ROAD SAFETY (DRIVERS) AND (VEHICLES) AMENDMENT (MISCELLANEOUS FEES) REGULATIONS 2015 RIS.DOCX
1 OF 37
COMMERCIAL-IN-CONFIDENCE
Regulatory Impact
Statement
Road Safety (Drivers) and (Vehicles)
Amendment (Miscellaneous Fees)
Regulations 2015
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 2
VicRoads
VicRoads
REGULATORY IMPACT STATEMENT
Road Safety (Drivers) and (Vehicles) Amendment (Miscellaneous Fees)
Regulations 2015
Contents
TERMINOLOGY .................................................................................................................................. 3
EXECUTIVE SUMMARY ....................................................................................................................... 4
INTRODUCTION................................................................................................................................. 6
Purpose....................................................................................................................................................... 6
Licence Exemptions ............................................................................................................................... 7
Defect Notice Clearance ....................................................................................................................... 9
Miscellaneous Registration ................................................................................................................ 10
Miscellaneous Licensing ..................................................................................................................... 11
OBJECTIVES .................................................................................................................................... 14
OVERVIEW OF COSTS TO BE RECOVERED ........................................................................................ 15
Costs: Licence Exemptions ............................................................................................................... 16
Costs: Defect Notice Clearance ....................................................................................................... 16
Costs: Miscellaneous Registration & Licensing .......................................................................... 17
COST RECOVERY PRINCIPLES ......................................................................................................... 19
How cost recovery principles apply to VicRoads ...................................................................... 20
ALTERNATIVE OPTIONS .................................................................................................................. 20
Non-regulatory options ...................................................................................................................... 20
Alternative fee and non-fee options .............................................................................................. 21
PREFERRED FEE OPTIONS ............................................................................................................... 22
OPTIONS ASSESSED INCLUDING COST/BENEFITS .......................................................................... 23
Base Case ................................................................................................................................................ 23
Multiple Criteria Analysis (MCA) ..................................................................................................... 23
Licence Exemptions ............................................................................................................................. 24
Defect Notice Clearance ..................................................................................................................... 27
Miscellaneous Registration & Licensing ........................................................................................ 31
Risks and Social Impacts As A Result Of New Fees ................................................................ 33
PROGRAM LEVEL IMPLEMENTATION AND ENFORCEMENT ............................................................... 33
CONSULTATION, MONITORING, REVIEW AND EVALUATION ........................................................... 34
APPENDIX ....................................................................................................................................... 36
Business Implementation Staff Costs ........................................................................................... 36
10-year Cost and Revenue Projections ........................................................................................ 37
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 3
VicRoads
TERMINOLOGY
Acronym /
Abbreviation
Description
AMS Appointment Management System
AustRoads National association of road transport and traffic agencies
CPI Consumer Price Index
DEDJTR
Department of Economic Development, Jobs, Transport and
Resources
EPA Environmental Protection Agency
ETS Enquiry Tracking System
MCA Multi-Criteria Analysis
NPV Net Present Value
NTC National Transport Commission
RACV Royal Automobile Club of Victoria
R&L Registration & Licensing (division of VicRoads)
RIS Regulatory Impact Statement
RWC Certificate of Roadworthiness
VTA Victorian Transport Association
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 4
VicRoads
EXECUTIVE SUMMARY
1. VicRoads has undertaken a review of its Registration & Licensing (R&L) division and
has identified a number of areas where the provision of services without charge to
customers means the cost to deliver these services is not financially sustainable.
2. The cost in providing these no-fee services exceeded $4 million in the 2013/14
financial year.
3. The cost of delivering these no-fee services has been absorbed by VicRoads,
requiring the re-allocation of funds from other VicRoads purposes.
4. This is inefficient and not sustainable in the long term as the rising costs of service
delivery (due primarily to population growth) create a growing funding gap.
5. In order to address the rising costs and to be more self-sustainable, VicRoads is
proposing to introduce new fees in the areas of Driver Licence Exemptions, Defect
Notice Clearance and Miscellaneous Registration and Licensing transactions.
6. The proposed fees, effective from November 2015, are:
Fee type Fee Model Recommendation
Proposed
New Fee
Units
Est. full
year
revenue
Licence
Exemption Fee
Customers would pay a fee with their application to
seek a licence exemption. The new fee is expected to
reduce demand for licence exemptions in favour of
applicants who can readily produce evidence.
4.16
($56.50)
$264K
Defect Notice
Clearance
Appointment Fee
Customers would pay an administrative fee to clear
their defect notices regardless of whether a vehicle
repair inspection is required. There will be a fee to
clear a defect during normal operating hours and a
separate fee for weekend operating hours.
1.28
($17.40)
Standard
rate
1.89
($25.70)
Weekend
rate
$640K
Appointment Fee
– Miscellaneous
Registration
Customers would pay an appointment fee for the
registration of new light trailers, machinery,
interstate registration changeover, and same-name
re-registration. Customers seeking interstate
registration changeover will pay the small
appointment fee to receive a Victorian registration for
the duration of their remaining expiry period.
1.28
($17.40)
$1.8M
Appointment Fee
– Miscellaneous
Licensing
Customers would pay an appointment fee for
interstate licence changeover. Customers seeking
interstate licence changeover will pay the small
appointment fee to receive a free Victorian driver
licence for the duration of their remaining expiry
period.
1.28
($17.40)
$1.6M
Net Present
Value
1
$34.8M
1
10-year NPV includes first year implementation cost of $110K and no additional ongoing maintenance cost.
Annual Discount Rate used was 4%.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 5
VicRoads
7. The above services were identified as relatively straight-forward to implement as
they do not involve extensive system changes or complex process re-designs.
8. Options for fee and non-fee alternatives have been assessed against meeting the
objectives of Efficiency, Equity, Effectiveness and Simplicity, and scored against a
multi-criteria analysis (MCA) framework.
9. A number of recommended options have been proposed in this Regulatory Impact
Statement (RIS) document.
10. The intention of the document therefore is to demonstrate that the introduction of
the proposed new fees is the most preferred solution to the identified problems of
some undesirable regulatory outcomes and insufficient cost recovery.
11. The RIS has been prepared in accordance with the requirements of the Subordinate
Legislation Act 1994 and the Victorian Guide to Regulation.
12. This RIS comprises:
a) Issues identified with current services
b) Summary of costs
c) Calculations of fee options
d) Recommended options
e) Implementation summary
13. Public comments are invited on the issues raised in this RIS.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 6
VicRoads
INTRODUCTION
Purpose
14. VicRoads has identified a number of areas in its Registration and Licensing (R&L)
division where the provision of no-fee services to customers has led to undesirable
funding arrangements in relation to these services. The annual costs absorbed by
VicRoads for the no-fee services highlighted in this RIS have exceeded $4 million.
With free services over-utilised, the demand for growth and associated service costs
are forecasted to rise each year.
15. Many of VicRoads’ R&L specialised services have not been charged to the requesting
public due to their historically smaller transaction volumes.
16. Charges collected from annual vehicle registrations and driver licence renewals go
into the Government’s Consolidated Revenue, whilst administration fees are relied
upon by VicRoads to fund its R&L operations. VicRoads under-recovers costs in
certain of its R&L operations, necessitating the use of funds from other VicRoads
sources to cover these costs.
17. These arrangements are not sustainable. In order to become more self-sufficient,
VicRoads has reviewed its charging arrangements for certain low volume services
and proposes to introduce new user-pay fees. The proposed fee changes to the
regulations foster regulatory compliance from customers and will support desired
regulatory and road safety outcomes.
18. New fees are proposed for the following Registration and Licensing services:
a) Licence Exemptions
b) Defect Notice Clearance
c) Appointments for Miscellaneous Registration
d) Appointments for Miscellaneous Licensing
19. These services were identified as the most straight-forward to implement in the
shortest timeframe. The operational changes required do not involve any system
changes or complex processes re-design.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 7
VicRoads
Licence Exemptions
20. The current Driver regulations mandate that the minimum driver licence
requirements are to be completed by probationary drivers prior to their qualification
for a full driver licence.
21. VicRoads may grant exemptions to the regulatory requirements to individuals who
confront exceptional circumstances. The exemptions allow individuals to attain a full
driver licence sooner, without the need to undergo the full extent of the minimum
licensing requirements.
22. Applying for a driver licence exemption is presently opened to all drivers. Applicants
can apply at any time during their probationary period for a variety of exemptions
listed in Table 1. VicRoads does not charge a fee for the entire application process,
which could take up to 5 days to assess and complete.
23. VicRoads processes around 6,000 applications for driver licence exemptions
annually. Table 1 depicts the volume of applications and approvals granted for each
exemption type. Licence exemptions are granted on the basis of:
a) Undue hardship – circumstances relating to “extreme inconvenience” such
as distance (e.g. no other transport is available), family related, medically
related or employment related.
b) Recognition of overseas or interstate licences, or prior driving experiences.
