Written evidence submitted by the Chartered Institution of Building Services Engineers (CIBSE) [BSB 410]
The Chartered Institution of Building Services Engineers is the professional body that exists to:
‘support the Science, Art and Practice of building services engineering, by providing our members and the public with first class information’
CIBSE members are the engineers who design, install, operate, maintain and refurbish the energy using systems installed in buildings, including homes. They are trained in the assessment of heat loss from building fabric and the design of energy using systems for the provision of heating and hot water, lighting, ventilation and cooling and small power distribution in homes. Many CIBSE members work in the public sector in general and in higher education in particular. CIBSE has over 20,000 members, of whom around 75% operate in the UK.
As an Institution CIBSE publishes Guidance and Codes which provide best practice advice and are internationally recognised as authoritative. The CIBSE Knowledge Portal, makes our Guidance available online to all CIBSE members and is the leading systematic engineering resource for the building services sector. It is used regularly by our members to access the latest guidance material for the profession. Currently we have users in over 170 countries, demonstrating the world leading position of UK engineering expertise in this field.
Our response addresses the questions identified by the call for submissions in order.
How well does the Bill, as drafted, meet the Government’s own policy intentions?
In principle and many of the details CIBSE believes that the Bill provides a satisfactory framework within which the stated policy intentions of the government can be delivered. The Bill responds to the key recommendations of the Independent Review undertaken by Dame Judith Hackitt. In particular, the Bill makes provision for improvements in industry competence, which are a very necessary precondition of achieving a number of the other policy objectives.
The Bill contains a number of enabling provisions for secondary legislation which has not yet been published. It is therefore not yet possible to form a clear view on the overall package and to assess how effectively the package as a whole will deliver the policy objectives.
However, there is one area where the Bill does not help to meet the policy objectives. Dame Judith characterised the behaviour of the industry as “a race to the bottom”. There is far too much focus on price at the expense of quality and even compliance. This behaviour is driven in large part by the financial model of the construction sector and by procurement practices, where cost is prioritised over either quality or compliance.
The government has recognised that there needs to be a fundamental change in the culture and practice of the industry. We must move from a culture that can at best be characterised as “will it do?”, and at worst “can we get away with this?” to one that asks “is this safe?”.
It may not be the place of this Bill to address these issues, but CIBSE believes that it needs to be clearly recognised that this Bill can only be a part of the overall response to delivering safe places for people to live, work be educated and receive healthcare and otherwise go about daily life. Without attention to and change in procurement practices and business models it will be difficult to achieve the cultural changes for which the independent review calls.
Annex 1 to this submission contains observations on procurement and business models in the sector. It proposes an explicit review of tenders and proposals to assess their ability or likelihood of delivering a safe building. This should be part of the assessment of whether any bid or proposal is compliant and suitable for further consideration. This is almost certainly a matter for further consideration by the new Regulator, but it illustrates the difficulty of assessing whether the Bill meets all aspects of the policy intentions.
The significant changes in Section 35 to the potential penalties for non compliance with Building Regulations are an essential element of the overall package – without meaningful penalties including imprisonment for significant failures to comply with building regulations it will be very difficult to change the culture of the industry.
Does the draft Bill establish an appropriate scope for the new regulatory system?
CIBSE believes that the current proposals for the scope of the higher risk buildings is appropriate at the outset, and the provisions for extension of that scope on an evidential basis are realistic. We are aware that some wish to see a broader scope. However, an initial focus on the scope currently proposed to establish the new regime is reasonable, realistic and manageable. Anything broader is probably not.
It is really important that the message that there is one system of building regulation, with a stricter regime and procedures for compliance for buildings in scope is conveyed consistently to avoid the erroneous view that this is only about “buildings in scope” and not a fundamental reform and change to the regime.
Will the Bill provide for a robust and realistic system of accountability for those responsible for building safety? Are the sanctions on those who do not meet their responsibilities strong enough?
We realise that more detailed arrangements covering the competence of Built Environment Professionals and others engaged in working on structures within scope will be developed under secondary legislation. It is essential that these requirements relating to enhanced competences are enforceable and that sanctions are applied to any dutyholder found not to have appointed appropriately competent people. TSome elements of the industry may only fully respond once the sanctions are applied and it is seen that a new era of enforcement and accountability has really arrived.
However, there are some anomalies. The sections which deal with reulations relating to building safety risk require a thorough and robust process to seek the advice of the regulator with a requirement to explain the reasons for not following the regulators advice (sections 16 and 17 of the Draft Bill) provide a robust framework. The establishment of the new committees set out in Sections 9-11 is reasonable.
