New Roads and Street Works Act 1991: The Road Works (Recovery of Costs) (Scotland) Regulations 2003: Recovery of Costs Regulations
Consultation Paper: July 2003
REGULATORY IMPACT ASSESSMENT
The Road Works (Recovery of Costs) (Scotland) Regulations 2000
1. Proposed regulations under section 155 of the New Roads and Street Works Act 1991 ("the Act") for improving the costing of utilities' road works by prescribing the basis on which the administrative expenses, including staff costs and overheads, involved in the cost of taking any action under the Act may be recovered.
2. PURPOSE AND INTENDED EFFECT
Issue and Objective
Issue | There have been long standing concerns about the wide differences in the way in which costs associated with utilities' road works have been calculated, in particular the costs involved where it is necessary to protect or re-site utility apparatus in the road (so-called 'diversionary works') as a direct result of major roads, bridge or transport works. Under the Act, diversionary works attract a contribution towards the total costs paid from the utility affected. There has been some indication in recent years that for diversionary works significant overheads have been charged by utilities. Roads authorities have sometimes seen these as unreasonable but utilities have said that they reflect the allocation of costs within their organisations. |
Objective | To introduce consistency between the various utilities and others with equipment in the street (mainly gas, electricity, sewerage, water, and telecommunications companies) on the one hand, and between the roads authorities on the other, in the way in which they cost their work, through the use of an agreed common accounting convention. The regulations would apply when either party recovered costs from the other. This should provide transparency of charging and reduce the scope and perception of inflated charging on either side. |
Risk Assessment
Not applicable.
3. OPTIONS
(a) The 'do-nothing' option would be to continue to accept the differing accounting practices at present in use by the roads authorities and the different companies.
(b) The second option, for which power exists in the Act, is to make Regulations, agreed between all the main parties (Roads authorities and the major utilities), prescribing a common basis for the calculation of administrative charges.
Issues of equity and fairness
Most of the organisations with apparatus in the street are substantial bodies - utility companies - which have access to the road through their own enabling statutes. Their organisation involves a considerable administrative infrastructure, including accounts departments. The other parties to road works transactions are the roads authorities and their agents, who have overall responsibility for the condition of the road under roads legislation, and have similar access to specialist staff.
Organisations and individuals without existing statutory rights - for example, a farmer needing to run a drain under a road, or an organisation occupying two or more buildings in neighbouring streets needing to link its internal communications systems between the buildings by way of ducts under the road, can apply to the roads authority for permission to dig up roads. Such permissions are granted under s.109 of the Act. Applicants may be required to pay the roads authority a fee for such permissions. Such permissions are currently excluded from the cost-sharing arrangements for diversionary works. Whether a similar exemption should apply to the costing of their administrative charges will depend on the outcome of the consultation. Certainly the Act could permit this. Consultation might well lead to the conclusion that applying the Regulations to those given permission under s.109 would be a case of 'using a sledgehammer to crack a nut', and might involve a disproportionate extra investment (eg in the appointment of an accountant solely to ensure that the Regulations were being complied with).
4. BENEFITS
Identify the Benefits
Some utilities, particularly since privatisation and the introduction of a greater element of competition in the provision of services, have been reluctant to disclose the basis of calculation for the indirect costs which they claim. An agreed basis that all have 'signed up to' can be expected, in time, by introducing a greater element of predictability, to lessen the number of disputes about invoices, particularly where utility diversionary works associated with large-scale road works are concerned.
Maintaining the status quo would mean continued uncertainty about the basis of costing utilities' contributions and hence pricing road projects.
Quantifying and valuing the benefits
These are not quantifiable. The main benefit will be through the reduction in disputes about costs and overheads. An indirect effect that could be expected is better planned road works because of more reliable estimates.
5. COMPLIANCE COSTS FOR BUSINESS, CHARITIES AND VOLUNTARY ORGANISATIONS
Business sectors affected
Utility companies and their contractors, and possibly some of those granted permission under s.109, could be affected. There will be no impact on charities or voluntary organisations.
Compliance costs for a "typical" business
Although costs are not quantifiable, it is considered that adopting a standard basis for recovery of costs would involve lower costs to individual utilities because any small costs for adjusting accounting systems would be more than offset by the greater degree of certainty and a reduction in disputes and possibly litigation.
6. CONSULTATION WITH SMALL BUSINESS
There will be wide consultation on these options which will include small businesses where they would be affected.
7. OTHER COSTS
None are anticipated.
8. SUMMARY AND RECOMMENDATIONS
It is recommended to proceed with the regulations subject to any detailed comments arising from consultation.
9. ENFORCEMENT, SANCTIONS, MONITORING AND REVIEW
The Roads Authorities and Utilities Committee (Scotland) exists as a forum for, inter alia, the review of the operation of the New Roads and Street Works Act 1991 and the associated regulations. Any problems arising in the operation of these regulations would be addressed there initially.