These exemptions are granted on the basis of prior driving experiences
gained from overseas or interstate, or in the case of heavy vehicle licence
exemptions, evidence of similar licence obtained from overseas or
interstate.
Table 1 - Licence Exemption Types
Exemption Type
Total
Application
Volume
Non-
hardship
Volume
Non-
hardship
%
Approved
Hardship
Volume
Hardship
Approved
Volume
Hardship
%
Approved
Heavy vehicle graduation
licence
2,126 1,666 98% 460 53 11.5%
Learner permit minimum
holding period or 120
hours supervised driving
rule for learner drivers
453
Not
applicable
Not
applicable
453 52 11%
More than one passenger
restriction rule for
probationary drivers
14
Not
applicable
Not
applicable
14 0 0%
More than one peer
passenger restriction rule
for probationary drivers
23
Not
applicable
Not
applicable
23 0 0%
Probationary prohibited
(modified) vehicles
316
Not
applicable
Not
applicable
316 8 2.5%
Probationary restrictions
on Lower-Performance
Supercharged and
Turbocharged vehicles
2,614 2,614 51% 0 0 0%
Total 5,546 4,280 70% 1,266 113 9%
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 8
VicRoads
24. A driver is eligible for a heavy vehicle driver licence once the minimum holding
period of a standard Victorian driver licence is attained. Depending on the class of
the heavy vehicle, the eligibility could also include a combined minimum holding
period of a smaller-class heavy vehicle driver licence. Drivers can apply for an
exemption to the holding period for employment reasons, particularly if they have
gained a similar licence from overseas or interstate. Prior to applying, applicants
must undergo training and testing with a VicRoads-accredited provider. Table 2
compares the full licence eligibility for each heavy vehicle type with the minimum
licence holding period to be eligible to apply for an exemption.
Table 2 - Heavy Vehicle Exemption Types
Heavy Vehicle Type
Licence eligibility without an
exemption
Minimum requirement to apply for
exemption
Light Rigid (LR)
Must hold an Australian car driver
licence for at least one year.
Employment: Any category except MC.
Minimum of 6 months driving
experience in a car or heavy vehicle.
Primary Producer: Any category except
MC. Held a car licence for at least 24
months and a lower category of heavy
vehicle licence for at least 6 months.
Motor trade/mechanic: Any category
except MC. Held a car licence for at
least 24 months and a lower category of
heavy vehicle licence for at least 6
months.
Emergency Services: Any category
except MC. May apply as soon as a car
licence is obtained.
Medium Rigid (MR)
Must hold an Australian car driver
licence for at least one year.
Heavy Rigid (HR)
Must hold an Australian car driver
licence for at least two years.
Heavy Combination
(HC)
Must hold an Australian car driver
licence for two years and a licence to
drive a MR vehicle or HR vehicle for
one year.
Multi Combination (MC)
For a period of 12 months must hold
or have held a licence to drive a HR,
or HC or combination of HR and HC
vehicles AND complete a training
course approved by VicRoads.
25. In granting licence exemptions, VicRoads takes into account the likely effect of its
decision on safe, efficient and equitable road use in Victoria, as well as the
applicant’s driving experience, driving record and the circumstances in which the
application is obtained.
26. Since the introduction of probationary restrictions on supercharged and
turbocharged vehicles for road safety purposes, there has been a volume increase in
the number of applications. Over the past three years, the volume of applications for
the supercharged/turbocharged vehicle category alone has increased 30% annually.
27. The increasing volume places a strain on existing VicRoads resources to efficiently
process exemption applications in a timely manner and effectively provide the
quality service to customers with genuine needs for licence exemptions.
28. Furthermore, non-approval rates for exemptions remain high, indicating that there
are a large number of applications with non-genuine needs. For example, there is a
49% non-approval rate for exemption applications to restricted supercharged and
turbocharged vehicles; and a high 97.5% non-approval rate for probationary
prohibited vehicles.
29. Whilst VicRoads encourages all drivers to conform to the minimum full licence
requirements, it acknowledges that it needs to consider the merits of all applications
and grant exemptions where the circumstances are warranted.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 9
VicRoads
30. Therefore, in order to recover labour costs, improve service levels as well as to
encourage higher levels of conformity to the minimum full licence requirements,
VicRoads is proposing to introduce a driver licence exemption application fee.
Defect Notice Clearance
31. Victoria Police, Environmental Protection Agency (EPA) and VicRoads (including
equivalent interstate) safety inspectors issue a defect notice when a vehicle fails to
meet roadworthy requirements and registration standards (see Figure 1). The
vehicle is considered a safety risk and must be repaired within the specified Notice
period.
32. A vehicle issued with a defect notice must not be used on a highway (road or road
related area) after the time and date specified on the Defect Notice, and its further
movement to another location may be restricted in accordance with terms specified
on the Defect Notice. If the compliance date on a Defect Notice has expired, the
registration may be suspended.
Figure 1 - Current Defect Notice Clearance Process.
33. Depending on the severity and complexity of the defect, the Defect Notice may
stipulate whether a Certificate of Roadworthiness (RWC) from an external VicRoads-
licensed vehicle tester is to be issued prior to clearance at VicRoads. Approximately
36% of notices issued are to vehicles with severe defects. These defects require a
RWC to be issued, involving additional inspection work from external vehicle testers
with costs ranging from $130-$150 depending on the complexity of the defect and
the repair.
34. Defect notices stipulating that a RWC is not required are issued to minor defective
vehicles. Once these defects are rectified, the vehicles can be taken straight to
VicRoads for clearance.
35. VicRoads processes an average of 36,000 applications per year to clear both RWC
and non-RWC type defect notices, from both commercial and private vehicle owners.
36. Clearing a non-RWC type defect at VicRoads involves a visual inspection of the
repair, a check of paperwork and subsequent clearance of the notice by a staff
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 10
VicRoads
member. Clearing an RWC type defect does not require an inspection from
VicRoads, since the inspection was already carried out by a licensed vehicle tester.
37. VicRoads prefers skilled inspectors that possess an understanding of the severity of
the defect and the adequacy of the repair undertaken. Training staff to acquire
these skills can take years of training and experience. Whilst VicRoads foresees
strengthening and even increasing the resource pool to meet the demands of defect
clearance work, it is currently constrained by funding in this area, due
predominantly to the services being provided at no charge.
38. Adding to the challenges of resourcing, the trucking industry has requested that
VicRoads consider establishing weekend defect clearance operations to service the
network of truck owners who, due to their consignment demands, are presently
unable to clear defect notices during normal VicRoads operating hours.
39. VicRoads presently does not charge fees for the clearance of defect notices.
VicRoads is reconsidering this practice, since it proposes to strengthen the resource
base to meet service demands which in turn fosters more favourable regulatory
outcomes.
40. Furthermore, based on a sample size of 192 vehicles
2
submitted to be cleared at
VicRoad’s Broadmeadows office in February 2014, there is an estimated 5% failure
rate, where vehicles have been found not to have met the minimum roadworthy
requirements and registration standards. Insufficiently repaired vehicles would need
the issues to be addressed by the owner and returned to be cleared at VicRoads.
41. Failure rates relate mainly to non-RWC defect notices where repair work inspection
by an external vehicle tester was not required. The inadequacy of the repairs could
be attributed to possible misunderstandings over the level of repair work required.
Some examples where clearances could not be granted include:
a) Claims that the defect notice was misleading or not warranted
b) Unrepaired or partially repaired defect.
42. Data collected by VicRoads only indicate the number of defects assessed and
cleared. However VicRoads staff has indicated that there are repeat offenders who
produce insufficiently repaired vehicles for defect clearance.
43. VicRoads believes that the failure rate would be reduced if a fee is introduced.
Payable when the appointment is made at VicRoads, the fee sends a pricing signal,
thus placing a higher perceived value on the service, prompting greater care to
ensure that all conditions of the defect notice have been met prior to applying for a
defect clearance. This will improve the effectiveness of roadworthy requirements
and registration standards.
44. Revenue from the fee will also enable VicRoads to fund extended weekend
operations to service the trucking community. This in turn fosters more roadworthy
and safer vehicles on the roads and thus benefiting the broader community and the
economy.
Miscellaneous Registration
45. VicRoads processed over 100,000 miscellaneous appointment registration
transactions in the 2013/14 year. These are appointment transactions that are not
classified under the much larger light vehicle registration volume. The volume of no-
fee miscellaneous registrations processed in 2013/14 is depicted in Table 3.
2
VicRoads only maintains data on vehicles cleared. Vehicles not cleared are not recorded; hence monitoring
activities were undertaken at the Broadmeadows branch in February 2014 to estimate the failure rates.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 11
VicRoads
46. The light vehicle registration transaction type, Interstate registration changeover,
involves the changeover of an interstate registration plate to a Victorian registration
plate.
