Pushing the policy boundaries. A
two-track regulatory system for the
heavy vehicle sector
Christopher Walker
School of Social Science and International Studies
University of New South Wales.
Overview
Background and approach to research Regulatory reform in the Australian heavy vehicle sector Accredita9on programs in the Australian trucking industry Na9onal Heavy Vehicle Accredita9on Scheme (NHVAS) Results and analysis Implica9ons for developing a two track regulatory system -­‐ building on the experience of NHVAS •  Poten9al weaknesses and risks •  Conclusion •
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Background
•  Intensifica9on of compe99on, growing freight task, environmental pressures, industry factors such as driver shortages, fuel costs etc generate pressure for liberalisa9on of regula9ons and efficient regulatory and enforcement prac9ces. •  Paper examines regulatory innova9on -­‐ NHVAS as a model of regulatory flexibility and efficiency. •  Can lessons be drawn from this experience to develop a two-­‐track regulatory system? A flexible, liberal and more accountable high track and a standard, prescrip9ve low track. Research method
•  41 interviews across all states and NTC. Some interviewees had dual roles, e.g., industry associa9on reps also operated their own trucking business. –  18 regulators –  12 industry associa9on representa9ves –  5 auditors –  12 operators Research method
Regulatory change and
alternative compliance
•  Past 20 years has seen push for deregula9on, regulatory efficiency, quality regula9on. •  Greater effort within public sector management prac9ce to make use of incen9ves and price signals to influence behavior. •  Stronger use of markets and light handed regula9on (modes of self –regula9on). Referred to as New Public Management (NPM). Regulatory reform
•  Ins9tu9ons and formal processes established to progress regulatory reform. –  NRTC – NTC reform program –  COAG regulatory reviews •  Na9onal consistency, regulatory reduc9on and regulatory innova9on. •  NHVAS and Chain-­‐of-­‐responsibility reflect a shiZ away from prescribed, roadside enforcement towards management, internal control systems and audits. Light handed regula9on. NHVAS
•  An alterna9ve compliance regime that relies on self-­‐regula9on with external valida9on through audit as evidence that the operator meets defined standards of scheme. •  Three modules – mass, maintenance and fa9gue. •  Provides access to regulatory concessions to help offset the cost of compliance – addi9onal mass, exemp9on from mandatory annual inspec9ons (NSW, QLD, SA) and op9ons to prescrip9ve driving hours. Concessions generate market pressure to join NHVAS. •  A way of accessing regulatory flexibility in key areas of compliance concern. Chain of responsibility
•  Extension of legal liability along the transport chain. •  Extends enforcement focus beyond the driver and the vehicle. •  Has generated market pressure where contrac9ng par9es require evidence of effec9ve self-­‐
management control systems such as NHVAS. •  A push factor encouraging operators into NHVAS. Accreditation programs
•  Range of accredita9on programs in trucking sector. –  Government and industry based. –  Compulsory and op9onal. –  NHVAS, WAHVA, TruckSafe, HACCP, PACIA, etc •  2006 NTC Austroads review of accredita9on found non accredited ar9culated vehicles (Vic, Qld & NSW) have an average crash rate 2.5 9mes higher than accredited vehicles (Rufford & Bass 2006) Accreditation and regulation
•  Accredita9on is effec9ve in liZing industry safety and performance standards. •  Accredita9on increasingly used as an assurance mechanism in response to regulatory relaxa9on / flexibility. •  Industry and regulator experience with NHVAS suggest some sec9ons of industry can respond to greater demands for accountability and higher safety and compliance standards – par9cularly as a pathway to regulatory flexibility. Two-­‐track regula9on. Analysis
•  Key findings of the NHVAS experience –  Cultural change – a new approach in regula9on. Building industry and regulator engagement –  Industry involvement in regulatory design –  Building operator capacity to cope with regulatory complexity and change –  Aligning regulatory and business interests – delivering beeer compliance outcomes –  Strategic enforcement and the cons9tu9on of markets –  The role of auditors – collabora9ve capacity builders and intermediaries –  The tendency towards ritualism –  Pull factors – rewarding compliant firms Cultural change
