Proposal for national licensing of the plumbing and gasfitting occupations /
The Council of Australian Governments’ National Licensing Steering Committee has prepared this Decision Regulation Impact Statement, with assistance from PricewaterhouseCoopers. Its purpose is to inform a decision by the Standing Council for Federal Financial Relations on the approach to national licensing for the plumbing and gasfitting occupations. /
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© Commonwealth of Australia 2013
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· ISBN 978 1 921916 11 3 (PDF)
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This is the second stage of a two-stage Regulation Impact Statement (RIS) process which includes a Consultation RIS followed by a final Decision RIS.The purpose of this Decision RIS is to present the costs and benefits of options associated with national occupational licensing reform to assist the Council of Australian Governments (COAG) in its decision making on reform paths. This Decision RIS incorporates jurisdictional and stakeholder views on reform paths following a consultation process. Consultants were commissioned by the COAG National Licensing Taskforce to prepare the Decision RIS, and it incorporates views that have been brought to the attention of the consultants. Extensive information has also been provided by jurisdictions on the costs and benefits of policy approaches and the detail of the licensing arrangements in each jurisdiction. /
Table of contents
About this Decision Regulation Impact Statement ix
Summary of options considered in this Decision Regulation Impact Statement x
Quantified impacts for the national licensing options xi
Executive summary xii
Purpose of the Decision Regulation Impact Statement xii
The problem xii
Government objectives for reform xiii
Options considered xiv
Preferred option xiv
Overview of alternative options to national licensing xv
Automatic Mutual Recognition xv
Status quo xvi
Factors in determining preferred national licensing option xvii
National licensing – costs and benefits xx
Impacts for licensees xxiii
Impacts for business and consumers xxiii
Safety and consumer outcomes xxiv
Impacts for government xxiv
Additional wider economic impacts xxv
Consultation process and outcomes xxvi
Other features of national licensing xxvii
Fees xxvii
Licence period xxvii
Responsibilities of the national authority and jurisdictional regulators xxix
Conclusion/Recommendation xxx
1 General policy context 1
1.1 The Occupational Licensing National Law Act 2010 2
2 Options for reform 4
2.1 Options considered 4
2.2 Preferred option - requirements 5
2.3 ‘Preferred’ national licensing option – Three tier sub-option2 5
2.3.1 Consultation feedback 8
2.4 Automatic mutual recognition 9
2.4.1 Existing Mutual Recognition Arrangements 9
2.4.2 Automatic mutual recognition – unharmonised approach 9
2.4.3 Consultation 10
2.4.4 Conclusion 11
3 National licensing – overview of preferred option 12
3.1 Preferred option -Three tier, sub-option 2 - overview 12
3.1.1 Proposed categories of regulated work 12
3.1.2 The proposed national licensing categories across the jurisdictions 13
3.1.3 Proposed regulated work 15
3.1.4 Endorsements 17
3.1.5 Nominees 18
3.1.6 Exemptions 18
3.1.7 Limited exemptions 19
3.1.8 Non-skills-based eligibility requirements 19
3.1.9 Relevant person 20
3.1.10 Proposed personal probity eligibility requirements 20
3.1.11 Proposed financial probity requirements 22
3.1.12 Qualification-based eligibility requirements 24
3.1.13 Experience requirements 28
3.1.14 Additional testing 29
3.1.15 Skills maintenance (continuing professional development) 29
3.1.16 Licence period 29
3.2 Rationale for proposed national licensing elements 29
3.2.1 Proposed categories of regulated work 29
3.2.2 Proposed regulated work 41
3.2.3 Endorsements 45
3.2.4 Nominees 49
3.2.5 Exemptions 51
3.2.6 Limited exemptions 52
3.2.7 Non-skills-based eligibility requirements 53
3.2.8 Qualification-based eligibility requirements 55
3.2.9 Qualification requirements for preferred option 55
3.2.10 Experience requirements 62
3.2.11 Additional testing 63
3.2.12 Skills maintenance (continuing professional development) 63
3.2.13 Licence period 65
3.3 Transitional arrangements 65
3.3.1 Deeming of current licence holders 65
3.3.2 Administrative transactions that were initiated before national licensing begins 66
