We Don’t Need No Stinking Permits!

July 1, 2012
I’m just going to say it: The most useless step in the residential HVAC installation process is permitting. Permitting adds costs, hassles, and little, if any value.

I’m just going to say it: The most useless step in the residential HVAC installation process is permitting. Permitting adds costs, hassles, and little, if any value.

In theory, permitting is necessary to protect consumers from poor work by contractors and to ensure the work meets current code requirements. In theory, passing inspection provides the contractor with liability protection in the case of a lawsuit (ha!). Also in theory, inspectors are competent, service oriented, have a strong work ethic, and operate in a department that’s staffed sufficiently so inspections are performed on a timely basis, at the convenience of the consumer and contractor.

While we’re still in theory mode, think about this: Even if the inspector does a perfect job, he’s only checking for the government’s minimum acceptable installation practices. Good contractors don’t need a government inspector to ensure they deliver quality work. They’ll do the same job whether there’s a permit or not. Where’s the value add? Moreover, many not-so-good contractors don’t bother to pull permits. Where’s the consumer protection?

The mere fact that a government inspector will sign off on an installation may give consumers peace of mind, but it’s a false peace. Incompetent contractors eventually go out of business. Incompetent inspectors keep going to work. Remove the aura of benign government protection and consumers will be more careful in the selection of contractors. This benefits better contractors.

A Negative Value Add
Permitting is a hassle. Typically, each locality has its own rules and requirements. Given the presence of Internet browsers for the last 20 years, one would think contractors could pull permits online. However, most jurisdictions still require someone to drive to a municipal office to pull a permit for each installation. In states blessed with licensing (CB, May 2012, page 64, or online at bit.ly/KDnIrD), some locales require the license holder to show up in person.

The way inspections are conducted varies by jurisdiction as well. Even within a town, different inspectors carry different pet peeves. Contractors often complain about the lack of uniformity from one inspector to the next within the same city.

If a consumer needs to be home to meet the inspector, someone likely has to take off additional time from work.

If the contractor must be present, the value of his time must be built into the job.

Inspections often aren’t timely. The codes and inspections area is one place where municipalities have economized. Many cities have backlogs of jobs awaiting final inspection. Since the fees, pricey as they can be, are unlikely to cover the costs of operating the department, why not just eliminate inspections altogether and give taxpayers, homeowners, and contractors a break?

Of course the major costs aren’t the fees the contractor must mark up or the time he must cover in his pricing. The major costs are tied to the mandates approved by the bureaucracy and enforced through the permitting process.

Some government entities use permitting as a way to force consumers to take actions and make upgrades that might be good for them, but that they don’t necessarily want to do at the time. This puts the contractor in the role of enforcer for the state, who must inform the consumer about the necessity to make undesired repairs or purchases (e.g., hard wired CO detectors in all electric homes) that may have little or nothing to do with the job at hand. Is this the role you want?

If permitting is so problematic, why do contractors put up with it? Many don’t. If the hassles are too high, the risks of getting caught are low, and the penalties acceptable, a number of contractors don’t bother pulling permits, giving them a competitive advantage over those who follow the rules. Those who do follow the rules, justifiably cry out for enforcement. Yet, effective enforcement would require government to swell the bureaucracy, further raising costs. Do we really want an army of bureaucrats looking over our shoulders, trying to find something wrong to justify their existence?

The current permitting system is broken. We can attempt to fix it through government. A better approach would be to outsource it to the private sector. Best would be to eliminate it altogether. In an industry without permitting, consumers would save money and be encouraged to be more careful when selecting a contractor. Taxpayers would see a reduction in the cost of government. Contractors would face fewer hassles and the playing field would be leveled for contractors who follow the rules. That’s a triple win.

Matt Michel is CEO of the Service Roundtable, which will pay contractors over $1 million in rebates on parts, supplies, equipment, consulting, software, books, and services. Call toll free 877/262.3341 to learn how much you can save with Roundtable Rewards.