Cost recovery for offshore activities - A guide
Eleventh edition - April 2022
Part 1: Cost recovery arrangements
This guide has been prepared for owners and operators of offshore installations and others who may be interested in how the cost recovery scheme operates. It provides information on the scope and nature of the activities undertaken by HSE and HSE activity relating to the Offshore Safety Directive Regulator Competent Authority functions for which costs are recovered. It also explains how the costs recovered are calculated. This edition shows the hourly fee from 1 April 2022.
What is cost recoverable?
HSE will recover the cost of work associated with assessment of safety cases under the Offshore Installations (Safety Case) Regulations 2005 (SCR05), the Offshore Installations (Offshore Safety Directive) (Safety Case etc.) Regulations 2015 (SCR2005) and for enforcement of the relevant statutory provisions (RSPs), that is, those health and safety provisions which apply to offshore installations or to activities on, or in connection with, them.
The fee boundary
The Health & Safety (Fees) Regulations, which are made annually, provide for HSE to recover a fee from an operator or owner (herein referred to as a duty holder) who has prepared a safety case for the performance of any function relating to the enforcement of SCR05, SCR2015 and the other RSPs, for providing advice on preparing a safety case or a revision to one, and for granting exemptions under SCR05 and SCR2015.
Cost recoverable activities
To provide guidance to duty holders on the exact nature of the work to be covered by a fee, the general scope for cost recovery has been broken down into descriptions of 'activities for which costs are recoverable' framed around the main functions which HSE undertakes in respect of SCR05, SCR2015 and the RSPs. These are as follows:
- assessment of safety cases and design notifications submitted under any of the provisions of SCR05 and SCR2015
- inspection work associated with offshore installations and with activities on or in connection with such installations
- investigation of incidents
Costs will be recovered for assessment of all types of safety cases and design notifications. Assessment includes all work associated with the provision of an auditable HSE decision record in accordance with HSE and OMAR procedures. Work that takes place in advance of safety case or design notification submission, including that which facilitates the assessment process, is categorised as inspection. Work in connection with notifications, thorough reviews and other submissions made under SCR05 and SCR2015 is also categorised as inspection.
The whole of the time HSE Inspectors spent assessing a particular duty holder's safety case is cost recoverable. This includes, for example, time spent on planning the assessment, recording findings and communicating with the duty holder to obtain further information. Dealing with third parties such as consultants or agents engaged by the duty holder to support the submission is also cost recoverable, but such contacts will only be made by arrangement with the duty holder.
Most assessment work takes place by consideration of the information provided in the safety case. However, it may be necessary to supplement this with visits to the duty holder's offices for discussion and clarification purposes. Assessment work may also on rare occasions involve a visit to an installation; such visits generally will not form part of the assessment process.
A visit to an installation to see whether the safety case reflects actual conditions is 'inspection' and not safety case assessment. However, assessment and inspection can and will continue to take place as parallel activities - they are not mutually exclusive.
Fees for assessment start as soon as the safety case or design notification has been received and cover all the stages in the assessment process through to case acceptance and the completion of appropriate case records (see paragraph 2.8 concerning charges for advice on safety case content given prior to case submission).
The fee for safety case assessment ends at the point at which HSE has communicated its findings to the duty holder. Where there is subsequent work to obtain and evaluate further information, or seek clarification relating to the contents of the safety case which do not delay the final conclusion, then this work is classed as 'inspection'. An installation visit which checks compliance with the conditions described in the safety case or which follow up issues offshore is also 'inspection'.
Advice and guidance
Safety case assessment can be greatly assisted by advance discussion between duty holders and HSE on key safety issues. Duty holders are encouraged to discuss and resolve such matters with HSE in advance of submission, thereby avoiding any difficulties imposed by the tight timescales for the assessment process. General advice on, for example, the main provisions of what a safety case should contain, is not included as a cost recoverable activity. This is likely to apply to most requests for general advice which can be resolved quickly, for example, through a brief telephone call. However, advice in connection with the preparation of a specific safety case prior to its submission, for example, where it is to the benefit of both the duty holder and HSE to discuss how the information is to be presented within the safety case, or what specific features are, or are not, likely to be acceptable, is cost recoverable and recorded as inspection.
