Abstract
The article draws academic attention to capture risks in the regulatory statutes that may lead to capture by regulators. It takes a practical outlook of Kenya for empirical demonstration of the statute-based capture risks. The article uses the Regulatory Impact Assessment (RIA) framework to identify the risk factors in the regulatory environment for professions involved in real estate development, that is, architects, engineers and quantity surveyors. The OECD Reference Checklist for Regulatory Decision-making is used as a reference point in identifying risk analysis as a candidate of inclusion in the checklist for purposes of improvement in regulatory outcomes. Document analysis is used to make observations on the statutes and generate data for qualitative analysis and interpretation. Capture risks are identified in terms of composition of regulatory boards that include powerful public servants. Exclusion of relevant stakeholders in the regulation of professions, inclusion of extraprofessional regulations and uncontrolled legislative powers are other sources of risk of regulatory capture. The article gives central focus to the capture by regulators. Existing regulatory capture literature predominantly consider regulatory capture by private or special interest groups.
Keywords
Background and Context
Construction projects are responsible for production of real estate. The projects’ market environment involves many actors including firms supplying goods and services and regulators. The suppliers of goods and services are, among others, developers, material suppliers, contractors, financiers and professional services firms. The markets of these goods and services are regulated by various agencies since actors come from multiple sectors of the economy. For instance, in Kenya, the developers and contractors are regulated by the National Construction Authority (NCA) (Gacheru and Diang‧a 2015) while each professional service provider is regulated by a relevant state agency.
Regulation of professions is a pertinent agendum of academic discourse today because of the various economic crises the world has experienced since the beginning of the Millennium including the 2008 financial crisis. Presumably, such crises were preventable with effective professional regulation. This has motivated Carter, Spence and Muzio (2015) in their proposals for future research on professions to focus on professional misconduct and malpractice. Berk and van Binsbergen (2017) raised the same issue concerning the US financial market.
In Europe, prior to the Carter, Spence and Muzio (2015) suggestion, research in professional regulation mainly focussed on deregulation and reregulation of professions in pursuit of competitiveness in the common market (Brosio 1997; Garoupa 2004; O’Leary 2015; Orzack 1983; Paterson, Fink and Ogus 2003; Van Den Bergh 1997; Zirnstein and Franca 2016). Mainly their concern was with removal of entry restrictions especially for non-resident professionals in a particular EU country.
In Africa, on the other hand, as suggested by Carter, Spence and Muzio (2015), regulation of professionals may be pertinent due to the issues of misconduct and malpractice. In the construction markets, Wells (2014; 2015) has flagged up mismanagement and corruption to be responsible for the shortcomings in the construction outcomes in developing countries. This is a problem that affects many countries in Africa including Malawi (Chiocha 2009) and Kenya (Dindi et al. 2018; Githui 2012), South Africa (Othman 2012) and Zambia (Mukumbwa and Muya 2013). However, it is imperative to note that the problem of professional misconduct in the construction sector has been raised in many other places in the world (Monteiro, Masiero and de Souza 2020). As much as this justifies the need for regulation of professionals involved in construction activities it is rare to find literature that questions whether the regulatory mechanisms put in place meet their noble intention as Carter, Spence and Muzio (2015) had envisaged.
Literature on regulation is preponderant in the field of health professions (Besançon, Rockey and van Zanten 2012; Carè, Steel and Wardle 2021; Clarke et al. 2016; Dower and Finocchio 1999; Dower, Moore and Langelier 2013; Kidane 2012; McLaughlin, Leigh and Worsley 2016; Regan et al. 2015; Saks 2014; Saks 2021; Samanta and Samanta 2004; Schaumans and Verboven 2008; Schepers and Casparie 1997; Squires and Dorsen 2018) and occasionally, the legal profession (Olgiati 1997) and accounting (Cooper and Robson 2006). Perhaps this may be so because the legal and medical professions compared to others happen to be highly regulated in the US and Europe (Garoupa 2004) and, also the oldest (Law and Kim 2004). Apart from Orzack (1983) that considered the regulation of architects and engineers in the EU market, it is rare to find research work that covers the gamut of construction professions.