Table 3 - Miscellaneous No-Fee Registration Types
Miscellaneous No-Fee Registration Type Description
Volume
2013/14
New Light Trailer registration
Registration of light trailers with
aggregate trailer mass of 750kg or less.
456
New Machinery registration
Registration of tractor, agricultural
machine or mobile plant.
21,930
Same-name re-registration of unregistered
vehicles
Re-registration under same name for
cancelled vehicle registrations.
23,025
Over-the-counter new vehicle registration
by dealer
Registration of vehicles performed by
motor dealer at a VicRoads centre.
1,259
Interstate registration changeover
Victorian registration of interstate
vehicles.
54,548
47. In addition to interstate registration changeovers, VicRoads is experiencing a
sizeable rate of “no shows” for miscellaneous registration transactions, where
customers have made appointments to register and inspect their vehicles but do not
attend their allocated appointments. “No shows” have been consistently high at
12% of appointments in this category. Valuable resources are held for the duration
of 10-15 minutes before an appointment can be considered a “no show”.
48. The negative impacts that no-show appointments have to business operations are:
a) Inefficiency – resources set aside for appointments that do not eventuate
can otherwise be allocated to other customer services where needed most,
b) Inequitable – appointments that do not eventuate could otherwise have
been allocated to customers that urgently need an available appointment
slot,
c) Ineffective – the non-commitment to a booked appointment does not
equate to an effective, workable booking system.
49. In order to reduce the volume of “no shows”, VicRoads is proposing introducing
registration appointment fees for the registration of vehicles that include light
trailers, machinery, same-name re-registrations and dealer transactions under the
Miscellaneous No-Fee Registration category, to encourage customers to place a
higher value on their appointment bookings. The fees would be charged at the time
of the appointment booking.
Miscellaneous Licensing
50. VicRoads processes interstate driver licence changeover at no cost to the customer.
Costs for interstate driver licence changeover are effectively subsidised by Victorian
drivers.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 12
VicRoads
Table 4 - Miscellaneous No-Fee Licence Types
Miscellaneous No-Fee Licence Type Description
Volume
2013/14
Interstate (driver) licence changeover
Issuing of Victorian driver licence to
interstate drivers.
79,987
51. The national agreement, which is administered by AustRoads, has been in place for
decades, and is documented in The Implementation of the National Driver Licensing
Scheme Policy issued by National Transport Commission (NTC). The agreement
binds interstate road authorities into allowing drivers moving permanently from
interstate to change over to respective local driver licences at no cost for the
remainder of the licence validity period.
52. VicRoads has upheld the agreement and have absorbed the cost of the no-fee
service over the years.
53. Along with VicRoads, road authorities from other states also recognise this
inefficient effect of the agreement. Road authorities from Western Australia, South
Australia and Tasmania, now charge small administration fees as well as additional
service fees to recover their costs, although the actual driver licences (for the
remainder of the validity period) are still granted at no cost. The fee charging
practice is possible since the binding of the national agreement requires that the
actual driver licence fee is not charged. The agreement does not restrict charging of
a fee for services and administration.
54. In order to contain service and administration costs, VicRoads is looking to follow
the lead of the above mentioned interstate road authorities. VicRoads is proposing
to charge a small appointment fee for interstate licence changeovers but will still
continue to waive the licence cost for the remainder of the interstate licence validity
period.
55. However, road authority jurisdictions in Western Australia, South Australia and
Tasmania charge small administration and service fees, as well charge for the
changeover of the driver licence for the remainder of the validity period (see Table
5).
56. VicRoads is proposing to introduce an appointment fee, whilst upholding the national
agreement to provide a local driver licence at no cost for the remainder of the
validity period, to recover the labour costs of providing parts of this service.
Table 5 – Current interstate charges for a driver licence changeover.
State
Fee if interstate licence has
expired prior to changeover
Appointment
Fee
Changeover Fee Admin Fee
Victoria
None if licence expiry is less than 5
years.
None None None
NSW
None if licence expiry is less than 5
years.
None None None
ACT
None if licence expiry is less than 5
years.
None None None
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 13
VicRoads
NT
Yes and if licence expiry is less than
5 years
None None None
Qld
Yes, standard licence fees apply if
expired.
None None None
SA
If more than 6 months expired, $22
admin fee plus licence fee.
None $40 for 1 year
$17 in addition to
changeover fee.
Tas
Yes and if licence expiry is less than
5 years
None
$30.72 for 1 year
through to $106.20
for 5 years
$10 photo fee
$37 Processing fee
WA
$38.50 transfer fee if licence expiry
is less than 5 years
None
$25.70 for 1 year
through to $128.70
for 5 years.
None
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 14
VicRoads
OBJECTIVES
57. The Cost Recovery Guidelines 2013 issued by the Department of Treasury and
Finance provide a rigorous framework for use by government entities when
developing and reviewing user charges and regulatory fees. When used in
conjunction with their Pricing Principles for regulatory activities, and government
goods and services 2014, the guidelines ensure that cost recovery and fee pricing
arrangements in Victoria are transparent, efficient, equitable, effective and
consistent with legislative requirements and government policy.
58. Through the introduction of new indexed
1
fees, the objectives of the proposed
changes to the regulations are:
Table 6 - Objectives Weighting.
Objective Importance Weighting
Efficiency
Full cost recovery promotes the efficient allocation of
resources without the need to rely on general taxation
revenue. VicRoads desires to move towards a
sustainable funding model based on fee-for-service
and hence rates this criterion highly. Hence, increasing
efficiency is the most important objective and has
been given the greatest weighting.
User charges for services are calculated to recover no
more than the marginal (labour) and fixed (overheads)
costs incurred by VicRoads in supplying the service.
30%
Equity
Current provision of no-fee services benefits a small
section of the public at the expense of the broader
community. The balance needs to be re-addressed
with user-pay initiatives. Whilst an important
objective, it is not the primary driver to introducing
the new fees and thus given a lower weighting.
25%
Effectiveness
The fees will be considered effective if the results are
stronger compliance with regulatory objectives which
in turn foster safer drivers, safer vehicles, safer roads
and ultimately a safer community. Though important,
it is a by-product of the proposed fee and thus has
been given the lowest weighting.
20%
Simplicity
The fee initiatives should be easy and quick to
implement with the minimal administration costs. The
fees are also to be easy to understand for the
community. Since this objective is an implementation
consideration, it has been given a lower rating to
Efficiency.
25%
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 15
VicRoads
OVERVIEW OF COSTS TO BE RECOVERED
59. VicRoads uses best practice cost recovery arrangements that require charges to be
set at a level that recovers the efficient (i.e. minimum) costs of providing the
goods/services at the required quality, or of undertaking a necessary regulatory
activity.
60. The proposed new fees are derived from activity-based costing (ABC) in order to
achieve full cost recovery. An efficient cost base is used to derive the appropriate
fee amount. VicRoads uses an ABC Costing Methodology
3
to derive the unit cost of a
full service transaction, where:
Input Variable Inclusions Notes
A
1
Internal service
cost
• Branch full cost
• Call centre full cost
EFFORT = Transaction times
(mins) x Volume
Inclusions are labour related
costs for staff including frontline
management and support staff,
accommodation costs, office
equipment, uniforms and staff
training. The cost is defined as
semi-variable.
VicRoads uses a Queue
Management System (QMS) to
measure transaction times. QMS
is software that tracks and
measures queue traffic by the
minute including wait times,
service demand levels and
servicing time.
This is a packaged operating
budget, regardless of how many
persons are involved in a task.
A
2
External service
cost
• Outsourced mail and back
office processing
Back end operations such as
forms processing and scanning,
and data entry are outsourced.
B
Materials and
Material Processing
cost, if applicable
• Number plate cost
• Licence card cost
Includes production and
distribution costs for number
plates and licence cards.
C
Computer systems
and database
maintenance
support cost, if
applicable
• Systems hosting,
maintenance & support
• National databases access
Costs based on current contract
with system providers and other
external system vendors.
D
Operational support
cost, if applicable
• Contracts management
• Operational policies
• Business management
• Operations assistance
Based on transaction volume.
E
4% Corporate
support cost
(mandatory)
• Executive services, HR, Media
and Finance
Overhead applied to all services,
based on current operational
corporate budgets.
3
VicRoads cost model allocation methodology for registration and licensing services was derived with the
assistance of KPMG in 2010-11. A Fully Loaded Transaction Cost will always include Unit Cost and Corporate
Support Cost (E), but depending on the service, may not necessarily include other variables B, C and D. For
the purposes of deriving the fees in this RIS, the formula excludes merchant payment processing costs, which
is normally an additional input variable into the ABC costing model.
