BPLS Inspections Guide

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BPLS INSPECTIONS GUIDE

CONDUCTING BUSINESS FRIENDLY LOCAL INSPECTIONS

IN THE PHILIPPINES

DISCLAIMER

This document is made possible by the support of the American people through the United States Agency

for International Development (USAID). Its contents are the sole responsibility of the author or authors

and do not necessarily reflect the views of USAID or the United States government.


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DISCLAIMER

This document is made possible by the support of the American people through the United States Agency for

International Development (USAID). Its contents are the sole responsibility of the author or authors and do not

necessarily reflect the views of USAID or the United States government.


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CONTENTS

Acronyms ----------------------------------------------------------------------------------- vAcknowledgements ----------------------------------------------------------------------- vii

Foreword ----------------------------------------------------------------------------------- xi

1. Introduction ---------------------------------------------------------------------------- 1

1.1 Overview ------------------------------------------------------------------------ 1

1.2 Rationale ------------------------------------------------------------------------ 1

1.3 Coverage ------------------------------------------------------------------------ 1

2. The Inspection System in the Philippines ------------------------------------------ 3

2.1 Zoning Inspections ------------------------------------------------------------ 4

2.2 Fire Safety Inspections -------------------------------------------------------- 6

2.3 Health and Sanitation Inspections ------------------------------------------ 8

2.4 Building Inspections ----------------------------------------------------------- 8

2.5 Radial Distance Inspections -------------------------------------------------- 13

2.6 Prevailing Business Inspection Models ------------------------------------- 14

3. Process Improvements ---------------------------------------------------------------- 19

3.1 Zoning Inspections ------------------------------------------------------------ 19

3.2 Fire Safety Inspections -------------------------------------------------------- 20

3.3 Health and Sanitation Inspections ------------------------------------------ 21

3.4 Building Inspections ----------------------------------------------------------- 21

3.5 Radial Distance Inspections -------------------------------------------------- 22

3.6 Joint Inspection Teams -------------------------------------------------------- 22

4. Best Practices for Effective Inspections -------------------------------------------- 25

4.1 Clear Legal Basis --------------------------------------------------------------- 25

4.2 Reasonable Fees --------------------------------------------------------------- 25

4.3 Prior Notice of Inspection --------------------------------------------------- 25

4.4 Prior Disclosure of Inspection Standards --------------------------------- 25

4.5 Professional Checklists and Procedures ----------------------------------- 27

4.6 Prompt Notification of Results --------------------------------------------- 28

4.7 Qualified Inspectors ----------------------------------------------------------- 284.8 Balanced Approach ------------------------------------------------------------ 28

5. Establishing Business Friendly Inspections ----------------------------------------- 31

5.1 Amending Local Ordinances ------------------------------------------------- 31

5.2 Streamlining Current Procedures ------------------------------------------- 32

5.3 Institutional Development Measures --------------------------------------- 36

5.4 Rationalization of Inspection Fees ------------------------------------------ 37

5.5 Automating the Inspection System ----------------------------------------- 40

5.6 Disseminating Relevant Information ---------------------------------------- 42


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CONTENTS Continued

Appendix A: Legal Basis for Business Inspections

Appendix B: Inspection Ordinance Template

Appendix C: Unified Inspection Checklist Template

Illustrations

Figures

Figure 1: Zoning Inspection Process Flow ---------------------------------------------- 5

Figure 2: Fire Safety Inspection Process Flow ----------------------------------------- 7

Figure 3: Health and Sanitation Inspection Process Flow ---------------------------- 9

Figure 4: Building and Occupancy Inspection Process Flow ------------------------- 11

Figure 5: Radial Distance Inspection Process Flow ----------------------------------- 35

Figure 6: Pre-Business Permit Inspection Process Flow ------------------------------ 15

Figure 7: Post Business Permit Inspection Process Flow ---------------------------- 16

Figure 8: Hybrid Business Inspection Process Flow ---------------------------------- 18

Figure 9: Integrated View of Building, Occupancy, and Business Permit Process - 35

Figure 10: Sample Automated Inspection System Scheme --------------------------- 39

Exhibits

Exhibit 1: Pre-Assessed Zoning in Singapore ------------------------------------------ 19

Exhibit 2: Supreme Court Ruling on License Fees ------------------------------------ 26Exhibit 3: Supreme Court Ruling on Gross Receipts as Fee Setting Criteria ---- 39

Tables

Table 1: Proposed Inspector Qualifications -------------------------------------------- 29


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ACRONYMS

ARTA Anti-Red Tape Act

BFP Bureau of Fire ProtectionBO Building Officials

BP Building Permit

BPLO Business Permits and Licensing Office

BR Business Registration

C/MPDO City/Municipal Planning and Development Office

CDP Comprehensive Development Plans

CLUP Comprehensive Land Use Plan

DENR Department of Environment and Natural Resources

DILG Department of Interior and Local Government

DOH Department of Health

DOLE Department of Labor and Employment

DOTC Department of Transportation and Communications

DPWH Department of Public Works and Highways

eBPLS Electronic Business Permits and Licensing System

ECC Environmental Compliance Certificate

EHS Environmental Health Service

EMB Environmental Management Bureau

FALAR Fire and Life Safety Assessment Report

FSC Fire Safety ClearanceFSIC Fire Safety Inspection Certificate

GIS Geographic Information System

HLURB Housing and Land Use Regulator Board

IRR Implementing Rules and Regulations

JIT Joint Inspection Team

LGC Local Government Code

LGU Local Government Units

LUP Land Use Plans

MP Mayor's Permit

NPCC National Pollution Control Commission

NWACPC National Water and Air Control Pollution Commission

OBO Office of the Building Official

OP Occupancy Permit

PD Presidential Decree

PIN Property Index Number

RA Republic Act

TOR Terms of Reference

TWG Technical Working Group

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ACKNOWLEDGEMENTS

Managed for USAID/Philippines by Nathan Associates Inc., LINC-EGLocal Implementation of

National Competitiveness for Economic Growthis a three-year project that began in 2008.

LINC-EG assists policymakers in improving the environment for private enterprise to establish,

grow, create jobs, and help reduce poverty.

This guide was developed under the LINC-EG Project to assist the Philippine government in

improving subnational systems for business permitting and licensing. Consultants Rachel Follosco

and Noel Macalalad conducted extensive research with national and local government officials

at workshops, seminars, and one-on-one meetings. We thank the officials for their advice and

support. Undersecretary Zenaida Maglaya of the Department of Trade and Industry (DTI) and

Undersecretary Austere Panadero of the Department of the Interior and Local Government

(DILG) were particularly generous with their time. This guide would not have been possible

without their reviews, recommendations, and validation of research findings. The guide also

benefited greatly from analysis and editorial review by Mikela Trigilio and Alid Camara of Nathan

Associates Inc.

The contents are the sole responsibility of the authors and do not necessarily reflect the

opinion of the Government of the Philippines or USAID.

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MESSAGE FROMTHE DEPARTMENT OF THE INTERIOR

AND LOCAL GOVERNMENT

The Department of the Interior and Local Government is pleased to be a partner of USAID

through the Local Implementation of National Competitiveness for Economic Growth (LINC-

EG) project in producing this document. As the nation walks through the "matuwid na daan",

this Guidebook is an important step that will deepen the reforms towards more efficiency in

government operations.

Inspection of business enterprises has been part of the business permits and licensing system

(BPLS) of local governments to ensure compliance with the regulatory requirements for safety

and general public welfare. However, the conduct of inspection and issuance of clearances, in

most instances, add to the complexity of business registration processes in the country. This

Guidebook, therefore, is an important undertaking that complements the Department's current

project to upscale BPLS streamlining to all cities and municipalities, as part of the government's

resolve to improve local competitiveness and spur local economic development.