•  Scheme supported by all stakeholders – a new approach that provides for industry self-­‐ regula9on – a change in industry-­‐regulator rela9ons. •  I think it was more like the industry wanted to work with people, for the government to be working with the industry, so we’re working towards a common goal and not working against each other. (Operator 01) •  “…I think the relaConship between our enforcement people parCcularly, and industry has been improved markedly.., where instead of taking the approach “Well we’re here to bust you”, we now say, “We’re actually here to help you run your business beFer so we don’t have to bust you.” (Regulator 02) Cultural change - communication
•  to me,… it (accreditaCon) improves communicaCon. It develops a construcCve working relaConship with government… (Industry AssociaCon 07) •  we have certainly increased our communicaCon and our level of engagement with the industry through this. I guess, rather than a pure compliance relaConship where many Cmes when you go out, previously it wasn’t the good news. Whereas now we meet industry and we’re working on a win-­‐win situaCon, so its much more favourable meeCng them than previously. (Regulator 11) Industry involvement
•  Building a regulatory program based on industry pilots means the resul9ng compliance standards and regula9ons are about what can work for operators. •  any accreditaCon scheme needs to have industry help develop it. It needs to have the right drivers behind it. Otherwise the chance of significant complexity is high. (Industry AssociaCon 05) •  Looking forward its really the only way to go … from an operator perspecCve to head down that track because you are maintaining some form of control over what can and can’t be done from an industry perspecCve. I mean, ulCmately it’s about what the industry needs in order to perform a task. (Operator 03) •  Building operator capacity to cope with
complexity and regulatory change
•  Experience with NHVAS helps operators cope with a changing regulatory environment. •  …the accreditaCon scheme actually helps people to understand the new regulaCons coming in…because you’ve got systems in place that will help you to deal with the new regulaCons. I mean…the way of dealing with any new regulaCons is to already have a system in place… (Operator 04) •  …any operator needs to have a really good understanding of the regulaCons and keep on top of it so I guess, having a system that requires you to know regulaCons is beFer than one that doesn’t. Yes, so I think accreditaCon probably facilitates a beFer understanding of regulaCons. (Operator 05) •  Aligning regulatory and business
interests
•  Mee9ng NHVAS requirements reveals more detail about business prac9ces. Operators learn how to improve business prac9ces whilst mee9ng compliance requirements. •  NHVAS maintenance delivers cost savings – beeer documenta9on, scheduling of repairs and maintenance. •  … it’s a lot of preventaCve maintenance so its cost effecCve… now you actually document the parts that are changed, the maintenance, the scheduling, so that you really know that this part has been in the truck for X amount of kilometers or X many years, best change it now before it gives up the ghost in the next few months. (Operator 04) •  Aligning regulatory and business
interests
•  Some of the smaller operators, say with 10 trucks, get a benefit. They are the sort of people I found that did not have good records of each individual truck. They had preFy good records overall, but if truck no. 6 was one of those trucks that created problems all the Cme they really didn’t know. They just kept fixing it. Now they have records that show how it has broken down over Cme so it enables them to look at it more carefully and ask what is wrong with the truck or what is wrong with the driver? (Auditor 04) •  ..ulCmately I think the operators benefit because they are more profitable, they have less breakdowns, they have beFer maintained equipment.. They way the economic climate is now, if you are a transport company and your fleet is unreliable, you just wont get work.. (Auditor 02) Strategic enforcement and the
constitution of markets
•  NHVAS was seen as supplementary to exis9ng enforcement effort. •  Roadside enforcement considered essen9al to maintain fair compe99on. •  Efficiencies achieved through NHVAS should allow enforcement to target cheats and noncompliant operators. •  It’s a more cost effec9ve way of regula9ng.... operators are learning about how best to manage their fleets so they can comply with regula9ons… it actually means that the regulators can actually start to focus on those that are poor performers in the industry… The role of auditors
