The Business Case for
Streamlining the Nationís Building Regulatory Process
Through the Effective Use of Information Technology
"Strengthening the publicís safety and the nationís economic competitiveness by streamlining the nationís building regulatory process through the use of information technology to enable the nation to build faster, better, safer and at less cost"
Mission Statement of the Alliance for Building Regulatory Reform in the Digital Age
THE CURRENT SITUATION - The Vital Role of Construction in Our Nation
Over 44,000 jurisdictions adopt and enforce building codes in this nation, protecting and serving over 95% of our population and regulating our nationís $1.1 trillion domestic building construction industry. Together, the real estate and construction industry are the largest single component of our economy, representing 20% of the Gross Domestic Product and over 70% of our national wealth.
The two major targets of terrorist attacks on the United States have been our
buildings – the World Trade Center and the Pentagon. Overseas terrorists
attack housing complexes and entertainment centers.
THE CURRENT REALITY - The Need for Greater Efficiency and Coordination
"I have been told by firms in my state that if they miss one business cycle they are dead in todayís marketplace." (1)
"To assure public safety and economic competitiveness of our nation, homeland security requires us to create interoperable government." (2)
Utah Governor Michael Leavitt at: (1) the NGA Winter Meeting in February 2000; and (2) the McGraw-Hill National Homeland Security Summit on May 15, 2003
"A major developer of high-rise residential structures has told us that a single dayís delay in the countyís building regulatory process costs his firm $100,000 in added costs. This is why we have streamlined our building regulatory system."
Sophie Zager, former Director, Office of Building Codes Services, Fairfax County, VA
Where they are effective and efficient, construction regulatory systems ensure public safety, affordability, quality, and disaster resistance of new and existing buildings. Where they are not efficient, regulatory systems increase costs, produce poor quality and poor performing buildings, making the private sector miss production cycles, creating barriers to effective approaches to secure buildings from manmade and natural disasters, and ultimately negatively impact the lives and livelihoods of all Americans. The insurance industry estimated that poor codes and codes enforcement, for example, contributed between 30 and 40% of the over $15.5 billion in insured losses in Florida from Hurricane Andrew.
Unfortunately, in the United States today far too many building owners, designers, builders, contractors, and citizens are faced with a confusing array of building regulations and inefficient code enforcement processes that cause: significant delays in construction time, lax code enforcement, and even hinder the ability of first responders to know how to effectively approach a building disaster site. Adding to such inefficiencies, most jurisdictionsí building regulatory responsibilities are split (and are far too often ill-coordinated) between different agencies including: building, fire, health, environmental, and energy departments.
Economic competitiveness and homeland security require us to find ways to cut
across such stove-piped administrative entities. Homeland security in particular
imposes new demands for interoperability of security and public safety
information including as-built building designs, building evacuation plans, and
coordinated mutual aid agreements between jurisdictions to provide first
responder support to manmade as well as natural disasters. Regulatory
streamlining and effective use of information technology - hardware and software
are vital to successfully address these issues. The following brief stories
demonstrate the business case for jurisdictions to undertake such regulatory
SAMPLE BUSINESS CASES FOR REGULATORY STREAMLINING AND EFFECTIVE USE OF INFORMATION TECHNOLOGY
The Economic Competitiveness Business Case – Annual Savings to Industry of over $15 Billion is Achievable through Regulatory Streamlining and the Effective Use of Information Technology
The Intel Story
One of the nationís Fortune 500 firms, the Intel Corporation, long ago fully applied information technology to the process of designing, building, and operating their computer chip plants. For Intel and other high tech firms, "speed to market" is everything.
Intel reports that a single dayís delay in the opening of a chip processing facility costs the firm $1,000,000 in time money value.
Intel spends $2 billion (inclusive of interest and cost of money) on the construction of a large chip facility. Included in that cost is the amount of time required by the permitting, plans review, and inspection process of the building department of either the state or local government in which that facility is being constructed. Intel designs all of their production facilities using computers. The facilities are designed to meet modern model building and fire codes as well as the special needs of the chip producer.
Intel reports that it takes between 14 and 16 days of work by their engineers and architects just to convert their building plans to meet the state or local building code of the jurisdiction in which that building is being constructed. That time frame translates into a $14 to $16 million cost to Intel out of its total $2 billion project.