This Guidebook is significant since it is the first time that the procedures of local inspections

have been documents guideposts for an effective and business-friendly local inspection system

that will promote investments are provided. The streamlining reforms in the guidebook are

quite comprehensive, covering the legal, institutional and procedural aspects of inspections,

including a template inspection regulation that the local governments can use. The Department

is confident that this guidebook will pave the way for more effective and efficient business

registration services for businessmen at par with our ASEAN neighbors.

Responding to the call of President Benigno S. Aquino III for good governance, we at the

Department will continue to partner with the USAID in assisting our local governments in

improving the investment climate in their localities and promote local economic development

that will create much needed jobs and reduce poverty.

Mabuhay!

Jesse M. Robredo

Secretary, Department of the Interior and Local Governments

Republic of the Philippines

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MESSAGE FROMTHE DEPARTMENT OF TRADE & INDUSTRY

We commend the Department of the Interior and Local Government (DILG) and the United

States Agency for International Development (USAID) through the Local Implementation of

National Competitiveness for Economic Growth (L1NC-EG) project for producing this

document.

As a partner of the DILG in the Nationwide Streamlining of Business Permits and Licensing

System (BPLS), the Department of Trade and Industry (DTI) is committed to pursue the goal of

streamlining all business-related permitting processes.

The tedious procedures involved in complying with the inspection requirements of both the

national and local governments have long been considered by many private business groups as

major deterrents to the competitiveness of the Philippine business environment. The Guidebook

is therefore a welcome initiative that would support OTI's resolve to address the long processing

time and lack of transparency associated with inspection processes.

The recommendations in the Guidebook will also assist the OTI, through the Construction

Industry authority of the Philippines (CIAP), in reviewing the current procedures in securingbuilding as well as occupancy permits.

Our partners in the business community welcome the Guidebook, which provides guideposts

which local governments can use in designing business-friendly business permitting processes.

We are pleased that the Guidebook puts a premium on the protection of the business sector

during the inspection process, recommending for instance the use of checklists and venues for

settling disputes, among others. Indeed, the document is an important and innovative governance

project that business chambers will benefit from.

As a major proponent of business registration reforms geared towards promoting the country'scompetitiveness, we at the Department will continue to partner with the OILG and USAIO in

assisting our local governments in transforming their localities into business-friendly hubs that

can attract investments and create much needed employment opportunities for our people.

Mabuhay!

Gregory L. Domingo

Secretary, Department of Trade & Industry

Republic of the Philippines


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FOREWORD

USAID has supported Philippine local governments in improving the administration of business

permits and licenses since 2005, particularly in Mindanao. Through partnerships with the World

Banks International Finance Corporation and the German government, this support has been

scaled up to the national level and extended to a number of local government units (LGUs).

LGUs now recognize the economic benefit of simplifying procedures and practices for issuing

business regulatory clearances. Streamlined and automated registration procedures are also

increasingly accepted as a means to reduce opportunities for informal payments and as part ofthe overall anticorruption effort in the Philippines.

In July 2010, USAID/LINC-EG supported a landmark effort of the national government to

establish better service standards for business permitting and license systems (BPLS), such as

unified registration forms, limits on processing times, and simpler payment procedures. USAIDs

technical assistance to local governments in adopting these standards revealed that business

inspections also need to be reformed. LGUs and businesses both identified the lack of a clear

legal and regulatory framework for business inspections as a constraint on BPLS reform.

This guide aims to clarify that framework. It refers to national rules as applicable, but focuses on

the legal aspects of business inspections and rules backing local government practices and

procedures. It recognizes that local reform can be complex and that Philippine LGUs have a

regulatory duty to ensure public welfare and security. It also recognizes that deterring and

punishing violations of public safety while using limited public resources efficiently requires that

regulations not be unduly difficult to comply with.

We hope that this guide will be useful to national and local policymakers as they embark on the

next wave of BPLS reform and as they seek to make the inspection system less onerous forprivate enterprises without compromising public safety.

Alid David Camara

Chief of Party, LINC-EG

November 2011

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http://www.nathaninc.com/


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I. INTRODUCTION

1.1 OVERVIEW

The Philippines' attractiveness as a destination for local and foreign investment has been declining

for the past several years. One reason for this decline is the difficulty of starting a business and

renewing business permits. If the countryside is to attract enough investment to spur economic

growth, business registration processes need to be simplified.

Part of the registration process consists of inspections that aim to verify that a business has met

regulatory requirements. These requirements ensure that public interest and social welfare are

protected. The clearance or permit issued after an inspection assures the authority and the

public that the business is safe and its operations are not detrimental to the community,

environment, or public welfare.

In most of the Philippines, inspections and the associated clearances are additional procedures

or steps, and add time and complexity to the registration process. Any effort to simplify those

processes should begin with the simplification of inspections to make them more investor-

friendly. Such an effort raises a question about balancehow to simplify the business inspections

without compromising public health and safety. Local governments are closest to businesses and

their answer to this question has implications for private investment and business registrations.

1.2 RATIONALE

The objective of this publication is to recommend guidelines to local government units (LGUs)

on how to simplify inspections and reduce the burden on businesses, especially small and micro

businesses that do not have the resources necessary to cope with cumbersome regulations.

Following these recommendations will allow an LGU to balance its local economic development

objectives with its responsibility to safeguard and promote public welfare. The guide is written

from a legal and regulatory perspective so LGUs may more readily comply with requirements

and regulations for proper inspections.

1.3 COVERAGE

The guidance herein focuses on business registration inspections, and is based on the findings of

a review of the legal, policy, and institutional framework for such inspections. Local regulations


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on inspections, to the extent available, were compared with the national laws related to different

inspection systems. The study also examined the impact of the Local Government Code (LGC)

on local inspection codes. The study assessed the inspection systems in ten cities: Quezon,

Marikina, Manila, Mandaluyong, Cebu, Mandaue, General Santos, San Fernando, Olongapo, and

Davao. Davao City was subjected to a closer scrutiny. In this document, LGU primarily refers to

cities studied.


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____________________________

1

Section 16 of the Local Government Code of 1991.

2. THE INSPECTION SYSTEM IN THE PHILIPPINES

The Local Government Code (LGC) of 1991 states that inspections are conducted primarily to

verify and ensure compliance with rules and regulations adopted to promote and safeguard

public welfare, including health, safety, and the enhancement of the right of the people to a

balanced ecology. 1Any effort to simplify the business registration process should thereafter

take into account the purpose and goals of inspections without summarily dismissing them. A

more rational method should be adopted for determining when inspections can be dismissed

and when they should be undertaken despite the inconvenience to business permit applicants.

Moreover, when an inspection is absolutely necessary, the LGU should strive to make the

4inspection as reasonable and business-friendly as possible.

Business inspection in the Philippines is mandated under several laws for various purposes, and

is to be conducted by different agencies of the government, either at the local or national levels.

In almost all cases, it is an integral part of initial business registration and the annual renewal of

business permits. However, while most mandatory business inspections are required for business

registration (BR-linked inspections), a few inspections are still enforced and undertaken

independent of business registration (NBR-linked inspections).

BR-linked inspections include the following:

Zoning Inspections, which are provided for in the LGC and determined by the local

zoning ordinance.

Fire Inspections, which are expressly required for the issuance of a business permit

under the Fire Code of the Philippines of 2008.

Health and Sanitation Inspections, which are usually required locally to secure a business

permit even though the Code on Sanitation of the Philippines (Sanitation Code) states

that a sanitation permit or clearance is only required for a few types of businesses.

Miscellaneous Inspections, which may be applicable to certain enterprises because of the

nature of their business, for example, inspections conducted by the Department of

Transportation and Communications (DOTC) on Motor Vehicle Private Emission Testing

Centers before accrediting these enterprises.