This article undertakes, according to Bowen (2009), O’Leary (2017) and K’Akumu (2022a), a qualitative document analysis (QDA) of the existing regulatory laws and agencies dealing with professionals involved in construction projects. Its primary objective is to establish the risk of capture by regulators. This is motivated by the past controversies involving the regulatory agencies and stakeholders that included or resulted in litigations. The review will appropriately inform the stakeholders on the best ways to regulate professions in the sector. Regulatory capture is mainly studied as capture by special (private) interest groups in the business sector but less in the regulation of professions and particularly in the context of capture by regulators. Therefore, this article makes two unique contributions to the regulatory capture literature: one, the experience of regulation of professions in construction and related activities; and two, capture by regulators in a developing country context.
Capture Risks in the Regulation of Professions
The lead theory in economic regulation is the public interest theory. Regulations seek to moderate market failures in delivery of quality goods and services thereby enhancing social welfare (Olsen 1999). Hence the very mark of evaluation for regulatory agencies is the extent to which they can (or actually) ensure public interest (K’Akumu 2022b, 2022c). However, in practice, regulations may fail to achieve public interest due to regulatory capture, an antithetical theoretical proposition that emphasises the role of interest groups in the formation of public policy (Laffont and Tirole 1991). According to Levine and Forrence (1990), the capture theory of regulation characterises actors in the regulatory process as motivated to pursue narrow or self-interest goals. Hence, ‘government regulation reflects the influence of special interests, and is created and operated for their advantage’ (Levine and Forrence 1990, 169). Therefore, the key question in this assessment is: To what extent does government regulation (or regulatory mechanism) reflect the influence of (public actors) special interest groups? Alternatively, to what extent is the regulatory mechanism give advantage to public actors to pursue narrow or self-interests?
According to Etzioni (2009) regulations can be captured by industries, businesses and professionals they are supposed to regulate or by other interest groups. They also can be captured by the regulators themselves who write and control the regulations (Etzioni 2009). Once captured the regulations will serve the group interests of these captors other than the public interest. Etzioni (2009) enumerated ways by which capture can be achieved including when special interests shape regulations, when existing regulations are diluted to accommodate low performance, when enforcement mechanisms of existing regulations are weakened, when existing regulations are repealed. Therefore, the level of capture also potentially determines or indicates the extent of attainment of public interest.
Regulation of Professions is a unique area unlike industries and businesses whose products are tangible. Professional services are quite intangible hence ensuring their quality can be challenging. Additionally, consumers of professional services lack perfect knowledge of the market in terms of quality (Olsen 1999).
There are four modes of professional services regulation: regulation by state/government, self-regulation (Bayles 1986; Des Places 2006; K’Akumu 2022d; Law and Kim 2004; Lombardi 1986; Olgiati 1997; Van Den Bergh 1997; Van Den Bergh and Faure 1991), regulation by private agencies (Garoupa 2004) and regulated (self-)regulation (Kaye 2006). Self-regulation is the mode where professionals take control of the regulations to oversee their own activities.
For instance, in the US, self-regulation practice involves professional societies that regulate their own practices by determining standards of entry and by developing a code of ethics in a situation where local and state governments delegate the regulatory powers of professional licensing to representatives of the professions themselves (Law and Kim 2004). Regulation by private parties mainly involve litigation. For instance, the prevalence of litigations based on malpractice liability may force practitioners out of the path of professional malpractices or lead to development of better regulations. Regulated (self-)regulation is an emerging hybrid of state and self-regulation (Kaye 2006).
According to Garoupa (2004) self-regulation is prone to the rent-seeking risks. One of the motivations for the capture of professional regulation activities is the rent-seeking behaviour by the professionals themselves (Garoupa 2004; Mocetti 2016). For instance, in the medical practice, Olsen (1999) explained the rent-seeking motive of professionals would be to capture the rules of licensure and structure them to limit the number of suppliers of medical professional services in the market and hence increase their income.