Unit Cost = (A
1
or A
2
)
Fully loaded transaction cost = Unit Cost + B + C + D + E
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 16
VicRoads
Costs: Licence Exemptions
61. The processing costs for licence exemption are calculated using VicRoad’s ABC
Costing formula. The breakdown of costs in the 2013/14 year is illustrated in Table
7. Since a licence exemption fee is currently not charged, the under recovered cost
is absorbed by VicRoads and the broader community.
Table 7 - Licence Exemption processing cost
4
.
Licence Exemption Type
FY 13/14
volume
Average
Assessment
Time
(mins)
Unit cost
FY 13/14
Total Cost
Internal Service Costs ($1.50/min) (A):
Heavy vehicle graduate licence 2,126 25 $38 $79,725
Minimum hold with 120hours 224 55 $83 $18,480
120 hrs - Supervised Driving 229 78 $117 $26,793
Passenger Number Restriction 14 56 $84 $1,176
Peer Passenger Restriction 23 56 $84 $1,932
Probationary Prohibited Vehicle 316 76 $114 $36,024
Turbo/Supercharged Vehicles 2,614 30 $45 $117,630
Other 17 35 $53 $893
Operational Support (D) $0.90 $5,007
Corporate Support (E) $2.07 $11,506
Total cost of service FY13/14 $299,166
Cost per transaction
5
$56.96
Costs: Defect Notice Clearance
62. Derived using ABC costing formula, the costs for the defect notice process are
depicted in Table 8
. The costs are based on weekday operating hours.
Table 8 - Defect notice clearance - weekday costs
6
.
Defect Notice Process
(Weekday Operations)
Average
Transaction
Time
(mins)
FY
13/14
Total
Volume
Unit
Cost
FY 13/14
Total
Cost
Back-end data processing of incoming defect
notices
36,000 $1.11 $39,960
Data validity checking, includes error
corrections of notices where applicable
7
3,600 $6.15 $22,140
Service Centre clearance processing
($1.50/min)
7.28 36,000 $10.92 $393,120
National Defects Database Access (C)
36,000 $1.65 $59,400
Operations Support (D)
36,000 $0.60 $21,600
Corporate Support (E) 36,000 $0.65 $23,400
Total cost of service FY13/14
$559,620
Cost per transaction
5
$16.46
4
In addition to Unit Cost, costs do not include variables B and C as they are not applicable, but will include
Operational (D) and Corporate Support (E).
5
Indexed to Treasurer’s annual rate for 2015/16. The cost may fluctuate depending on volume served.
6
No material costs are applicable, hence variable B is not included into calculations.
7
Processing error rate equates to roughly 10% of total volume.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 17
VicRoads
63. As weekend services to clear defect notices are not yet operational, the anticipated
costs have been derived using FY13/14 variable units from Table 8, then adding
weekend loading of time and a half to labour costs, giving the anticipated total costs
shown in Table 9
. Assumptions include a weekend traffic volume of 10% of
weekday equivalent, and the availability of operations support.
Table 9 - Defect notice clearance – weekend costs
6
.
Defect Notice Process
(Weekend Operations)
Avg Trans
Time
(mins)
Estimat
ed
Volume
Unit
Cost
FY 13/14
Based
Cost
Back-end data processing of incoming defect
notices
3,600 $1.11 $3,996
Data validity checking, includes error
corrections of notices where applicable
7
360 $6.15 $2,214
Service Centre clearance processing
($2.31/min weekend loading)
7.28 3,600 $16.81 $60,516
National Defects Database Access (C)
3,600 $1.65 $5,940
Operations Support – weekend loading (D)
3,600 $0.90 $3,240
Corporate Support (E) 3,600 $0.65 $2,340
Anticipated total cost of service
$78,246
Estimated cost per transaction
5
$23.02
Costs: Miscellaneous Registration & Licensing
64. Appointments for registration can involve a visual check of the vehicle and a
national database search to validate the vehicle identification. Licensing transactions
can involve photography, on-the-spot printing of driver licences, as well as database
searches to validate interstate and overseas driver licences.
Table 10 - Costs
8
for Miscellaneous No-fee Registration and Licensing transactions
Miscellaneous No-fee Registration and
Licensing
FY 2013/14
Volume
Avg Trans
Time
(mins)
Unit
Cost
FY13/14
Total Cost
Internal Service Costs ($1.50/min)(A):
Dealer Miscellaneous Registration
1,259 10.05 $15.08 $18,985
Misc- Registration Changeover 54,548 5.33 $8.00 $436,384
Trailer Pack & Vessel Registration 456 5.61 $8.42 $3,839
Trailer/Machinery Pack 21,930 5.61 $8.42 $184,650
Victorian re-registration under same name 23,025 5.33 $8.00 $184,200
Combined I/S C/O of licence and registration 7,683 10.05 $15.08 $115,859
Misc – Licence Changeover 79,987 10.05 $15.08 $1,206,204
Appointment “No shows” 22,247 10.00 $15.00 $333,705
National Database Access and Search (C) 188,888
$1.65 $311,665
Operational support (D) 188,888
$0.90 $169,999
Corporate support (E) 188,888 $0.58 $109,555
Total cost of service FY13/14 $2,741,340
Cost per transaction
5
$15.37
8
Material costs (variable B) for registration plates and licence cards are not included into these calculations
since overall material costs (including material losses) are already factored into the standard fees charged for
vehicle registrations and driver licences.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 18
VicRoads
65. Appointment “no shows” is an issue for all transaction types in Table 10, since the
volume is sourced from actual transactions served and matched against
appointments made. Actual transaction volumes therefore do not include
appointment “no shows”.
66. Dedicated staff members are allocated to appointment bookings with actual times
tracked and managed by VicRoad’s Appointment Management System (AMS). This
guarantees service time to customers with booked appointments. In the event of an
appointment “no show”, the allocated staff member will wait ten minute duration, in
the expectation that the customer is running late for their appointment.
67. Consideration was given to exclude no-shows from the cost equation. However,
whilst the new appointment fees will certainly reduce the rate of no-shows, it will
not eliminate the event completely since there are many reasons given for no-
shows.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 19
VicRoads
COST RECOVERY PRINCIPLES
68. Cost-recovery is the recovery of the costs of government-provided or funded
products, services or activities that, at least in part, provide private benefits to
individuals, entities or groups, or reflect the costs imposed by their actions. Cost
recovery is a method of recovering all or some of the cost of particular activities
undertaken by government agencies from individuals or businesses, based on the
beneficiary pays
9
or user pays
10
principle. The concept ‘user pays’ will be used in
this RIS to capture both situations.
69. The task of setting cost recovery fees/charges involves determining whether to
recover costs from users or others who benefit; those whose actions give rise to it;
or taxpayers more generally. Whether costs should be user-pay or more generally
funded by taxpayers will depend on the type of activity and the existence of any
public benefits.
70. The Cost Recovery Guidelines apply to cost-recovery arrangements of government
departments and agencies, and include the recovery of the costs incurred by the
Government in providing goods and services.
11
71. As stated in the Cost Recovery Guidelines, Victorian Government policy is that
regulatory fees and user charges should generally be set on a full cost-recovery
basis.
12
However, if it is determined that full cost-recovery is not consistent with
other policy objectives of the Government, it may not be appropriate to introduce a
full cost-recovery regime. Consideration may be given to a regime of partial cost-
recovery (if it can be demonstrated that a lower than full cost-recovery does not
jeopardise other objectives) and/or to rely on other funding sources (e.g. general
taxation) to finance the activity.
72. When designed and implemented appropriately, the adoption of cost-recovery has
the potential to advance efficiency and equity objectives. However, the Guidelines
note that “efficiency and equity considerations may need to be balanced against
each other in determining the appropriate form of cost-recovery”.
13
73. As noted, the Guidelines set as the main objective full cost-recovery from the
activity. While this does not preclude partial cost-recovery or no cost recovery, it
does set out conditions under which less than full cost-recovery would be considered
appropriate. Less than full cost-recovery may be deemed appropriate where:
• goods are being provided to or where activities generate benefits to
unrelated third parties (positive externalities),
• objectives of income redistribution or social insurance are important,
• concessions are deemed appropriate,
• full cost-recovery may undermine innovation and product development,
• the government is providing goods and services on a commercial basis in
competition with the private sector, and/or
• full cost charging could undermine other objectives.
9
Those who benefit from the provision of a particular good or service should pay for it (Productivity
Commission, 2001, p. XXI).
10
This is where user meets the full costs of their actions, based on the view that those who create the need for
a service should incur these costs.
11
Government of Victoria, 2013, Cost Recovery Guidelines, Department of Treasury and Finance, Melbourne.
12
Cost Recovery Guidelines, 2103, p. 7.
13
Cost Recovery Guidelines, 2013, p. 6.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 20
VicRoads
How cost recovery principles apply to VicRoads
74. In terms of vehicle registration and driver licensing, a case can be made that
provision of services with fees will need to be subjected to concessionary
considerations, given the broad spectrum of the public that VicRoads serves, and
hence should be provided at less than full cost recovery.
