Premier problems

by Fred Nix, Lou Smyrlis and John G. Smith

When it comes to the world of enforcement, it’s always been a balance between carrots and sticks. Do you entice truck owners with the proverbial carrot – incentives for doing a good job – or do you punish them when they do something wrong?

Until recently, Canadian jurisdictions have tended to prefer the swing of the sticks.

But over the past decade, premier carrier programs have slowly squeezed their way into motor carrier compliance offices as alternatives to our predominantly penalty-driven system of enforcement. Premier carrier programs, such as Partners in Compliance (PIC) run by Alberta and Oregon’s Green Light and Trusted Partner, distinguish carriers that obey safety regulations and have above-average on-road safety performance. In addition to being recognized with a distinctive label, participating carriers are supposed to receive benefits that make the effort and money spent on achieving the nation’s best safety records a worthwhile investment.

Although Alberta and Oregon are the only two jurisdictions to get real programs off the ground, the support for this alternative is growing.

The Insurance Corporation of British Columbia is developing a carrier incentive program that will draw elements from programs around the world – including Alberta’s PIC – for a made-in-B.C. solution. It’s hired former Canadian Council of Motor Transport Administrators programs manager Sean McAlister to oversee the process, and he met with Alberta officials during last month’s annual meeting of the British Columbia Trucking Association.

Quebec is in discussions with its carriers, the Northwest Territories plans to join PIC some day, and Ontario has gone part way with an “excellent” category in its carrier rating system. There is also a push to create a nationally harmonized incentives system. South of the border, in addition to Oregon’s programs, there are two scale bypass systems – NorPass with seven participating states and PrePass with 16 participating states – that, because their carriers are screened for eligibility, have minor characteristics of a premier-carrier program.

The thinking behind premier-carrier programs is straightforward: If safety ratings work by targeting unsafe carriers and forcing them to shape up, then the opposite – recognizing and compensating the safest carriers with appropriate “carrots” – should also provide an incentive for the industry to raise its safety standards.

That’s the theory.

The reality can be much different. Fundamental philosophical differences about what kind of rewards government should be offering, combined with apparent indifference in the private sector about the value of safety, may be leaving our country’s safest carriers starving on a decidedly meagre diet of carrots.

Alberta’s much-publicized PIC program is a case in point. Launched as a pilot project in 1995 when the Alberta Trucking Association and Alberta Transportation and Utilities (now Alberta Infrastructure) signed an agreement, it’s now looking to grow by adding 100 carriers over the next three years. Yet questions are surfacing about the real benefit of being a PIC carrier.

The program, run by a board of directors made up of equal representation from government and industry, employs a complex system involving elaborate screening procedures to join, and a government audit. There is a written contract between the carrier and the enforcement agency, as well as a series of benchmarks to be met and onerous reporting requirements. The 26 carriers currently enrolled in PIC have to fill in monthly reports showing how they did in comparison to those benchmarks.

There’s no question about what the program has been able to achieve on the safety side.

“A lot of operators have told me ‘my fleet could be in PIC’ but when they actually get down to the measuring and verifying they find they’re not at that level (of safety performance). It’s a stretch and they have to work to get there,” says Alberta Infrastructure’s Roger Clarke, who chaired the development of PIC and sits on its board of directors. “Is PIC raising the bar on safety? Absolutely.”

What is being questioned is what PIC members are actually getting in return for their exemplary safety performance.

Trucks with PIC plates do enjoy expedited treatment at inspection stations. And PIC carriers have fewer audits (no IRP or IFTA) than non-PIC carriers and fewer insurance or inspection forms to file. Also, the Canadian Chemical Producers Association recently granted the PIC program equivalency status with its own Motor Carrier Evaluation Program. This saves participating PIC carriers the burden of another audit. But considering the administrative effort required to join and stay in the program – Calgary-based Canadian Freightways found that its employees were spending 25 hours a week administering PIC when the company first joined -many participating carriers believe these rewards are hardly enough.