3.3.3 Disciplinary and court processes and actions 66
3.3.4 Transitioning suspended licensees 66
3.3.5 3.3.5 Transitioning disqualified licensees and cancelled licences 67
3.3.6 Eligibility for those who initiated training before national licensing begins 67
3.3.7 Eligibility for those who completed training before national licensing begins 67
3.3.8 Lapsed licences 67
3.3.9 Current trainees for a restricted licence 67
3.3.10 Consultation 68
4 Impact analysis 69
4.1 Transition and implementation costs of a national licensing system 69
4.1.1 Cost to plumbing and gasfitting licensees 69
4.1.2 Cost to business and consumers 70
4.1.3 Costs to government 70
4.2 Direct costs and benefits of national licensing 74
4.2.1 Labour mobility 74
4.2.2 Removal of multiple licences held across jurisdictions 77
4.2.3 Flexible licence periods 79
4.2.4 Licence tiers and qualification requirements 80
4.2.5 Reducing the costs of regulatory requirements 88
4.2.6 Costs imposed by new requirements 91
4.2.7 Business value-add 93
4.2.8 National Occupational Licensing Authority – ongoing operational costs 94
4.2.9 Potential changes in government revenue 95
4.2.10 Potential benefits to governments from simplified administrative arrangements 95
4.2.11 Other impacts that have not been quantified 98
4.3 Impact on consumer outcomes 103
4.3.1 Potential safety impacts 103
4.3.2 Consumer protection impacts 105
4.4 Comparing the impacts for licensees working in single and multiple jurisdictions 106
4.5 Wider economic impacts on the Australian economy 108
4.5.1 The shock to the model – the scenario modelled for this Regulatory Impact Statement 109
4.5.2 Key results 109
4.6 Sensitivity testing of key assumptions 112
4.6.1 Alternative licence period 112
4.6.2 Net present value assumptions 113
4.6.3 Cost and benefits of the automatic mutual recognition option 115
4.6.4 Summary of the costs and benefits of national licensing by jurisdiction 120
5 Consultation 128
5.1 Public information sessions 128
5.2 Feedback on Consultation RIS and draft legislation 129
5.3 National Occupational Licensing Authority (NOLA) 129
5.4 Submission Summary 129
5.5 Overview of selected stakeholder positions 131
6 Conclusion and recommendation 133
6.1 Recommendation 133
6.2 Overview of the proposed national licensing approach to the plumbing and gasfitting occupations 134
6.2.1 Licence categories 134
6.2.2 Scope of regulated work 134
6.2.3 Endorsements 137
6.2.4 Nominees 137
6.2.5 Exemptions 137
6.2.6 Non-skill-based eligibility requirements 138
6.2.7 Qualification-based eligibility requirements 140
6.2.8 Experience requirements 144
6.2.9 Additional testing 144
6.2.10 Licence period 144
7 Implementation 145
7.1 Implementation of national licensing 145
7.2 Key steps in implementation 146
7.2.1 Notification of national licence(s) 146
7.2.2 Issuing of new national licence documentation 147
7.3 Communication strategy for national licensing 148
7.4 Review 148
Attachment A - Overview of the sector and existing licence requirements 150
Overview of the plumbing and gasfitting sector 150
Regulatory framework 152
Overview of existing licensing requirements 153
Plumbing work 154
Water (supply) plumbing work 154
Sanitary plumbing 154
Drainage work 155
Fire protection 155
Mechanical services 155
Gasfitting 155
Gasfitting Type B 156
Attachment B – List of submissions 157
Attachment C – National licensing policy development process 181
Attachment D – Risks associated with plumbing and gasfitting work 186
Sub-option 2 – How proposed Certificate IV units address risks 190
Attachment E – Key changes to existing jurisdictional licensing arrangements 196
New South Wales 196
Victoria 202
Queensland 208
Western Australia 215
South Australia 220
Tasmania 226
Australian Capital Territory 231
Northern Territory 236
Comparison of Certificate IV – current and three tier approach 241
Plumber 241
Drainer 244
Fire protection 246
General gasfitter 247
Gasfitter Type B 249
Mechanical services 249
Attachment F – Regulated work – definition of terms 252
Attachment G – Approach to impact analysis 257
Approach to the impact analysis – calculations and method 257
Calculations used in the cost–benefit analysis 257
The status quo 257
Calculating the present value of yearly impacts 258
Method underlying the computable general equilibrium modelling 269
Overview of the modelling 269
