Third-Party Building Departments

Back in 2016, I reprinted a letter by Royal Mortier of Mortier Ang Engineers and Northwest Code Professionals that addressed the State of Oregon’s Building Codes Division’s (BCD) proposed changes to administrative rules regulating the certification of building inspectors, plans examiners, and building officials. His letter took exception to the proposed changes, which as implemented weakened certification requirements and over time will adversely impact the quality of the permitting and inspection processes.

Two years on, Royal has brought to my attention further news from the BCD with significant implications for many of the smaller communities in Oregon who have long relied upon third-parties to provide the services of a building department they cannot otherwise afford. In a February16, 2018 memorandum, Katharine Lozano, Assistant Attorney General with the State of Oregon Department of Justice, asserts the State possesses the exclusive and ultimate responsibility for the delegation of building programs to municipalities who use private third-party contractors. From that perspective, such delegation is fine to the extent they do not violate the Oregon constitution; however, the effective outcome will be the abolishment of third-party permitting and inspection services.

The underlying premise of Lozano’s interpretation of the state constitution is founded upon the distinction between “ministerial” and “discretionary” functions. Her memo contends that delegation of building programs to private third parties is unconstitutional because such delegation necessarily involves giving discretionary governmental powers to private entities, and because “adequate procedural safeguards to provide government accountability do not exist.” Additionally, because some of the third-parties providing building services also have “private financial interests in the decisions made by the building departments they serve, the adequacy of procedural safeguards would receive heightened scrutiny, which the programs would not survive.” These private financial interests include commercial engineering services owned by the same individuals who operate the third-party plan review and inspection businesses. Through this lens, Mortier Ang Engineers and Northwest Code Professionals are public enemy Number 1 because Royal is an owner of both companies.

Pursuant to Lozano’s analysis, the state updated its program delegation and renewal standards to be consistent with the Oregon constitutional restriction on delegating discretionary decision-making authority to a non-governmental employee. Under a proposed program delegation rule, cities and counties will be required to either hire a building official or cede their programs to a larger jurisdiction with a building official on staff, such as a larger county or the state. Up to three cities can share a building official. Third-party contractors may continue to review and conduct inspections on behalf of cities based on list of standards, statutes and rules; however, they are prohibited from issuing or denying building or electrical permits, issuing stop work orders, resolving disputes or providing code interpretations, so the net effect is to emasculate private contractors.

Why is the use of third-party plan review and inspection services now a question? Smaller municipalities who cannot afford their own full-time building officials, plans examiners, and inspectors have long relied upon private contractors to provide the necessary services. Private companies provide fill-in support as needed, assist with large influxes of work, and are a cost-effective alternative for smaller jurisdictions. Note that third-party contractors are used in every other state in the nation. Oregon will be an anomaly once the new delegation rule is in full force.

As a private contractor, Northwest Code Professionals assists its clients in various capacities ranging from plans review and inspection services to full building programs for 30 jurisdictions throughout Oregon (in addition to communities in Idaho and Washington). Without the services of Northwest Code Professionals and other third-party contractors, Oregon’s small cities and counties will assume the burden of new expenses without the budgets to pay for them. The fact most public building departments are already beyond their capacity to meet obligations is not helpful. The upshot of the new rule will almost certainly be poorer service at greater cost.

The League of Oregon Cities (LOC) and the Association of Oregon Counties (AOC) both take exception to the new program delegation rule. They cite as objections the prospect of increased costs, swelling of bureaucracies, lengthier permitting processes, and inspection delays. Both have lobbied hard for granting cities and counties the freedom to use whomever they see as the best certified building program option for their respective communities. They’ve done so because they know how important the use of private companies is to smaller cities and counties, not only in Oregon but elsewhere as well.

Perhaps I’m overly cynical, but I believe the motivation for this narrow interpretation regarding statutory authority has less to do with constitutional requirements as it does the monopolizing of building department functions under agency control, specifically at the BCD or state level. Citing protection of safeguards and government accountability as further rationales seems disingenuous given that third-party contractors have performed this work for decades without significant prior challenges. How are the third-party services Northwest Code Professionals provides philosophically different than those licensed engineers or architects furnish their clients? Don’t they also have private, financial interests in the decisions they make in their work as design professionals? Should all engineering and architectural work for public agencies only be performed by government employees? The arguments posed by the Building Codes Division in support of the rule seem spurious. Am I missing something here?