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News & opinion

28 FEB 2019

It’s time to call for outcomes not more red tape

We’re privileged to have David Chandler OAM speak at our Building Confidence conference in August. An eminent professor and academic, David presents his view of the debate around construction industry non-compliance and building certification in this comment piece.

The recent Building Ministers Forum (BMF) in Hobart was noteworthy for proposing the need for more red tape, more checkers checking the checkers and avoiding any measurable outcomes that would really make a difference.

A few days after the BMF, the biggest overhaul of building laws in NSW history was announced. Apparently, the announcement had been in the making for some time.

We've heard this language before

The NSW Building Minister’s announcements flowed from the Building Confidence Report delivered to the Building Minister’s Forum in February 2018. Yes, 12 months ago.

The Minister referred to the report by Professor Peter Shergold AC and Bronwyn Weir, who spent six months examining building regulatory systems around Australia.

The nature and extent of the problems put to us are significant and concerning. They are likely to undermine public trust in the health and safety of buildings if they are not addressed in a comprehensive manner.

Building Confidence Report (co-author Bronwyn Weir will speak at the Building Confidence conference)

The Minister said the NSW government will undertake the largest reform program in the construction industry and declared: “If you are a building practitioner and you are found to be doing the wrong thing, we will rub you out of the industry”. It seems like a big stick, but what does it mean?

Similar language has been used at the federal level to justify the Australian Building and Construction Commission (ABCC). The problem for both is that they fail to say what the measurable benefits will be.

Wouldn’t it have been impressive if the Minister had announced that residential projects started after July 2020 involving three or more storeys would need to be guaranteed by a 10-year warranty to cover their structure, envelope, basement and waterproofing; for these warranties not to be a last resort and body corporates to be named on the policies?

Such a call would show that the NSW Building Minister was serious and understood impact.

Minister Kean instead announced he will appoint a Building Commissioner to act as the consolidated building regulator in NSW, including having responsibility for licensing and auditing practitioners along with several ambiguous new regulations, to require:

  • building designers, including engineers, to declare that building plans specify a building that will comply with the Building Code of Australia;
  • builders to declare that buildings have been built according to their plans;
  • and requiring building designers and builders to be registered.

The industry has endorsed the registration of building designers and builders. Other industry feedback suggests that little of the rest will have much of an impact because there will be so many other opportunities to blame somebody else for failures. And these measures don’t address the many other factors affecting the state of construction today.

Here are some questions that must be answered:

  • Why is every construction contract heavily modified to shift risk that can’t be quantified to contractors and their supply chains?
  • Why are designers and building professionals becoming more theoretical in their training instead of having to also prove their applied capabilities?
  • How can NSW’s fragmented jurisdictions, who cover the construction industry’s many facets, be brought under one roof?
  • Why have the productivity achievements in the NSW construction industry been so poor over the last 10 years, and how can this be turned around?
  • How could today’s dysfunctional and expensive professional indemnity insurances deliver better outcomes?
  • What impact will the Opal Tower experience have on residents’ property rights and future construction contracts?
  • How is the regulator monitoring the occupancy and safety issues that arise from the Opal Apartments now that the developer/builder has repossessed more than 30 per cent of the apartments without any visible formal processes or clear outcomes?

Unsustainable tendering practices

While the NSW building Minister was attending the BMF, a recent article in The Fifth Estate calling out unsustainable practices of tendering in NSW was forwarded to his office.

This article has been heavily endorsed by readers with comments such as:

“All building defects ultimately relate to price, and the attempt to realise a project or work for something for less than its actual realistic construction cost.

“This is further exacerbated by poor, and often, misleading tender documentation. Proper documentation communicating the client’s requirements and the requirement to comply with various building codes and regulations, in a simple, usable, and understandable manner with as minimal ambiguity as possible, so that the contractor may take such documentation and physically construct the project, will have much more effect in preventing building defects than greater regulation.”

The reply from the Minister’s office the same day was: “Thank you for your correspondence to the Minister for Innovation and Better Regulation, about procurement and standard forms [sic contracts] … This matter falls within the Planning portfolio and the Treasury portfolio where we have forwarded your correspondence for consideration.”