Given the need for speed to market and the $1,000,000 per day costs to Intel for any delays in the construction process, the effectiveness and efficiency of the building regulatory system of states and their localities plays a major role in determining where Intel will build a new or expand an existing production facility.
When Intel is considering such construction in the United States, the corporation lets each of their existing production facilities in Arizona, New Mexico, California, and Oregon compete with each other to submit the most cost effective construction proposal. A major cost factor in those proposals is the cost and amount of time needed to move through the building regulatory system of each of those states or their local jurisdiction.
Regulatory streamlining undertaken by jurisdictions in the State of Oregon over the past few years, including online permitting processes and special inspection systems, facilitated Intelís decision two years ago to build a new chip plant on an existing Intel site in the Portland suburb of Hillsboro.
That plant, which cost $2 billion to build, was completed in just 18 months
and was opened by Oregon Governor Kulongoski on April 26, 2003. At start-up, it
will employ 1,000 Oregonians and expand to 2,000 when it reaches full
The Oregon Story – Building One-Stop Process and Regulatory Streamlining Initiative
Buoyed in part by the Intel success story, Oregon Governor Ted Kulongoski, in his inaugural address in January 2003, announced a statewide regulatory streamlining effort. The streamlining initiative focuses on process and service improvements in all areas impacting construction (building, land use, transportation, etc.).
Development of a one-stop business process for building construction approvals, with the ability to receive regulatory services anywhere in the state, through the use of common forms, procedures, and methodologies via e-commerce, combined with a process for rapid and pre-approval of special construction projects, is part of the Governorís effort to stimulate Oregonís economy.
As Oregon launched this initiative, the state estimated the potential savings in the construction industry through the use of e-commerce and regulatory streamlining. Oregon building departments in 2001 collected over $75,000,000 in building department permit fees on approximately $1 billion in construction activity. Oregon estimates that successful implementation of an e-commerce system and regulatory streamlining will achieve a 10% savings in building permit processing costs, with the potential for up to another 10% savings to the construction industry through reducing the delays. (A potential annual savings of $7.5 million in processing costs, and $100 million in overall construction costs.)
Extrapolated, if all states had construction volume equivalent to Oregonís,
then the Oregon projected cost savings from their basic e-commerce initiative
would equal a total national savings to the construction industry of over
$5,300,000,000 each year. Construction volume nationwide, however, is $1.1
trillion, not $50 billion. The potential for national savings to the
construction industry from Oregonís streamlining initiative, therefore, is in
the magnitude of $15 to $20 billion a year.
The Boeing Story
In 2001 Boeing Aircraft Corporation stunned the State of Washington by announcing that, due in large part to the cumbersome and costly construction, zoning, and land use regulatory system in that state, they were relocating their corporate headquarters to Chicago.
Washington State Governor, Gary Locke, in his State-of-the-State Address in January 2003, announced a major initiative to work together with local government to streamline the regulatory process (including construction) across the state to make it more effective and efficient.
In the wake of that announcement and several other actions by the state, Boeing in March submitted to Washington Stateís Governor a list of 20 regulatory, tax, and other initiatives that could bring Boeingís headquarters back to the state and also help assure that a new aircraft production facility (for the 7E7) being considered by that firm would be built within Washington. Streamlining the building regulatory process is one of the 20 items on Boeingís list.
Milpitas, California – Creating Partnerships to Achieve Goals
The Silicon Valley Joint Venture initiative was launched in 1992 in an effort to restructure the regulatory system within local communities in that area of California to enable them to keep the information technology industry firms that had grown up there in the 1970ís and 80ís. That initiative successfully generated online permitting systems throughout the Valley, reduced the number of diverse amendments in the building codes in use within the region from 400 to 6, and retained the high tech firms that had been looking to relocate elsewhere in the nation due to the cost of the construction regulatory system.
A city of 50,000, Milpitas, California, is one of the smaller communities within Silicon Valley, yet it provides offices and production facilities for over 100,000 Californians and is the corporate headquarters for two Fortune 500 firms.
