Part 1: Introduction

Inquiry into the Plumbers, Gasfitters, and Drainlayers Board.

1.1
In this Part, we briefly explain:

Why we carried out our inquiry

1.2
In September 2008, the then Minister for Building and Construction (the Minister) wrote to the then Auditor-General to ask if we would inquire into the way the Board was carrying out its statutory functions – in particular, its registration and licensing functions. The Minister was concerned about the number and nature of complaints received by the Minister and the Department of Building and Housing, many of which suggested that the Board was not carrying out its core functions adequately.

1.3
The complaints raised potentially significant questions about the Board's performance, including whether it was acting within its statutory authority and making decisions on an appropriate basis. At the time, there were few effective avenues for requiring the Board to account for its actions. It was not subject to the Ombudsmen Act 1975 or the Official Information Act 1982, and the types of issues being raised were unlikely to be reviewed through court action. However, the Auditor-General audits the Board and can inquire into its use of its resources.

1.4
The work of the Board is important. Through its registration and licensing processes, it controls entry to the plumbing, gasfitting, and drainlaying trades. Effective regulation of these occupations is important for public safety. These trades are also important economically because they are necessary for an effective building and construction industry. Equally, the Board's decisions are important for the more than 10,000 individuals who need current licences to be able to work, and for the businesses that employ them.

1.5
The Auditor-General agreed to the request from the Minister and announced terms of reference for the inquiry on 17 November 2008 (see Appendix 2).

Role of the Plumbers, Gasfitters, and Drainlayers Board

1.6
The Board has existed in some form since 1912 to control entry to the plumbing, gasfitting, and drainlaying trades. The Board's workload is significant, particularly because it regulates three trades at once. Most regulatory bodies focus on a single trade or profession.

1.7
For all of the period examined by our inquiry, the Board was operating under the Plumbers, Gasfitters, and Drainlayers Act 1976 (the 1976 Act). An updated Act was passed in 2006 (the 2006 Act), but only a small number of its provisions were brought into force straight away. Most of the 2006 Act was to come into force after consultation about the future structure and categories of registration for the regulated trades. The consultation has recently been completed, and the 2006 Act came into force on 1 April 2010.

1.8
Under the 1976 Act, the Board's main functions were to:

  • make recommendations to those who teach or train people to work in these trades;
  • organise examinations for people wanting to work as plumbers, gasfitters, or drainlayers;
  • register people to work in these trades if they meet an appropriate standard;
  • administer the ongoing licensing system for those currently working in these trades;
  • run a continuing professional development programme for gasfitters to ensure that they maintain an adequate level of competence; and
  • operate the disciplinary system for people breaching the legislation or standards of work.

1.9
The 2006 Act continues these functions and broadens them to include, among other functions:

  • determining the registration categories for the three trades, the minimum standards that people who wish to be registered must meet, and the terms and conditions under which people are registered;
  • determining for each class of registration the work that they are authorised to do, or to assist in doing;
  • issuing and renewing licences to registered people and prescribing terms and conditions on those licences;
  • promoting, monitoring, and reviewing the ongoing competence and safe work practices of registered people and provisional licence holders; and
  • making recommendations to the Minister about making regulations.

1.10
Under the Gas Act 1992 and associated regulations, the Board receives copies of all certificates issued for gasfitting work. It has statutory power to enter premises to check the adequacy and accuracy of those certificates.

1.11
The Board is a stand-alone statutory body. A Minister appoints the members of the Board, and the Board appoints a Registrar. The practice has been for the Registrar to effectively function as chief executive of a small secretariat.2 The Board does not receive any funding from the government and must fund its activities through the fees it charges.

1.12
For many years, the Board was administered as part of the health portfolio. Appointments were made by the Minister of Health, and the Ministry of Health was responsible for the Board's legislation. On 31 January 2008, those responsibilities were transferred to the newly created portfolio of the Minister for Building and Construction. At the same time, the Department of Building and Housing became responsible for the Board's governing legislation.

1.13
The regulatory system that the Board operates is complex, and can be quite difficult to understand. It also changed in important ways after the 2006 Act came into force on 1 April 2010.

Recent history of the Plumbers, Gasfitters, and Drainlayers Board

1.14
The Board has had a complex and difficult history in recent times. It has been heavily affected by changes to the organisation of trades, and by changes in the tertiary education system that affected the funding and delivery of trade training and apprenticeships.

1.15
In 1999, the 1976 Act was amended to change the composition of the Board. Those changes removed the formal link between the Board and the Master Plumbers Association and other trade bodies, and created instead a link with a newly established Industry Training Organisation (ITO). This was a major shift from the traditional structure of the industry and was controversial at the time.

1.16
The introduction of the competitive provision of tertiary training was also significant for the Board. It had a major effect on the relationship between the entry examinations the Board administered and what might be taught in apprenticeship teaching in polytechnic institutes and on-the-job training. The Board had previously worked with the New Zealand Trades Certification Board to arrange examinations, but this body was replaced by the system that established the New Zealand Qualifications Authority (NZQA) and the National Certificate qualification.