75. VicRoads provides concessions to core registration and licensing services, where
concessionary provisions do not impact when taken as a whole, the ability to fully
recover the underlying costs that are incurred in providing those services. This is
due to the higher volume nature of those core services.
76. The provision of the registration and licensing services presented in this RIS
however, clearly has “private good” characteristics (in that the “goods” are likely to
be of more use to those making the specific request than to other parties) and
therefore a strong case for “user pays” can be made.
14
77. The provision of licence exemptions, defect notice clearances and miscellaneous
registration and licensing activities are extended services that are provided in
addition to the core registration and licensing services. They are of historically lower
volumes and are utilised by smaller sections of the community. As a consequence, if
the services were provided in a partial-cost recovery manner, VicRoads will not have
any other efficient means to fully recover the extended services costs, without
resorting to fee increases in other areas.
78. It is therefore proposed that licence exemption, defect notice clearance and
miscellaneous registration and licensing service activities be conducted in a fully
cost-recovered manner. In this case, a departure from full cost-recovery would
result in the broader Victorian community providing a subsidy to individuals or
organisations who request these services.
ALTERNATIVE OPTIONS
Non-regulatory options
79. A Regulatory Impact Statement must contain a statement of other practicable
options of achieving the objectives and reasons why the other options are not
appropriate.
80. The Victorian Guide to Regulation states that, in the case of RISs prepared for fees
and charges, the range of different options will be narrower than for other types of
regulations, and is likely to include consideration of different levels of service
provision that are to be funded through fees and charges; different types of fee
structures; and different levels of cost sharing.
81. Given the limited discretion provided by the Act, this RIS will focus on alternative
fee design options rather than considering alternative non-regulatory options for
achieving government objectives.
82. Removing the service entirely and thus removing the need to implement a fee was
not considered a feasible option.
14
“Private goods” are those where consumption by one party conflicts with its use by another, and where
benefits of consumption only accrue to the consuming party.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 21
VicRoads
Alternative fee and non-fee options
83. In summary, the following alternative fee and non-fee options were considered:
a) Fee cap in lieu of indexed fees,
b) Fixed fee versus different fee levels for each licence exemption type,
c) Invest into technologies to reduce costs rather than introduce fees on
existing costs,
d) Charging a flat fee to clear defect notices on the weekdays and weekends,
e) Charging different fees for RWC and non-RWC type defect notices,
f) Charging different fees for low-cost and high-cost miscellaneous
transactions, and
g) Applying different treatments to appointment “no-shows”.
84. Imposing a fee cap may lead to undesired outcomes from an operational
perspective, however the pattern of requests and fees over the first two years will
be monitored and the need for a fee cap may be considered in the future.
85. Technology advancements that could be used to lower or eliminate existing costs
while fulfilling regulatory requirements without the need to introduce fees were
assessed, such as:
a) Automated Licence Exemptions: Not feasible since manual assessment of
applications is still needed.
b) Automated Defect Notice: Given the relatively low volume, the high
investment required in automating the defect notice creation process and
upgrading of systems at Victorian law enforcement agencies as well as
VicRoads, is not feasible.
c) Miscellaneous registration and licensing: Digitisation of registration and
licensing processes is a long 5-10 year term commitment at VicRoads but
is not currently feasible without substantial investment required in existing
technology systems infrastructure. For this reason, it is not appropriate to
undertake further analysis for the purposes of this RIS.
86. Charging a flat fee for weekday and weekend defect notice clearances was given
consideration. However given the higher volume for clearances during weekdays,
the flat fee (if charged at the weekend rate or at a rate which is the midpoint of a
weekday and weekend rate) could result in over-recovery of costs. This conflicts
with the principles of full-cost recovery guidelines and hence is not appropriate for
this RIS.
87. A variety of treatment options for appointment “no shows” were considered
including applying an additional “commitment” fee in addition to the appointment
fee charged when the appointment booking is made. The “commitment” fee is then
refunded if the person presents for their appointment. This proposed process
however, would place an additional strain onto the existing costly refund process
since all refunds are sent as cheques. Customers would also have to wait for their
refunds leading to a poorer customer experience.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 22
VicRoads
PREFERRED FEE OPTIONS
88. The proposed indexed fees are outlined in Table 11. Full details of cost/benefit
options assessed are discussed further in sections to follow.
Table 11 - Preferred Fee Options
Fee type Fee Model Recommendation
Proposed
New Fee
Units
Est. full
year
revenue
Licence
Exemption Fee
Customers would pay a fee with their application
to seek a licence exemption. The new fee is
expected to reduce demand for licence
exemptions in favour of applicants who can
readily produce evidence.
4.16
($56.50)
$264K
Defect Notice
Clearance
Appointment Fee
Customers would pay an administrative fee to
clear their defect notices regardless of whether a
vehicle repair inspection is required. There will be
a fee to clear a defect during normal operating
hours and a separate fee for weekend operating
hours.
1.28
($17.40)
Standard
rate
1.89
($25.70)
Weekend
rate
$640K
Appointment Fee
– Miscellaneous
Registration
Customers would pay an appointment fee for the
registration of new light trailers, machinery,
interstate registration changeover, and same-
name re-registration. Customers seeking
interstate registration changeover will pay the
small appointment fee to receive a Victorian
registration for the duration of their remaining
expiry period.
1.28
($17.40)
$1.8M
Appointment Fee
– Miscellaneous
Licensing
Customers would pay an appointment fee for
interstate licence changeover. Customers seeking
interstate licence changeover will pay the small
appointment fee to receive a free Victorian driver
licence for the duration of their remaining expiry
period.
1.28
($17.40)
$1.6M
Net Present
Value
15
$34.8M
89. The Net Present Value (NPV) calculation over 10 years on implementation costs
produced a benefit of $34.8M. This is a benefit to the community.
Table 12 - Net Present Value
Year 1 2 3 4 5 6 7 8 9 10
Benefit
($M)
-0.907
16
4.295 4.464 4.638 4.820 5.008 5.205 5.409 5.622 5.845
Net
Present
Value ($M)
34.8
15
10-year NPV includes first year implementation cost of $110K with no ongoing additional maintenance cost.
Annual Discount Rate used was 4%.
16
Fees for services are expected to only recover costs part way through Year 1.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 23
VicRoads
OPTIONS ASSESSED INCLUDING COST/BENEFITS
Base Case
90. The “base case” describes the regulatory position that would exist in the absence of
the proposed fees. The base case of not doing anything (or maintaining status quo)
is not considered a practical alternative, given that VicRoads has identified problems
that need to be addressed. However, it is necessary to establish this position in
order to make a considered assessment of the costs and benefits of the viable
options.
91. For the purposes of comparing with the options assessments, the base case scores
are ranked zero for all objectives – Efficiency, Equity, Simplicity and Effectiveness.
Multiple Criteria Analysis (MCA)
92. A multi-criteria analysis (MCA) is a decision making tool that can be used where
judgement is required about how proposed options will contribute to a series of
criteria that are chosen to reflect the benefits and costs associated with the
proposal. The MCA involves:
a) Specifying assessment criteria
b) Assigning a “weighting” to each criterion
c) Assigning scores for each option in relation to each criterion; and
d) Calculating a weighted score for each option.
93. Options are given a score, from -10 to +10 against each criterion. The base case
(no fee) has a zero score in relation to all criteria. Options are then scored by
reference to whether the expected outcome resulting from the option represents a
positive or negative change relative to the base case.
94. The weighting for each objective is depicted in Table 6. In order to give weighted
scores for each objective, their raw scores are multiplied by their allocated
weighting to give a “weighted” score. For example, the weighting for Effectiveness is
20%, so its raw score is multiplied by 0.20 to produce its respective weighted score.
Table 13 - Criteria Scoring
Outcome Weak Small Moderate Significant Extreme
Negative change
-1 -3 -5 -7 -10
No change
0 0 0 0 0
Positive change
+1 +3 +5 +7 +10
95. To assist in identifying the appropriate, equitable level of cost recovery, two levels
of cost recovery (100 percent and 50 percent) were assessed using an equity and
efficiency criteria framework (Table 14). The scores may be positive or negative,
relative to the base case (i.e. no fee, zero cost recovery).
96. The equity and efficiency criteria used in the framework assessment in terms of
costs recovery are:
a) Horizontal equity (efficiency) – the extent to which the fee option reflects
the most efficient use of resources and minimises cross-subsidisation.
b) Vertical equity – the extent to which the fee option impacts an individual
or a business’s ability to pay.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 24
VicRoads
Table 14 - Cost Recovery Equity and Efficiency Criteria Framework
Level of
Cost
Recovery
Criteria Description
Full Cost
Recovery
(100%)
Horizontal Equity
(Efficiency)
Full cost recovery promotes the efficient allocation of resources
without the need to rely on general taxation revenue.
