What is regulation impact analysis?
Regulation impact analysis is the process of examining the likely impacts of a proposed regulation, compared with a range of alternative options that could meet government policy objectives. The purpose is to identify an option that can deliver the highest net benefits to the community.
Regulation impact analysis is intended to achieve better regulation by supporting sound analysis. The case for a proposed regulation identifies the perceived problem and addresses the fundamental question of whether regulatory action is required. The analysis describes the policy objective, and assesses the costs and benefits of the proposal and alternative options in achieving that objective. The case for a preferred option becomes clear during this process. It assists regulatory decision making and public understanding of regulatory decisions.
Consultation is vital to the process. Stakeholders that may be affected by a proposal are often able to offer pertinent information and data that can be incorporated into the impact analysis. This enhances the evidence base, the depth and robustness of the overall regulation impact analysis.
Why we do it
Regulation impact analysis is undertaken by the Australian Building Codes Board (ABCB) to comply with an objective in the Inter-Government Agreement, to:
“ensure that, in determining the area of regulation and the level of requirements:
- there is a rigorously tested rationale for the regulation;
- the regulation would generate benefits to society greater than the costs (that is, net benefits);
- there is no regulation or non-regulatory alternative (whether under the responsibility of the ABCB or not) that would generate higher net benefits; and
- the competitive effects of the regulation have been considered and the regulation is no more restrictive than necessary in the public interest.”
The ABCB is also obliged to undertake regulation impact analysis as described in Best Practice Regulation, a publication of the Council of Australian Governments (COAG). This reflects the ABCB’s status as a COAG agency, accountable to the Governments of the Commonwealth, the States and the Territories.
More broadly, the ABCB undertakes regulation impact analysis to find the right regulatory balance. Well designed regulation has a key role in addressing some of the problems in the construction sector. However “well designed” is an important qualifier: poorly designed regulation may not achieve its objectives. Hence the ABCB acknowledges the importance of transparency, accountability and consultation in its consideration of regulation proposals.
Amending the National Construction Code
Regulation impact analysis is undertaken to assess proposals that seek to amend the National Construction Code (NCC), either by introducing a new provision or by amending existing provisions. There are three levels of regulation impact analysis.
- A Proposal for Change, prepared by any member of the public, sets out the case for a new provision or amending an existing provision. The template, to assist the public in making a case for change, follows the steps outlined in Best Practice Regulation.
- A Preliminary Impact Analysis (PIA) provides an early-stage assessment of a proposal, drawing on information from a Proposal for Change and other data as appropriate. It rigorously follows the requirements of Best Practice Regulation. Where the impacts are minor and an overall net benefit can be demonstrated, the PIA can be considered by the Board for decision. Where the impacts appear substantial and net benefits appear possible, the Board may choose to commission a Regulation Impact Statement.
- A Regulation Impact Statement (RIS) is a comprehensive evaluation of a proposal, and alternative options, to achieve a government policy objective. The RIS must provide sufficient evidence and analytical rigor for stakeholders to understand the issues, and for the Board and associated committees to make recommendations and decisions. Each RIS is assessed by the Office of Best Practice Regulation to ensure that it complies with the requirements of Best Practice Regulation.
The NCC includes provisions that reference other documents, including Australian Standards. A proposal to introduce a new or amend an existing referenced document would, in the first instance, be considered by the owner of the referenced document. Should the proposal warrant further investigation, for example through an Australian Standards committee supporting further investigation, then the ABCB would become involved and begin the normal processes of assessment. A PIA would be prepared and evaluated according to the process indicated above.
How we consult
The ABCB consults on substantive proposals by issuing a Consultation Regulation Impact Statement (Consultation RIS).
The Consultation RIS is prepared especially for the purpose of consulting with stakeholders. It contains the essential elements of regulation impact analysis, including cost benefit analysis. The ABCB encourages feedback from stakeholders on matters raised in the Consultation RIS.
The Consultation RIS may include a series of specific questions, seeking specific information or general reactions to a particular methodological approach. In addition stakeholders are invited to comment generally about issues raised In the Consultation RIS. A Consultation RIS is published on the ABCB website with online forms to facilitate feedback. The period for feedback is typically six weeks. Consultation RISs prepared by the ABCB for stakeholder feedback can be found here.
More generally, please note that the ABCB consults on every amendment to the NCC through a Public Comment Draft, released in June each year. Where possible, if there are substantive proposals to be considered, the ABCB endeavours to release a Consultation RIS at the same time.
Stakeholder comments are considered by the ABCB and a more thorough regulation impact analysis, incorporating stakeholder information, is prepared as a Final RIS for decision by the Board. Final RISs can be found here.
Key steps in regulation impact analysis
The regulation impact analysis at each level follows the guidance provided in COAG’s Best Practice Regulation. The key steps are:
- Identify the fundamental problem that needs to be addressed
- How significant is it?
- What evidence exists to show there is a problem?
- Is government action needed to correct the problem?
- Articulate the intended outcomes, goals or targets of government action.
- Should not pre-justify a preferred solution.
- Should be broad enough to allow consideration of alternative options.
- Identify a range of viable options that address the problem.
- As appropriate, include non-regulatory and co-regulatory options.
- Impact Analysis
- Indentify groups in the community likely to be affected.
- Assess the costs and benefits of each viable option.
- Quantify the costs and benefits where possible.
- Consider business compliance costs.
- Consider any restrictions on competition.
- Describe how consultation was conducted.
- Articulate the views of those consulted.
- Describe how those views were taken into consideration.
- Show that the preferred option has the greatest net benefits for the community, taking into account all impacts.
- The benefits of the preferred option should outweigh the costs.
- Implementation and review
- How will the preferred option be implemented?
- Describe the strategy for reviewing new regulations.
The ABCB provides a range of supporting documents to assist the preparation of regulation impact analysis.
Proposal for Change Template and Guideline
Good Practice Guide for Preliminary Impact Analysis
Regulation Impact Analysis Protocol