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NBR-linked inspections include the following

Building Inspections, which are conducted by building officials (BOs) or their authorizedrepresentatives in compliance with the National Building Code of the Philippines (Building

Code), and includes plumbing, electrical, and mechanical inspections. These inspections

are required for building and occupancy permits. The Implementing Rules of the Building

Code (Building Code IRR) calls for these to be conducted on an annual basis.

Labor Inspections, which are conducted by the Department of Labor and Employment

(DOLE) to ensure compliance with labor laws.

In many cases, inspections that are not, by law, BR-linked inspections are linked to businessregistration requirements by LGUs, or they are applied indiscriminately to all businesses rather

than those that specifically require the inspection. The most common examples of this are the

Health and Sanitation Inspections, which should apply only to businesses that could risk public

health, and Building Inspections, which should be applied to the building owners rather than the

businesses operating within.

2.1 ZONING INSPECTIONS

Zoning is mandated in the LGC. At the policy level, the LGC empowers local governments toset reasonable limits and restraints on the use of property in their territorial jurisdictions. The

LGC also states that LGUs need to comply with all of these restraints and limits in a zoning

ordinance, the basis for the regulation of subdivision and housing development; industrial location;

and the reclassification of agricultural land into residential, commercial, industrial, institutional,

or other purposes/classifications.

The development of a zoning ordinance is usually based on the local governments Comprehensive

Land Use Plan (CLUP). The CLUP estimates the optimum size of zones of use (e.g., agricultural,

residential, commercial, industrial), with sizes guided by various standards and formulas fromthe rural and urban development sciences. Most LGUs also prepare city/municipal Comprehensive

Development Plans (CDP), a strategic plan that states priorities and the basis for their

development in the medium-term. CLUP preparation is mandated by Executive Order (EO)

No. 72, which also appoints the Housing and Land Use Regulator Board (HLURB) as the national

authority to review, evaluate, and approve or disapprove CLUPs of LGUs.

Under EO 72, the HLURB is also empowered to prescribe standards and guidelines in the

preparation of land use plans, monitor the implementation of such plans, and adjudicate and

settle disputes among LGUs over their CLUPs and zoning programs. EO 72 likewise prescribes


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Figure 2-1

Zoning Inspection Process Flow

the mechanism for the development of the CLUP. It designates the City/Municipal Development

Council to initiate the formulation and updating of the CLUP in accordance with the planning,

zoning standards, and guidelines prescribed by the HLURB. The formulation of the plan ismanaged by the City/Municipal Planning and Development Office (C/MPDO).

Businesses applying for a permit to operate, sometimes referred to as a Mayors Permit

(hereafter referred to as a business permit) are required to check first with the C/MPDO to

see if the proposed business is permitted in the area it plans to operate in Figure 2-1 shows the

typical process followed in securing a zoning clearance.

One of the requirements for a business permit is a sketch of the location of the business. This

allows the zoning officer/staff to visually assess the zoning classification of the proposed enterprise.Using the location sketch, the zoning officer tries to accurately locate the proposed establishment

on the zoning map of the city/municipality. After ascertaining the location, s/he notes the

permissible use based on the zoning ordinance and checks if the proposed enterprise is allowed

in the area. The use of roads as zonal boundaries enables the zoning officer to accurately

determine location, as construction seldom traverses across roads. If it is allowed, a zoning

clearance is issued to the applicant; if not, then the application is denied.

The assessment process for the issuance of a zoning permit should normally take no more than

5 to 15 minutes. However, the need for onsite visits often severely delays the process. An actual


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____________________________

2 Memorandum Circular No. 2010 67 dated July 26, 2010 no longer requires the preparation of FALAR as a supporting document in the issuance of

a Fire Safety Inspection Certificate.

onsite visit may be conducted if it is found that the proposed location is near or at the boundary

between two zones. This is true for most ambiguous cases, although there are some notable

exceptions, such as the SM Megamall in Mandaluyong City, where construction crossed a roadand even linked two buildings over the road.

In cases when the application is denied, most cities/municipalities allow the applicant to file a

motion for reconsideration. This requires the council, the Mayor (Vice Mayor), and the Planning

Office to deliberate on the appeal. To resolve the appeal, the Planning Office usually inspects the

site, checks the development in the area by noting the types and number of establishments, the

scale of the investment, and other city/municipality-specific considerations. If the area proves to

have sufficient economic development and progress for the kind of business being proposed,

then the appeal may be granted. Appeals involving zoning re-classification or exemptions tozoning regulations are addressed through the Sangguniang Panglungsod or Bayan.

2.2 FIRE SAFETY INSPECTIONS

Like the Building Code, the Fire Code also provides guidelines for the design, construction, and

operation of a building or a building space regardless of its final use. The policy objective of the

Fire Code is the advancement of public welfare and the protection of the environment while

promoting the professionalization of the fire service.

The Fire Code (and the Implementing Rules and Regulations of the Fire Code) lays down a

comprehensive plan that includes provisions for self-funding and capacity building for the Bureau

of Fire Protection (BFP). The Fire Code has a section devoted to the reorganization of the BFP

that describes the needed competence and qualifications for fire safety professionals. It also

provides for improvements in the remuneration of BFP personnel that facilitates the hiring and

retention of highly-trained individuals.

The Fire Code IRRs detail the certification/clearances that attest to the safety of a building or

a space within a building. These include the following:

Fire and Life Safety Assessment Report (FALAR). A FALAR2 is designed to be the primary

source of information on fire safety. There are three types. FALAR1 and FALAR2 are

required for new buildings according to the Fire Code IRRs. FALAR 3 is the statement

of the fire safety of a building as a result of the design and construction review, and

the annual building inspection process. FALARs 1 and 2 are supposed to be prepared by


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Figure 2-2

Fire Safety Inspection Process Flow

the architect and the fire safety practitioner that designed and constructed the building.

FALAR1 is issued with the building permit and is a certification that attests that theproposed building design complies with the guidelines set forth in the Fire Code.

FALAR2 is issued alongside the occupancy permit and attests that the final

construction complies with the guidelines set forth in the Fire Code.

FALAR3 is signed by the building administrator upon the regular annual fire safety

inspection and certifies the safety and the condition of the building after the annual

fire inspection.

Fire Safety Inspection Certificate . The FSIC is released by the BFP after an applicants

compliance with the requirements of the FALARs. The Fire Code categorically provides

that the FSIC is a pre-requisite for the issuance of a business or mayors permit and

other permits.

Fire Safety Clearance. The FSC is required for business establishments that store, handle,

install, and transport hazardous material, or are engaged in hazardous operations and

processes.

The FSIC is the only clearance that is specifically required prior to the release of a business

permit. Some observers have pointed out that the BFP inspection procedure for the issuance of

this certification causes delay in the issuance of a business permit. The typical fire inspection

process is illustrated below:


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2.3 HEALTH AND SANITATION INSPECTIONS

The policy objective behind the conduct of health and sanitation inspections (henceforth referredto as sanitation inspections) is the protection and promotion of public health. Sanitation

inspections are generally required periodically and in certain instances, such as in the case of

food establishments, more frequently than once a year.

The Department of Health is the primary agency tasked with enforcing the Sanitation Code

and the Secretary is authorized to develop the Implementing Rules and Regulations (or Sanitation

Code IRRs). S/he is represented at the local level by the Local Health Officer. The City/Municipal

Health and Sanitation Department conducts inspections both before and after the issuance of

a business permit.

The focus of the health and sanitation inspection varies depending on the stage at which it is

conducted. In pre-business permit inspections (such as plumbing) or in inspections conducted

during construction for the issuance of the occupancy permit, the focus is the consistency of

the sanitation design and plumbing plans with the specifications prescribed in the Sanitation

Code. These inspections are highly technical and focus on plumbing installations and other

sanitation facilities, depending on the type of business. The common causes for delay during the

pre-inspection stage are design-related. In such cases, the design engineers usually just amend

the design to address the issues.