Vertical Equity
A fee for full cost recovery is likely to affect an individual’s
ability to pay, noting that in absolute terms the fees are not
significant. The criteria will need to be balanced against other
alternatives available to the individual, as well as the outcome
received as a result of the paid good/service.
Partial Cost
Recovery
(50%)
Horizontal Equity
(Efficiency)
A partial 50% cost recovery will require reliance on taxation
revenue and will not allow a full, self sufficient allocation of
resources.
Vertical Equity
The subsidised option provides a cheaper alternative to the
paying individual. However as fees are not significant a partial
cost recovery may provide only a marginal improvement to
vertical equity.
97. The equity criterion in some cases also takes into account the degree to which under
an option the user pays for the services they privately benefit from. In other words,
a fee structure that involves a greater level of cross subsidisation across services
against the base case would be reflected negatively in the equity criterion.
98. For simplicity, VicRoads prefers to minimise where possible, costs that might be
incurred in implementing the new fees, as well as ongoing maintenance costs that
might arise as a result of introducing a new fee or process. The impact to the
community is also considered such as, how the charge is applied is easy to
understand.
a) Where available, determine similar fee amounts currently in use at
VicRoads that can be reused and applied to the transaction cost, so that
the fee amount can be remembered by frontline staff and fee maintenance
is minimised.
b) Where available, benchmark with similar and comparable fee activities in
use by other interstate road authorities, so that the fee structure is more
acceptable by the public.
99. The effectiveness of a proposed fee amount is also derived using a series of steps.
a) Determine whether the proposed option meets the stated objectives.
b) Consider the ability of the proposed option in reducing the level of “no
shows”, reducing non-approval rates or improving service levels.
c) Determine if the proposed option helps promote safer drivers, safer
vehicles and safer roads.
Licence Exemptions
Base Case Scenario
100. There is presently no fee charged for the assessment of applications for licence
exemptions, making this the base case scenario.
101. The Base Case scenario generates an undesirably high application volume, with
increases of 30% year on year, placing considerable strain on existing resources.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 25
VicRoads
102. Processing applications for licence exemptions presently cost VicRoads
approximately $294K per year. Continuing with the base case trajectory would see
costs rise to $497K within 3 years. This is a cost that would be absorbed by
VicRoads and the broader community.
Assessment of Options
103. The new proposed Licence Exemption fee will primarily affect learner and
probationary drivers, overseas and interstate drivers, comprising the largest group
at over 3,400 applicants. In addition, the Heavy vehicle exemption category
comprises over 2,500 applicants with a mix of backgrounds including overseas,
interstate, primary producers, motor trade and emergency services. These
applicants are seeking exemptions for the purposes of quicker employment or as
part of a business trade requiring the use of heavy vehicles.
104. Customer observations at customer service branches estimate a 25% potential
reduction in application submission rates for licence exemptions as a result of the
imposition of a full-cost recovery fee. The volume reduction has been factored into
full-year revenue projections.
105. Based on the above prediction by the service branches, introducing a fee would
achieve higher compliance with minimum licence attainment requirements,
contributing to a high score for Effectiveness.
106. The cost to seeking licence exemption for applicants is the once-off fee, payable
for each application. There is a high exemption approval success rate for overseas
and interstate applicants who can produce evidence of a similar licence attained for
the exemption category that they are seeking (as is the case for Heavy Vehicle
Graduate Licence).
107. Based on the scoring of fee options in Table 15, Option 1 is the preferred fee.
Table 15 - Licence Exemption Fee and Non-Fee Options
Options Objectives Score
Weighted
Score
Analysis of option
Option 1
Implement a full cost
recovery model for licence
exemption applications by
charging a fee unit of 4.16
per application.
Efficiency 10 3
Quickest full cost recovery. Full
cost passed to user in need of
activity, easing fiscal pressure
to the broader community
(Horizontal equity).
Equity 5 1.25
The least affordable fee option
to applicant (Vertical equity).
Effectiveness 7 1.4
The price signal from the fee
would encourage the greatest
level of customer conformance
to minimum licence attainment
requirements.
Simplicity -1 -0.25
Easy to administer and
understand as it is a fee per
application.
Option 1 Total Weighted Score 5.4
The best option to foster
greater compliance to
regulations and to recover full
costs.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 26
VicRoads
Option 2
Implement a partial (50%)
cost recovery model
whereby a lesser fee unit
of 2.27 is charged for each
licence exemption
application.
Efficiency 5 1.5
A partial 50% cost recovery will
still require reliance on taxation
revenue and will not allow a
full, self-sufficient allocation of
resources.
Equity 7 1.75
The subsidised option provides
a cheaper alternative to the
paying individual. However –
while fees are not significant -
there is still the possibility of a
negative impact to some
individual’s ability to pay.
Effectiveness 5 1.0
May encourage regulatory
conformance but not as
effective as a full fee.
Simplicity -1 -0.25
Easy to administer and
understand.
Option 2 Total Weighted Score 4.0
Not an efficient and effective
option.
Option 3
Implement different fee
for each licence exemption
type.
Efficiency 10 3 Leads to full cost recovery.
Equity 7 1.75
Individual’s ability to pay would
differ depending on the
exemption type. This option
would mean fees for specific
services would be either higher
or lower than the single fee
proposed in option 1 or 2 ,
depending on the complexity of
the exemption process.
Effectiveness 3 1.0
May encourage regulatory
conformance but it could also
lead to undesirable bundling
and submission of many
different applications as a
single, cheaper application.
Simplicity -5 -1.25
More complex to administer
given the varying fee levels for
six types of exemptions.
Option 3 Total Weighted Score 4.5
More equitable option but
scores lower in effectiveness
and simplicity.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 27
VicRoads
Defect Notice Clearance
Base Case Scenario
108. There is presently no fee charged for clearing defect notices, making this the base
case scenario.
109. Under the Base Case scenario an undesirably high number of vehicles are
currently failing clearance. VicRoads believes that the no-charge service enables
customers to take a chance on clearing insufficiently repaired vehicles rather than
commit to the expenses and inconvenience in repairing the vehicle.
110. Clearing defects cost VicRoads approximately $554K per year. The low value
placed by applicants on the defect clearance process does not foster greater
regulatory compliance and safer vehicles on the roads.
Assessment of Options
111. The new Defect Notice Clearance fee for weekday and weekend services will
affect a mix of private and commercial vehicle owners (including motor vehicle
dealers, the trucking industry and motor mechanics) that would require clearance of
defect notices.
112. Clearing defect notices is a vital process in ensuring that defective vehicles are
repaired to a satisfactory state in accordance to regulatory requirements. Removing
the process is not an option.
113. VicRoads currently charges a standard across-the-board 1.28 fee units for
appointments. For the purposes of simpler financial administration, the standard
VicRoads appointment fee will be applied to clear defect notices during weekdays.
114. VicRoads will introduce the appointment booking process. This means that defect
notices cannot be cleared without an appointment booking. The new fee will be
applied at the time the appointment is made – whether online or over the phone.
VicRoads does not provide concessions or waivers on appointment bookings.
Table 16 - Defect Notice Clearance Fee Options
Options Objectives Score
Weighted
Score
Analysis of option
Option 1
Implement a full cost
recovery model, charging
the standard VicRoads
appointment fee of 1.28
units to clear a defect
notice on weekdays. In
addition, extend services
by opening weekend
inspection centres to
Efficiency 10 3
Quickest full cost recovery. Full
cost passed to user in need of
activity, easing fiscal pressure
to the broader community
(Horizontal equity).
Equity 5 1.25
While the fee may affect some
individuals ability to pay, the
fee is not expected to be
perceived as a significant
amount for applicants.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 28
VicRoads
provide greater
convenience to customers
with a weekend fee of 1.89
units.
Effectiveness 9 1.8
The extended weekend service
will provide convenience to
those who cannot attend
inspection centres during the
week. The fee would
encourage the greatest level of
customer conformance to
minimum licence attainment
requirements and reduce the
number of vehicles currently
failing clearance through the
perceived value in the fee.
Simplicity -3 -0.75
Easy to administer but with
added complexity of weekend
fee.
Option 1 Total Weighted Score 5.3
Is the most effective option to
fully recover costs, with the
weekend extended service
offering convenience to
customers, encouraging higher
volume of defect clearances
and hence higher conformance
to regulatory requirements.
Option 2
Implement a full cost
recovery model, charging
the standard VicRoads
appointment fee of 1.28
units to clear a defect
notice on weekdays only.
Efficiency 10 3
Quickest full cost recovery. Full
cost passed to user in need of
activity, easing fiscal pressure
to the broader community
(Horizontal equity).
Equity 5 1.25
While the fee may affect some
individuals’ ability to pay, the
fee is not expected to be
perceived as a significant
amount for applicants.