Working with its high tech and other firms, Milpitas drew from the Joint Venture Partnership to develop and launch its own private-public sector "Partnership to Achieve Goals."
The Partnership focuses on meeting the mutual needs of the private sector (the developer/owner, the architect, and the contractor) and the City of Milpitas by streamlining the building regulatory process and applying information technology including: online permitting processes, electronic plans submittals, IVR inspection systems and single point access, and online tracking systems for construction projects.
The restructured and now largely electronic building regulatory system successfully meets the following needs of the private sector (developer/owner, architect, contractors):
The system also meets the following needs of the City of Milpitas:
Reflecting the success of this regulatory streamlining and information technology initiative in Milpitas, the private sector not only has continued to grow in that city but has supported the construction of a new "state-of-the-art" City Hall that incorporated high tech into the building codes divisions, zoning and planning and City Council chambers work areas.
The Los Angeles Story - Significant Savings Achieved for both the Construction Community and City
The City of Los Angeles several years ago redesigned their building regulatory process and put in place online permitting and IVR inspection request system and electronic plans submittals.
A partial listing of savings achieved by both the city and its construction community is as follows:
Energy Conservation Story – States use REScheck and COMcheck to verify compliance with state energy code provisions – 90% time savings and enhanced enforcement.
The Building Codes Assistance Project (BCAP) reports that 33 states now accept either or both the U. S. Department of Energyís REScheck (formerly MECcheck) and COMcheck-EZ software packages completed for new construction in their states as a way to show compliance with the state energy codes for residential and commercial structures. When completed for an individual building, the software produces both a compliance report and an inspection checklist that building departments can use in the field.
In addition, states and their localities that have adopted and maintained an energy conservation code based on the International Energy Conservation Code (IECC) are making use of DOEís "Plan Check and Field Inspection Guide" to also help assure that energy code requirements have been properly met on the construction site.
Contractors and building departments using REScheck and COMcheck-EZ have reported that once they have crossed the learning curve to use this software, they are seeing a 90% savings in the amount of time it takes them to check a buildingís design for energy code compliance over the traditional hand calculation methods.
These two software packages (both of which were early models circulated for
national adoption in the Streamlining the Nationís Building Regulatory Process
project that was the forerunner of the Alliance) have significantly
enhanced greater energy conservation code compliance in the jurisdictions that
use them. The packages also have helped to familiarize state and local building
code personnel and the construction industry with plans checking software,
paving the way for building departments and builders to make use of plans
checking software for other aspects of building design and construction as they
become available in the market place.
The Homeland Security Business Case
The World Trade Center Story
On Tuesday, September 11, 2001, first responders to the disaster at the World Trade Center rolled up on the incident with little understanding of the true severity of the crisis in which they were involved.
Responders did not know that some of them parked heavy fire equipment over four and five story voids that lay beneath thin concrete slabs. They did not have access to structural information concerning the World Trade Center, nor information on the temperatures at which large quantities of aviation fuel would burn, and the impact that those intense fires would have on the remaining structural members of the building. They did not have access to the names or means to immediately reach the key personnel in city government and the architects and engineers who built the World Trade Center and did have access to such vital information.
As a result: fire equipment nearly began to fall through non-supporting concrete pads, command centers were located in the tower lobbies, fire fighters rushed into both towers to try to put out fires that were unquenchable, and people (including first responders) who should have been immediately evacuated from both towers remained in the buildings too long on the floors below the fires, and died when the two towers ultimately and inevitably collapsed.
In the wake of both the World Trade Center and the Pentagon disasters, building and fire officials, emergency personnel, architects, engineers, building owners, and public officials have assessed and discussed actions that could have been taken to perhaps further reduce the loss of lives in future such disasters.
The Alliance for Building Regulatory Reform in the Digital Age and The Infrastructure Security Partnership (TISP), participated in several of those discussions resulting in the Alliance, on October 10, 2001, amending its adopted Action Agenda to add a new work product that might address the above situation. That product is a nationwide system of secure state-maintained interoperable databases of the as-built designs, evacuation plans, and key personnel contact information for critical structures that first responders would access as they roll up on the site of a manmade or natural disaster.