Requests for exemption from the requirements of SCR05 (regulation 23), and SCR2015 (regulation 35) are dealt with as part of the safety case assessment process. In effect, HSE will have to consider and evaluate a mini safety case submission to be assured that an exemption is appropriate and the risks to health and safety will be properly controlled. By granting an exemption, HSE is applying the same philosophy as when a safety case is accepted, that is, giving a permission. A cost for this work will therefore be made.
The work associated with the consideration and evaluation of all requests for exemptions under SCR05 and SCR2015 and the RSPs will be cost recoverable and recorded as assessment.
Requests for submission in a shorter period
Many provisions in SCR05 and SCR2015 allow submission of a safety case, or notification, in "such shorter period as the Executive may specify". Requests for a "shorter period" will be cost recoverable as assessment.
Inspection includes all regulatory and directly linked activity; planned inspections of conformity with the safety case; investigations; formal enforcement action; theme and corporate audit; regulatory activity arising from notification of well operations, combined operations and thorough review summaries and provision of general advice and guidance.
All inspection work in relation to activities on or in connection with offshore installations is cost recoverable. Activities in connection with an installation are specified in Article 4 of the Health and Safety at Work etc. Act 1974 (Application outside Great Britain) Order 2013 (AOGBO). Further useful examples of such activities are contained in the HSE guidance to the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995 (MAR) (Available from HSE Books Reference L70 ISBN 0 7176 2572 9). Cost recovery applies to the normal range of inspection techniques utilised including auditing safety management systems, theme audits, technical assessments and examinations, meeting with safety representatives, etc.
Examples of the work included in cost recovery for inspection are:
- preparatory work, for example, drawing up a strategic inspection plan or detailed plan for a specific duty holder or installation from existing information or following the assessment of a safety case
- examinations of the installation or parts of it, including making tests, taking samples, taking photographs and gathering other information
- examination of management systems, systems of work or work practices, including making enquiries with employees or other persons with relevant information relating to compliance with the regulations documentation of findings and preparation of reports
- pursuing matters with the duty holder as necessary to ensure compliance with the accepted safety case and the RSPs
The duty holder will be informed of the regulators planned interventions. There are a number of factors which affect the frequency, duration and nature of inspection visits. There may also be visits by HSE inspectors to other locations such as the duty holder's offices or other workplaces. Onshore visits to contractors and other persons to follow up matters arising from work carried out on or in connection with a specific installation is cost recoverable inspection work. Inspection visits may be carried out to contractor's workplaces onshore such as fabrication yards, workshops or factories to monitor the duty holder's compliance with the safety case and the RSPs (for example, the Offshore Installations and Wells (Design and Construction, etc) Regulations 1996 (DCR)). These inspections, which are cost recoverable, will not involve inspection of the contractor's regulatory responsibilities.
The majority of inspections are planned in advance and prior notification given to the duty holder. However, occasionally, some inspections may be undertaken at short notice where this is deemed appropriate.
Inspection - Duty holders
Activities which test a duty holder's compliance with the RSPs are within the cost recovery boundary. SCR05 regulation 12(1) (a) and SCR2015 16-1 (a) requires a duty holder to demonstrate that his management system is adequate to ensure the RSPs are, in respect of matters within his control, complied with'; and that there is 'satisfactory management of arrangements with contractors and sub contractors'. Testing duty holders' compliance with RSPs is the practical way in which HSE evaluates the outcomes of, and compliance with, the accepted safety case in accordance with SCR05 regulation 16 and SCR2015 regulation 28.
When, during an inspection, it becomes clear that it is necessary to commence an investigation with a view to its being ascertained whether a duty holder should be prosecuted for an offence under the RSPs, this investigation work is cost recoverable (but see section outlining exclusions below).
A mobile structure (installation) which has been taken out of use (for example Mobile Offshore Drilling Units (MODUs)) which are stacked or are undergoing maintenance or repair within territorial waters or within the baseline) and is not for the time being intended to be used, is not an installation at that time. It is not therefore subject to the safety case regime (AOGBO article 4(3) (-)(c) refers), and hence inspection of such structures is NOT cost recoverable. Inspection of MODUs which have been stacked or are under repair as described above is undertaken by Field Operations Division inspectors. Where there is a definite intention to use the installation for one of the specified purposes in AOGBO article 4(2), that is, the installation is ready and preparing to depart for work on the UKCS, the mobile structure once again becomes an installation and therefore, inspection after that time is cost recoverable.