This is in contrast to sanitation and health inspections related to business registration, which

ordinarily seek to confirm that the employees have health certificates and that the business

implements the sanitation practices relevant to its type of business. These inspections are

typically conducted for high-risk businesses that require safety inspections prior to the issuance

of a business permit. For businesses with low sanitation/health risks, inspection, if any, is done

after the business permit is issued. High-risk businesses such as food establishments are not

only required to undergo inspection prior to business permit issuance, but are also required to

be inspected more frequently, often at least twice a year.

The length of time required for a BR-linked inspection is dependent on the number of the

enterprise's employees, which is used as a proxy for the size of the establishment. The sanitation

inspection process is illustrated in Figure 2-3.

2.4 BUILDING INSPECTIONS

Building inspections are mandated under the Building Code for the issuance of building and

occupancy permits. It is conducted to safeguard life, health, property, and public welfare, consistent


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Figure 2-3

Health and Sanitation Inspection Process Flow

with the principles of sound environmental management and control. An occupancy permit

attests that a constructed/renovated building is suitable for its intended use and conforms to

the applicable provisions of the Building Code, and certifies that the building/renovation is

ready for immediate occupancy.

The Building Code provides a framework for the use of minimum standards and requirements

that guide, control, and regulate the structure's location, design, quality of materials, construction,

use, occupancy and building maintenance, and other systems and installations. These standards

and requirements must be applied in designing the building plan and requires the expertise of

several licensed professionals, such as architects and engineers. A typical plan consists of several

sections that correspond to the architectural, structural, plumbing/sanitation, electrical, mechanical,

electronics, and fire safety3 components of the building. It is submitted by an applicant and is

assessed before the building permit is issued. It is also the basis for the inspections that are

conducted during construction to ensure that safety-compliant specifications are followed.

The administration and enforcement of the Building Code is the responsibility of the Department

of Public Works and Highways (DPWH) through its representatives and counterparts in the

Office of the Building Official (OBO)4. The LGC amended the Building Code to state that the

city/municipal engineer shall be concurrently the Building Official. The OBO enforces the Building

____________________________

3 The fire code now requires a separate design for fire protect ion, which must be signed by a licensed fire safety practitioner.4 Section 477 of the Local Government Code of 1991 reads, in part, as follows:

SECTION 477. Qualifications, Powers and Duties (a) No person shall be appointed engineer unless he is a citizen of the Philippines, a resident of

the local government unit concerned, of good moral character, and a licensed civil engineer. He must have acquired experience in the practice of

his profession for at least five (5) years in the case of the provincial or city engineer, and three (3) years in the case of the municipal engineer.


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____________________________

The appointment of an engineer shall be mandatory for the provincial, city and municipal governments. The city and municipal engineer shall also act

as the local building official.

Code in two stages: (1) the issuance of the building permit, and (2) the issuance of the occupancy

permit. The securing of the building and occupancy permits is often mistakenly thought of as an

integral part of the business permit and licensing process. The Building Code seems to suggestthat this is a separate and distinct regulatory process in itself. The inspection process is shown

in Figure 2-4.

Stage 1Application for a Building/Renovation Permit

An applicant must first secure two clearances before he or she can file an application for a

building permit:

Barangay Clearance. Securing a barangay clearance is not explicitly required by the BuildingCode for the filing of an application for a building permit. However, almost all LGUs

require it to ascertain the location of the building and the sentiment of the affected

community regarding the presence of the proposed building in its area.

Zoning Clearance . Zoning clearances ensure that the LGUs can manage and control the

prescribed reasonable limits and restraints on the use of property within their territorial

jurisdiction.

Once both clearances are secured, the applicant for a building/renovation permit is required tosubmit 5-6 copies of the building/renovation plans.

Different units in the OBO correspond to various technical/engineering disciplines and are

tasked to review the submitted design plans. The assessments these units conduct ensure that

applicable design standards were followed by the design professional. The OBO also ensures

that all the plans are properly signed by qualified and licensed individuals and that the plans

comply with Building Code specifications. The OBO also coordinates with the Bureau of Fire

Protection (BFP), which conducts an independent technical assessment of the building in the

formulation of the Fire and Life Safety Assessment Report (FALAR). It is only when all of theserequirements are satisfied that the building permit is issued.

During specific stages of construction, the Building Official (BO) or his representatives conduct

technical inspections based on the submitted construction schedule. These inspections are

designed to ensure that the submitted plans are being followed and that changes in the plans

are still compliant with Building Code standards and are appropriately noted in the construction


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Figure2-4

BuildingandOccupancy

InspectionProcessFlow


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5 Section 306 of the Building Code.6 Section 701 of the Building Code classifies buildings according to their use or the character of its occupancy: Group A - Residential Dwellings; Group

B - Residences, Hotels and Apartments; Group C - Education and Recreation; Group D - Institutional; Group E - Business and Mercantile; Group F -

Industrial; Group G - Storage and Hazardous; Group H - Assembly Other Than Group I; Group I - Assembly Occupant Load 1000 or More; Group J

Accessory.

log book. Deviation from the approved plans may be grounds to revoke or suspend the building

permit that has been issued, particularly if the actual construction ceases to comply with the

requirements of the Building Code. 5

The time required to complete the assessment depends on the size of the construction or

renovation. The Building Code specifies that the business permit be issued within 15 days from

payment of fees for Group A-J6 and 30 days for other groups of applicants. The common cause

of delay in the inspection process is the extent of work involved in assessing design plans. An

average-sized 10-storey building will typically have hundreds of design pages for review. Disputes

in the use of design standards occasionally occur, but these are usually immediately resolved by

the submission of a new design reflecting the correction of the design flaw.

Stage 2Application for an Occupancy Permit

At the end of the construction/renovation period, the contractor is required to submit six

copies of the as-built plans, including a construction log book that is duly signed by the responsible

engineers and architects. The OBO assessing officer then checks for plan modifications and

determines if these are within the applicable design standards. The assessment also includes a

review of the construction log book for the technical notes of the construction engineer.

A site inspection is conducted to ensure that the submitted as-built plan reflects the actualconstruction/renovation. The whole construction, including all the variations between the original

designs and the as-built plans, are again evaluated to ensure compliance with the Building Code.

An occupancy permit is issued after the OBO validates that the construction/renovation is in

accordance with the submitted plan, and that the actual construction/renovation is compliant

with the appropriate provision of the Building Code.

As with the assessment for the building permit, the time required to complete the assessment

for the occupancy permit depends on the size of the construction or renovation. The typical

assessment time for an average-sized structure is one to two weeks. Deviations from thesubmitted plan are the common cause of delay in the occupancy permit assessment. In most

cases, the design professional is required to submit a design computation that justifies the

change. When the application for deviation is denied, the applicant is required to submit new

design computations, signed for by a responsible licensed professional.


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2.5 RADIAL DISTANCE INSPECTIONS

The radial distance that should be observed between certain types of establishments is partlyprovided for by the Sanitation Code, particularly the Sanitation Code IRRs. 7 Chapter V, Section

8.1 of the Sanitation Code IRR recognizes the prerogative of LGUs to adopt zoning ordinances

prescribing where various types of businesses may be located. However, if there are no zoning

laws or ordinances, the Sanitation Code IRRs give the local health officer the responsibility, and

thus the discretion to determine the suitability of the location of a particular business. There is

no categorical directive under the Sanitation Code for this arrangement.

Only businesses that are specifically required by ordinances or the Sanitation Code and its IRRs

to be within certain distances from other types of establishments need to go through a radialdistance inspection. This inspection generally includes a site inspection to verify the actual

location of the business permit applicants proposed premises. The typical process for radial

inspection is presented in Figure 2-5.

