Licensing and Permitting

Principle 1: Focus on policy outcomes

 

Principle definition
L&P processes should be designed and implemented to align with broader policy goals, and their results should be evaluated based on how well they meet those goals. Licensing authorities should ensure adequate resources and capacity so that L&P systems achieve their intended outcomes.
Sub-principles	Criteria
1.1 Align L&P with key policy objectives	Integrate L&P with public policy goals to enhance effectiveness, efficiency, and compliance Identify the policy objective and select the appropriate tool Design a strategy to monitor and evaluate whether L&P work
1.2 Base L&P decisions on evidence and data	Justify with evidence any potential intervention choice Use data to boost evidence in the L&P decision-making process Develop a framework for data collection, analysis and management
1.3 Assess performance of the L&P system	Assess regularly the performance of L&P systems against criteria that show what really matters Conduct transparent, inclusive performance assessment with stakeholder engagement and user satisfaction in mind Keep improving the L&P system to reduce burdens
1.4 Ensure L&P systems have the right resources	Secure the right funding in a manner that is transparent and accountable Ensure the necessary technical and ‘soft’ skills to deploy and operate L&P systems Introduce the right tools to support L&P authorities and their staff Invest in IT solutions that can support an effective L&P system

Licensing authorities should clearly identify the policy objectives that they aim to achieve and select the most appropriate tools to produce the desired outcomes. L&P must be evidence-based, enabling licensing authorities to identify policy issues, manage risks, and assess policy outcomes effectively.

To ensure effectiveness, licensing authorities should base their L&P decisions on data and establish a framework for data collection and management.

Through diligent performance assessment, licensing authorities can ensure that L&P continue to deliver on their intended policy objectives while reducing burdens that hinder economic growth. The continuous evaluation and refinement of L&P criteria and processes ensure they remain relevant, efficient and responsive to changes and emerging needs.

Adequate resourcing ensures that L&P authorities have the necessary capacities, personnel, tools and technology to carry out their activities effectively and efficiently. This includes managing applications, fostering compliance and supporting regulated subjects.

Overall, fostering a culture of continuous improvement and accountability against foreseen outcomes enhances the credibility and reliability of the L&P system. It supports innovation and economic growth while reducing risks. It also builds trust among stakeholders and the public who can be confident that the system is designed and managed to uphold high standards of safety, quality, and fairness.

1.1. Align L&P with key policy objectives

Integrate L&P with public policy goals to enhance effectiveness, efficiency, and compliance. The effectiveness of any regulatory intervention depends on connecting a public policy problem with the policy instrument most likely to produce the intended outcomes (OECD, 2021[12]). This could involve, for instance, ensuring environmental protection, maintaining a safe workplace, or providing food that is safe for consumption without worry. Defining a public policy problem, that L&P seeks to address, involves a clear understanding of the situation, the probability of its occurrence, and its potential negative effects on society. Efficiency is ensured by selecting the intervention that best achieves the desired outcomes while remaining cost-effective. This approach promotes compliance, as it ensures that the regulation has a valid purpose and a positive societal impact.

Identify the policy objective and select the appropriate tool – licenses and permits should only be used when needed. The potential use of L&P as a regulatory tool should be carefully assessed against other options. Licensing authorities should identify the challenges to be addressed by the L&P and the resources needed for adequate implementation. Conducting this ex ante assessment allows authorities to select the most suitable intervention to achieve the policy objective, whether it be L&P or a non-regulatory alternative, such as behavioural incentives.

Design a strategy to monitor and evaluate whether L&P work. Licensing authorities should monitor how existing L&P are performing and evaluate whether they are delivering on desired outcomes. If necessary, a monitoring and evaluation strategy can provide evidence to assess compliance and adjust interventions. Any evaluation should compare expected versus actual outcomes and examine the potential negative effects resulting from the use of L&P.

1.2. Base L&P decisions on evidence and data

Justify with evidence any potential L&P intervention choice. Intervention choices can have meaningful impacts. This includes creating market barriers to entry, generating distortions, changing individuals’ behaviour, and/or potential negative effects on society. Licensing authorities should therefore justify their intervention choices, including L&P, with clear and objective supporting evidence. Collecting evidence can be supported by using regulatory management tools, such as Regulatory Impact Assessment (RIA), stakeholder engagement, and ex post evaluation (see Box 1.1).

Box 1.1. The use of regulatory management tools to collect evidence for public interventions

The use of regulatory management tools constitutes a source of information and evidence for the entire life cycle of a policy intervention. A Regulatory Impact Assessment (RIA) provides a framework to assess policy alternatives ex ante (including L&P). It is a tool aimed at providing a formal appraisal (based on evidence) of the potential effects of regulations (and other instruments) from the early stages of their design and implementation.

An RIA establishes a series of inquiries to make clear the justification for a public intervention, the potential alternatives at hand and the cost-benefit analysis of each alternative. When assessed in this way, draft L&P interventions must have a positive net effect.

While the RIA is an excellent tool for ex ante evaluation, there are thousands of existing L&P across countries that cannot be assessed with this tool. For L&P already in place, an ex post evaluation of L&P processes can bring to light the effects of the intervention, including any evidence of the need to adapt policy to meet real needs or risk exposure. However, ex post evaluation has its own challenges: technical expertise, resources, among others. Successful ex post evaluation is also dependent on the reliability of data and information.