•  Act as intermediaries and facilitate an understanding of compliance requirements amongst operators. •  Auditors ac9vely work to improve safety standards and compliance of industry. •  Auditors build compliance capacity of operators. •  you really have to help them through these processes. My a^tude is if I find a non-­‐conformance and I can explain to the person why they’ve got this non-­‐conformance and get them to understand how to take improvement acCon, parCcularly with this driver that can’t read or write or whatever. I think the outcome from that is far beFer than just wriCng up a non-­‐conformance and walking away and saying, well you fix it. (Auditor 03) The role of auditors
•  Auditors play a nurturing and suppor9ve role. •  The audit becomes a learning experience where knowledge is transferred amongst industry par9cipants with the aim of improving compliance. •  Auditors help liZ lower performing firms into a higher program of compliance. The tendency towards ritualism
•  Regulators and operators engage in symbolic prac9ces. •  Absence of a substan9al threat of being checked -­‐ few random inspec9ons and triggered audits. •  Some operators purchase audits yet fail to change opera9onal prac9ce and meet compliance standards. Use NHVAS to access concessions and avoid enforcement. •  Though auditor experience suggests the majority of operators are genuine par9cipants working to improve compliance levels. Developing a two-track
regulatory system
High track Flexible regula9on, concessions and higher compliance standards Uniform assessment, monitoring and performance standards in safety, efficiency and environmental performance Na9onal Heavy Vehicle Regulator Enforcement prac9ces expanded and orientated towards pushing firms up into high track Low track Prescrip9ve regula9on and standard limits State regulators Two-track regulation
High Track •  Flexible regulatory arrangements/concessions act as a pull factor crea9ng incen9ves for firms at the margin with a predisposi9on for beeer compliance to enter high track. •  Firms and regulators develop innova9ve and alterna9ve accountability and monitoring mechanisms. •  Higher compliance, safety and environmental standards for high track operators. •  High track firms become known as more reliable, compliant with beeer safety and environmental standards – longer term strategic business benefits -­‐ bigger markets and contracts. Two-track regulation
High Track •  Consistent applica9on of environmental, safety and efficiency principles. •  Common applica9on and assessment processes and standardised monitoring and repor9ng requirements. Two-track regulation
Low Track •  Prescrip9ve regula9on. •  Tradi9onal enforcement prac9ces with new approaches that aim to push the willing and capable firms into high track system. •  Recognises ease of entry into industry and high turnover – prescrip9ve approach remains appropriate for large sec9ons of industry. Two-track regulation
•  NHVAS experience demonstrates that sec9ons of industry can handle more complex and sophis9cated regulatory regime. •  Differen9a9ng regula9on and enforcement correlates with emerging sophis9ca9on of sec9ons of industry. •  Provides a framework for building regulatory flexibility enabling a response to future demands, changes etc. •  Integrates concession based schemes into a comprehensive framework and moves away from the ad hoc, smorgasbord approach of operator specific schemes. Two track regulation
•  Ensures a common applica9on and assessment process for high track entrants. •  Integrates monitoring and repor9ng technologies. •  Develops a focus on experimenta9on and building industry compliance capability. Institutional arrangements
•  Two-­‐track system can be mapped against changing ins9tu9onal framework for regula9on of heavy vehicle sector. •  High Track -­‐ Na9onal Heavy Vehicle Regulator. •  Low Track – State based regulators and enforcement agencies. •  Separa9on encourages state agencies to push compliant firms into high track system. Weaknesses of a two-track
system
•  Unfair compe99on •  Complex enforcement •  Costly implementa9on •  Ritualism, abuse and game playing Conclusion
•  A con9nuum of regulatory op9ons from prescribed standards to flexible self-­‐regulatory arrangements. •  Industry capability and interest varies from basic minimum to sophis9cated systems. •  Experience with NHVAS suggests opportunity exists to build a more sophis9cated regulatory regime orientated towards innova9on and flexibility. References
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