Effectiveness 3 0.6
Encourages a greater
regulatory conformance but
lack of weekend service does
not give every customer a
chance to conform to
regulations easily.
Simplicity -1 -0.25
Easy to administer with one
standard VicRoads
appointment fee.
Option 2 Total Weighted Score 4.6
Viable option, however the lack
of weekend services do not
encourage greater regulatory
compliance from customers
(e.g. trucking community) who
would benefit from extended
services from VicRoads.
Option 3
Implement a different fee
structure to charge more
for defect notices not
requiring a RWC and less
to notices with RWC on
Efficiency 10 3
Consideration was given to add
an additional fee to non-RWC
notices since this type of
defect requires a visual
inspection by a VicRoads staff
member. This would lead to
full cost recovery.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 29
VicRoads
weekdays and weekends.
Equity 7 1.75
An individual’s ability to pay
would differ depending on the
inspection, although fee
amounts are not expected to
be perceived as significant.
This option would mean the
fees for different services
would be either higher or lower
than the single fee proposed in
option 1 or 2, depending on
the complexity of the
inspection.
Effectiveness 9 1.8
The fee would encourage a
high level of customer
conformance to minimum
licence attainment
requirements and reduce the
number of vehicles currently
failing clearance through the
perceived value in the fee.
Simplicity -7 -1.75
Most complex to administer
with multiple levels of fees for
both weekday and weekend
services and added difficulty in
using a non-standard
appointment fee.
Option 3 Total Weighted Score 4.8
Full cost recovery however the
imposition of an additional fee
for non-RWC notices could be
administratively burdensome
Option 4
Implement a partial (50%)
cost recovery model
whereby a lesser fee of
0.64 units is charged to
clear defect notices on
weekdays only.
Efficiency 5 1.5
A partial 50% cost recovery
will still require reliance on
taxation revenue and will not
allow a full, self-sufficient
allocation of resources. The
loss incurred would not justify
the effort needed to implement
the fee.
Equity 7 1.75
While the lower fee may
increase some individuals’
ability to pay, this is limited as
the full fee is already expected
to be perceived as a small
amount for applicants.
Effectiveness 3 0.6
May encourage regulatory
conformance but not as
effective as a full fee.
Simplicity -3 -0.75
VicRoads does not administer a
cheaper appointment fee so is
one extra fee to maintain.
Option 4 Total Weighted Score 3.1
Not an efficient or effective
option to justify effort in
implementing.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 30
VicRoads
115. Based on the scoring of fee options in Table 16, option 1 is the highest scoring
fee scenario. The level of success for the preferred option will be monitored over the
course of 12 months and any future needs for different fee levels may be re-
considered.
116. It is anticipated that weekend labour costs of time-and-a-half would apply for
extended hour’s services, bringing an increase in weekend appointment fees to clear
defect notices to 1.89 fee units.
117. The cost of 1.28 fee units to clear a vehicle defect notice on weekdays (and 1.89
units on weekends) is comparatively small when the alternative is a registration
suspension (applied if a vehicle defect is not rectified within the notice period).
118. The defect notice clearance fee is supported by the Victorian Transport
Association (VTA), an organisation representing a number of freight transport
groups. Work schedules are cited as making it difficult for members of the truck
driving community to visit VicRoads centres during the weekdays to clear defects.
The new fee will help VicRoads fund extended weekend opening times at its
inspection centres to service the truck driving community.
119. The community benefits with more vehicle defects cleared over the weekends as
the initiative will help foster safer vehicles and safer drivers.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 31
VicRoads
Miscellaneous Registration & Licensing
Base Case Scenario
120. There is presently no fee charged for administering miscellaneous registration and
licensing transactions, making this the base case scenario.
121. In providing a no-fee service for these licensing transactions, VicRoads does not
promote equitable treatment of customers since a sizeable section of the community
enjoys the benefits of no-fee registration and licensing services.
122. VicRoads believes that the Base Case scenario causes appointment “no shows” as
customers place a lower value on no-charge appointments compared to their other
personal priorities, cost of travel or cost of lost time as a result of travelling to a
VicRoads service centre.
123. Miscellaneous registration and licensing transactions cost VicRoads approximately
$2.7 million per year. This is a significant shortfall that is absorbed by VicRoads,
costing the broader community to service a small section of the public.
Assessment of Options
124. The new Appointment fees for Miscellaneous Registration will affect members of
the general public who would require registrations for new light trailers or the re-
registration of registration expired vehicles, as well as primary producers who would
require registrations of new machinery (tractors, agricultural machines). The largest
impacted group (comprising 64,000 transactions) is interstate migrants to Victoria
who would require interstate changeover of registrations. The total volume of
miscellaneous registration transactions is approximately 112,000 per year.
125. Similarly, Miscellaneous Licensing will affect interstate migrants into Victoria who
would require interstate changeover of driver licences. This group comprises 90,000
transactions.
126. VicRoads currently charges a standard across-the-board 1.28 fee units for
registration and licensing appointments. In line with full cost recovery and for the
purposes of simpler financial administration, the standard fee will be applied to
miscellaneous registration and licensing appointments
127. VicRoads will revise the existing appointment booking process for miscellaneous
transactions to enable the booking fee charge. The new fee will be applied at the
time the appointment is made – whether online or over the phone. VicRoads does
not provide concessions or waivers on appointment bookings.
Table 17 - Miscellaneous Registration & Licensing Fee and Non-fee Options
Options Objectives Score
Weighted
Score
Analysis of option
Option 1
Implement a full cost
recovery model, charging
the standard VicRoads
appointment fee of 1.28
units.
Efficiency 10 3
Quickest full cost recovery. Full
cost passed to user in need of
activity, easing fiscal pressure
to the broader community
(Horizontal equity).
Equity 5 1.25
The least affordable fee option
to applicant (Vertical equity).
Effectiveness 7 1.4
The fee would reduce the rate
of “No shows” by placing a
higher value on appointments.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 32
VicRoads
Simplicity -1 -0.25
Easy to administer and
understand.
Option 1 Total Weighted Score 5.4
Most effective option to fully
recover costs and reduce the
volume of “No shows”.
Option 2
Implement a partial (50%)
cost recovery model
whereby a lesser fee of
0.64 units is charged.
Efficiency 5 1.5
A partial 50% cost recovery will
still require reliance on taxation
revenue and will not allow a
full, self-sufficient allocation of
resources.
Equity 7 1.75
The subsidised option provides
a cheaper alternative to the
paying individual. However
there is still the possibility of a
negative impact to some
individual’s ability to pay.
Effectiveness 5 1
May reduce the rate of “No
shows” but not as effective as a
full fee.
Simplicity -3 -0.75
VicRoads does not administer a
cheaper appointment fee so is
one extra fee to maintain.
Option 2 Total Weighted Score 3.5
Not the most efficient and
effective option. Not as simple
to implement.
Option 3
Implement different fees
for low- and high-cost
miscellaneous
transactions.
Efficiency 10 3 Leads to full cost recovery,.
Equity 7 1.75
Option has less cross-
subsidisation across
transactions than option 1 and
2 since users would pay higher
fees for more complex
transactions.
Effectiveness 8 1.6
The fee would reduce the rate
of “No shows” and also place a
higher value on more complex
appointments.
Simplicity -5 -1.25
Multiple fee levels are complex
to administer and are more
confusing to customers.
Option 3 Total Weighted Score 5.1
More viable than Option 2 but
not as simple to implement and
multiple fees are potentially
confusing to customers.
128. Based on the scoring of fee options in Table 17, option 1 is the preferred fee
scenario.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 33
VicRoads
129. There is no expected negative impact in demand as a result of introducing the
new fee since there are already customer expectations that there are costs
associated with acquiring Victorian registrations and licences.
Risks and Social Impacts As A Result Of New Fees
130. There is a risk that the introduction of the defect notice clearance fee could result
in the likelihood of more vehicle registration suspensions occurring and ultimately
more unregistered, un-roadworthy vehicles on the roads. The percentage impact is
hard to predict and quantify particularly on a relatively small fee (compared to the
cost of a vehicle repair). It is more likely that the costs of vehicle repairs are the
prime causes of vehicle owners taking suspension risks.
131. The introduction of the Licence Exemption fee is not expected to increase any
likelihood of drivers breaching learner and probationary rules, given the existing
rigid exemption assessment process in place.
PROGRAM LEVEL IMPLEMENTATION AND ENFORCEMENT
132. Amendments to Regulations, VicRoads brochures, website and communication
paraphernalia will be undertaken by existing VicRoads resources. There are
additional costs in legal and policy support, communication of the new fees, project
management, development and revision of materials/programs. The following table
provides a summary of the one-off business costs associated with the introduction of
the new fees. There are no system development costs.