Figure 2-5

Radial Distance Inspection Process Flow

____________________________

7 The Sanitation Code IRR, unlike most IRRs of laws, is not contained in one document but consists of several issuances, each implementing a chapter

of the code. The following are the IRRs so far issued: Chapter II Water Supply (Supplemental IRR); Chapter III Food Establishments; Chapter IV

Markets And Abattoirs; Chapter V Public Laundry; Chapter VI School Sanitation and Health Services; Chapter VII Industrial Hygiene; Chapter IX

"Rest Areas, Bus Terminals, Bus Stops And Service Stations; Chapter XI Dancing Schools, Dance Halls And Night Clubs"; Chapter XV Port, Airport,

Vessel and Aircraft Sanitation; Chapter XVI Vermin Control; Chapter XVIII Refuse Disposal; Chapter XIX Nuisances And Offensive Trades And

Occupations; Chapter XX Pollution of the Environment; and Chapter XXI Disposal of Dead Persons.


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In most cities, the City Engineering Office conducts the radial inspection. A field survey is

required to officially measure the radial distance of the applicants establishment. The City

Engineering Office issues a certificate of the official distance measurement between theestablishment and key institutions in the area. This serves as basis for the BPLO to decide

whether or not to issue a business permit on the basis of the radial distance.

2.6 PREVAILING BUSINESS INSPECTION MODELS

In general, BR-linked inspections in LGUs follow any of the following inspection models: (1)

pre-business permit (traditional) model; (2) post-business permit regulatory compliance model;

and (3) the hybrid model.

Pre-Business Permit Inspection

The process consists of conducting inspections before the release of a business permit (see

Figure 2-6). A business permit, which does not include a temporary authority to operate, is

released only after the business establishment complies with all applicable regulatory

requirements. This process provides the least risk to public welfare and the local environment.

However, this process can place an undue burden on LGU inspection units and discourage

private investment and business registrations. There are three noted variations in the pre-

business permit inspection process; (1) inspections are conducted as pre-registration activities;(2) inspections are conducted upon receipt of business permit application; and (3) inspections

are conducted upon proof of payment.

Post-Business Permit Inspection

Under this model, the compliance requirements are deferred to a later date in favor of getting

the investor in to legally operate as quickly as possible. This is distinctly opposed to the procedure

under the Pre-Business Permit Inspection Model, where businesses are not allowed to renew

their permits unless they have complied with all the regulatory requirements. At the operationallevel, LGUs following this model have opted to provide business establishments with a grace

period for complying with all the regulatory requirements. This grace period ranges from as

short as 30 days to as long as 120 days.

The inspection process under this model is shown in Figure 2-7. There are noted variations in

this process: (1) temporary business permits after showing proof of payment, followed by

official business permits once inspections have been completed; and (2) actual business permits,

stating that permits are subject to revocation if the business does not comply with stated

requirements.


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Fig

ure2-6

Pre-BusinessPermitInspectionProcessFlow


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Figure2-7

PostBusinessPermitInspectionProcessFlow


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Hybrid System

To address observed weaknesses in the inspection models, some LGUs practice calibratedrestrictions and use building risk categories. Low risk establishments are allowed to go through

the registration process unhampered. In some cities, these establishments are no longer inspected

and can get their permits within 24 hours of applying. The process, however, becomes stricter as

the perceived level of risk posed by the business establishment increases. This process offers

some flexibility to LGUs, particularly for small and medium enterprises. However, this approach

may make the inspections process cumbersome and lengthy for large businesses deemed to be

risky or semi-risky.

The success of the hybrid model (see Figure 2-8), depends mainly on the accuracy of thecategorization of businesses according to the level of risk they pose to the public and the

environment. There is some debate regarding how to categorize businesses into separate risk

categories. For example, the city environment office requested that the car wash business be

categorized as high risk, as the oil, soap and other chemicals used in it are potential threats to

the environment. The BFP requested that mobile vendors using open flame stoves be classified

as a high-risk business, despite its small size and minimal capitalization.

There are several techniques for risk-based categorization, but set rules for classifying business

risks do not yet exist. What is evident is that there is a need for consensus. A single riskcategory for all types of risks may not be justified or reasonable (e.g., a business may pose a

significant fire risk but practically no sanitation risk, making a single classification for purposes of

both types of inspections inappropriate). Best practice likewise dictates that the criteria used

to evaluate the level of risk posed by a business for a particular type of risk should be specifically

identified, and if necessary, assigned varying weights. For example, a business that poses a fire

risk could be judged based upon the nature of the materials handled, the use of a fire/combustion-

prone process, and the number of people exposed to the risk at any given time. Widely accepted

technical practices for risk evaluation in each sector should be relied upon when possible.


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Fi

gure2-8

HybridBusinessInspectionProcessFlow


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3. PROCESS IMPROVEMENTS

3.1 ZONING INSPECTIONS

Some LGUs have made improvements that speed up the processing of applications for zoning

clearances. These include

Requiring applicants to submit photographs. Including photographs of the front, back,

and side of the building that show the nearest landmarks facilitates the process of

locating the proposed location accurately by providing a reference point for the zoning

officer. However, it adds to the expenses already incurred by the investor.

Using Property Index Numbers. The Property Index Number is a unique number that

identifies a parcel of land based on the tax map of a city or municipality. It is issued by

the Real Property Office, also known as the Assessor's Office. Knowing this number

makes identification and ascertaining the location of a proposed business location easier.

Some LGUs associate it with tax mapping. If used in an integrated IT system, it makes it

possible to trace payments of property and other relevant taxes, thus saving an investor

from some inconvenience. There is a growing trend among LGUs to require property

tax clearance prior to the renewal of a business permit. An online system will save a

taxpayer the trouble of going to the Assessors Office to get a tax clearance.

Using a Geographic Information System Map. The property number is best used with a

geographical information system (GIS). A GIS is a database that can store pictures and

text as a point in a map. This makes the GIS map an intelligent representation of city

resources. Many LGUs use a GIS map to integrate data and information among offices

in the city. The maps can be used in both the business registration inspection and

assessment processes, while also ensuring accuracy in determining zoning classifications.

Exhibit 3-1

Pre-Assessed Zoning in Singapore

One model that may be considered as best practice and could thus be emulated is the Singapore

model where all spaces (e.g. land, a building, or a space within a building) in a locality are pre-

assessed. These spaces are then pre-tagged for specific purposes, be it commercial, residential,


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or industrial. This implies that establishments will only be allowed to set up businesses in pre-

tagged areas. For instance, a factory can only be built in areas pre-tagged for industrial purposes.Properly implemented, pre-tagging available spaces encourages investors to follow strict zoning

regulations.

3.2 FIRE SAFETY INSPECTIONS

Fire safety inspections are challenging to both BFP inspectors and business permit applicants,

but for different reasons. BFP inspectors are frequently unable to conduct all the required fire

inspections due to a lack of manpower and resources. For businesses, the basic challenge is

determining and understanding the requirements to pass fire safety inspections. This confusion

can include items as fundamental as the correct number and type of fire extinguishers required

for their premises.

Some LGUs and the BFP have taken initiatives to better cope with the limitations faced by the

BFP in conducting inspections, without foregoing inspections altogether. Some of these measures

include the following:

Post-application inspections and issuance of a temporary permit to operate which, in

effect, allows the LGUs and the BFP to buy time to conduct necessary inspections. In

Davao City, for example, the Temporary Authority to Operate that it issues gives the

permit applicant and the business inspection teams an additional 30 working days to

conduct the inspection and complete the business renewal process.