If it is necessary to inspect an installation outside UK waters prior to its entering UKCS with an intention to work there, such an inspection is cost recoverable to the duty holder. The necessity and reasons for such a visit will be agreed in advance with the duty holder.
Inspection - Contractors
Inspection of a contractor is cost recoverable to that duty holder if the purpose of the inspection is directly related to the systems the duty holder has in place for managing the risks created by the contractor's activities. If, during an inspection, it becomes clear that it is necessary to commence an investigation with a view to its being ascertained whether the contractor (or both the contractor and the duty holder) should be prosecuted for an offence under the RSPs, this is cost recoverable (but see section on exclusions below).
Inspections of contractors which do not relate to a specific installation or a specific duty holder are not considered a cost recoverable activity. This includes, for example, the corporate audit of a contractor (even if this involved visits to one or more sites) or to the general application of the law to a contractor's activities concerning various installations which are not operated by a single duty holder.
Inspection - Diving
Diving takes place both from installations and from diving support vessels (DSV's).
Inspection of all diving work which takes place from an offshore installation is cost recoverable to the duty holder in the same way as for other contractors.
Inspection of diving activity in respect of those things which MAR regulation 3(3) deems to be part of an offshore installation is cost recoverable. The MAR regulation 3(c) deeming provision includes 'any well for the time being connected to it by pipe or cable' and 'such parts of a pipeline connected to it as is within 500m or any part of the main structure'.
Where diving takes place more remotely from an installation, but this is relevant to the safety and control of an installation, the inspection of this activity is also cost recoverable. An example is work on a sub sea isolation valve (SSIV). Work which is 'relevant to the safety and control of an installation' means work carried out for a purpose related to the installation which could affect the health or safety of persons on the installation.
In general, for inspections where the diving activity has been contracted by an installation duty holder, the inspection is cost recoverable to that duty holder. Where the diving activity has been contracted by the pipeline operator (which is more remote from the installation) the work is not cost recoverable as the regulatory duties are those of the pipeline operator.
Inspection - Pipelines
The Pipeline Safety Regulations 1996 are RSPs. Inspection of compliance with these Regulations is cost recoverable for inspection of those parts of the pipeline which are deemed to be part of the installation (MAR regulation 3(c) refers). This includes inspection of activities concerning well isolation valves (where wells are tied back to the installation by flow lines), and high pressure high temperature (HPHT) flow lines at high integrity control systems at well heads.
The proactive or reactive inspection of those parts of the pipeline deemed to be part of the installation including pig traps, emergency shutdown valves (ESDVs), SSIVs, riser connections, riser supports and clamps is cost recoverable. Inspection work elsewhere is not generally cost recoverable, unless the work is relevant to the safety and control of an installation, for example SSIVs. Work which is 'relevant to the safety and control of an installation' means work carried out for a purpose related to the installation which could affect the health or safety of persons on the installation.
Inspection - vessels, for example, heavy lift vessel (HLV), pipelay barges and well service vessels which are not otherwise installations
Where activities on vessels are carried out in connection with an offshore installation (or connected wells which form part of the installation), inspection of these activities is cost recoverable to the installation duty holder. Examples of such activities include well servicing, unloading, loading, construction, dismantling and any activity immediately preparatory to such activities. Inspection of pipelay activities on pipelay barges will not be cost recoverable.
Inspection work of well notifications that relates to the safety of the production installation from which the well operations are taking place is cost recoverable from the installation's duty holder.
Therefore, –HSE will recover costs for the following well notifications:
- Inspection of well notifications submitted to HSE as per SCR05 regulation 17(2) and also SCR2015 regulation 21(i), where the well referenced in the notification is (or is planned to be) connected to a production installation
Costs for the following inspections of well notifications will not be recovered:
- Inspection of well notifications submitted to HSE as per SCR05 regulation 17(1) and SCR2015 regulation 21(1), where the well referenced in the notification is not (or is not planned to be) connected to a production installation
- Inspection work for well notifications submitted to HSE as per regulation 6 of the Borehole Sites and Operations Regulations 1995
Dangerous occurrence at a well (Well incidents)
A dangerous occurrence at a well is reported to HSE by the person/company appointed by the licensee to execute the function of; organising and supervising the drilling of, and all operations to be carried out by means of, that well. This person/company is usually referred to as the Well Operator. If the licensee has not appointed a well operator then he is required to report it.
