The “9 Steps” program greatly facilitates construction for small business


The Government of Moscow has launched an ambitious program “9 Steps From Project to Object”. One of the most important distinctions of it is the actual existence of evident “target audience” – the builders that work with low-risk projects.

According to the Construction Code of the Russian Federation all the buildings and structures are divided into three large groups:
•    utilities of special regulation – technically complicated, unique or high consequence facilities, such as the Metro system. The federal agencies – Rosglavekspertiza (All-Russian State Expert Committee) and Rostechnadzor (Federal Environmental, Industrial and Nuclear Supervision Service of Russia) exercise control over them;
•    facilities of usual regulation, that is housing, office facilities, etc. The supervision and examination is carried out by municipal authorities, which are represented by Mosgosstroynadzor (Moscow State Supervision Committee) Mosgosekspertiza (Moscow State Expert Committee)in Moscow;
•    and finally, low-risk facilities such as low-rise buildings (up to three floors), warehouses, etc.  This category of real estate is high in demand by companies from sector of small and medium-sized business.

In order to facilitate the work of entrepreneurs of small and medium-sized business, a few years ago the government withdrew from the supervision of such facilities. And now, the city authorities are going to ease significantly the implementation of construction projects by launching the program “9 Steps From Project to Object”, reports the agency “Prime”.

In a face of disappointing performance in construction industry in 2015, when the number of bankrupt developers and representatives of small enterprises has reached the level of 2700, and the new year has brought the collapse for about 200 companies, the new program of the Moscow Government should facilitate the operating conditions of developers and reduce the risks of the current economic crisis for them.

The program “9 Steps From Project To Object” includes several main aspects.

The first aspect concerns the elimination of excessive administrative procedures. Now only 9 steps separates an investor from “a table with papers” to a construction site, before that this route consisted of 21 steps. Thus, 12 approvals were eliminated from the list of mandatory procedures, notably that some of these exclusions concerned not only low-risk facilities but other objects as well.

It is remarkable that all the steps are performing sequentially and they do not duplicate each other, the city authorities communicate with investors on the principle of one-stop shop: instead of 10 different kinds of examinations the only one is performed, and 4 types of construction supervision is combined into a single state construction supervision.

The Construction Complex which is supervising the program is included in an integrated system of interdepartmental cooperation – it is forbidden to demand from applicant documents available to the other state agency. Documents are requested directly through the system.

Such efforts of the Moscow government will have a positive impact on the investment activity of small and medium-sized business, said Executive Director of the Fund “Institute of Urban Economics” Tatiana Polidi.

“The concept of a simplified control in low-risk construction projects was inserted in the Construction Code at the time of its adoption. Additional steps in this area have repeatedly been made by the Russian government, for example, when adopting the regulation “On exhaustive list in housing development”. However, different cities still have many administrative procedures, and not all of them seek to optimize this list. On this background Moscow looks like a positive exception: the city authorities really strive to increase transparency and facilitate the procedure for obtaining state services,” says the expert.

Another goal of the program is the reduction of terms for necessary procedures. Reduction of excessive procedures allowed reducing the average timing of administrative procedures to 99 days (excluding the time needed for revising of documents due to applicant’s fault). Thus, in less than four months an investor is able to complete the “paperwork” and start the construction on the site.

In addition, a more stringent timing is applied to entire series of examinations. For example, the term of state examination of standard project documentation was reduced from 50 to 30 days, for not the non-standard – shortened from 50 to 45 days. Certificate of approval of architectural and urban planning solution is now issued in 14 days instead of 30. The term of orders for excavation halved to seven days.

The managing partner of “Ost Legal” Vladimir Lipavsky thinks that “reducing the timing for processing of documents up to 99 days is a very ambitious task”. According to him, “nowadays the collection of documents and subediting them takes much longer now”. “However the fact that the city government is ready to offer the 9 steps procedure of approval seems to be a welcome development that will contribute to speeding up the process of preparing documents for construction,” added Vladimir Lipavsky.

The third aspect of the program concerns stimulation of e-document flow. The project of conversion of state services to electronic format was launched in 2013 and primarily included only 7 services. Since then, it was doubled. “Today Moscow provides 14 state services in the field of investment and construction activities, and 12 of them – in electronic format. This measure gives a serious boost to investment in the construction industry, and of course makes the procedure for obtaining state services as open and transparent as possible,” explained the Deputy Mayor for urban policy and construction Marat Khusnullin.

The growing demand for e-document flow is supported by statistics: while in 2013 only 12% of the total number of applications was submitted in electronic format, in 2014 the figure was 33%, and in 2015 it amounted to 70% of applications.

Now a developer can carry out all the necessary 9 steps using e-document flow on the portal of state services. Processing of the approval procedures can be monitored in Developer personal account on the portal.

“At the moment the applicant can get all the paperwork done at all stages of the construction project starting with the conclusion of the land lease contract and ending with obtaining occupancy permits without personal visit to the authorities,” previously said the Mayor of Moscow, Sergey Sobyanin at the board of the Construction Complex.

Advantages of this approach are obvious: in addition to evident benefits the conversion of procedures to electronic format allows to use services from anywhere in the world, and receive actual information on processing documents online.

As a result all concerned benefit from this. Due to the simplified algorithm of processing documents developers will be able to more effectively plan their business and reduce the costs of pre-construction activities. “Developers can reinvest their savings in projects. Facilitation of procedures reduces the timing for putting objects into operation, thereby it is enhancing their earning capacity,” said the head of the Moscow Department of Urban Planning policy Sergey Levkin.

Facilitation of administrative procedures in construction saves money to the city budget and developers, notes the chairman of the Association of Investors Lyubov Tsvetkova. The Association of Investors together with the Construction Complex holds regular seminars and roundtable discussions for developers, technical supervisors, principal contractors; they address actual problems and find solutions for them. Many administrative procedures in the construction industry has become rather transparent, the Construction Complex of Moscow decided to cancel the most time-consuming procedures. “Of course it is too early to say that everything is perfect and we have no problems. I am glad that the Moscow city government makes balanced decisions on further removal of administrative barriers,” added Tsvetkova according to the portal

Muscovites will also have benefits of the situation. They will quickly gain access to a variety of new facilities, because their commissioning time will be reduced, moreover they will get new workpalces. According to expert estimates, Moscow construction industry provides the city almost one million jobs. At the same time one job in construction industry creates 8-9 jobs in related industries.

Owing to the new program Moscow itself will not only save a part of the city budget on optimizing the regulatory process, but also significantly improve its own investment environment. The ranking of the World Bank DoingBusiness serves a fair indicator of how it works. Although the ranking is compiled for countries on certain criteria (including the degree of difficulty of “obtaining a construction permit”), the calculation is based on the performance of the largest cities, in the case of Russia – Moscow. In recent years Russia has greatly improved its figures largely owing to Moscow: in 2011, Russia ranks 179th, then in 2015 – it was 119th. According to the World Bank, in a 5-years’ time due to the actions taken by the Government of Moscow, terms of administrative procedures in construction industry decreased by 2.5 times and developer’s savings amounted to 2.5% of total project value as compared with 2010.