Part 2: Regulating vehicle inspectors and inspecting organisations

Regulating vehicle safety inspections.

2.1
In this Part, we describe:

  • the legal framework for regulating vehicle inspectors and inspecting organisations;
  • the activities of the team that regulates vehicle inspectors and inspecting organisations; and
  • changes NZTA made after a significant regulatory failure.

Rules made under the Land Transport Act 1998 set out safety standards

2.2
Rules made under the Land Transport Act 1998 (the Rules) set out safety standards vehicles need to meet to get a warrant or certificate of fitness. The Rules cover parts of the vehicle like brakes, seat belts, and lights.

2.3
A warrant or certificate of fitness inspection is not the same as a pre-purchase inspection (for example, it does not look at the engine or the transmission). Similarly, anything that is not covered by the Rules is not checked in a warrant or certificate of fitness inspection, even if it affects vehicle safety. This includes more advanced safety features (discussed further in Part 4) or, if a vehicle has had to be recalled by the manufacturer, whether the problem has been fixed.

2.4
This means that a warrant or certificate of fitness inspection does not provide complete assurance that a vehicle is safe, only that it meets certain minimum safety standards.

2.5
The Rules also provide the legal framework for safety inspections. This allows NZTA to:

  • appoint people, called vehicle inspectors, to inspect vehicles and decide whether a vehicle meets the standard for a warrant or certificate of fitness;
  • check whether vehicle inspectors are inspecting vehicles correctly; and
  • take action when they do not.

2.6
The Rules cover the appointment of inspecting organisations. A vehicle inspector needs to work for an inspecting organisation to be able to issue a warrant or certificate of fitness. An inspecting organisation could be any size of business, from a small independent garage owned and run by an appointed vehicle inspector to a national chain like Vehicle Testing New Zealand (VTNZ), which employs hundreds of vehicle inspectors.

2.7
There are about 8400 approved vehicle inspectors working for 3500 inspecting organisations.

2.8
NZTA does not set the cost of a warrant or certificate of fitness inspection. Each inspecting organisation decides how much to charge vehicle owners, but pays NZTA a fee of $4.16 for each warrant or certificate of fitness they issue.

One team manages the regulation of vehicle inspectors and inspecting organisations

2.9
The Safer Vehicles team manages the regulation of vehicle inspectors and inspecting organisations. Within this team, there is:

  • a team that manages applications from people and organisations that want to be a vehicle inspector or inspecting organisation;
  • four regional teams that monitor vehicle inspectors and inspecting organisations;
  • a complaints team; and
  • other staff who carry out supporting and administrative roles.

2.10
The Safer Vehicles team also includes teams that regulate other types of vehicle inspections, including for imported vehicles, light vehicle repairs, and heavy vehicle specialist certifications. Although we did not look at these types of vehicle inspections, some of our findings might also be relevant for them.

2.11
The Safer Vehicles team is part of Te Rōpū Waeture, Regulatory Group in NZTA. This group is led by the Group General Manager who also holds the statutory role of Director of Land Transport. This role has certain functions, powers, and duties relating to regulatory matters that include monitoring how the land transport system complies with legislation.

2.12
Another part of Te Rōpū Waeture, Regulatory Group manages the safety standards that vehicles need to meet to get a warrant or certificate of fitness. Any changes to the safety standards and the underlying Rules require a change to legislation. The relevant legislation is administered by the Ministry of Transport in collaboration with the System Leadership Group in NZTA. Figure 1 shows the respective roles of the Minister of Transport, the Ministry of Transport, and NZTA in making changes to the Rules.

Figure 1
Roles and organisations in the land transport regulatory system

Chart showing the roles and organisations involved in the land transport regulatory system. The Minister of Transport has the authority to make and change Land Transport rules. The Ministry of Transport advises the Minister on exercising those powers. The New Zealand Transport Agency Waka Kotahi helps develop, consult on, and finalise new rules and rule changes, and is responsible for implementing the rules.

A regulatory failure in 2018 prompted significant changes

2.13
In 2018, a man died after his seat belt failed in a crash, shortly after the car had received a warrant of fitness. Investigations uncovered a history of poor compliance by the vehicle inspector and inspecting organisation that had issued the warrant. NZTA had taken minimal action after each incidence of non-compliance. It had not considered the overall pattern of non-compliance and whether it was appropriate for the vehicle inspector and inspecting organisation to retain their appointments.

2.14
NZTA publicly admitted there had been a regulatory failure. Further investigations also found 850 other cases of non-compliance that had not been acted on. Of these, 152 were considered high priority.

2.15
NZTA started making changes immediately. It commissioned a formal inquiry and the Ministry of Transport also initiated a separate review.

2.16
These reviews identified wider systemic failure caused by multiple weaknesses across different points of the regulatory system. These weaknesses included:

  • weak regulatory leadership with a lack of regulatory expertise at a senior level and too much focus on NZTA's other functions of investing in and providing infrastructure;
  • lack of a regulatory strategy;
  • a poor regulatory culture, including treating regulated parties like customers;
  • unclear processes for escalating and acting on non-compliance; and
  • inadequate data and analytics capability.

2.17
In response, NZTA and the Ministry of Transport made significant changes. A follow-up review in 2021 found that good progress had been made but there was still work to do. Significant changes that had been made were:

  • introducing a regulatory strategy;
  • creating the new Group General Manager Regulatory role and formalising the Director of Land Transport role in legislation;2
  • making one team responsible for all tasks involved in appointing and monitoring vehicle inspectors and inspecting organisations;
  • developing new regulatory practice frameworks;
  • strengthening processes for escalating risks; and
  • building better relationships with the vehicle inspection industry.

2.18
NZTA received loans from the Government totalling $95 million to pay for urgent improvements and to clear its backlog of non-compliance cases. NZTA also increased the number of frontline regulatory staff, which helped to increase the frequency of its routine monitoring of vehicle inspectors and inspecting organisations (see Part 3).

2.19
After the regulatory failure, NZTA reviewed the funding for all its regulatory functions.3 It found that it did not have enough income to fully fund the ongoing cost of resourcing and carrying out regulation at the level it now required. As a result, NZTA updated many of its fees and charges, including the fee NZTA receives for each warrant or certificate of fitness issued. At the same time, it removed the application fees for new vehicle inspectors and inspecting organisations. These changes came into effect in October 2023.

2.20
NZTA told us it is too early to say whether the new fees and funding arrangements can sustain the enhanced regulatory function, but it expects to review the arrangements more frequently in future.

2.21
We did not assess NZTA's progress against findings and recommendations from the previous reviews. We also did not assess NZTA's review of its regulatory funding or the changes it made as a result. We only looked at the practices for regulating vehicle inspectors and inspecting organisations as they were at the time of our audit.

2.22
However, it is clear that significant improvements have been made in response to the regulatory failure in 2018. We heard about the positive impact of the changes that had been made from many of the people we spoke to for this audit.

2: The Director of Land Transport was a role in predecessor organisations but was disestablished when NZTA was formed in 2008. The role was re-established in 2020.

3: As well as regulating vehicles, NZTA regulates all vehicle drivers (through the driver licensing system), anyone who transports people or goods for a living, and rail safety.