Another relevant regulatory management tool is stakeholder engagement whereby government and policymakers consult on the design, development and revision of regulations. By involving citizens, businesses and civil society, engagement helps ensure that regulations are focussed on actual needs. Citizens are more likely to view regulations as fair if they are engaged in the policy design process, and the outcomes of consultations are clearly explained.

Source: (OECD, 2021[13]), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en.

Use data to boost evidence in the L&P decision-making process. Data and information are crucial for defining a policy problem and selecting the most effective policy response. During the implementation phase, data and information should be used to monitor and evaluate the level of compliance. Although public institutions often collect data from L&P, they may not use it strategically. To support informed decision-making, licensing authorities should therefore invest in robust data collection and analysis, as well as in a data management system.

Develop a framework for data collection and management. This starts by identifying the sources of data needed. This may for instance include information and data related to applications as well as the number and types of existing permits, collected via the licensing authority or from regulated subjects. It also requires clarity as to how best to manage the data to ensure accuracy and quality. Technology is invaluable for managing large quantities of data, but it is just as important to have the necessary resources to gather accurate and complete data sets that the technology relies on. A small, accurate quality dataset is preferable to a large one with gaps or missing information.

1.3. Assess performance of the L&P system

Assess regularly the performance of L&P systems against appropriate criteria. Authorities and staff should assess the performance of the L&P system against key policy objectives to demonstrate outcomes achieved. Criteria and indicators telling a story about e.g. limitation of emissions in the air, quality of water, or level of safety for workers are more meaningful than ones that merely show outputs. Regular reviews and updates of L&P tools, criteria and requirements should be conducted to reflect evolving industry standards, technological advances, and a continuous evaluation of existing and emerging risks. Licensing authorities should be required to justify their decisions on maintaining, modifying, or eliminating licensing requirements based on empirical evidence. They should also monitor any redundancies or complexities faced by individuals and businesses navigating the L&P system, such as processing times, compliance costs and business impacts. These efforts will ensure that the regulatory framework is fit for purpose and supports compliance and innovation without imposing undue constraints.

By setting measurable goals, regulators can objectively assess the effectiveness of their L&P frameworks. The principles outlined in this document – as well as the OECD’s Best Practice Principles on The Governance of Regulators (OECD, 2014[7]) – provide a guide for metrics and criteria by which to assess the performance of economic and sectoral regulators. Such metrics can include compliance rates with key regulatory requirements, the time taken to process applications, and most importantly the impact of regulations on public safety and business operations. Data collection is essential in this process; governments should leverage digital platforms to gather and analyse relevant data, facilitating more accurate and timely evaluations of regulatory effectiveness, enabling continuous improvement and evidence-based decision-making.

Conduct transparent, inclusive L&P performance assessment with stakeholder engagement and user satisfaction in mind. Relevant authorities should regularly consult with businesses, industry associations, and the public to gather feedback on the L&P process. This feedback can highlight practical issues and provide insights into how regulations affect various stakeholders. By incorporating diverse perspectives, regulators can make more informed decisions and ensure that licensing frameworks are balanced and fair.

Keep improving the L&P system to reduce burdens. Businesses have to comply with several regulatory requirements and perform administrative activities, which can be graded from simple to complex. Larger, better-resourced organisations or industries may find these easier to perform. Smaller industries or businesses however might require professional help and need to incur additional costs in order to comply. The administrative burden stemming from L&P may be substantially greater for them. That said, administrative requirements can also be complex to fulfil for large industries. This could be due to lack of clarity around the administrative process, costly assessments, and burdens of judicial challenges. In this context, a complex administrative landscape can deter economic growth and investment.

1.4. Ensure L&P systems have the right resources

Secure the right funding in a manner that is transparent and accountable. Adequate funding is crucial to ensuring that L&P systems function smoothly and maintain high standards of safety, compliance and service. Investment in resources and training not only enhances the system's efficiency and reliability but also fosters public trust and supports the overarching regulatory framework by ensuring fairness, consistency, and the proper enforcement of regulations. However, L&P authorities need to make sure that funding mechanisms are transparent and do not inadvertently introduce biases into the system. For example, funding that originates from fines and sanctions typically creates a conflict with the primary objective of regulatory delivery authorities (which is to encourage and secure compliance).

Ensure the necessary technical and ‘soft’ skills to deploy and operate L&P systems. L&P personnel should collectively have the skills to perform a range of tasks. These include risk assessment, understanding current regulations, process applications, conducting inspections, supporting compliance, and managing IT systems. To this end, continuous training and capacity-building programs are essential — including for the “soft skills” needed to guide and support L&P applicants.

Introduce the right tools to support L&P authorities and their staff. L&P officials should be equipped with the appropriate methods and materials to support their work. These include risk-assessment methods, complaint management workflows, and enforcement management models to determine the measures to be applied when non-compliance is found. Other tools that L&P officials should have access to may include transportation (for on-site checks) and devices to perform verifications and monitoring (e.g. to measure emissions or water quality).

Invest in IT solutions that can support an effective L&P system. Applied technology can have a meaningful impact on the delivery of L&P through its enabling of efficient processing, secure data management and seamless communication. Integrated software systems can be used to support the submission, processing and tracking of applications. This includes user-friendly online portals that allow applicants to submit applications, pay fees, and track their status. Mobile applications can also provide field staff with the tools to access information and update records in real-time. Such applicant, permit and compliance information can be stored in centralised databases, facilitating information sharing with other pertinent authorities, as well as data-driven approaches to risk assessment. Across all applications, robust security measures are essential to protect sensitive information and ensure data integrity.