Regulation 3 of the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 (RIDDOR) defines who the 'responsible person' is. Schedule 2, Part 1 paragraph 20 of RIDDOR defines what well dangerous occurrences are.
Where the subsequent investigation involves the installation duty holder the work is cost recoverable from that duty holder. If the discussion only involves the licensee the work is not a cost recoverable activity.
Management system audits of duty holders are cost recoverable. However, an audit of a contractor is not a cost recoverable activity even when this involves installation visits.
Suppliers of articles and substances for use at work
When, during inspection (or investigation), it is found that there are significant safety problems with a recently supplied article or substance being used on, or in connection with, the installation, the regulatory activity may include a follow up visit with the supplier or manufacturer to monitor compliance with the supply requirements of the RSPs. Such regulatory activity is cost recoverable to the duty holder as part of the inspection or investigation.
Any subsequent discussion of a general nature not directly linked to a specific installation and routine visits to suppliers etc. of articles and substances for use at work in the offshore industry is not a cost recoverable activity.
HSE does not wish to discourage duty holders from seeking advice and guidance. Where requests for advice and guidance can be quickly resolved for example by a brief telephone call this work is not recorded as a cost recoverable activity. However where extended or further discussions are necessary this is cost recoverable and will be recorded as inspection.
Investigations may commence as a result of notifications made under RIDDOR, DCR (Regulation 9), the EU Reporting Regulations, or where HSE becomes aware of any other incident which has caused, or is liable to cause, injury to persons. Investigations may also arise from complaints received. The word 'incident' is used in the following paragraphs to describe any accident, dangerous occurrence, incident or complaint.
Examples of the sort of work likely to be undertaken include:
- examinations of the installation, or parts of it, or of activities in connection with the installation which were affected by the incident, including making tests, taking samples, taking photographs and gathering other information needed to confirm the nature or extent of the incident and to determine suitable remedial measures
- examination of management systems, systems of work or work practices, including making enquiries of employees or other persons (including contractors and their employees) affected by the incident or having relevant information relating to the incident being investigated
When a possible offence comes to the attention of HSE, any activities carried out to enable HSE to decide whether to prosecute is cost recoverable. These activities may include:
- consideration of the facts given in a report or in a telephone conversation
- a visit to an installation
- the gathering of evidence (including forensic testing)
- the taking of statements
- the detail of the provisions concerning the recovery of costs incurred in connection with such investigations differ with regard to those costs that can be recovered in connection with investigations in Scotland (see section 6).
Investigative work is reactive in nature and cannot be pre-planned. It is therefore difficult for HSE to give duty holders any real indication of a typical cost. However, experience has shown that investigation utilises significant resources resulting in a serious impact upon HSE's normal planned work.
Subject to the exclusions below, the cost connected with investigation activities is recovered from the duty holder who is required to have their safety case assessed by HSE and who is a subject of the investigation.
HSE may take formal enforcement action, that is, serve an improvement or prohibition notice, to secure compliance with the RSPs; duty holders who contravene the RSPs may be prosecuted. Subject to the exclusions outlined in the section on exclusions below, the costs connected with formal enforcement activities are recovered from duty holders.
Examples of the sorts of activities when cost recovery is likely to be undertaken are:
- written communication between HSE and the duty holder relating to improvements or modifications needed to secure compliance with SCR05, SCR2015 and the RSPs, including requests for further information relating to the operation of the installation
- communication with the duty holder or their representatives to discuss remedial measures
- preparation and service of improvement or prohibition notices
- visits to check compliance that are not included as part of a subsequent inspection
- collection of evidence and preparation of reports for the purposes of prosecution
The cost recoverable activity starts as soon as HSE decides that action is necessary to ensure compliance and finishes either when HSE is satisfied that the duty holder complies with the RSPs or at the commencement of legal proceedings. The costs associated with checking that remedial measures and improvements have been undertaken is recovered.