(Click here for a paper outlining, for federal, state and local government and first responder consideration, a structure and basic details that must be addressed to develop and deploy such a state-based nationwide system.)
The Salt Lake City Story
In preparation to host the 2002 Winter Olympic Games, the State
of Utah and Salt Lake City, acting through the Utah Olympic Public Safety
Command (UOPSEC), made use of an existing software data-management tool that
originally had been developed at Oak Ridge National Laboratories as part of the
Domestic Preparedness Act with Nunn-Lugar-Domenici funding. The program database
included basic building plans, evacuation route information coupled with 360
degree photographs of all the rooms inside every Olympic site and the entire
Salt Lake Airport. The system was also linked to a bio-chem sensor warning
system which could provide first responders critical life safety information as
they rolled up to the site of potential terrorist events during the Winter
Games. The same laptop based data system was made available for first responders
in several other nearby non-Olympic event jurisdictions and was used to
effectively respond to some 600 bomb calls and an Anthrax scare by FBI teams.
A VEHICLE TO SPREAD REGULATORY STREAMLINING SAVINGS ACROSS THE NATION – THE ALLIANCE FOR BUILDING REGULATORY REFORM IN THE DIGITAL AGE
A number of the above "business cases" were supported by the work of two public-private sector initiatives, the 1996-2001 Streamlining the Nationís Building Regulatory Process project and the Alliance for Building Regulatory Reform in the Digital Age. The Alliance is comprised of 41 national organizations and governmental agencies that came together in the summer of 2001 to identify barriers to regulatory streamlining and develop an action agenda to promote the adoption and implementation of efficient regulatory practices and information technology that enhance the ability of the nationís construction industry to "build better, faster, safer and at less cost," and reduce the potential damage and loss of life from both manmade and natural disasters. The National Conference of States on Building Codes and Standards has served as Secretariat to both the Streamlining initiative and the Alliance.
Supported by grants from the White House Office of Science and Technology Policy Subcommittee on Construction and Buildings and the in-kind services of its members, the Alliance since 2001 has generated a number of work products that state and local governments are beginning to use to help them streamline their building regulatory processes.
These include: model streamlining legislation, rules, regulations and administrative procedures; listings of available hardware and software that jurisdictions can use to increase the effectiveness and efficiency of their building regulatory process; this business case for regulatory streamlining; and information on how jurisdictions are covering the cost for information technology.
Work products scheduled for completion by the Alliance later in 2003 include: Regulatory streamlining cost/benefit analysis tools; model procurement guidelines for jurisdictions to acquire hardware and software for their building regulatory processes; a prototype for field testing of a secure database for first responders of as-built building designs, evacuation plans, and other key contact information; the promotion of interoperability requirements for hardware and software used in the building regulatory process; the development of grant criteria for states and locals to implement regulatory streamlining within their jurisdictions; and the pursuit of national funding to support the matching grants.
STREAMLINING'S RETURN ON INVESTMENT
Model streamlining processes adopted by state and local governments that were developed and promoted by both the 1996-2001 Streamlining the Nationís Building Regulatory Process Project, and the current Alliance on Building Regulatory Reform in the Digital Age have begun to have a significant impact on reducing the regulatory cost of construction in some portions of the United States.
Examples of a few of those models that were put in place and the savings that are being achieved include the following:
Of the 60 original streamlining models developed out of 250 submissions by jurisdictions from across the nation, NCSBCS reports that there have been multiple adoptions and uses by jurisdictions scattered throughout the United States. The MECcheck (REScheck) and COMcheck-EZ models in the Streamlining project in particular were adopted for use in several dozen jurisdictions as a result of their being available online.
The Oregon and Los Angeles stories covered earlier in this report flowed from input from the Streamlining project to those jurisdictions. Oregon in particular benefited from the adoption and implementation of several streamlining models and a round of streamlining workshops conducted by NCSBCS across that state in 1998. The 1998 workshop conducted in Portland, Oregon, resulted in legislation later being introduced and adopted in Salem establishing the Metro Portland Tri-County Services Center. The Center that created uniform code applications and reduced overlapping and conflicting interpretations and applications of the statewide building code, passing along an average savings to builders in that region of $50,000 in reduced time in the regulatory process for each commercial building project they were undertaking.
