Fixing the Building Industry - A Wishlist

Michael Smith , 19 September 2019

When did Australians sign up for this system of building and buying defect-prone apartments without recourse? Michael Smith highlights the state of play in the building industry, and lays out his wishlist of reforms. 

The ongoing building defects crisis is seemingly getting worse by the day, as more and more revelations of defective buildings come to light. Over the last few years, what has become glaringly obvious is that the causes behind the surge in building defects are both complex and systemic. It is not simply a case of a few bad apples, it is the failure of a complex system which is itself no longer fit for purpose. Australians expect the construction industry to deliver fundamentally safe buildings that are structurally sound, robust and durable. These expectations are currently not being met and they haven’t for some time.

The rules and systems that architects, builders and consumers have to play by have been continually evolving since the first structures were built. At no time was a serious design or redesign of the system undertaken; instead, piecemeal change has occurred, driven by vested interests, leading ultimately to a frankly ludicrous position. The ridiculousness of the current situation is perhaps best described by comparing apartment procurement to the purchase of an automobile.

I want a car!

One day a customer decides they would like to buy a new car. They hit up a website and find a picture of a car that they like for a price they can afford to pay. The website directs them to a sales agent. The sales agent shows further pictures of the car, along with some pictures of the roads that the car might drive on. There is also the obligatory picture of a car owner drinking a coffee.

At this point the company selling the car is not a car manufacturer, nor a car designer. In fact, it isn’t really a company at all. It is a $2 business that is operated by an accountant, with no particular knowledge about cars whatsoever.

The purchaser signs up to a contract to buy the car, based solely of some pretty pictures and a description that it will have a leather interior. The car at this point is purely a concept and has not been fully designed.

As a cost cutting measure, the accountant engages a new design team to further develop the design of the car. Despite no knowledge or training, the accountant proscribes key elements in the car construction, optimising for their own cash flow and profit. There is zero incentive for quality or durability, and the ‘free market’ in this instance rewards the cutting of corners and penalises long-term decisions. The car needs to survive just long enough for payment to be irrevocably made.

The design team is not paid to do anything other than what is considered the bare minimum. They are not engaged to assist in any way with the assembly of the car. The car is assembled at the lowest priced factory. As a cost saving measure, the car engine is substituted for a golf cart motor, while the seat belts and airbags are installed without supervision.

Other material substitutions are made in order to save on costs. One plastic component is exchanged for another one that looks the same but has a very different chemical composition. The associated documentation says it is compliant, but actually it isn’t.

When the car is completed, the car looks very similar to the pictures and has the promised leather interior. The customer questions the engine, but is told it is compliant and has no recourse contractually. An engine was promised and an engine was delivered. As the car is driven away, the $2 company closes.

Less than a kilometre down the road, the wheels fall off.

This is how the apartment procurement system operates today. Sure, there are people trying to do the right thing in this system, but it is the system itself that is the problem.

When did Australians decide that this is the way we should build and buy apartments? With the system so broken, the question becomes how do we fix it?

There has been a significant number of reports generated into how to reform the building industry. The most prominent is the Shergold Weir report. A summary of this report by the Australian Institute of Architects can be read here.

With this report in mind, here are ten areas of reform I think need urgent attention. It is a wish-list of how to improve the construction industry for the benefit of the general public.

1. National Building Product Certification

Product certification is not an opportunity for a competitive market solution. We should not have for-profit product compliance certification schemes. Instead we should have a single government-implemented and controlled building product compliance and certification body. This body should utilise government testing facilities to determine if a product is suitable for sale on the Australian market.

If a product is found to be suitable it should have a government-issued certificate indicating which tests it passed, which standards it meets, and which building types and uses it is compliant for. The certification would be backed by a searchable database and phone app which would allow any product on site to be verified for suitability and use.

This would give huge confidence to everyone in the industry that they were working with genuinely compliant materials.

2. Australian Standards For All Australians

The distribution of Australian Standards should not be a business or an opportunity for someone to make money. It is a Government responsibility. Access to Australian Standards should therefore not require payment or even a username and login. They should be just as easily accessible to a tradesperson, designer or member of the public. If the public can access the standards, then they are more empowered purchasers.

Up until fairly recently, even the Building Code of Australia required payment. Requirement of payment in order to understand the rules runs completely counter to the objective of getting as many people as possible to follow the rules. 

3. Improved National Construction Code

For many years the National Construction Code was ‘improved’ to enable construction to be more flexible and cost efficient. The time has come for the emphasis to be placed on construction durability over construction cost.