Regulation of professional services are implemented using regulatory instruments. For instance, in the US and Europe the following regulatory instruments are used in the legal and medical professions (Garoupa 2004, 12; see also Haller 2010):
Restrictions on entry that create professional monopoly rights Restrictions on self-promotion in the profession including advertising Restrictions on fees and on fee contracts Restrictions on organisational forms Restrictions on conduct and procedures
In Canada self-regulation is common (Adams 2009) where states grant power to professions through regulation in response to lobby efforts for mutual benefits. The professionals benefit from a privilege market position, but the professions also facilitate state governance by enhancing social order (Adams 2009).
The methodology section follows below, before the next sections that critically review the professionals’ registration boards and their constituent legislations to document their regulatory nature and further determine the extent of regulatory capture and the scope of public interest they engender.
Data Sources and Method of Analysis
Risk assessment of existing regulatory statutes involve Regulatory Impact Assessment, or Analysis, (RIA), methods. In common usage RIA refers to the process of systematically assessing the benefits and costs of new or existing set of regulations with the aim of improving the quality of regulatory policy (Kirkpatrick and Parker, 2004). It is an analytical tool initiated by the Organisation for Economic Co-operation and Development (OECD) for purposes of quality assurance in regulatory reforms and the improvement of regulatory performance, as contained in ‘The OECD Reference Checklist for Regulatory Decision-Making’ (OECD 1995). In this article, we argue that one of the most problematic issues of regulation, that is likely to compromise its quality and hamper its performance and that is well captured in public management and economic literature, is regulatory capture as fully discussed in the preceding section. Since the overall goal of RIA is to achieve better regulation or quality regulation, the article proposes to include capture risk analysis as part of RIA procedures.
Whereas it is in the purview of government institutions to apply RIA in normal policy development and implementation duties, it is not out of order for an academic endeavour to apply RIA in deserving situations at least as a practical demo of what benefits the government could reap from it when officially incorporated into public policy. Such is the situation in Kenya regarding the statutory regulation of professions involved in building construction. According to Ladegaard (2005) RIA is a process through which regulatory interventions are systematically and coherently assessed to improve regulatory outputs and decision-making, starting as early in the policy-process as possible. Therefore, RIA can be used to assess impacts of new regulation (flow) or of existing regulation (stock). In this study we use RIA to assess regulatory stock.
Conventionally RIA involves application of benefit–cost analysis based on social welfare objectives like public interest (Malyshev 2006) however qualitative methods, also, may be used (Ladegaard 2005). In this study, as proposed by O’Leary (2017) and K’Akumu (2022a), we use QDA as an analytical method to evaluate the statutes intended to regulate architects, engineers, and quantity surveyors in Kenya. In this context we observe every clause of each statute against the analytical question: To what extent does it engender the risk of regulatory capture? Where the risk is observable, the matter is brought up for discussion.
The study qualitatively document analysed three operational statutes: Architects and Quantity Surveyors Act, the Engineers Act and Engineering Technology Act as shown in Table 1.
The Statutory Stock Under Regulatory Impact Assessment (RIA) Using Qualitative Document Analysis (QDA).
The Statutory Stock Under Regulatory Impact Assessment (RIA) Using Qualitative Document Analysis (QDA).
The Architects and Quantity Surveyors Act has been active in the country since 1934 (Republic of Kenya 2012). The Engineers Registration Act was active from 1969 until it was repealed in 2012 and served to register engineers and ‘technician engineers’ (Republic of Kenya 2009). It was replaced by the two subsequent legislations; the Engineers Act that covers for engineers’ registration and the Engineering Technology Act that carters to the equivalent of ‘technician engineers’. The results of this qualitative document analysis are presented in the following sections organised into: Composition of the Boards; Incorporation of Professional Associations and Stakeholders; Inclusion of Extraprofessional regulations and; Legislative Powers.