1.17
In 2001, the Ministry of Health asked Audit New Zealand to investigate concerns about the overall governance of the Board's functions, and specifically the management and conduct of the examinations for registration as a craftsman. That review identified problems with the examination systems that were operating then and recommended changes to strengthen them.

1.18
In 2006, the Minister for Tertiary Education commissioned an independent review into relationships in the plumbing, gasfitting, and drainlaying industry, with a particular focus on training and entry qualifications. The review was carried out by a barrister, Hazel Armstrong, and is known as the Armstrong report. The Armstrong report identified the following underlying issues:

  • skills shortages, with insufficient and declining numbers of people achieving registration;
  • substantial increases in government funding for training, while the number of new registrations continued to fall;
  • a dysfunctional relationship between the Board and the ITO, with the Board having lost confidence in the National Certificate as a prerequisite for registration, 90% of National Certificate holders failing the registration examination, and not enough co-operation between the bodies to enable new unit standards to be developed; and
  • poor performance by the ITO, with the Tertiary Education Commission (TEC) expressing concern, a substantial section of the industry withdrawing from it and establishing a separate system for training apprentices, and NZQA refusing to register amended unit standards (which needed Board endorsement).

1.19
The backdrop to both reviews was a very low pass rate for people sitting the Board's examinations. The Armstrong report's overall conclusion was that:

There is a systemic failure at the interface of the training and registration systems which is resulting in poor value for money for both Government and industry.3

1.20
The report made a number of recommendations for change, directed variously at TEC, NZQA, the administering government department (at the time, the Ministry of Health), the ITO, the Board, and the select committee that was at the time considering a Bill that would amend the 1976 Act. Some but not all of the recommendations were implemented, and the Board members were replaced.

1.21
As already noted, a revised Plumbers, Gasfitters, and Drainlayers Act was passed in 2006. It preserved the basic elements of the regulatory system and the role of the Board but made several changes to modernise the system. Most of the 2006 Act was not brought into force at the time, because consultation and new regulations were needed before it could operate effectively. Completing these steps was hampered by the change to a new administering department and changes in the composition of the Board.

1.22
In 2007, the Board raised its licensing fees to take account of the extra costs that it anticipated would follow from implementing the 2006 Act. The increase provoked some concern in the industry. The Minister asked us to comment on the Board's processes for setting fees and, in particular, on the adequacy of its consultation, in 2007.

1.23
In July 2008, the Minister replaced most of the Board members with new appointments, including Hazel Armstrong, who carried out the 2006 inquiry into problems in the industry. The new Board appointed Ms Armstrong as chairperson.

1.24
In September 2008, the Minister asked the then Auditor-General to consider carrying out an inquiry. We have been aware throughout our work that the current Board has been appointed with a mandate to address the existing problems, including those that we might identify, and to usher in the new legislation.

1.25
The current Board, working with the Department of Building and Housing, has given priority to implementing the 2006 Act in 2009/10. During 2009, the Board completed a new process of consultation with the industry. The new Act came into force on 1 April 2010.

1.26
It has been clear throughout our work that the Board and the trades it regulates have had a turbulent recent past, with a significant amount of change and discontent. When we began our work, a decade after the major reforms of 1999, it was clear that the discontent and concerns had not diminished sufficiently and that significant parts of the dysfunction identified in the Armstrong report still continued. We sought to understand what was driving those problems and what steps might need to be taken to address them.

Scope of our inquiry

1.27
Our terms of reference (see Appendix 2) focused on plumbers and gasfitters, rather than drainlayers, because the concerns that had prompted our inquiry largely related to those trades. Our terms of reference stated that we would examine whether the Board had appropriate policies, procedures, and systems in place for:

  • setting examinations for people wishing to become plumbers and gasfitters;
  • registering and licensing people;
  • assessing applicants from overseas; and
  • ensuring proper supervision of people required to work under the direction or supervision of a more experienced (formerly "craftsman" and now "certifying") plumber or gasfitter.

1.28
As is standard in our major inquiries, we also indicated that we could look into any other matter that arose during our work. In practice, we have ended up looking broadly at all of the Board's functions. This is because a very wide range of concerns were raised with us during the inquiry.

1.29
As well as the core areas noted above, we have also considered the disciplinary process, the interaction between the Board and the teaching and training providers, the Board's general approach to interaction with the people it regulates, and some internal governance and management questions.

1.30
This wider scope increased the time needed to complete the inquiry, but we considered that it was important to address the full range of issues that emerged, given the breadth and depth of the concerns raised with us. In summary, those concerns included:

  • the Board's interaction with training providers, including the quality of teaching, variability of teaching and assessment, lack of national co-ordination, and unreliable standards;
  • the quality of the examination questions, the setting and marking process, and the link with what was being taught;
  • the ability of the registration system to respond to overseas applicants effectively, and the way in which several overseas applicants were dealt with;
  • the basis on which the Board was making registration and licensing decisions, with many people expressing concern that they did not understand the reasons behind adverse decisions and fears that they were being victimised;
  • uncertainty about the legal capacity of the Board to take some of the steps it took, generally and with individuals;
  • concern about disciplinary systems, both in how they were initiated and operated in individual cases and the efficiency and responsiveness of the overall system;
  • the adequacy of the audit process for gas installations, and its link with the maintenance of standards of competence;
  • the adequacy of the continuing professional development programme;
  • confusion about supervision and direction requirements for those not yet fully registered, including what was needed to meet these requirements and the approach taken to enforcement;
  • concern about the scale of fees and recent increases, with particular concern about the fees for examinations and assessments of overseas applicants;
  • many general expressions of lack of faith in the system and dissatisfaction with the nature of interaction and communication between the Board and those it regulates; and
  • governance questions about the way the Board was operating, the role of the Registrar, and the general running of the organisation.

