NEW SOUTH WALES
The Design and Building Practitioners Bill currently before the NSW Parliament must heed the lessons of the Banking Royal Commission or the bill will fix nothing and could even make things worse.
Big banks. Big profits. Big profiteering. For years conservatives refused an inquiry into banks, the most profitable companies in Australia, saying it wasn’t necessary as they had a ‘tough cop on the beat’ (i.e. ASIC and APRA). When the inquiry finally happened, we discovered two things: there was a deep-rooted rottenness within the banks; and the ‘cops’ had been utterly incapable of dealing with it.
It turns out no amount of policing was able to detect, prevent, or cure the ingrained and corrupt behaviour at the very heart of the banking industry. The public expects banks to reform the way they conduct their businesses, and act in a far more ethical and moral way, or be sanctioned by newly beefed up ‘police’.
The parallels with the construction industry are striking. Both are significantly large parts of Australia’s economy - construction is the largest single sector of employment - and both are under heavy scrutiny right now for the same reasons: a failure to meet decent standards.
And just as it was with the banks, there are refusals to have a (Royal) Commission of Inquiry into the construction industry, the conservatives saying that there are already ‘cops on the beat’ (but adding that they need to be tougher).
As it was with the banks, so will construction ‘cops’ (in this case certifiers, architects and engineers) be incapable of reeling in the problems coming to light in recent apartment failures, no matter how tough they are. However, this idea of ‘better policing’ is the deluded approach that the LNP has made in its ‘Design and Building Practitioners Bill’ — trying to stiffen the requirements of the ‘cops’, but failing to address the real problem: developer-builders are currently not held responsible for the defects they create.
The scenario is easy to understand: profits from construction are huge, particularly in apartments for sale. Seven of the 20 wealthiest people in Australia made their fortunes in construction and real estate, so the sector attracts a lot of attention, and ‘wanna-be’ millionaires. Large established firms are often the developers as well as builders and are not at issue here, but a lot of the newer, smaller developers rely on builders who have a licence to build apartments, and who have competitively tendered to build at the lowest price.
The problem for these smaller developers is that their builders can have no responsibility whatsoever for the defects they create should they choose to walk away. The builder closes the nominated building company by declaring bankruptcy and takes the builder’s licence to a new ‘phoenixed’ entity. They never look back or go back to clean up the mess they made.
And the developer follows suit, folding the tent and disappearing into the night.
For these shonky builders, the desire to make up for a low tender price or to increase profits by ‘cutting corners’, is great. If the banks require pre-sales to guarantee a loan, then the builder loses all incentive to build well.
There are lots of ways to dumb the building down: changing the design, omitting parts, lowering standards, substituting cheaper, nonconforming materials, thereby forcing lower prices from sub-contractors and then not paying the last instalment. That’s profiteering.
The ‘Shergold-weir Report’ was written in response to these problems, but it missed the mark as it answered the wrong questions, avoiding the issue of builder’s liability. The key remedy is to hold the builder directly responsible to fix any problems for a period of, say, six years after occupation. This requires that the building licence nominated at the time of issuing a construction certificate should not be able to walk away. Frequently, the holder of the builder’s licence is nominated to a company, which allows the ‘phoenixing’ of the company — closing one and opening another, so directors avoid liability.
The solution is easy: change the Corporations Act to make directors (and hence the builder’s licence they operate
under) responsible for their work. However, this would require a massive change to Australian corporate law and would be totally unacceptable to the Conservatives or even the market-obsessed Labor party. So that’s never going to happen. Perhaps that’s why the Shergold-weir Report’ was misdirected by the government to avoid the issue of builders being held primarily accountable.
The solution is to bind the builder’s licence to a person, not a company, and then require that builder to pay a bond, or have insurance, or both. Quality builders, (those that are financially stable), have nothing to fear, and the risk-averse insurance industry would soon weed out the ‘shonks’.
This is the only way to make the authors of the defects, and the consequent misery, pay for rectification. The NSW bill, which has just been deferred for further amendments, will ultimately fail as it does not address this key issue, but rather seeks to make more onerous demands on the practitioners (‘building police’) without offering any increased powers or compensation. Trying to force ‘the cop on the beat’ to undertake more and more onerous inspections on a ‘shonky builder’ who can walk away, will not stop the rank profiteering.
At the same time, however, in the builder’s defence, we must answer why building apartments has become so fraught. The answer is twofold: extraordinary increases in the complexity of design and regulation, and a consequent complexity of contractor arrangements.
Some 17 years ago, NSW introduced legislation to ensure ‘apartment design quality’, which it has done for the external appearance, but it has driven perverse and undesirable changes internally as it was based on the flawed assumption that an apartment building is a stack of houses.
Just two of the many issues are the demand for sunlight in the middle of winter which has produced thousands of apartments with huge windows facing east and west that overheat in summer, and ‘cross ventilation’ that has created some of the most contorted plans imaginable to show an imaginary path for wind, the very wind that will never eventuate on the hot still nights when it is needed.
As well as design, increased building regulations and standards, such as sprinklers, higher acoustic requirements and fire ratings have added complexity and costs. Their undoubted necessity was in part driven by changes in materials: where once double brick sufficed, the costly lack of bricklayers meant that other options have been developed and they needed to be regulated.
The demand for increased ‘quality’ has also added complexity: apartments are larger, with tiles and timber floors (rather than quieter carpet) more bathrooms (with double the basins in each), air-conditioning (that needs external fans that have to be hidden), more glazing (with more curtains); the list goes on in the real estate culture wars.
On the opposite side of the same coin, builders’ contractual arrangements to deal with this increased complexity have become, themselves, more complex. Where once a contractor would have a foreman in charge for the length of a project, overseeing employees of the main firm, we now have a hired ‘site supervisor’ overseeing dozens of sub-contractors with sub-sub-contractors to them and so on.
The person actually doing the work may be four or five times removed from the head contractor. It’s nick-named ‘pyramid building’, not for what they are building but the way it is built.
Long gone is the practice of the owner or developer having a ‘clerk of works’ on site every day to check quality. A highly costeffective solution that the government is trying to emulate by having multiple ‘building practitioners’ make increased site visits, and increased reports. Some firms are finding the old clerk of works, often an experienced but semi-retired builder, is a better way forward.
And being on a building site is more dangerous than going to war; the second highest number of workplace deaths in Australia.
And who polices the staggering number of possible ways a worker can be injured? Not the local council inspectors whose numbers have been drastically reduced. And not the state’s workplace authorities who are overwhelmed not by the increased activity, but by the unions.
Yes, that would be the same CFMMEU that the federal government wants to emasculate. Trying to remove one loud-mouthed obnoxious official, who has been making sites safer, could end up making every building site more dangerous.
When building gets more complex, when construction processes gets more complex, when sites get more dangerous, when the possibility for failures is exponentially increased, we need a wholistic solution, not more ‘cops on the beat’.
The sad irony in the NSW Design and Building Practitioners Bill is that, not only will it not address the key problem but it will reduce down the number of ‘cops on the beat’ that it seeks to promote. Engineers, architects and particularly certifiers, are having their costs massively increased; insurances are rising up to ten-fold for PCA’S. That will drive them out of the industry, leaving shonky builders even more scope to build badly. Let’s hope the bill is stalled for good.