Composition of the Boards
Each statute has created a corresponding regulatory board: Architects and Quantity Surveyors Act—Board of Registration of Architects and Quantity Surveyors (BORAQS); Engineers Board of Kenya (EBK) and; Engineering Technology Act—Kenya Engineering Technology Registration Board (KETRB). Table 2 presents the structure and compositions of the boards; this has implications on capture risks.
Board Compositions.
Board Compositions.
There are four professional associations in the construction market: the Architectural Association of Kenya, Institute of Quantity Surveyors of Kenya, Institute of Engineers and Institution of Engineering Technologists and technicians, as shown in Table 3. Involvement of these associations is pertinent for successful regulation of these professions. In other jurisdictions like the UK, professions are given the upper hand to craft and implement strategies for self-regulation. The UK government is reluctant to regulate professions and mainly limits itself to giving advice toward achieving the target of better regulations.
Corresponding Professional Associations.
Corresponding Professional Associations.
In Kenya the regulatory statutes have given very little consideration to professional associations. Their role is limited to nominating representatives to the boards as shown in Table 2. The case of KETRB is worse; of the seven nominees to the board there is only one representative of the professional association. The board is crammed with persons who have nothing to do with the practice of the profession. The risk of this is obvious. These persons are likely to bring on board their own agenda and sway the board away from its sole purpose of regulating the practice of the profession.
The regulatory statutes also tend to include extraprofessional regulations within the regulatory ambits of the boards. These are regulations that go beyond the practice of a profession. The ultimate objective of the board is to regulate the practice of a profession. The newest one KETRB has the following extraprofessional to-do list.
enter and inspect sites where construction, installation, erection, alteration, renovation, maintenance, processing or manufacturing works are in progress for the purpose of verifying that
engineering professional services and works are undertaken by registered persons standards and professional ethics and relevant health and safety aspects are observed, in line with Occupational Safety and Health Act, (No. 15 of 2007) assess, approve or reject engineering technology qualifications of foreign persons intending to offer engineering technology professional services or works in Kenya; enter and inspect business premises for verification purposes or for monitoring works, services and goods rendered by professional engineering technologists; recommend for the suspension of any engineering technology professional services, works, projects, installation process or any other engineering technology works, which are done without meeting the standards; plan, arrange, co-ordinate and oversee professional training and facilitate internship of engineering technologists;
The first one is the duty of National Construction Authority (NCA) and when OSHA was enacted it was made clear who should implement its provisions. Number 2 in the to-do list is the jurisdiction of the ministry of education. Number 3 is the duty of Kenya Bureau of Standards. Number 4 again is the work of NCA and has nothing to do with professional services regulation. Number 5 is fine except the issue of internship that has nothing to do with professional practice. The board should deal with persons already registered. All that we have seen for KETRB was borrowed from the enabling legislation of EBK and the observations made above apply where EBK is concerned.
One other source of unlimited powers which can induce boards to go rogue is subsidiary legislation. Usually, these powers are given to the cabinet head to prescribe rules and by-laws to help in the functioning of the boards. The cabinet head is to do so in consultation with the board but in reality, it is the board that will request the cabinet head to Gazette particular legislations regarding professional regulation. The cabinet head is a political administrator of the docket while the board is chaired by a technical person, so it is the technical person who shall advice the cabinet head.