Pre-application inspections in order to comply with the express mandate of the Fire

Code for business permit applicants to secure an FSIC before they can get a business

permit. In certain LGUs, such as Davao City, the BFP have conducted fire safety inspections

ahead of the business permit renewal period. The results of the inspections made

during the year serve as basis for the issuance of the FSIC for use in the subsequent

years business permit renewal application.

Other process enhancements require a change in the law and the Fire Code IRRs. These are

discussed in Section 4, Establishing Business Friendly Inspections.


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3.3 HEALTH AND SANITATION INSPECTIONS

Health and sanitation inspections would benefit from the increased efficiency associated withrisk-based categorization of businesses. Low-risk businesses, although exempt from regular

inspections, may not be excused from the other basic requirement, such as the need for employees

to secure health certificates. However, there is no need for an actual inspection to ensure that

employees have health certificates. Compliance with this requirement can be checked by asking

the new/renewed business permit applicant to provide a list of employees, which can be checked

against the database containing the names of holders of health certificates and their respective

employers. This assumes that the application form for a health certificate requires the disclosure

of the name of the applicants employer.

3.4 BUILDING INSPECTIONS

It is clear that the assessments conducted for the issuance of building and occupancy permits

are comprehensive, involving each aspect of construction. Thus, to require building-related

inspections to be conducted again during the initial business permitting process would be

unnecessary if the building will be used for exactly the same purpose as declared during the

building permitting stage. The following measures are recommended to improve the processing

of applications for building and occupancy permits:

Building and Occupancy Permits Database. Some LGUs make use of a database of all

constructed and renovated facilities to minimize the need for site inspections. The

availability of such a database enables the BPLO to directly check for inspection clearances

that have recently been issued. This renders it unnecessary to conduct new inspections

or seek confirmation from the OBO/LGUs engineer. Significant investments in

information technology may enable an LGU to maintain and update information on

buildings in their locality, including the history of renovation for a particular building.

GIS systems are particularly useful in matching locations with permit data. Naga City

relies on such a database to determine if a business establishment requires an inspection.

Adoption of Risk-Based Classification. If LGUs determine that there is a sound legal

basis for annual building inspections, a risk-based classification of businesses should be

established. Under a risk-based system, low risk businesses will have less onerous

inspection requirements. The practice of some LGUs that have dismissed building-

related inspections for business premises measuring 50 square meters or less may have

some basis and is helpful in simplifying registration for small businesses.


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Pre-inspected Sites. Technical inspections are best done during the construction/

renovation phase. This practice appears to be similar to the way Singapore managed to

implement a business-friendly process, despite more stringent regulatory requirements.

Elimination of Building Inspections for New Businesses. The technical clearances needed

for building-related approvals can be lengthy, and in fact, unnecessary for some new

businesses. The findings of the Regulatory Simplification Project of the Ateneo School

of Government and the International Finance Corporation noted that 80 percent to

90 percent of new businesses required some form of construction/renovation. This

means that the majority of the new business premises have just undergone a thorough

inspection during construction/renovation. The BPLO could do without the building

inspections if that can be sufficiently treated as a separate set of procedures. Thismeasure is now being practiced in some cities that require just copies of the occupancy

permit as a requirement for new business registration.

3.5 RADIAL DISTANCE INSPECTIONS

Radial inspections can be done away with by using digital maps freely made available on the

internet, a detailed database of the location of registered businesses in the LGU, and local maps

that reflect the provisions of the LGU's zoning regulations. These resources enable the LGU to

check compliance with prescribed radial distances through desk checking, removing the needto conduct onsite inspections. Alternatively, a business establishment that is subject to radial

distance constraints may be required to complete a questionnaire demonstrating its adherence

to the regulations. As a safeguard against any erroneous declarations of the required information,

the LGU may require the declaration to be made under oath, thereby subjecting the application

to prosecution for perjury and a revocation of their business license.

3.6 JOINT INSPECTION TEAMS

The Joint Inspection Team (JIT) is an international best practice recently been introduced in thePhilippines. It is an approach to conducting actual inspections regardless of the regulatory or

policy directive. The JIT method referred to in this publication is one where all regulatory

inspection offices, through their respective representatives, conduct a coordinated inspection

of the business premises of an applicant. Instead of separate visits by each of the offices required

to conduct inspections, business owners are able to schedule a one-stop inspection. Cebu,

Mandaue, and four other cities in the Visayas currently field JITs.

Cebu City uses JITs only for new businesses, while Mandaue City uses it for both new and

renewed business permits. The self-reported benefits to Cebu and Mandaue include


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Positive public perception because JITs are equated with being business-friendly,

Minimal disturbance of businesses,

Better relationships with the business sector; Improved regulatory compliance, and

Minimizing of corruption.

In some cities in Metro Manila, however, there is a perception that JITs are impractical given

budget, manpower, and other constraints involved in coordinating across departments to field

a JIT for a high number of business establishments. During the regulatory simplification upgrade

of the IFC, the Quezon City Simplification Project Team8 expressed reservation that a JIT may

not be feasible given the number of registered business, the physical size of the city, and the

prevalent traffic in Metro Manila. The team also indicated that adopting a JIT process willnecessarily require more inspectors.

Other cities claim that lack of manpower prevents them from shifting to the JIT scheme. This

was observed in some cities where there is a noticeable imbalance in the number of inspectors

between the BPLO and BFP, with the former having more. Until it is able to increase recruiting

efforts, the BFP maintains that separate fire inspections are the most efficient mechanisms.

There is also the matter of timing. Some inspections take much longer than others, creating

inefficiencies in the process. Advocates of JIT point out that JIT is best done by zone, thus, those

who are finished with their inspection with one business can move on to the next businessestablishment while the others are finishing up with their inspection, all within a particular area

or zone. In the end, JIT has both advantages and disadvantages. The most important determinant

for success of the JIT method is buy-in from the LGU as a whole. The LGU must be willing and

able to do whatever is necessary to ensure the success of a JIT, including the hiring of additional

inspectors for offices lacking manpower. Further details on how to establish JITs are included in

Section 5.3.

____________________________

8 Simplification Project Teams are representatives from the various departments that are involved in the registration and renewal of business permits.


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4. BEST PRACTICES FOR EFFECTIVE INSPECTIONS

4.1 CLEAR LEGAL BASIS

Approving and codifying the legal aspects of business inspections is important because inspections

without a legal basis are likely to be arbitrary. The conduct of the business inspection can be

prescribed and authorized under a national law, a local law, or both. The inspection process

should have clear policy objectives and a way to safeguard these objectives. The legal bases for

business inspections are summarized in Appendix A. The lack of a legal basis at a national level

does not indefinitely impede the conduct of business inspections at the LGU level. If an inspection

does not have any statutory basis in national law LGUs can readily have the legislative assembly

consider and pass an ordinance prescribing the conduct of the business inspection.

4.2 REASONABLE FEES

Fees are imposed to recover the cost of a service rendered. As such, inspections and their

corresponding fees may not be imposed in order to raise revenue. In the exercise of its authority

to set fees, it should be clear that fees are separate and distinct from taxes. In this regard, the

discussion of the case decide by the Supreme Court is instructive (see Exhibit 4-1). Details on

how to establish reasonable fees for business friendly inspections are provided in Section 5.4.

4.3 PRIOR NOTICE OF INSPECTION

Inspections should be conducted with prior notice to the business permit applicant at the time

the application is submitted, or by separate written notice. Prior notice is important so that

business owners may exercise their right to be assisted by the appropriate professionals, such

as an engineer, during the inspection. This will help business establishments comply with inspection

requirements, prevent misunderstandings with the inspecting authority, and more immediately

remedy negative findings. Notifications also allow the business establishment to analyze their

schedule and be prepared to receive the inspector.