However Section 12 then provides powers to quietly abolish any of these committees without even a requirement to consult the regulator, or indeed parliament, let alone explain why any advice is being disregarded!
So parliament is invited to set up a committee under primary legislation, but to enable it to be scrapped using a Statutory Instrument with no scrutiny, or even affirmative procedure? It compares very badly with Section 7 of the Draft Bill on proposals and consultations relating to regulations, which requires multiple hoops to be jumped through for the SoS to do something not proposed by the Regulator. If they are important enough to be set up under primary legislation then they are important enough to need primary legislation to abolish.
Section 12 might be named the ‘Henry II powers’, for riddance of any “turbulent committees”.
Can these committees really be considered a robust provision if they can be swept away just like that? And if the committees are that insecure, does that not undermine them from the outset? If they are so undermined, then perhaps we should return to the first question posed, because these provisions may not meet the policy objective of delivering an overarching governance and advice structure as recommended by Dame Judith.
CIBSE does have concerns about the apparent absence of the supply chain from the definition of the built environment industry in Section 35. It relates to the provisions in Section 6 about improving competence across the industry, in particular:
6 (1) The regulator must provide such assistance and encouragement as it considers appropriate to—
(a) persons in the built environment industry
For the meaning of “built environment industry” the Draft Bill refers to section 35, which says:
“the built environment industry” means—
(a) persons carrying on, for business purposes, activities connected with the design, construction, management or maintenance of buildings, and
(b) employees of such persons; and references to a person “in” the industry are to any such person or employee;
There is no reference to the manufacture of products or components or systems intended for permanent installation in buildings. It may be implied if one assumes that manufacturing a brick or a boiler is intended to be used in the construction or maintenance of a building. But given what is emerging from the Enquiry about the ability of the supply chain to understand what is implied and not explicit, this seems to be a significant omission. Given the scope of Schedule 8 on construction products it seems a missed opportunity not to make some explicit reference to the inclusion of the materials and products supply chain in Section 35 in the definition of the built environment industry and then by extension to address the competence of that supply chain in Section 6.
If the competence of the materials supply chain is not within the scope of the “built environment industry” then the Draft Bill may not fully meet the overall policy intentions.
Will the Bill provide strong mechanisms to ensure residents are listened to when they have concerns about their building’s safety?
CIBSE is not closely engaged with residents and has no comment to offer on this question, beyond once again supporting the overall objective of giving residents a meaningful role in the management of the buildings in which they live.
Is the Government right to propose a new Building Safety Charge? Does the bill introduce sufficient protections to ensure that leaseholders do not face excessive charges and that their funds are properly managed?
It cannot be fair or equitable that leaseholders face significant and unaffordable costs for the refurbishment of their buildings due to the historic use of materials now seen to be unsafe, use which the current regulatory regime has permitted widely.
The current maximum figure of £78,000 for the cost to leaseholders is clearly unaffordable for many. It has caused a great deal of concern amongst those the Bill is intended to protect.
The provision for 28 days’ notice to pay leaseholder contributions is insufficient and quite unrealistic.
Does the Bill improve the product testing regime in a way that will command the full confidence of the sector?
CIBSE agrees that construction products should be brought more fully within the regulatory framework to ensure more effective testing and oversight of products, particularly safety-critical products.
However, this is another area where it is difficult to comment because the Draft Bill only reveals part of the picture, and in the case of construction products, which are traded across borders, including both the Irish and the North Sea, there are other significant areas of emerging policy which may have an impact on the sector.
Is it right that the new Building Safety Regulator be established under the Health and Safety Executive, and how should it be funded?
CIBSE fully supports the establishment of the Building Safety Regulator under the Health and Safety Executive. Given the costs to the UK economy that have been incurred as a result of the failures of the current regime, which the Draft Bill seeks to remedy, it seems reasonable to propose that the Regulator should be funded from tax revenues. The cost of a properly resourced and adequately funded regulator is a fraction of the cost of dealing with the consequences of the Grenfell Tower Fire. And the real burdens on business, and on many hard working families and other tenants and leaseholders imposed by the failure of the building regulatory regime far outweigh any suggested “burdens” on business arising from the alleged red tape of building regulations. A fully funded and resourced Regulator is required and should be put in place.
Does the Bill present an opportunity to address other building safety issues, such as requirements for sprinkler systems?
