging webssite..
2.12 The report indicates a degree of support from duty holders for an alternative charging scheme and inspectors support this. Some work has already been done in this area. A study into the feasibility of a component-based scheme was undertaken at the request of the COMAH CRG. This study indicated it was feasible to have a component-based approach but it would be complex if constricted by current legal powers. Primary legislation would probably be necessary and a suitable vehicle is not currently in the offing. There are concerns as well that the CA would be swapping one set of problems for another.
Effect of charging on shaping the Competent Authority's (CA) strategic goals and policy approach [section 5.6]
2.13 Impact: None.
The effect of charging on the operational behaviour and morale of inspectors [section 5.4]
2.14 Impact: Inspectors are perceived as more professional in their approach and meetings are more focused. Some inspectors had specific chargeable days targets and felt under pressure as a consequence.
2.15 It is not HSE policy to issue inspectors with targets of chargeable hours. Inspectors are, however, given targets for COMAH work based on planned priorities and risk. Inevitably, these targets have budgetary implications. Management has adopted a flexible approach where there are reasons why programme targets have not been fully met.
2.16 Nor do the Agencies set chargeable hours targets. Targets are set for inspections and resource input into safety reports which are risk-driven and form part of a general priority planning process for environmental protection. The Agencies have the same type of targets for their other pollution control programmes. They use a variety of charging approaches including banded charges and time and materials recharges.
Whether charging has resulted in efficiency improvements and has greater transparency resulted in benefits to industry and the regulator [section 5.8]
- Overall, there has been no difference in efficiency. About a quarter of respondents said that the CA had become less efficient. One reason cited for this was because inspectors had to spend more time on the bureaucracy of charging.
- Some duty holders were concerned about the inconsistent application of regulation and the inconsistent treatment of chargeable activities. In some cases, they also thought that the co-ordination between HSE and EA/SEPA could be improved.
- Most inspectors thought that their work had become more focused, more transparent and more efficient.
2.18 Work recording is an essential element of the charging process. It is not new to CA inspectors but was not transparent to duty holders in the past. While charging has introduced the element of queries being raised on invoices which might include some enquiries of inspectors, the additional time and effort for inspectors to comply with COMAH is not substantial.
2.19 On the inconsistency of regulation and treatment of chargeable activities, no site will be exactly the same as another (whether it is part of a multi-site organisation or not) and standards of compliance will vary. The time taken to inspect will depend on a number of factors, such as what weaknesses were found on a previous visit and need to be re-examined, how large the site is etc.
2.20 The Agencies will be transferring some COMAH establishments from the current Integrated Pollution Control (IPC) regime to the Pollution Prevention and Control (PPC) regime between now and 2007. PPC encompasses new requirements to use best available techniques to prevent accidents and there is potential for increased overlap between COMAH and PPC. The Agencies are well aware of this potential problem. The Environment Agency is revising its internal guidance and, as part of this process, will clarify the treatment of any regulatory overlap between COMAH and IPC or PPC charging schemes.
2.21 On the co-ordination of arrangements between HSE and either EA or SEPA, the CA has laid down procedures to help ensure consistent, co-ordinated, targeted and proportionate interventions and to avoid unnecessary duplication of interventions. This is intended to address concerns of companies with a number of similar sites. For example, a lead-unit system has been set up to deliver central co-ordination of interventions with multi-establishment companies. A Coordinating Inspector will be identified as the point of contact for both Inspectors from HSE and the Agencies, and the company on centrally co-ordinated issues. The CA has also set up the COMAH Steering Group specifically to discuss and resolve issues of mutual interest.
3 The efficiency of administrative processes related to charging
3.1 On The Hourly Charging Framework [section 4.3.1] , the charging feasibility study considered whether a levy scheme could be introduced. However, this was not a feasible option as HSE does not have the legal powers to introduce a levy. Primary legislation would be necessary and a suitable vehicle is not currently forthcoming.
3.2 On The Business Case for Merging Central Finance and Charging Teams [section 4.3.2] , during the period that the evaluation of the charging processes was being undertaken, for its own reasons, HSE decided to merge the work of the COMAH and gas transportation teams with the offshore charging team and relocate the work from Bootle to Aberdeen. This has helped reduce the amount of effort and partially meets the recommendation to merge charging and finance teams. At present, as acknowledged in the consultants' report, the workload of the Charging Teams appears to be too great to be incorporated into the existing Central Finance Team. Merging the teams would be unlikely to yield any savings and would dilute experience and knowledge. Potential savings would only come through improvements to existing IT systems.
3.3 On The Business Case for Implementing an End-to-end Accounting System [section 4.3.3] , at the time charging was to be implemented, major changes to IT systems for management information purposes for those activities to be covered by charging were already at an advanced stage. It was critical that time recording systems were in place for the introduction of charging to guarantee the charging schemes could be operated effectively. While IT developments were taking place, if they did not meet the criteria of being able to operate effectively for charging purposes, other systems were used. Until the roll-out of IT systems was completed in autumn 2001, simpler systems, such as a database, had to be used. Further changes in organisation has led to additional systems being used in the time-recording process.