4.4 PRIOR DISCLOSURE OF INSPECTION STANDARDS

Checklists detailing inspection standards, steps, and pass/fail criteria should be created for each

inspection. The checklist should be completed during the inspection and a copy left with the

owner of the business establishment or his or her representative. Checklists


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Standardize the inspection process, minimize subjectivity from its conduct, and limit

the discretion of the inspector;

Ensure the observance of a minimum standard of quality standard in the conduct of theinspection, such that the quality of the inspection does not depend solely on the

inspectors individual level of competence and thoroughness.

Spare establishments surprises and ensure transparency because they allow post-

inspection verification and thus the filing of protest against findings.

EXHIBIT 4-1

Supreme Court Ruling on License Fee

It is often loosely used to include levies for revenue as well as levies for regulatory purposes such

that license fees are frequently called taxes although license fee is a legal concept distinguishable

from tax: the former is imposed in the exercise of police power primarily for purposes of regulation,

while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus,

if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition

is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained

does not make the imposition a tax.

To be considered a license fee, the imposition questioned must relate to an occupation or activitythat so engages the public interest in health, morals, safety and development as to require regulation

for the protection and promotion of such public interest; the imposition must also bear a reasonable

relation to the probable expenses of regulation, taking into account not only the costs of direct

regulation but also its incidental consequences as well. When an activity, occupation or profession

is of such a character that inspection or supervision by public officials is reasonably necessary for

the safeguarding and furtherance of public health, morals and safety, or the general welfare, the

legislature may provide that such inspection or supervision or other form of regulation shall be

carried out at the expense of the persons engaged in such occupation or performing such activity,

and that no one shall engage in the occupation or carry out the activity until a fee or chargesufficient to cover the cost of the inspection or supervision has been paid. Accordingly, a charge of

a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to

be a tax rather than an exercise of the police power.

SOURCE: Progressive Development Corporation vs. Quezon City, G.R. No. L-36081dated April 24, 1989


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4.5 PROFESSIONAL CHECKLISTS AND PROCEDURES

The use of checklists is very effective in ensuring that there is no inconsistency in the parametersused during inspections to evaluate compliance. The checklist should be completed during the

inspection, and the evaluation parameters should apply uniformly to similar businesses. If the

checklist is not customized to the types of business, then the inspector needs to indicate which

items in the checklist are not applicable to a particular business. The minimum information that

should appear on the completed checklist includes (1) the name of the inspector and his/her

position together with his/her signature; (2) the time and date of the inspection; and (3) an

affirmative statement where the business owner or his authorized representative acknowledges

the conduct of the inspection, receipt of a copy of the inspection report, and a verifies that s/he

has a clear understanding of any negative findings and what measures must be taken to ensurecompliance.

The Fire Code IRRs already include checklists for the inspection of various types of businesses

while the IRRs of the various chapters of the Sanitation Code include detailed lists of what

needs to be checked in the course of an inspection. These lists can readily be reorganized and

converted into standard checklists. A sample checklist for sanitation inspection is provided in

Appendix C. In addition, the following procedures should be observed during inspections:

Inspections should be efficiently conducted and completed within a reasonable periodof time without undue delay.

Except when justified, no more than two inspectors from the same inspectorate group

should conduct the actual inspection.

Inspectors should present an identification card from his/ her office and an original

copy of the Mission Order or another competent proof of authority, unless the prior

notice already includes these details.

Inspections should be conducted in the presence of a representative of the business

establishment, preferably a person who is knowledgeable about the relevant

circumstances and can properly relay the comments and findings of the inspectors to

the owners of the establishment.

One checklist should be used and completed in the course of the inspection, including

all negative findings, comments, and recommended courses of action for their own

reference and that of the business owner.


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The checklist should record the reasons why a business establishment is or is not

compliant with each criteria through an indicator detailing the level of compliance.

Findings should be explained to the representative of the business establishment and, if

necessary, clarifications/explanation should be sought from him or her.

A copy of the completed checklist, signed and dated by the inspector, should be left

with the representative of the business establishment. The copy retained by the inspector

should be signed by the representative to verify his or her receipt of a copy of the

checklist.

If possible, the checklist should also indicate the proposed timeframe for remedying anegative finding, and when the business applicant can expect another inspection. The

business applicant should be informed of how he or she may go about contacting the

inspector to reschedule the inspection.

4.6 PROMPT NOTIFICATION OF RESULTS

If there is no negative finding, the certificate, clearance, or permit applied for should be issued

no later than one day after the inspection. If there is a negative finding, it should be made clear

what the consequences will be, including whether (1) the negative finding can simply be satisfied/remedied and thereafter, the permit issued; (2) the negative finding cannot be remedied and

results in the non-issuance of the permit/clearance applied for; or (3) the negative finding will

result in a fine or other penalties for the continued failure of the applicant to correct or

remedy the noted violation. If there is disagreement regarding the outcome of the inspections,

the LGU should provide a dispute resolution mechanism so that the business applicant can

appeal the decision. Further details on how to implement an appeals process is include in

Section 0.

4.7 QUALIFIED INSPECTORS

Inspections for the issuance of new and renewed business permits are technical and should be

conducted by professionals with commensurate education and training. Basic technical

qualifications for inspectors are proposed in Table 4-1.

4.8 BALANCED APPROACH

The business registration and renewal process is a delicate balancing act between an LGU's

desire to improve its business friendliness and its need to protect public welfare and the local


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Table 4-1

Proposed Inspector Qualifications

environment. The local economy improves due to the influx of new investments or expansion

of existing businesses that generate jobs, alleviate poverty, and improve living standards. However,

every business that is permitted to operate in the city or municipality potentially puts publicwelfare and the local environment at risk. Every new business generates waste that goes into

the landfill, contributes to pollution, uses natural resources, and creates other forms of

environmental pressure.

It cannot be emphasized enough that this delicate balance between the need to enhance local

economic development and the need to protect public welfare and the local environment must

be maintained in order to create a sustainable practice. This balance is maintained by, among

other factors, the inspection processes that the local governments implement, provided that

the regulatory purposes of the different kinds of inspections are achieved. Achieving the regulatory


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purposes of inspections is best served through a cooperative effort between the business

community and the local government. This requires a common understanding among all

stakeholders of the purpose of each inspection.


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5. ESTABLISHING BUSINESS FRIENDLY INSPECTIONS

5.1 AMENDING LOCAL ORDINANCES

While national laws affecting the inspection and regulation of businesses at the local level still

need to be amended to improve the policy environment, LGUs may take measures on their

own to improve regulation in their jurisdictions, particularly regulation of registration and

inspections. The basic restrictions on this authority are the mandatory provisions of law, which

LGUs cannot defy and which no ordinance issued by them may contradict.

Many LGUs have not passed detailed inspection ordinances even though a significant number of

inspection issues can be addressed by such ordinances. Ideally, these ordinances should provide

the legal basis for the prescribed inspection, purpose of the inspection, method for conducting

inspections, applicable penalties for noncompliance, method for applying penalties, and recourse

for applicants who do not pass inspections, among others. Appendix B is a template for a local

ordinances concerning health and sanitation inspections. This template, which can be modified

for other types of inspections, follows the best practices for effective inspections discussed

above and reflects other recommendations presented in this chapter.

Repeal of Duplicative Fire Inspection Fees. LGUs are advised to repeal ordinances that

require fire inspection fees above and beyond those collected by the BFP, unless it is

proven that their fire marshals are separate and distinct from those of the BFP, and that

these personnel enforce other legal requirements based on a legal basis or authority

other than the Fire Code.

Appropriate Application of Fees. To reduce confusion, LGUs may revisit their ordinances

that categorically prescribe inspection fees and assess whether it is best to refer to

these fees in a more general way as "regulatory fees. LGUs are not always able to

inspect all registration applicants for all required inspections, yet they still charge the

corresponding fees. This being the case, LGUs may not continue to charge inspection

fees for inspections they do not conduct.