Formal enforcement work is reactive in nature and cannot be pre-planned. It is therefore difficult to give an estimate of typical costs. However, experience has shown that such work may utilise significant resources resulting in a serious impact upon HSE's normal planned work.
Appeals against notices
The costs incurred by HSE in connection with the service of improvement or prohibition notices are recoverable, including those cases where an appeal is successful. However, costs incurred by HSE with respect to its response to the appeal, from the date on which a notice of appeal has been received by the Employment Tribunal, are not recoverable.
Overseas visits by HSE inspectors
The legal powers of HSE inspectors and application of the fees regulations is limited to the United Kingdom Continental Shelf (UKCS). There may be occasions when an inspector undertakes activities abroad which, were they to be undertaken on the UKCS, would be cost recoverable. In such circumstances HSE will seek to recover the cost of such work.
The general principles covering any overseas visit by HSE inspectors are:
There must be clear benefit to HSE in influencing improvements in health and safety on an offshore installation which will (in the reasonably near future) be working on the UKCS. Convenience of the duty holder alone is not sufficient justification;
HSE will explore if there are any alternative methods of achieving the same end (for example, company presentations in the UK or inspection of the installation concerned as soon as it arrives on the UKCS);
The overseas visit must be essential and the most efficient and effective approach to achieve our purposes of securing compliance with the law, securing efficient and effective assessment of safety cases (which would not be possible in any other way), or to bring about significant improvement to duty holder safety performance.
Providing the above criteria are met and the purpose of a visit is to facilitate safety case assessment or early resolution of possible inspection issues, the activity falls into a cost recoverable category. In the main it is expected that visits of this nature will be requested by the duty holder, although there may be instances when HSE might initiate. In either case duty holder agreement to a cost being raised will be sought before HSE approval for the visit is given. A cost recoverable visit will not take place without duty holder agreement. The fee will cover travel, subsistence and inspector time, and will be detailed on the normal quarterly invoice.
Where an overseas visit is required as part of an investigation of an incident occurring on the UKCS the normal cost recovery rules apply. These provisions do not affect current formal treaty arrangements (covering activities outside the range of UK-based transport) where work is paid for by the duty holder.
In England and Wales, no costs will be recovered for work done after a summons has been obtained from a Magistrate's Court. HSE may, however, apply to the court to recover its costs at the end of the trial.
In Scotland, no costs will be recovered for work done after the inspector undertaking the investigation submits a report to the Procurator Fiscal for their decision as to whether a prosecution should be brought, or the Procurator Fiscal intervenes in the investigation, whichever is the sooner. In Scotland, unlike in England and Wales, HSE is not given the power to recover its prosecution costs at the end of the trial.
Investigation costs, as described in above, incurred prior to the date:
- in England and Wales, that the summons is obtained
- in Scotland, that a report is submitted to the Procurator Fiscal for his decision as to whether a prosecution should be brought or the Procurator Fiscal intervenes, whichever is the sooner;
are recoverable from the duty holder.
These are calculated on an 'actuals' basis. That is, the recovery of the full costs of the time spent by HSE inspectors carrying out a relevant activity for a particular installation on any particular occasion or occasions. The way in which HSE has approached the calculation of the relevant costs follows HM Treasury's Managing Public Money. For activities involving a visit to an offshore installation, the time spent includes the time from initial check-in to landing back on the beach. Any other travelling time is not included in activity time.
From 1 April 2022 the cost recovery rate is £286 per inspector hour.
Who is subject to cost recovery?
Costs fall to duty holders, that is, generally, the person who is in control of the installation. A 'person' may mean an individual or corporate body. Where the installation is to be constructed, persons who commission the design or construction of the installation fall within the definition of 'duty holder'.