In the case of BORAQS the enabling legislation have given legislative powers expressly to the board. BORAQS has powers to make by laws for purposes of its operations including:
the management and duties of the Board, the holding of meetings of the Board, the issue of notices calling such meetings and the procedure to be followed at such meetings the appointment and duties of the officers of the Board the appointment of committees, and the powers and duties and the proceedings of such committees the administration, investment and expenditure of the property and funds of the Board from whatsoever source and for whatsoever purposes received a definition of unprofessional conduct and for determining the mode of inquiry into and the method of dealing with such conduct and the penalties which may be imposed upon any member found guilty of such conduct the scale of fees to be charged by architects and quantity surveyors for professional advice, services rendered, and work done the fees to be paid for registration the holding of examinations authorised or permitted under the provisions of the Act and for the carrying into effect of any scheme or curriculum for education in architecture or quantity surveying formulated under the provisions the prescription of the conditions under which registered persons may practise as limited liability companies, and for requiring professional indemnity insurance in the case of unlimited companies and private firms the instructions and orders conducive to the maintenance and improvement of the status of architects and quantity surveyors in Kenya
Number 4 gives the board power to acquire property of any description and by whatever means and invest its incomes according to their choice. Essentially this makes it a business enterprise rather than a regulatory body.
Further it is important to note that legislators of the operational law are representatives of the people and legitimately represent public interest. Any law made by the board or minister may not necessarily represent public interest. Therefore, allowing for excess legislative powers to the advantage of the board is not in public interest.
Discussion
Regarding the regulatory boards, it is observable that composition of the boards reflects the balance of public service professionals and private sector professionals. Compared to the newly created boards, BORAQS and the defunct ERB were well balanced, see Table 2. The EBK and KETRB includes the Principal Secretary which is a wrong trend in board composition. The Principal Secretary is the top-most executive officer of a sector whose professionals are being regulated. Including such a powerful state officer to the board is like handing it over to state control so that state functionaries can use it to their interests other than the interest of the public. This is a form of in-built capture by the regulators.
Second, it is unnecessary for Principal Secretaries of finance and education to be included in EBK. Concerning finance, other professional regulation legislations have just provided that the finance ministry should vote monies for running a board. The Principal Secretary ministry of education has been included as an unnecessary reaction to the litigious controversy that had arisen between the defunct ERB and the Ministry of education, three universities and the university education commission over the accreditation of engineering courses.
Lastly, the KETRB is not professionally composed. It is a stellar representation of institutions rather than a board created to regulate the practice a profession. The general practice is that the board is composed of peers in the professions who will be able to discern and judge malpractices in that profession, not mere representatives of institutions with no common agenda regarding the practice of a profession. This will not give better direction to the practice.
Regarding incorporation of non-state regulatory actors, it can be observed that state regulation is very important but monolithic regulatory bodies are not recommended in progressive economies. The boards are handling everything including development of curricula, administration of entry examinations. These are some of the functions that could be delegated to the professional associations in a co-regulation arrangement (K’Akumu 2022d), or what Kaye (2006) calls regulated (self-)regulation. Further, it is not good practice in terms of effective governance that the boards should function as rule setting, rule implementing, rule policing and rule jurying all rolled into one. Some of these powers must be decentralised for better decisions and actions.
For instance, BORAQS, is an excellent example of regulatory capture by the regulators. The board is quite imperial perhaps because of its colonial heritage. The board controls everything and shares no responsibility with any other institution regarding regulation of professions. The board conducts entry examinations something it could have left to professional bodies. Section 9 of the operational law on qualifying examinations, provides that ‘[t]he examinations […] may be conducted either by the Board or by such other authority as the Board with the approval of the Minister may select’. Professional bodies, the AAK and the IQSK, are left redundant in the regulatory process; except for the former that is given the nominal role of nominating 4 members to the board.
Sometimes regulatory boards incorporate stakeholders other than the professionals themselves. The primary objective of regulation is to protect the interest of the public or the interest of the service consumer. However, of all the boards under consideration, in none sits a representative of public or consumer of professional services. However, inclusion of stakeholders should not only end at the boardroom level. Ayres and Braithwaite (1991) have argued for tripartism strategy as a solution to regulatory capture in the business environment. According to this strategy, regulation should not involve two actors (regulator and regulatee) only but must also involve stakeholders as third parties in equal measure as shown in Figure 1.

This shall ensure that the interest groups including professional associations and consumer organisations check excesses of the regulator and breaches of the regulatee.