Limitations of the modelling 271
The shock to the model 272
Calculating an increase in efficiency of labour in plumbing and gasfitting services 273
Calculating an increase in capital efficiency 273
Calculating a decrease in government fees 273
Calculating changes to government expenditure 274
Inputs and assumptions underlying the analysis 274
Assumptions in the cost–benefit analysis 274
Real discount rate 274
Evaluation period 274
Wage rate 275
Industry growth rates (employment) 277
Licence fees 278
Number of licensees 283
Frequency of renewal of licence 285
Time cost of applying for a licence 286
Time cost of renewing a licence 287
Transition costs for industry 289
Government communication costs 289
National licensing register costs 290
Government operating costs associated with the licensing authority 291
Mutual recognition 294
Removal of requirement to hold multiple licences across jurisdictions 295
Experience requirements 296
Business value-add (capital efficiency) 297
Improved labour mobility 297
Changes to Certificate IV units 298
Duplicate testing in Victoria 302
Cost of introducing financial probity requirements 303
Removal of personal probity requirements for non-contractor licences 304
Removal of the requirement for apprentices to apply for a licence 307
Introducing worker licences in Queensland 307
Introducing contractor licences under national licensing 307
Providing evidence of skills maintenance 308
Attachment H – References 309
Reports and presentations 309
Legislation 311
About this Decision Regulation Impact Statement
The purpose of this Decision Regulation Impact Statement (RIS) is to recommend a preferred option for policy to underpin the establishment of a national licensing scheme for the plumbing and gasfitting occupations. This follows stakeholder comment on the Consultation RIS for national licensing for the plumbing and gasfitting occupations.
This Decision RIS identifies the nature of the problem to be solved, outlines the alternative policy options considered and explains the rationale for selecting the model proposed and the elements that comprise the model. It also assesses the costs and benefits of the preferred model compared with the other options identified.
This Decision RIS follows the guidelines of the Council of Australian Governments (COAG) in the COAG Best practice regulation Guide (2007). It has been approved for release by the Office of Best Practice Regulation.
PricewaterhouseCoopers was engaged by the COAG National Licensing Steering Committee to assist with the preparation of both the Consultation RIS and the Decision RIS.
Summary of options considered in this Decision Regulation Impact StatementReform of licensing for the plumbing and gasfitting occupations has the potential to deliver significant ongoing benefits, most of which go to plumbers and gasfitters, businesses that use their services, and consumers. There are one-off costs under some options for reform, including costs to licensees and businesses to become aware of the proposed changes, and costs to government for the establishment of the National Occupational Licensing Authority (NOLA) and the national licensing register. There would also be ongoing costs to maintain NOLA and the register. This Decision RIS indicates that the benefits of the reform outweigh these costs.
In the Consultation RIS, two approaches were considered to the way in which ‘national licensing’ could be structured.
1. A ‘three tier’ option (involving three levels of licence: contractor, full licensee and supervised licensee). Two sub-options are possible under this approach. The first (sub-option 1) would increase competency requirements for full licence holders for the majority of jurisdictions. The second (sub-option 2) would keep competency requirements for full licence holders broadly in line with current requirements but make them consistent across jurisdictions.
2. A ‘two-tier’ option, so called as it removes the supervised licensee level, meaning there would only be the full licence and contractor levels of licence. Under this option, upon completion of a Certificate III level qualification, a licence holder would be authorised to conduct all regulated work for that licence category, enabling them to satisfy jurisdictional administrative processes with regard to certifying or ‘signing off’ on the work undertaken.