3.4 HSE has recently entered into a new partnership on its IT services. One of the priorities will be to replace HSE's finance and accounting system. The requirements of the charging schemes will be included as part of this process. Recent feedback from industry suggests that the quality of invoicing is much less of an issue than it was. The business case suggested by the consultants will therefore be considered as part of the overall review of IT strategy.
3.5 On Requirements for Future Systems Working Within The Existing Charging Framework [section 4.3.4] , the IT facilities covered by the business case have been put in place. These fully resolve the need for an invoice tracking log and enables the automatic establishment of billing addresses for each site for the offshore charging scheme. Through these and other changes to the IT systems, HSE has moved closer to an end-to-end accounting system. For example, recent changes have resulted in reducing the 'invoicing run' from one week to 4 hours. In addition, EA has resolved difficulties arising from missing site identifiers through changes to their procedures.
4 The effectiveness of the Queries and Disputes Procedure
4.1 The number of queries continues to fall as duty holders become accustomed to the invoicing process. The number of queries raised during 2001/02 up to the end of January 2002 was 191, representing 7% of the total invoices issued during the period, a fall of 12% in the last 16 months. Most queries sought straightforward clarification or further information and were cleared at Level 1. Some 78% of invoices were paid within 60 days and 83% within 90 days.
4.2 On Duplication of Effort and Number of Handovers [sections 3.1.1 and 3.1.2] , the apparent solution would be to merge the roles of the Charging Teams and the Central Finance Team to reduce the number of tracking logs and handovers. However, the consultants identified that the workload of the Charging Teams appears to be too great to be incorporated into the existing Central Finance Team. Charging Teams also have a closer relationship with duty holders and with inspectors if the need arises to seek further information. This would be lost if all the activities were concentrated in one large team. This needs to be considered in the context of the recommendation that a business case should be prepared to establish whether the benefits of introducing an integrated time recording and invoicing system across all or many of HSE's charging schemes would exceed the costs of procuring and implementing an appropriate solution. HSE's view is that it has substantially moved in that direction and a more efficient invoicing process has recently been introduced.
4.3 On EA's Queries [section 3.3.4] , EA's time recording system provides information on hours worked. This is converted into a format agreed as being necessary by the CA when it was established. This provides details of:
- The operator
- The location of the site
- The date of activity
- The billing reference
- The employee
- Whether a visit to the operator was undertaken
- A description of the activity (e.g. Safety report assessment).
4.4 HSE has set up procedures to provide additional information to operators of COMAH establishments. EA would incur substantial costs and time if it attempted to provide this extra level of information, particularly in relation to the level of income from COMAH which it currently collects. However, EA provides further information to operators on request, as necessary, once the invoice has been received by the duty holder.
4.5 On The length of the Process [section 3.2] , it is always the CA's intention to try to resolve the dispute at a lower level and to keep within the timescales. Frequently, the information the duty holder has requested has been provided but neither is the invoice paid nor is the next stage of the Disputes Procedure invoked. Also, some duty holders do not keep within the time limits for invoking Level 2 or 3. This slows the process down. With the Industry-wide Charging Review Group's agreement, HSE modified arrangements in autumn 2000. HSE/the Agencies can invoke Level 2 of the procedure and, where Level 3 had not been invoked, would write to duty holders to request that either payment be made or that Level 3 should be invoked.
4.6 On The timing of response by HSE [section 3.2] , had HSE not responded to queries raised, there would be a significant number of invoices unpaid or duty holders would have paid invoices with which they fundamentally disagreed. This is not the case. The review of the Procedure included an analysis of the query logs and the report states that most of the queries relating to HSE are able to be resolved and usually within the specified service level.
4.7 On The Amount of Documentation [section 3.2] , the response from HSE to a Level 3 dispute must include information on the processes and procedures which are relevant to the case. Where several invoices are in dispute, this may result in substantial documentation. The views of the Disputes Panels are sought at the end of each hearing on whether improvements can be made to the procedure. While recognising the amount of paper this might involve, members have said that they require this background information, particularly the external member ( Footnote 1 ). Guidance for duty holders on what to expect when submitting a dispute to Level 3 has been placed on HSE's website and this includes reference to the possibility that documentation might be bulky.
5 The Reasonableness of charge-out Rates
5.1 HSE welcomes this report. It underlines the need to continue to focus on increasing the proportion of inspector hours available for this work. HSE is already committed to improving operational productivity. It will carefully examine these recommendations not just for the four charging schemes but also across HSE's cost base as a whole, particularly the mix of support to technical staff (though it is worth noting that the ratio is similar across all the public sector comparators). HSE will also carefully examine how it can reduce other aspects of its cost base. However, there could be inherent risks of reducing costs, for example, less guidance might have to be provided and less dialogue with duty holders.
6 Ministerial response
6.1 The HSC has reported to Ministers on the main findings of these reports. Ministers have agreed with HSC's conclusion that there should be no fundamental change in the COMAH charging scheme. It was noted that the queries and disputes procedure had proved effective and that users had found it fair. Ministers also welcomed the commitment that HSE has made to improve its internal administration of charging across the four schemes and to work to lower the hourly charge out rates which work by the consultants suggest are high in comparison with others.
Footnote 1: Two external members have been appointed for each of the four charging schemes. External members are recommended by the appropriate Charging Review Group and are experts in their industry.