So much for a Building Commissioner to act as the consolidated building regulator in NSW.

A challenge for the new Building Commissioner

The new Building Commissioner should publish a list of priority actions for impact and list the governance areas that will be brought together under this new appointment. Set benchmarks to indicate anticipated progress and accountability. Set out a plan to make the regulatory system future-fit.

For example, describe how new technologies may be introduced to provide digital passports for all registered construction and design professionals including those who are in charge of workplace safety and construction waste depots. Require all registrants to log their projects and any non-compliance records so that these follow them for five years.

There are other emerging technologies referred to in the Building Confidence report.

These technologies may be deployed to provide trustworthy lines of sight to how buildings are specified, constructed, assured and maintained. They will be disruptive, for good.

Green building
The industry has endorsed the registration of building designers and builders

A further challenge

Many of the residential developments that are now causing stress for their residents have been built by an increasing cohort of what could be described as ‘self-performing developers’. These developers usually have a holding company that hosts a series of project-specific development entities. Often, they host a related-party building company.

These developers seem to wield influence. Any enquiry into the state of construction in NSW will need to look at this development delivery model. On the face of it, their lobbying efforts seem directed at cutting development red tape. But on the delivery side, there seems to be a growing list of issues that go with the pop-up nature of some of these businesses.

These developers shop around for the cheapest design and engineering firms to do their work. They descope the level of documentation they need for a full resolution of design before work starts onsite. This may meet the code, but much more detail is required.

David Chandler OAM

They contract internally and let their building company sort out the missing details as construction proceeds. There is often no record of the final product. These developers will then pay a two per cent defects levy in NSW, that will then become their get-out-of-jail card if the going gets tough for their project-specific entity or related-party builder, or both.

A fee of two per cent is a minor cost in the development equation. Who will pick up the pieces and pay for the balance? Apartment owners?

How will confidence be built?

No minister, this won’t work

The announced reforms don’t go far enough to fix these practices or make these projects safe. When asked to account in a year or so, the Building Commissioner will no doubt shrug and point to the hand dealt. The mandate was to narrow to have an impact.

How will the public be convinced the cards are not still stacked against them? And how will the trail of defective work and the costs of rectification of the past be addressed?

The warranty idea

The only viable solution is to require either the developer or the builder to arrange for a 10-year unconditional warranty to cover the key elements of a development as described at the start of this article, and to commence this for all new residential projects from July 2020.

The insurance industry is best placed to sort out their current fragmented offerings. It will price design and construction risk based on qualifications, experience and track record. A higher value will automatically be placed on demonstrable technical know-how and not just the theoretical. And if one of these parties lets the system down, they will pay the price and carry it around on their digital passport. The risk and cost of insurance will come down.

All the Building Commissioner will need to do is set the high bar for registration and hold the records. And then the bureaucrats, politicians and the public will start to feel safe.

Minister, that is how the wrong doers will get rubbed out. Your way won’t.

The NSW construction industry still needs a roots and branches enquiry as many more failures will be revealed. The Opal apartments should provide one lens for this to occur and ensure its residents are not forgotten. A study of up to 20 projects should be added to the remit of the enquiry to include differing procurement, scale and location insights in NSW.

Building Confidence

"Australia’s construction industry is one of the most important sectors for our society and economy, but it faces many challenges. Our education institutions are struggling to deal with preparing the next generation of construction professionals to be 'future ready'..."

David Chandler OAM

About David Chandler OAM

David Chandler OAM has extensive construction industry experience across the Australian and Asia Pacific markets. He has led major construction projects such as Australia’s new Parliament House and was CEO of Fletcher Construction Group’s Australian, New Zealand, Pacific, North American and Asian operations. He has had major roles in project formation and procurement for Health, Education and Defence facilities and in large scale Urban Renewal and Housing developments.

David was awarded and Order of Australia Medal in 1989 for services to the construction industry. He is an and Adjunct Fellow at Western Sydney University in the School of Computing, Engineering and Mathematics, specialising in Regional Modern Construction.

David provides specialist corporate advisory to public and private sector businesses on the future of construction, housing procurement and the implementation of new construction enterprise capability building. He works with industry institutions to help prepare tomorrow’s constructors.