133. Calculations of business resource cost are based on an estimated number of man
days expected to implement the fees. The team is comprised of Project Manager,
Business Analyst, Legal Representative, Financial Analyst, Communication Analysts
and Trainers (see Appendix for rates used and salaried costs based on VicRoads
salaries).
Table 18 - Business Implementation Costs
Cost type
Daily
rate
Implementation
Cost
(Ex GST)
Business Resources
• R&L Project Resources 48 days
o (Project Manager VRO5-4)
• R&L Project Resources 100 days
o (Business Analyst VRO4-4)
Financial resource for new fee uploads and testing 20 days
o (Financial Analyst VRO5-4)
• R&L communications & training resources 30 days
o (Communication and training analysts VRO4-4)
Total Program cost with contingency
$640
$510
$640
$510
$31,000
$51,000
$13,000
$15,000
$110,000
134. There are no additional ongoing maintenance costs.
135. In enforcing the new fees, the Road Safety (Drivers) Regulations and the Road
Safety (Vehicles) Regulations will be amended:
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 34
VicRoads
a) Road Safety (Drivers) Regulations 2009, for new fees relating to licensing,
b) Road Safety (Vehicles) Regulations 2009, for new fees relating to
registration.
136. The new fees will be communicated to customers on the VicRoads website and
existing brochures will be amended accordingly. Front line VicRoads staff will be
briefed on the new fees with work instructions updated accordingly.
137. Calculation of regulatory fee units is derived using the base fee unit
17
for the
2014/15 financial year. The resulting fee units will be specified in Schedule 5 of the
respective Drivers and Vehicles regulations.
CONSULTATION, MONITORING, REVIEW AND EVALUATION
138. In considering the types of costs to be recovered and the comparison to similar
fees charged, preliminary communications occurred at a bi-monthly meeting at
AustRoads, the national association of road transport and traffic agencies. Present at
the meeting were representatives of interstate road and transport authorities.
Preliminary communications have also occurred with Victorian Transport Association
(VTA) and the RACV where discussions have helped contributed to the development
of fee options.
139. Post Implementation Review will be carried out to determine the benefits realised
in regulatory compliance, financial terms as well as the traffic volume impacts the
new fees will have on overall management of customer services. This is carried out
annually by multiple departments within VicRoads:
• Monitoring of traffic volume impact and monetary tracking will be carried out by
VicRoads’ R&L Business Services.
• Reporting of benefits will be carried out by R&L Business Services.
• VicRoads Finance (Management & Accounting) will make changes to fee tables
and demand management to enable monitoring of the new fees charged.
• VicRoads Finance (Management & Accounting) will report to Department of
Economic Development, Jobs, Transport and Resources (DEDJTR) on the revenue
realised from the Increased Revenue and Cost Recovery Program.
140. There are a number of indicators that will be used to monitor the effectiveness of
the fees implemented, as illustrated in the table below.
Table 19 - Indicator monitoring methods.
Indicator How monitored?
Net cost of operations
Determined from fee revenue minus process cost.
Monthly data for fee revenue is compiled and
compared with service costs on an annual basis. The
data is compiled by VicRoads’ payment systems.
Level of demand for licence exemptions
Data for the number of exemption applications
received and successfully processed is manually
compiled on a monthly basis by the exemption
assessment team. Monthly volume trends will be
charted for pattern shifts and reviewed annually.
17
As specified by the Treasurer.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 35
VicRoads
Level of demand to clear defect notices
Data for the appointment volume for defect
clearances and the volume cleared are captured by
two systems to be monitored on a monthly basis.
Monthly volume trends will be charted for pattern
shifts and reviewed annually.
Level of demand for appointments
The appointment system captures data on the type
of appointment made and the time made. Monthly
data will be charted and reviewed annually.
Reduction of No Shows
Appointment no-show data is compiled by the
appointment system. Annual data will be compared
to previous years for pattern shifts.
Public feedback on new fees
Public feedback is collected by VicRoad’s Enquiry
Tracking System (ETS). With this system, public
sentiment can be heard and addressed by relevant
staff members. Feedback collected can be compiled
to gauge the public perception on the fees and
general effectiveness of the fees.
Level of suspended vehicles
VicRoads currently does not monitor this activity and
it does not keep track of causes of suspensions.
However as a result of the Defect Notice Clearance
fees, more attention could now be paid to the
general trends in the number of suspended vehicles
over time from the number of suspension letters
issued, to determine if new initiatives could be
created in the future.
141. Fees are reviewed and revised annually prior to end of each financial year and
normally at the time when the Treasurer’s annual rate for the next financial year is
released. It is anticipated that the fees will continue to be in place as an ongoing
part of VicRoads operations.
142. A primary function of the RIS process is to allow the public and stakeholders to
comment on the proposed Regulations before they are finalised. Public input
provides valuable information and perspectives and improves the overall quality of
regulations. Accordingly, feedback on the proposed Regulations is welcomed and
encouraged. The consultation period for this RIS will be 28 days, with written
comments required by no later than 5:00pm, on the advertised due date.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 36
VicRoads
APPENDIX
Business Implementation Staff Costs
The following staff costs have been used in the calculation of costs to implement the
project within the business.
The daily rate has been calculated by multiplying 7.6 hours per day by the hourly rate.
The hourly rate has been calculated on the basis that the total annual costs cover 46.2
weeks per year (52.2 weeks minus 4 weeks annual leave and 2 weeks for other leave
(including public holidays), and 38 hours worked each week (as per the VPS Workplace
Determination). This is to ensure the fees capture the true incremental staff cost of the
activity. Therefore the hourly rate is:
Hourly rate =
(Total annual cost of staff member)
(46.2 weeks x 38 hours)
Table 20 - Staff salary rates
Team
Member
Staff
Level
Salary
Hourly
Rate
Activities
Project
Manager
VRO5-4 $148,010 $84.30
Project management, Stakeholder and Team
management.
Project
business
analyst
VRO4-4 $117,922 $67.20
Stakeholder liaison, business impact analysis,
business process impact analysis and design.
Legal
representative
VRO6-4 $187,124 $106.60 Regulatory development and legal advice.
Financial
analyst
VRO5-4 $148,010 $84.30
Fee implementation, financial systems testing,
accounting.
Communication
analyst
VRO4-4 $117,922 $67.20 Departmental and external communications.
Trainers VRO4-4 $117,922 $67.20 Staff training.
Salaries are based on 2014 rates.
Road Safety (Drivers) and (Vehicles) Miscellaneous Fees Regulations 2015 - Regulatory Impact Statement 37
VicRoads
10-year Cost and Revenue Projections
Table 21 - 10-year Projections
Year 1 2 3 4 5 6 7 8 9 10
Costs ($million)
Defect Notice 0.601 0.616 0.632 0.649 0.666 0.673 0.702 0.721 0.740 0.760
Licence Exemptions 0.245 0.251 0.257 0.264 0.271 0.278 0.286 0.293 0.301 0.309
Misc Reg’n & Licensing 2.956 3.370 3.512 3.661 3.817 3.979 4.147 4.323 4.507 4.698
Systems implementation 0 0 0 0 0 0 0 0 0 0
Business implementation 0.110 0 0 0 0 0 0 0 0 0
Total Cost (projected) 3.912 4.237 4.401 4.574 4.754 4.930 5.135 5.337 5.548 5.767
Benefit ($million)
Defect Notice 0.481 0.640 0.657 0.675 0.693 0.711 0.730 0.749 0.769 0.791
Licence Exemptions 0 0.264 0.272 0.279 0.286 0.294 0.302 0.310 0.318 0.327
Misc Reg’n & Licensing 2.524 3.391 3.535 3.684 3.841 4.003 4.173 4.350 4.535 4.727
Total Benefit (nominal) 3.005 4.295 4.464 4.638 4.820 5.008 5.205 5.409 5.622 5.845
Net Benefit ($million)
Net benefit (nominal) -0.907 0.058 0.063 0.064 0.066 0.078 0.070 0.072 0.074 0.078
Net Present Value (NPV) 34.8
Note: the Net Present Value (NPV), using the formula, assumes that all costs are incurred at the end of each time period and are discounted using an annual discount rate of
4%, in accordance with the Victorian Guide to Regulations.
Based on a three-year volume fluctuation pattern of -0.51% (2011-12), 6.38% (2012-13) and 6.85% (2013-14), increases for miscellaneous registration and licensing volumes
are based on average yearly rise of 4.24%. Also included is an assumed 50% reduction in the volume of appointment “no shows” in absolute terms (on 2013/14 volume).
Volumes for Defect Notices and Licence Exemptions fluctuate yearly and their volume projections are based on an average yearly rise of 2.65%.
The above calculations indicate a net benefit with an NPV of $34.8M. This includes a first year implementation cost of $110K. The fee initiatives are planned for release in the
second quarter of the first year, with the exception of the Licence Exemption fees (where current plans are for a second year release). The fees are expected to fetch long term
benefits to the community.