The ongoing regulatory savings that are being achieved by state and local governments and their construction industry through the adoption and use of models made available by the Streamlining the Nationís Building Regulatory Process project has not been compiled. However, in just the few cases cited above, streamlining has resulted in over $50,000,000 in savings to the jurisdiction and their construction community.
New model streamlining processes and materials assisting states and localities in selecting and making effective use of information technology being assembled by the Alliance for Building Regulatory Reform in the Digital Age, will significantly further reduce the regulatory cost of construction in this nation and enhance effective code enforcement.
As noted earlier, the State of Oregonís projected savings from their business one-stop process project will save the state and its construction community over $107,000,000 each year. That basic streamlining initiative applied against current construction volume throughout the nation would yield savings of approximately $15 billion each year.
The cost thus far for developing these models and making them available to jurisdictions across the nation?
From its inception in 1996 through its end in mid-2001, the Streamlining the Nationís Building Regulatory Process project was funded by $952,044 in federal grants from the members of the White House Science and Technology Councilís Construction and Buildings Subcommittee and by $845,000 in in-kind services contributed by the Allianceís 56 national partners.
Since its establishment in the summer of 2001, the Alliance for Building Regulatory Reform in the Digital Age has received from federal agencies through the members of the Construction and Buildings Subcommittee $232,500 in funds and over $180,000 in in-kind services to develop the list of products noted in the previous section of this paper.
The Alliance is currently seeking additional funding to carry out its mission, including a request for $8,000,000 in matching grant funding to state and local governments to assist them in the adoption and implementation of one or more of the streamlined building regulatory processes that make effective use of information technology.
If funded, the Allianceís work of $8.5 million in exchange for potential additional savings to the nationís construction industry and to state and local governments of amounts in the order of $15 billion per year is a good return on investment for this nation.
" THE TIME IS NOW"
The above theme was selected by the Alliance as the title for their two annual progress reports to the nationís state governors, the federal government, and their partners in the public and private sector.
The continued homeland security threat to this nation, the ongoing threat of other disasters (both manmade and natural), coupled with the need for all communities to revitalize their economies, all add to the business case for the further development of the Allianceís pending work products and their adoption and use by state and local buildings departments across the nation.
The "Time Is Now" for several other reasons –
First, in their inaugural or state-of-the-state addresses, seven governors noted that regulatory streamlining would be one of the major actions of their administration. Among those states are California, New York, Oregon, and Washington. In addition, streamlining initiatives in the building codes and standards area also are underway in Michigan and Minnesota. These efforts are being undertaken during the statesí fiscal crisis to: reduce the cost of government, increase its efficiency, and help jump start their economies.
Second, action now in carrying out the Allianceís national initiative supports parallel information technology actions within the construction industry itself. Those actions include the work of the following:
These initiatives also add to the Allianceís business case for completion of its work products and the funding and launching of a proposed multi-year $8 million national streamlining implementation pilot grant project which is designed to seed across the nation regulatory streamlining projects that make effective use of information technology and save our consumers and construction industry a projected $15 billion a year in unnecessary construction costs due to regulatory delays and inefficiencies.
HOW CAN THE ALLIANCE HELP YOU?
Youíve read the business cases. Now, how can the Alliance help you? Is the building regulatory system in your state or community effective and efficient? How long does it take to issue permits, get plans reviewed and inspections done? Does your city/county work in partnership with your construction community? Have regulatory inefficiencies contributed to increased costs of new homes or building rehabilitation in your state? Are companies relocating out of state due to regulatory delays or other inefficiencies? How effective & efficient are communications across agencies in your state/locality for disaster response coordination and mutual aid agreements with other communities?
If your community/state needs assistance in one or more of these areas, visit the Alliance on the NCSBCS website (www.ncsbcs.org) and look at model streamlining processes and enabling legislation that may be of assistance to your state or local government.
If you are interested in learning more about the work of the Alliance, becoming an Alliance member, helping to launch a regulatory streamlining project in your community, or assisting in the funding of the Allianceís work, please contact Carolyn Fitch at the Allianceís Secretariat, the National Conference of States on Building Codes and Standards, 800 362-2633 ext. 238, for more information.