In construction, there's one process critical to the schedule and flow of a project that's out of a builder's control. No matter how organized and efficient a construction company is, everyone has to wait on the building department — whether it's for a plan review necessary to get a permit or a routine inspection. It's all a part of doing business, but what happens when there's a surge in construction activity, stressing the building department's resources? The answer: delays.

In March, the National Association of Home Builders reported that the median delay for a single-family home permit was seven months in 2015, up from four months in 2011. In addition, according to the American Institute of Architects, builders could expect holdups of six to eight months in the busiest markets, like Florida and California.  

The answer to this ongoing problem for many states and municipalities is third-party, private inspectors, either directly hired by the local government or as an option for construction companies that don't want to wait on normal processing times. Some smaller municipalities even contract their entire inspection and permitting responsibilities out to these private vendors. Is the use of third party inspectors an effective way to alleviate backlog, or does it present a new risk for potential corruption?

A choice out of necessity

In Florida, state statutes allow construction companies to use third-party inspectors for both plan review and building inspections, according to Joe Belcher of JDB Code Services in Homosassa, FL. The state even allows municipalities to accept affidavits from state licensed or registered architects and engineers in lieu of plan reviews and inspections, although most local governments verify the information, he said. "Even if they're using a private provider, they'll go out and verify — do spot checks, things like that," Belcher said.

Local jurisdictions can also hire a private firm to conduct their inspections and plan review — all or just a portion — depending on how busy they are or on the limitations of their staffing. For example, Belcher said he does high-rise plan review for some small jurisdictions who don't have anyone on staff available to do it. Belcher said it seems the use of third-party inspectors is growing, but he didn't go so far as to say that government-run building departments are on their way out. Many times, he said, the choice to use third-party inspectors is out of necessity.

Belcher said that during the recession, building departments were forced to lay people off, "and a lot of those people have not come back." After the massive layoffs, the once-secure government job didn't have the same level of certainty as it once did, making other options more attractive. "They've been hired by these private inspection providers," he said, "and the inspection providers are actually paying better, especially when compared to smaller or more rural areas." He's even heard of building departments in the state having trouble retaining staff because once they’re trained and certified, they leave for a job with a private company.

The upside to this trend of third-party inspectors, Belcher said, is the fact that there is rarely a conflict between in-house inspectors and third-party inspectors because "in a lot of cases, the private guys are people that the people who work for the government know. They worked together before." Smaller cities "have the headache of (paying) benefits, insurance, vacation, sick time," and welcome the opportunity to farm it out, Belcher said.

Belcher rejected the idea that third-party providers aren’t as qualified as their municipal-employee counterparts. "These guys still have to get licensed. If (they're) not architects or engineers, they have to have the same license the inspectors have. It doesn't mean that the guy doing the work is any less qualified," he said.

Cities make the ultimate decision

Paul Schaffer, chief construction inspector with the city and county of Denver, said it's up to each municipality to decide whether or not to use third-party inspectors. Currently, he said, Denver allows an owner to hire a third-party roofing inspector, but the city is looking at utilizing more third-party inspectors because of its current building boom. Schaffer said the city has a 4,000-inspection backlog, down from 6,000 in January. In his section alone, he said they have 400 to 500 inspections scheduled every day.

Originally, Schaffer noted, the building department began to approve third-party roofing inspectors as a way to deal with the unusual number of re-roofs after severe hailstorms. That authorization, he said, will eventually expire, but that won't happen until they reduce their roofing inspection backlog, which now stands at a little more than three months. "All options are on the table to get people taken care of," he said.

And it's not just inspections. "We're up 15% from last year on incoming plan reviews," he said. The plan review department has been hiring third-party reviewers directly for about a year to help that process along.

It's also up to local jurisdictions in South Carolina to decide whether or not to use third-party providers, according to Ken Granata, deputy building official with the city of Charleston. Charleston, he said, allows their use but has a "robust" policy of certification and limits third-party inspectors to certain types of inspections. For example, foundation inspections or certificate of occupancy inspections, among others, can only be performed by city inspectors.

Each building official also has the right to not accept third-party inspectors on certain projects as well, such as historic buildings that the official believes will need special expertise to handle. If the building department's workload is light, officials might decide not to allow private providers at all, as long as the city inspectors can handle the workload.

"We want to be able to provide a certain level of customer service delivery. If we have — and we do right now — an extraordinary amount of construction, we put this out as a means for (us) to be able to deliver that level of service we want to provide when necessary," Granata said.

In addition, he said, city officials are committed to maintaining a stable workforce, and using third-party providers allows them to avoid layoff situations when construction activity slows down. "We want to maintain and keep an educated and trained workforce. We try not to add to our team, and then, all of a sudden by the time we add them, the cycle downturns, and we have too many people. We don't want to lay people off or not have enough or have too many," he said.

Unlike Florida and Denver, though, Charleston does not contract directly with third parties, and currently third parties do not conduct plan reviews.  

Increasing the risk of corruption?

However, attorney Elan Parra, construction industry investigator and managing director at Lemire LLC in New York, is not a fan of the third-party inspector concept. He said his primary concerns involve qualifications and ethics.

Even though agencies often prequalify these third-party inspectors, Parra said his concern is the integrity of the inspector's role. "I think it's a recipe for potential corruption," he said. "You have a situation where, unless you have very robust vetting, very robust background investigation and an ongoing process by which these third-party inspectors are continually investigated, it's a fine line that a lot of these municipalities are possibly walking." Parra added that policies should be in place so that if there ever is a question of ethics, it can be "elevated" to a board of authority to ensure that a proper investigation is conducted.

Parra said there is an inherent risk in a builder hiring its own inspector, but a prequalification system like Charleston's is a step toward mitigating that risk. However, he said, "if you're not putting in place broad restrictions promulgated by the municipality to ensure that there aren’t going to be corruption or ethics violations, then you're running the risk of really creating a situation where you have a corrupt practice going on."

Granata said a jurisdiction must ensure quality control over a (third-party inspector program). "There should be checks and balances," he said. "There should be follow-up." Granata emphasized that building relationships is crucial, as inspectors must be trustworthy and  able to meet their responsibilities to the community. "We see the advantage of being able to focus our resources where they're needed most," he said.