Regarding extraprofessional functions, it can be noted that the problem with inclusion of extraprofessional functions is that it deviates the attention of the regulatory agency from its primary role of regulating professional practice; which entails capture risks. It also leads to clash with other statutory bodies whose jurisdictions are being crossed by extraprofessional endeavours of the boards; hence leading to unnecessary regulatory conflicts. This was the case with the defunct ERB in a case where it refused to register engineering graduates because it had not accredited the courses they had qualified under. In Jesse Waweru Wahome and two Others v. Kenya Engineers Registration Board 1 , ERB lost in the suit and the final appeal to the Supreme Court of Kenya. The judge held that ERB had no role in accrediting courses offered by university schools of engineering. The litigants had pointed out that there was no clause in the Engineering Registration Act that enabled ERB to accredit universities. As a response to this, the succeeding legislation made an express provision that gave the new board power to accredit universities.
Lastly, the extraprofessional regulations are easy prey to regulatory capture as regulators pick and use them to ends other than professional regulation.
For BORAQS the attempt to take charge of the knowledge of the teaching of architecture is its main extraprofessional breach. Section 10 of the operational law states that the board can give directions on scheme and curriculum for schools of architecture. The essence of the board is to check professional misconduct which it can do using the register, certification and inquiry. The board registers architects who are trained from any part of the world. There are so many schools of architecture in the world hence the board cannot claim to be able to give them direction on the scheme and curriculum for the teaching of architecture. Recently the board has narrowly interpreted this clause to mean schools of architecture in Kenya and has attempted to claim accreditation role over their curricula. Although the extension of mandate to regulation of schools rather than professional services is out of scope because universities have their own regulators.
The study has demonstrated that professionals involved in construction projects including architects, engineers and quantity surveyors operate under well-established regulatory regimes spanning decades of operations. However, the regulatory regime may present opportunities to regulators to capture the regulatory instruments to exercise excessive and absolute power over professionals and the industry. This is an instance of regulatory capture by the regulators themselves. Etzioni (2009) had hinted that regulators also can capture regulations for their own self or group interest.
The regulatory regime is made up of monolithic regulatory bodies that are legally crafted to wield absolute powers in the process of regulating professions who in turn manage projects. The boards are populated by high-ranking government officers, some have very low representation of the professionals themselves while none has representation from the public. This renders them liable to direct control by the government or capture by the regulators themselves.
Each board operates in an environment where there are many actors it could cooperate with in the process of regulation such as professional associations. These are given very limited roles. The boards also tend to extend their authorities beyond their jurisdictions as regulators of professional practices. The extraprofessional expeditions make them clash with other regulators in the industry and bring about loss of focus on the primary goal of professional regulation. When crafting the statutes regulators must not be allowed to confuse industry regulation with professional regulations. The industry has many other actors apart from the professionals and those actors have their respective regulators too.
The regulatory statutes also give boards freedom to undertake legislations to guide their operations. This gives a carte blanche for making any provisions that could be self-serving. All these lead to centralisation of power that is dangerous to the sector in the context of regulation of engineers, Canada serves as one of the global best practices, where regulatory power is distributed both horizontally and vertically rather than centralized (Vassos and Smith 2001). Centralisation of power means that the regulatory instruments can easily be captured by the regulators to serve own other than public interest. This regulatory capture by regulators is rarely studied in professional regulation as much as the regulatory capture by professionals and this is the major contribution of this article.
Moving forward, the enabling legislations should be revised to eliminate extraprofessional regulations and regulatory powers should be decentralised to allow for the participation of other legitimate regulatory bodies such as the professional associations and consumer organisations. Lastly, from the shortcomings unearthed in this study, it becomes apparent that it is important to include capture risk assessment in the repertoire of mandatory RIA procedures.
Nevertheless, it is imperative for the reader to treat the findings with caution since the QDA method did not include triangulation of information, hence some interpretations may sound biased. This is an acknowledged limitation of the research design that was employed in this study.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.