“PIC is valuable as a management tool to assist carriers in complying with the National Safety Code at a very high level. Its reporting requirements and its benchmarks serve carriers very well and the participating carriers strongly support it…But if it wasn’t for the fact it is an excellent management tool, the wheels would have come off this wagon long ago,” acknowledges Al Smythe, head of the Alberta Trucking Association. “The participating carriers are very adamant that the program is not providing the anticipated benefits that were envisioned at the start of the program. There is no question that there has been a significant failure on the part of the province to buy into the benefits side of things.”

Smythe adds that the lack of tangible benefits has become a deterrent to attracting more carriers to join PIC. He says carriers would like to see benefits such as reduced vehicle registration fees included in the program.

But that’s a path the Alberta government is distinctly reluctant to tread.

“It’s a show-stopper,” acknowledges Clarke, Alberta Infrastructure’s executive director of vehicle safety and carrier services. “Every time it’s raised it’s immediately shot down. Government will not be giving out money for being a safe operator. If it did we would have a lineup around the legislative building of other groups that want exactly the same thing. It’s a slippery slope and you just don’t go there. But that doesn’t mean other types of benefits can’t be offered.”

He adds that government and industry haven’t been as creative as they could be in coming up with “meaningful benefits” that don’t involve the government handing money over, pointing to online plate registration as a good example. The government will in fact be working with the Alberta Trucking Association over the summer to come up with such ideas.

While the issue over the Alberta government’s handling of PIC is centred on a fundamental philosophical difference, the reaction of shippers and the insurance industry to the program appears to be rooted in apathy. Although Smythe says that’s partly because the program’s organizers haven’t done an aggressive enough job of telling shippers the benefits of dealing with carriers that sustain high safety standards, the reality is that price – not safety – remains the major determining factor when shippers are selecting a trucking company.

“One shipper told me straight out if we limit ourselves to using only PIC carriers we may not get the lowest rate. (Price) is all they care about,” Smythe said.

Nor have insurance companies been quick to offer PIC carriers rate discounts even though it can easily be argued that the country’s safest carriers pose much lower liability risks.

David Bradley, head of the Ontario Trucking Association and CEO of the Canadian Trucking Alliance, says private-sector apathy towards premier carrier programs is hardly surprising.

“It’s naive to suggest that insurance companies are going to use this type of thing in setting their rates. Indeed, the insurance companies were not involved in the development of such safety rating systems from the get go. The insurance sector operates in a m
arketplace like anyone else, and as the insurance market becomes tighter, premiums go up, and when there is significant capacity prices go down, regardless of what a carrier’s (safety rating) might be,” Bradley says. “Equally naive is the view that shippers would voluntarily come to the table and pay for safety. What I’m hoping is that if we do one day get a national safety rating system the liability a shipper faces in using a carrier with a less-than-satisfactory safety rating might be enough to be able to create an environment where there actually is a bottom-line return on safety.”

Oregon has shown that there is clearly a different way of building a premier carrier program. Its Green Light and Trusted Partner programs are much simpler in comparison to PIC’s elaborate screening procedures and onerous reporting requirements. Any carrier can apply to join Green Light and have transponders mounted in its trucks. These identify the truck to an inspection station down the highway, triggering an immediate snapshot of the carrier on the computer screen along with the axle weights of the truck as measured by a weigh-in-motion scale embedded in the pavement of the highway. If everything looks good, the truck is sent a signal – green light on a transponder – and the driver keeps on trucking, right past the inspection station.

To join Green Light, a carrier has to have no overdue tax bills, no unsatisfactory safety fitness rating from the U.S. Department of Transportation, and no SafeStat score of 150 or higher. SafeStat is a number that measures how safe a motor carrier is. The calculation takes into account continuously changing information on roadside inspections (out-of-service defects), collisions, driver convictions and management safety procedures. A score of 150 or higher puts a motor carrier into the area where it may be subject to a special monitoring program.

The second part of Oregon’s premier-carrier program, which started two years ago, provides the best carriers with “Trusted Partner Carrier” plates. The first requirement to be a Trusted Partner is that the carrier is already in Green Light. If so, and if its history of paying taxes on time and staying out of trouble looks good, it is given the special plates identifying its trucks as Trusted Partners. Among other things, staying out of trouble means having an out-of-service rate for both drivers and vehicles that’s lower than the U.S. national average.