Methodology used for calculating amounts payable
The fee is calculated on the basis of the time spent on that particular cost recoverable activity multiplied by a predetermined hourly rate. HSE operates a work recording system to generate the relevant information. The costs recovered are calculated in accordance with HM Treasury's Managing Public Money and include the full cost of all the resources used in carrying out and supporting that cost recoverable activity. These costs are included in the Memorandum Trading Accounts prepared annually and which are set out on the basis of six main headings. The costs included in these headings are as follows:
- Gross salaries of direct staff
- Staff actually carrying out the work, their line managers and support staff
- Gross salaries of Operational Management and Strategy
- staff who deal with the consistency and quality of operational work as well as finance and planning issues specific to that directorate
- General Administrative Expenditure
- Accommodation costs
- Use of information technology
- Travel and subsistence
- Staff development and training
- Office services (for example, postage and telecommunications)
- Services bought from external suppliers
- Any other appropriate costs that may arise
- Corporate services
- Common services (for example, finance and planning, human resources, senior management and business services)
- Capital charges,
- Depreciation of fixed assets, cost of capital and insurance
- Indirect costs for example
- Developing and maintaining guidance to duty holders
- Internal guidance to inspectors (e.g. to achieve consistency of regulation)
- Consulting and discussing current problems and their effective control with duty holders and their representatives
- Industry specific research and development
- Considering and responding to OGA requests in connection with their appointments of licensee's and operators
Interface with the Maritime & Coastguard Agency (MCA) and the Civil Aviation Authority (CAA)
HSE's regulatory responsibilities can, on occasion, overlap with those of both the MCA and CAA. To enable those boundaries to be understood and assist inspectors, Memoranda of Understanding have been produced and are available online.
- Memoranda of Understanding with the Civil Aviation Authority (CAA)
- Memoranda of Understanding with the Maritime & Coastguard Agency (MCA) .
Offshore Competent Authority – Offshore Major Accident Regulator (OMAR)
HSE and BEIS (OPRED) form the Offshore Safety Directive Regulator partnership to regulate major hazard offshore safety and environmental risks covered by the Offshore Safety Directive 2013/30/EU. There is a Memoranda of Understanding which explains this working relationship. HSE and BEIS recover costs separately according to relevant legislation.
Administrative and financial arrangements
HSE issues invoices and receive payments for all cost recoverable activities (irrespective of who carried out the work, for example, HSE or a contractor). HSE is responsible for debt recovery. Invoices identify:
- each separate cost recoverable activity
- date of activity
- the number of hours
- the rate to be applied to the number of hours
- the name of the inspector doing the work
- the total payable
Invoicing and debt recovery functions are carried out centrally; inspectors are not responsible for the issuing of invoices nor for any follow up actions relating to non-payment of invoices. In addition, they are not well-placed to discuss charging policy. Queries on invoices should be referred to the contact point given under 'Contacts for advice and guidance'.
Invoicing will take place within thirty working days of the end of a quarter. Invoices will be issued on the pattern of quarters March to May, June to August, September to November and December to February. Invoices will invariably contain costs for time outside these strict quarterly periods.
Payment will be due to HSE within thirty days of the date of invoice. HSE will actively pursue outstanding debts in accordance with its own debt recovery procedures.
HSE will prepare annual Memorandum Trading Accounts which will be subject to scrutiny by HSE's Internal Audit and also externally by the National Audit Office.
Procedure for handling queries and disputed invoices
If a duty holder has a query about an invoice, they should contact the HSE to seek to resolve it informally. If it is not possible to do this, then the duty holder is advised to refer to the CA's procedure for handling queries and disputed invoices. These are described in 'HSE Procedure for Queries and Disputes' on the HSE website.
In some cases it will not be possible to reach informal agreement and the CA has introduced a procedure for handling queries and disputed invoices. These are described fully in the 'Procedures for Queries and Disputes'
Please note that there are time limits at each level within which queries should be submitted.
Procedure for resolving operational issues
Where matters of dispute arise on operational issues which have implications for the cost recovery regime, these will first be considered by the Offshore Cost Recovery Review Group which has the overall responsibility to keep under review the effectiveness and operation of the offshore cost recovery regime's financial and administrative arrangements. The membership of the Review Group will comprise representatives from industry and trade associations as well as HSE officials.
If the matter cannot be resolved by the Review Group, it will be referred to senior officials in HSE.
Contacts for advice and guidance
Should you need advice on the operation of the cost recovery system or have a specific query, please contact:
Planning, Finance and Procurement Directorate – Finance – CEMHD - ED
E-mail: [email protected]
For queries about making a payment
Health & Safety Executive
1- A priced publication available from HMSO Books: ISBN 0 11 560043 4.