Offshore Charging Review Group
Minutes of the Meeting held on 18 October 2002
Mr Ian Whewell, Chair, HSE
Mr Bob Kyle, UKOOA
Mr Nigel Savage, Shell UK
Mr Paul Holman, BROA
Ms Jane Bugler, IMCA
Mr Bill Murray, OCA
Mr Bill Tomkins, PEFD
Mr Mark Reyland, PEFD
Dr Brian Fullam, HID
Mr Kelvin McFadyen, HID, Secretary
Welcome and Introductions
The Chair welcomed everyone to the meeting and introduced Bill Murray who had succeeded Iain Bell as Chief Executive of the OCA.
Apologies were received from Rab Wilson (Amicus), Dennis Krahn (IADC) and Donald Taylor (Kerr McGee) who had resigned from the Group on changing jobs.
Minutes of the Meeting held on 18 April 2002
The minutes were accepted having been circulated to members prior to posting on the Internet. Industry asked for the Internet website address to be listed in the minutes. This was agreed.
Matters Arising (not covered elsewhere)
The action on the Secretary at Min.3 had been met by the circulation of paper OCRG 2002/6. This provided data on the number of small value invoices, outlined the difficulties that current IT systems had in identifying these and expressed the HSE view that no changes should be made as to do so could increase costs. Industry said that small value charges were a cost to them as these often had to be passed on to their business partners. The business partners queried the charges being made to them, which in turn meant the queries were passed on to HSE. HSE agreed to take the issue again to see what improvements could be made.
Progress on the Evaluation of Charging
A progress report (OCRG 2002/7) had been circulated to members. The emerging view was that charging was not having any strong adverse effect on health and safety performance, policy or practice in the industries concerned. A paper would be going to the HSC on 3 December saying that there was no evidence in the three reports (on the effects of charging in the gas transportation, railway and offshore industries) suggesting that the impact was such that fundamental rethink to the approach to charging was needed; that the administration could be tightened up; and that the disputes procedure is long winded, but equitable. The final consolidated report will be posted on the website.
In the Rail report there was a widespread view in favour of a move to a levy. The railway industry was different from others affected by the review (because the safety regime was being overhauled in the light of the Cullen Report into the Ladbroke Grove Disaster). If a levy is introduced for that industry it is proposed that HSE would recover all its costs, including policy, which would increase revenue. That proposal has been put to the Minister, but no response has been received yet. The proposal was for a specific enabling power to amend the Health and Safety at Work etc Act 1974 providing for ministers to have the power to make regulations to provide for a levy for the railway industry. How the system would work is not clear yet. There are practical difficulties and it is not known if it will happen anyway. HSE is not seeking general levy powers as this has been tried unsuccessfully before. Industry commented that in other areas where a levy is in place it has been a case of swapping one problem for another.
One problem industry faced was budgeting for HSE's costs. OSD has a small project running to see if they can be more predictive on the time to be spent on assessment and inspection, but not reactive work such as investigations. Currently inspectors talk to duty holders about their inspection plans, but do not quantify them sufficiently to provide cost data. Industry welcomed this and the process of evaluation, which was providing some good news such as the better focus of inspections, and asked to be kept informed of any outputs from the OSD project.
Charging efficiency project/Bearing down on bureaucracy
This project had arisen from the evaluation report on reasonableness of charge out rates and is aimed at improving the productivity and efficiency of staff and operations. The reasonableness report showed a variation of rates across the six organisations compared in the evaluation, with HSE's rates higher than the others.
To reduce rates HSE will consider ways of increasing the proportion of productive days, increasing the productivity of individuals, reviewing the mix of support and technical staff and reducing aspects of the indirect cost base.
The terms of reference of the project are:
Taking account of work done and in train to improve efficiency in the areas covered by HSE's major hazards charging regimes, and of the work and recommendations of Deloitte and Touche, to consider and report by no later than 1 April 2003 on what further action should be taken, the order of magnitude of the achievable cost savings, and the timescale over which they could be achieved.
The scope of the project covers the charging regimes for COMAH, offshore, railways, gas transportation and nuclear. There is a project board chaired by a member of the HSE Board, with members of senior staff from various divisions plus two external members. The project team consists of three staff from HID and one external member.
The plan is to collect data from the five regimes, the Environment Agency and the external comparators used by Deloitte & Touche. The collection of this data and its analysis is due to be completed by mid-December. There will then be a report produced, in conjunction with those doing the work, on cost reduction and productivity measures, with a timetable for implementation.
There are projects already underway in rail, COMAH, gas and field operations to increase the productivity of front line inspection staff. It is planned to tap into these projects to gain data for the efficiency project. These projects arose because studies showed that the amount of contact time recorded by inspectors was low and reducing. This was considered to be related to the administrative burden placed on front line staff, which was diverting them from the planned number of days available for front line work.
Industry welcomed this sort of analysis being carried out.
Proposed Chargeout Rate for 2003/04
A letter had been sent to members in advance of the meeting setting out the proposed rate of £155 ph for next year. Members were provided with a handout showing the outturn rate for 2001/02 was £147 ph. This was used to inform the new rate proposals. The proposed rate is the 2001/02 outturn plus two years' inflation at 2.5% pa. HSE tries to ensure that, wherever practicable, all costs are treated in a consistent manner. During the process of putting together memorandum trading accounts for 01/02, an inconsistency came to light. Offshore had previously treated travel time as a non-chargeable activity, whereas, in other charging regimes, it had been treated as an overhead. Re-classifying travel time as an overhead increased the percentage of costs that needed to be recovered.
An HSC sub-group had been set up to look at the detail of the fees regulations and make recommendations to the full HSC. The sub-group is to meet on the 29 October and the HSC on 3 December, with the proposals going to Ministers after that. The new rate will be implemented as near to 1 April 2003 as possible.
Industry expressed dismay that the rate was to increase substantially and voiced concerns that some items charged for were unnecessary. They cited HSE staff attending meetings but not contributing and the re-opening of safety case issues already closed out. HSE was aware of these criticisms, but it was a difficult judgement to make when an expert was taken to a meeting for a particular thing that, in the event, did not arise. HSE was trying to improve its safety case tracking system to provide a corporate memory and better recording of underlying issues.
HSE said that these problems probably do happen and must be addressed, but industry should provide specific information where this sort of thing has occurred. UKOOA are trying to gather data rather than perceptions to pass on to HSE. Industry is also looking at ways to make safety cases easier to assess and offered to provide assistance in this area with the charging efficiency project. Action: HSE - to advise HSC Sub Group of industry's position; Industry to provide data /information
Industry were informed that the proposed rates for 2003/4 for the other regimes were:
- Rail £155
- COMAH £113
- GSMR £110
Report to the ICRG
A draft report OCRG 2002/8 had been circulated to the group in advance. It was agreed that the report reflected the business conducted. It was agreed that an additional point regarding industry's concern at the size and increase in the charge rate should be added. Action: Secretary
(Post meeting note: Report amended and revised version circulated to members)
Frequency of Meetings
The group agreed that in future meetings could be held annually in October unless there was specific business that could not wait.
Any Other Business
Industry were asked whether they would be nominating a replacement for Donald Taylor. UKOOA agreed to co-ordinate consideration of a replacement. Action: Industry
Date of Next Meeting
The date of the next meeting was agreed as 2 October 2003.