A third option, automatic mutual recognition (the ‘driver’s licence’ model) was also considered. This model would allow a plumber or gasfitter to have their current state- or territory-based licence recognised by another jurisdiction, enabling them to work in that jurisdiction without having to apply for another licence or pay an additional licence fee. This option is based on licences issued in a particular jurisdiction being accepted in all jurisdictions. A number of approaches were identified as possible: under an unharmonised model, there would be no change to existing licence categories and scopes of regulated work; under a harmonised model, jurisdictions would seek to harmonise licence categories (either according to the policy developed under national licensing or using existing ministerial declarations as a basis). A harmonised approach could also be implemented as a staged process. The overall option has not been fully developed and is therefore not fully costed. While this would allow for increased mobility of labour, with reduced transition costs compared to national licensing, the benefits likely to flow from the agreed establishment of NOLA are not guaranteed. Furthermore, without ongoing coordination and impetus to maintain and build on the initial reforms, there would be a risk that automatic mutual recognition may only provide one-off selective reductions in regulatory burdens that may be eroded over time. For these reasons, this option is not supported in the Decision RIS.
The impetus for licensing reform is a desire to enhance labour mobility and remove unnecessary regulatory burdens on plumbers and gasfitters. All of the options for reform enhance labour mobility. Given this, consideration has focused on the differing licence structure and competencies required for each option, and their impact on costs, safety and consumer protection outcomes for industry and users of plumbing and gasfitting services.
Quantified impacts for the national licensing options
Table 1 shows the quantified impacts for the national licensing options, that is, it measures the financial costs and benefits of each option. A decision on the preferred option depends on assessing a full range of costs and benefits, such as the impact on safety outcomes from changes to supervision requirements and competencies. While the quantified impacts suggest that the two tier option has the highest benefit, stakeholder feedback and analysis of the safety risks indicates that this option would not provide the skills necessary for a full licence holder to carry out regulated work and would therefore give rise to safety risks for workers and reduced consumer protection outcomes for users of plumbing and gasfitting services. The three tier, sub-option 1 would provide an increase in regulatory requirements when compared with the status quo. The preferred option in this Decision RIS is the three tier, sub-option 2 as it addresses worker safety and wider consumer protections, including safety, while not increasing overall regulatory requirements. A payback period is included in the table to highlight the length of time that will be needed for the benefits to offset the transition costs. This payback period is quite short, while the benefits are expected to be ongoing.
Table S.1: Impacts of national licensing options
National quantified impacts
/ Two tier
/ Three tier, sub-option 1
/ Three tier, sub-option 2
/
Ongoing net impact ($ million per annum) / 90.24 / 38.02 / 52.19
Community (licensees, business, households) / 92.46 / 40.24 / 54.41
Government[1] / (2.22) / (2.22) / (2.22)
One-off transition costs ($ million) / (23.74) / (23.74) / (23.74)
Community (licensees, business, households) / (15.07) / (15.07) / (15.07)
Government / (8.67) / (8.67) / (8.67)
Total 10-year NPV ($m) / 566.67 / 226.02 / 318.41
Benefit-cost ratio of the total 10-year NPV / 14.70 / 2.67 / 8.13
Payback period (years) / 0.26 / 0.62 / 0.45
Rate of return (annualised percentage) / 380% / 160% / 220%
10-year NPV ($m) / NSW / VIC / QLD / WA / SA / TAS / ACT / NT
Two tier / 118.42 / 112.27 / 128.07 / 145.82 / 29.84 / 11.10 / 14.34 / 6.80
Three tier, sub-option 1 / 93.92 / 40.88 / 55.69 / 20.94 / 10.02 / 3.69 / 0.20 / 0.67
Three tier, sub-option 2 / 100.57 / 60.25 / 75.33 / 54.82 / 15.40 / 5.68 / 4.03 / 2.34
NPV = net present value
Executive summary