1.31
Towards the end of 2009, a significant public safety concern emerged about gas installations and the adequacy of the certification and audit regime. The Minister, and the Associate Minister of Energy and Resources, wrote to the Auditor-General to ask that we extend our inquiry to also take account of these events. We agreed, because the issues highlighted the significant public safety goals that the Board's systems are meant to support, and were relevant to a number of processes that we were already considering.

How we carried out the inquiry

1.32
We structured our work in part as an open-ended inquiry and in part as a performance audit (where we systematically assessed the Board's policies and procedures and sampled files to check whether we could see those procedures operating in practice).

1.33
We carried out most of our fieldwork in late 2008 and the first half of 2009. We reviewed 100 files of individual plumbers and gasfitters, and a wide range of Board files and minutes relating to the governance of the organisation.

1.34
We systematically assessed the Board's standard policies and actions against the legislation, to identify the legal basis for the way in which it was acting. We expected to be able to trace a clear line from the legislation, to an operational policy, to individual decisions and actions.

1.35
We interviewed about 60 people, including all current staff, current and past Board members, representatives from major industry organisations, training providers, other government agencies that interact with the Board, and some businesses in the industry. We were also contacted by many individuals working in the industry. We met with some of these people and talked to many others by telephone.

1.36
This provided us with a great deal of information and perspectives on all aspects of the Board's operations. We then spent some time analysing that information, and checking many matters of detail and fact. This process included our seeking an independent review of the questions used in the examinations administered by the Board, because concerns were raised so often about the quality of those questions and their marking.

1.37
We gathered additional information on the gas certification and audit system by reviewing the Board's files and systems in late 2009, when we were asked to also inquire into the effectiveness of those systems.

1.38
In December 2009, we provided an initial draft of our report to the Board for comment. Because the Registrar had recently left the Board, we consulted him separately on the draft report.4

1.39
Given that the report was long and detailed, we asked for comment initially on the accuracy of the information and analysis it contained, before we formed firm views on the matters we were discussing. As part of this process, the Board provided us with a considerable amount of information about the work it had been doing in 2009 to address some of the problems and to enable the 2006 Act to be brought into force.

1.40
We revised the draft report to take account of this information and other comments. As the 2006 Act came into force during this time, we also assessed the effect of the 2006 Act on our findings. We then consulted again with the individuals and organisations discussed in the draft report, both to ensure the accuracy of our work and to ensure that all of those affected by the report had a full opportunity to respond to any criticisms.

Structure of this report

1.41
Our work has been wide-ranging and detailed. We do not attempt to summarise it all in this report. Rather, we have focused on the main areas of the Board's activity and the main matters that we consider need attention. We have included examples to illustrate our findings, but we do not name any individuals in those examples.

1.42
The report is complex because we have needed to take account of the 2006 Act coming into force towards the end of our work. Where relevant, we first summarise the requirements under the 1976 Act and our findings when we carried out most of our fieldwork and analysis in 2008/09. We then go on to discuss any changes arising from the 2006 Act or steps taken by the Board, before highlighting any issues that we consider still require attention.

1.43
The report summarises our work and conclusions in the following eight Parts:

  • Part 2 looks at organisational issues and discusses the Board's policies and procedures, strategic capacity, relationships with the sector, organisational culture, and a number of other issues;
  • Part 3 discusses the Board's role during apprenticeship and training;
  • Part 4 discusses the registration and licensing system operated by the Board;
  • Part 5 discusses the examination system operated by the Board;
  • Part 6 discusses the gas certificate system and gas audit system operated by the Board;
  • Part 7 discusses the process the Board uses to register overseas applicants;
  • Part 8 discusses the fees and charges set by the Board and the process it uses to do this; and
  • Part 9 draws together the common themes that emerged from all of these different activities and summarises our overall concerns and comments.

1.44
Appendix 1 sets out the story of Mr Garry Jones, a plumber and gasfitter from Te Anau. We have included his story as a case study of the types of things that can and have gone wrong with the Board's processes. Appendix 2 sets out the terms of reference for our inquiry.

2: We were told that the Board's policy was for all correspondence to be signed by the Registrar. Unless otherwise stated, the Registrar had signed all the correspondence we refer to.

3: H Armstrong (May 2006), An Independent Review into Relationships in the Plumbing, Gasfitting and Drainlaying Industry, page 16.

4: We refer to him as the former Registrar when we are reflecting his comments.

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