Frequently Asked Questions
- What does the Dealing with Construction Permits measure?
- What type of company is considered?
- What type of construction project is measured?
- How does Dealing with Construction Permits indicator count procedures?
- How does the Dealing with Construction Permits indicator measure time?
- How does the Dealing with Construction Permits indicator record cost?
- How are electronic procedures (e.g. online) recorded?
- Does the Dealing with Construction Permits indicator record the de jure (the law) or de facto (the practice) situation?
WHAT DOES THE DEALING WITH CONSTRUCTION PERMITS MEASURE?
The Dealing with Construction Permits indicator records all procedures required for a business in the construction industry to build a standardized warehouse, along with their associated time and cost. These procedures include obtaining and submitting all relevant project-specific documents (for example, building plans, site maps and certificate of urbanism) to the authorities; obtaining all plans and surveys required by the architect and the engineer to start the design of the building plans (for example, topographical surveys, location maps or soil tests); obtaining all necessary clearances, licenses, permits and certificates; completing all required notifications; and receiving all necessary inspections. Doing Business also records procedures for obtaining connections for water, and sewerage. Procedures necessary to register the property so that it can be used as collateral or transferred to another entity are also counted. The questionnaire divides the process of building a warehouse into distinct procedures and calculates the time and cost of completing each procedure. The indicator also has a component on the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The ranking of economies on the ease of dealing with construction permits is determined by sorting their distance to frontier scores for dealing with construction permits. These scores are the simple average of the distance to frontier scores for each of the component indicators.
WHAT TYPE OF COMPANY IS CONSIDERED?
The Dealing with Construction Permits indicator considers a limited liability construction company (called BuildCo) that operates in the economy’s largest business city, is 100% domestically and privately owned, has 5 owners (none of whom is a legal entity) is fully licensed and insured to carry out construction projects (such as building warehouses) has 60 builders and other employees (all of them nationals with the technical expertise and professional experience necessary to obtain construction permits and approvals), has a licensed architect and a licensed engineer, both registered with the local association of architects or engineers, where applicable; and has paid all taxes and taken out all necessary insurance applicable to its general business activity (for example, accidental insurance for construction workers and third-person liability). BuildCo is not assumed to have any other employees who are technical or licensed specialists, such as geological or topographical experts.
WHAT TYPE OF CONSTRUCTION PROJECT IS MEASURED?
The Dealing with Construction Permits indicator records all procedures required for a business in the construction industry to build a standardized warehouse. The warehouse will be used for general storage activities (such as storage of books or stationery) will not be used for any goods requiring special conditions (such as food, chemicals or pharmaceuticals), has 2 stories, both above ground, with a total surface of 1,300.6 square meters (14,000 square feet), each floor is 3 meters (9 feet, 10 inches) high, is not located in a special economic or industrial zone, is located on a land plot of 929 square meters (10,000 square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry.
HOW DOES THE DEALING WITH CONSTRUCTION PERMITS INDICATOR COUNT PROCEDURES?
A procedure is defined as any interaction of the company’s employees or managers, or any party acting on behalf of the company, with external parties, including government agencies, notaries, the land registry, the cadastre, utility companies and public inspectors—and the hiring of private inspectors and technical experts apart from in-house architects and engineers. Procedures that must be completed in the same building but in different offices are counted as separate procedures. Interactions between company employees, such as development of the warehouse plans and inspections conducted by employees, are not counted as procedures. However, interactions with external parties that are required for the architect to prepare the plans and drawings (such as obtaining topographic or geological surveys), or to have such documents approved or stamped by external parties, are counted as procedures. If BuildCo has to visit the same office several times for different sequential procedures, each is counted separately. It is assumed that the minimum time required for each procedure is 1 day, except for procedures that can be fully completed online, for which the time required is recorded as half a day. Although procedures may take place simultaneously, they cannot start on the same day (that is, simultaneous procedures start on consecutive days). A procedure is considered completed once the company has received the final document, such as the building permit or zoning certificate. If a procedure can be accelerated legally for an additional cost and the accelerated procedure is used by the majority of companies, the fastest procedure is chosen.
HOW DOES THE DEALING WITH CONSTRUCTION PERMITS INDICATOR MEASURE TIME?
Time is recorded in calendar days. The measure captures the median duration that construction professionals indicate is necessary in practice to complete a procedure with minimum follow-up with government agencies and no extra payments.
HOW DOES THE DEALING WITH CONSTRUCTION PERMITS INDICATOR RECORD COST?
Cost is recorded as a percentage of the warehouse value (assumed to be 50 times income per capita). Only official costs are recorded. All the fees associated with completing the procedures to legally build a warehouse are recorded, including those associated with obtaining land use approvals and preconstruction design clearances; receiving inspections before, during and after construction; obtaining utility connections; and registering the warehouse property. Nonrecurring taxes required for the completion of the warehouse project are also recorded. Sales taxes (such as value added tax) or capital gains taxes are not recorded. Nor are deposits that must be paid up front and are later refunded. The building code, information from local experts, and specific regulations and fee schedules are used as sources for costs. If several local partners provide different estimates, the median reported value is used.
HOW ARE ELECTRONIC PROCEDURES (E.G. ONLINE) RECORDED?
Each electronic procedure is counted separately. If 2 procedures can be completed through the same website but require separate filings, they are counted as 2 procedures. However, if a procedure can be fully completed online, the time required is recorded as half a day.
DOES THE DEALING WITH CONSTRUCTION PERMITS INDICATOR RECORD THE DE JURE (THE LAW) OR DE FACTO (THE PRACTICE) SITUATION?
The Dealing with Construction Permits indicator records both law and practice:
1. Procedures: Law and practice. The indicator records all procedures that are legally required (even if not done in practice) and all procedures that are commonly done in practice (even if not required by law).
2. Time: Practice. The time measure captures the median duration that local experts indicate is necessary to complete a procedure in practice.
3. Cost: Law or practice in the absence of law. Official fee schedules are the source for cost and where there are no fee schedules, the indicator records the practice (median estimates reported by experts).
4. Building quality control index: Law and practice. The quality control during construction, quality control after construction and the liability and insurance regime sub-indices have some components that address both law and practice. All other sub-indices measure the law.