CIBSE believes that the Draft Bill offers scope to address a wide range of continuing safety issues including sprinkler provision, overheating of homes and provision of adequate ventilation. It offers a mechanism to address both immediate and catastrophic safety risks as well as longer term health issues that may cause as many premature deaths as a sudden catastrophic event but dispersed in both location and time so that the root cause is far harder to discern.
It is worth noting that the HSE has considerable experience in dealing with such long latency health problems such as occupation respiratory disease and so is well placed to consider both types of risk to residents.
Industry Procurement and Business Models
Whilst outside the scope of both the Independent Review and indeed the Building Safety Bill, they are critical elements of the overall operation of the construction sector. Unless these issues are addressed they will work against the changes being sought through the Draft Bill.
Many of the problems in construction are due to contractors’ broken financial model. Projects are commonly procured in a ‘cash negative’ model that persists throughout much of the contract. Work proceeds on site in advance of payment and the problem is compounded by retentions, which are frequently in the region of 3%. This figure is broadly comparable to the overhead and profit margin on contracts such that any profit is not realised until well after project completion, often a year for typical retentions.
Since work is only paid for once it is executed on site, the working capital for a project must come from elsewhere, creating the environment for undesirable behaviours. These might include substitution of materials and reduced levels of site supervision, which are covered in the Draft Bill. But the business model also results in financial pressures being transferred down the supply chain via poor payment terms and retention policies to consultants, subcontractors and suppliers.
This financial model fails to recognise the project planning required before starting on site and does not deal with the cashflow implications of increasing proportions of work being carried out off-site either. This business model fundamentally undermines the aims and ambitions of the Draft Bill to raise standards of quality and safety.
These issues have been clearly identified in previous reports (notably the Latham reviews, Trust and Money (interim report published in 1993) and Constructing the Team in 1994 , the Egan review Rethinking Construction in 1997 , the Wolstenholme Report Never Waste a Good Crisis in 2009 and the Farmer Review of the Labour Construction Model, Modernise or Die in 2016 ). But the fundamental problems, including retentions and late payment to suppliers, have not been tackled, thereby undermining much other good work. Proposals for legislation have been under discussion for years, but have not been brought forward and adopted.
It is time that serious consideration is given to this aspect of the sector, and that we move to a regime whereby once work is recognised as being satisfactory and safe, it is paid for fully and promptly, and that payment distributed fairly through the supply chain without delay.
Procurement of the design and construction of many new and refurbished buildings is flawed. A culture or philosophy that ‘lowest price wins’ is all pervasive and drives the ‘race to the bottom’. It has undermined quality issues for many years if not decades.
Consultants and construction firms routinely win work on sub-economic or negligible margins, which are driven through the supply chain. At these low fees or prices the supply chain seeks to minimise its costs and therefore its input to projects. In this it is unlikely that the designer will be paid to follow a project through from design to handover.
Procuring on lowest price rather than best value is endemic, particularly in the public sector. The Farmer Review in 2016 pointed to the inadequacies of procurement. Farmer, its author, argues that in relation to building safety “the debate that focuses on materials and products in isolation is flawed; we need to address the basic process, whether that is procurement or the method by which we design and construct.”
In 2018 the Public Administration and Constitutional Affairs Committee (PACAC) found the collapse of Carillion was in part the result of the government’s procurement policies.
Many clients and their advisers are unclear how to procure other than on the lowest price. We need to procure the best value, which includes safety, and not simply take the lowest price. To achieve this the procurement system must be overhauled so that quality and life safety are given the right level of priority compared to cost.
In the public sector, the default to lowest price is further driven by rigid and sometimes erroneous interpretations of procurement governance. The default procurement route leads to fragmented design and construction responsibility with a lack of aligned interests in the outcome. Perhaps inevitably this leads to a blame culture when things go wrong. It can also
lead to a loss of understanding of design intent on projects particularly about life safety.
In this culture of intense competitive pressure compliance with building regulations and other standards is challenging. Whilst intended to be minimum standards they become target standards, as exceeding them adds cost. This increases the risks project outcomes, since not all minimum conditions will be met. This also leads to higher construction operating and maintenance costs, reduces quality and may undermine safety considerations.
The need for major procurement reform is well understood across construction’s trade and professional bodies. Transforming the culture of procurement demands leadership and change in public procurement and will influence change in the private sector.
To achieve this, the procurement system must be overhauled to prioritise quality and life safety over cost.
Until procurement practices change there is a significant risk that the measures in the Draft Bill to protect the safety of residents and improve performance and quality of buildings will be seriously undermined.