Disambiguation of Similar Fees. The simultaneous imposition of closely related fees,

particularly those that are not readily distinguishable on the basis of their names, such

as Environmental Protection/Supervision Fee and Environmental Protection Office

Accreditation Fee as well as Sanitation Inspection Fee and Sanitation Permit Fee,


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should be avoided as much as possible. To applicants, the distinction is not apparent and

makes them suspect duplication. Fees should be distinct and what is being paid for

should be made clear, including the reason for imposition of a fee.

5.2 STREAMLINING CURRENT PROCEDURES

The ability of LGUs to conduct inspections all the time for all business establishments in their

respective jurisdictions is seriously restricted by resource limitationsinadequate manpower

and finances. These constraints are compounded during the legally mandated business renewal

period, which is restricted to a mere three weeks each year (January 121). LGUs need to

streamline current inspection procedures in order to service all business renewals in the

restricted period.

As a matter of reform a combination of the following options may be considered, and to some

extent are already being observed in several LGUs: (1) total elimination of unnecessary

inspections, (2) selective inspection of enterprises based on risk level and business size, and (3)

staggered inspections.

Elimination of Duplicative Inspections

Several inspections can be eliminated for certain types of businesses altogether:

Commercial Building Inspections . Building inspections may no longer be needed for

individual establishments located in shared premises, such as commercial buildings and

malls.9 The inspection requirements are already covered by the annual building inspection

prescribed under the Building Code IRRs. Omitting these inspections eliminates

duplicative inspections and fees. In this case, the annual building inspection fee may be

charged directly to the building owner, who will then allocate fees among tenants

accordingly.

Renewal Sanitation Inspections. The annual sanitation inspection of business premises

may be dismissed as a prerequisite for business permit renewal in the case of businesses

that are not subject to such inspection under the Sanitation Code, although an initial

sanitation permit is still required for new businesses.

Zoning and Radial Distance Inspections. Inspection for purposes of zoning and radial

distance clearance may be eliminated completely, particularly in the following instances:

____________________________

9 Davao City practices this method.


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When the business is clearly within the area authorized for such purpose based on

the provisions of the LGUs zoning ordinance and various zoning maps;

Business permit renewals when there is no change in the address of the business

establishment;

The business permit sought is clearly within the declared purpose of the building,

as may be apparent from the building permit and occupancy permit that was issued

for the building; and

The business permit applicant owns the building; has just secured an occupancy

permit not more than one year prior to the date of application for a businesspermit; and the business is consistent with the declared purpose or use of the

building as indicated in the occupancy permit.

Risk and Size-based Categorization

Risk-based targeting requires LGUs to formally adopt a system of classifying risk posed by

various businesses and then provide an inspection prioritization scheme on that basis. This is

similar to the low-risk/high-risk classification scheme being implemented by some LGUs. However,

the classification method enforced by certain LGUs could be refined or improved in the followingmanner:

Create and/or adopt formal criteria for assessing risk and defining the applicable

regulatory parameters for each level of risk.

Develop unique risk criteria for each type of inspection.

Transparently communicate risk levels to business permit applicants, including for each

type of inspection and the consequences/regulatory parameters of the risk levelclassification that a business has been given.10

These recommendations are also applicable to categorization businesses by size. The number

of inspections that new business permit applicants are subjected to, and the resulting high cost

of registration has discouraged small businesses from formalizing their businesses by securing

the needed permits. LGUs seeking to lure new businesses, particularly smaller ones, may set a

____________________________

10 Based on information provided in an interview of paralegals doing business registration work, while Quezon City applies a risk-based classificat ion

allowing low-risk businesses to forego inspections, this practice is not clearly communicated to the business permit applicants.


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threshold business size based on capitalization11 that qualifies an enterprise for simplified

business registration procedures. See Section 5.4 for more details on implementing a risk-

based system and how it may impact fee setting.

Staggered Inspections

LGUs may find it feasible and preferable to integrate the building, occupancy, fire and business

permitting processes by requiring that all building inspections be conducted during the

construction of the business venture. If corrections or alterations to the structure are necessary

to comply with regulatory requirements, it would be more cost-effective to remedy perceived

problems at this stage, rather than after the completion of construction. Under this scheme, all

technical inspections during the business permitting process will be redundant, creating asignificantly streamlined registration procedure as shown in Figure 5-1. This scheme could reduce

the typical business permitting process to just two steps.

Fire, health and sanitation, and other building-specific inspections are best conducted during

the construction phase. Occupancy inspections would be the only building-specific inspections

that would take place after construction. Any deviation from the intended declared use should

automatically mean that the applicant will be required to apply for a building permit. This process

is clearly spelled out in the Building Code as change of use. To synchronize the building

business permit processes, the building permit application would include the purpose of thestructure being constructed. If the structure is being constructed for business purposes, then

the BPLO should be notified during the construction stage. This procedure links the two processes

and makes the building inspection less redundant.

For inspections that need to be conducted after the business has opened, LGUs should focus

on operation-oriented rather than asset-oriented inspections. Asset-specific inspections

are focused on determining or evaluating whether applicable technical standards and specifications

(such as those prescribed under applicable codes like the Building Code) relative to an asset,

such as a building, have been complied with. On the other hand, an operations-specific inspectionis focused on determining whether in the course of the operation of an entity of its business,

applicable safety, health, and environmental standards are being observed or complied with. 12

For example, the existence of a waste disposal area or facility, built in accordance with

specifications such as size and capacity, could be checked in the course of an asset-specific

____________________________

11 Sole proprietors generally indicate an arbitrary amount of capital investment in their application forms. This is because their personal properties are

often not seen as distinct assets, therefore they do not strictly account for the assets of their business and their personal funds separately, unlike in the

case of corporations where the assets of the corporation are generally clearly distinct from the assets of the shareholders.

12 Local Government Academy. 2011. Asset Specific Inspection and Operations Specific Inspection. Available at http//lga.gov.ph/bpls-faq3.


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Figure5-1

Int

egratedViewofBuilding,Occupancy,andBusinessPermit

Process


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inspection. However, whether or not the waste disposal area or facility is actually being used

and maintained as required is a matter that is best ascertained in the course of an operation-

oriented inspection. Similarly, the existence of fire exits complying with the required size/specification will be confirmed by an asset-specific inspection, but the operation-specific inspection

will determine whether or not the fire exit is subsequently locked, broken, barricaded or blocked.

Operation-oriented inspections do not necessarily need to be conducted during the limited

business renewal period from January 1st through 20th of each year. Relevant LGU departments

could conduct inspections throughout the year, on a staggered basis, so long as certifications of

inspections are valid for one year following issuance.

5.3 INSTITUTIONAL DEVELOPMENT MEASURES

From the institutional development standpoint, the following measures are recommended to

make the inspection process more business-friendly:

Forming Joint Inspection Teams

LGUs wishing to implement JITs may consider the following steps:

1. Form a Technical Working Group (TWG) composed of representatives from the city/

municipalitys inspection units to assess the feasibility of adopting JITs in the city/municipality;

2. Formulate the JIT Inspection Process, once a consensus is established: the LGU registration

process is the best starting point;

3. Select a Registration Model (pre-, post-, or hybrid) once an agreement on the JIT process

is reached, and develop the JIT Terms of Reference (TOR), which should detail the following:

Composition of the JIT

Objectives and functions of the JIT Schedule and frequency of inspections

Inspection process for each unit per business type

Format of the Mission Order for each inspection

Head of the JIT

Staff training needs and a training plan if needed

The primary objectives of each inspection, ensuring that the rationale for inspection is

aligned with national and local policy

Inspection procedures, indicating Anti-Red Tape Act (ARTA) commitments for various

units


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Organizational structure of the JIT, including structure of each field inspection team

Reporting re

BPLS Inspections Guide

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