The benefits of being a Trusted Partner (currently 454 carriers hold that status, three of them Canadian) include the bypass privileges of the Green Light program plus being exempt from random roadside inspections. There are more than 12,000 trucks in the two programs and, in the first two months of this year, there were 63,085 instances where trucks bypassed the 15 Oregon inspection stations that have Green Light equipment installed.

Yet Oregon ran up against the same brick wall when it tried to offer its members financial rewards on top of the usual operational incentives. An attempt to introduce legislation that would have given Trusted Partners tax breaks failed.

Meanwhile, Ontario has experimented with premier carrier programs and has recently introduced one major element – screening criteria to identify good carriers. When Ontario introduced AVION in 1995, an inspection-station bypass technology, only carriers with a good record were eligible for the necessary transponders. But AVION never got past the demonstration stage (officially, a decision on the final fate of AVION has yet to be made, although the Ontario Trucking Association believes the program is dead). In 1999, Ontario launched its new safety-rating program with an extra rating category of “Excellent.” This was a recommendation of Target ’97, a joint government-industry report on how to reform Ontario’s safety regulations. But, while Target ’97 recommended a premier carrier designation, it also recommended carriers meeting the criteria be rewarded with privileges or incentives such as the right to bypass inspection stations or the right to obtain permits to operate longer trucks (LCVs). That hasn’t happened yet. Ontario is waiting for the development of a national agenda before proceeding.

Perhaps most promising is B.C.’s look at such programs, since the Insurance Corporation of British Columbia (ICBC) has jurisdiction over everything from insurance rates to vehicle inspections. It simply has a greater selection of potential carrots – real financial benefits – from which to choose.

While B.C., Saskatchewan and Quebec have public insurance programs, other provinces leave that to the private sector. And the private sector hasn’t been that quick to embrace the idea of restructuring insurance premiums.

“Some of the incentives may be more relevant to some carriers than others,” McAlister adds, referring to why different industry sectors will be consulted during the program’s design stage. “Different operations may desire different incentives. Some carriers may be less-interested in bypass privileges but more interested in enhanced permitting or registration/licensing incentives for their operations.” Even the possibility of incentives that involve insurance premiums for carriers with exemplary accident loss and safety compliance performance is being reviewed.

“B.C. is the only province that recognizes financial incentives are needed,” says Graham Cooper, executive vice-president of the Canadian Trucking Alliance. “The other provinces are not about to open their purses. Either they can’t or they won’t.”

So-called “operational” help isn’t much of an incentive for carriers to work beyond the “satisfactory-unaudited” safety ratings under the National Safety Code, he says. “Why would they?

“The bottom line is, for the most part, provinces don’t have the mechanisms or the funds or the will to provide incentives we believe will encourage carriers (to shoot for an ‘excellent’ rating).”

Which brings us to the next knock on the current premier carrier programs. They are stand-alone programs. PIC carriers, for example, are not necessarily recognized as excellent carriers by other provinces, although the Alberta Trucking Association’s Smythe is hopeful that a reciprocity agreement can be struck with British Columbia when that province gets its premier carrier program underway.

“Do we want that kind of (stand-alone) program to predominate across the country or, since we’re going through all the effort to put a national safety ratings system in place, do we want it to be tied to that?” asks Cooper, who addressed the issue in June during the Canadian Conference of Motor Transport Administrators’ (CCMTA) annual convention. “I think the answer is clear that we would like a national incentives program in place that is an extension of a national safety ratings program. What it would mean is one additional rating above satisfactory, an excellent rating. That to us would make a lot of sense, rather than trying to run these things on a stand-alone basis.”

Cooper adds that if carrier incentives were not uniform across the country, it would create a situation where carriers had the incentive to attain an excellent safety rating in one province and no incentive to do it in another. He says creating such a nationally uniform incentives system is not unrealistic. If the provinces can get to the stage where they can agree on a nationally harmonized safety ratings system it shouldn’t take much more effort to devise a nationally consistent incentives program to go with it. But he acknowledges the toughest part will be getting governments to agree to spend the money to make such an incentives program meaningful.

“There is a lot discussion still, a lot of work that needs to be done. But our view is that it doesn’t look particularly promising at this point that governments are really prepared to offer meaningful incentives to carriers to get their ratings to the level governments would like them to be at,” Cooper says. n

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