There are types of construction that are currently technically compliant but will require replacement or substantial maintenance within only a few years. Tiled balconies, for example, are notorious for being a weak point for water egress due to movement in the building. We need to lift the bar on what is compliant, so that it is at least in line with the quality that is expected by the Australian public.

4. Registration of Professionals

Recommendation 1 from the Shergold Weir Report is that key professionals and trades participating in multi-storey construction are in fact registered. Unbelievably, the current system in some jurisdictions allows engineers to be unregistered. This is utterly bizarre and needs fixing immediately.

We must also consider the site managers and project managers that have no registration and no minimum training. The Australian Institute of Architects has been lobbying for years for these people to be registered and carry insurance. The idea that people can be decision makers without consequence needs urgent addressing.

5. Registration of Developers

Action urgently needs to be taken regarding the role of developers. The practice of setting up a company for the period of time between sales and settlement removes any ability for the purchasers to hold a developer to account. The registration of developers would enable individuals to be held responsible beyond settlement.

It is also an opportunity to control a developer’s influence on a project. Several categories of developer could be established. For example, an accountant that knows nothing of construction could be given the opportunity to not be held responsible for defects, if they are registered as a finance-only developer. This would require that they not give any direction in regards to the building materials or design. Alternatively, they could be a design developer or a construction developer. These categories would enable input into those areas of the project, but would also open up liability for the decisions made.

6. Clerk of Works

Apartment projects should have a professional – financially independent from the builder and developer – who is responsible for checking all compliance items throughout the build. This clerk of works would essentially be the ‘cop on the beat’, making sure that build quality and compliance are met. This would be additional to the minimum inspections currently required.

Michael Hegarty has written an article for the Association of Consulting Architects on the necessity for this role to return to construction sites across Australia.

7. Procurement Regulation

Currently the contractual relationships between developer, architect and builder are left essentially to the free market. This free market rewards developer profit and risk reduction at the expense of everything else. Imagine a world where construction contractual arrangements had to meet a public interest test. Novation of the architect to the builder could occur, but only in a way that protected project quality. Rather than the current legal arms race, the procurement model and contracts would be from a proscribed set of permissible models set by the government.

If parties wanted an alternative arrangement to the default options, the custom deal would have to satisfy a public interest test, to ensure that quality was not being compromised via contractual creativity.

Fundamentally where two independent parties make an agreement that is to the detriment of uninvolved bystanders, there is a case for government regulation in order to protect the unrepresented third party.

8. Actual Plans for ‘Off the plan’ Sales

Off the plan apartment sales are currently skewed entirely in the favour of developers. The developer’s legal team put together the contracts to give maximum flexibility to the developer and minimum flexibility to the purchaser. The plan for the contract is presented with minimal details to allow for almost any end product to be delivered by the developer.

It is time to give purchasers more power. A simple step that would have a profound impact would be to require that all off the plan sales to be undertaken off the building permit documentation. This would ensure that the purchaser had far more certainty as to what was being built. It would also change the development process. Cost cutting design changes mid project would basically be eliminated as every design change would entitle the off the plan purchaser to reconsider their purchase. The purchaser, for example, might be very happy with a concrete structure but unhappy with a perfectly compliant but inferior lightweight alternative.

This process would also enable the building surveyors greater time to scrutinise plans prior to issuing building permits, which is another problem that was identified in the Shergold Weir Report.

9. Improved Strata Rules

The current system allows titles to be split into Strata arrangements far too easily and with far too little consumer protection. Once ownership of a building is split between multiple parties, management can become quite challenging.

We need to get more serious about how these buildings are managed. Developers should not be allowed to permanently lock in the owner’s corporation to a costly management system. Some developers are using this tactic to turn the owner’s corporation into a long-term revenue stream.

Another protection that could be put in place is the requirement for professional facilities managers as a requirement of subdivision.

If improvements are not made to the Strata rules, it may become necessary for developers to be required to hold a significant stake in the project well after the project is completed. For example, if a developer was required to own 25% of all apartments in a building for at least two decades after completion, suddenly the long-term performance of the building becomes the developer’s problem.

10. Design Team Engaged For the Life of the Project

When building surveying was privatised, rules were put in place to prevent these surveyors being sacked mid project for upholding the rules. This hasn’t stopped developers from shopping around to find the most flexible surveyors, but it does give continuity for an individual project. From the architects’ perspective, continuity on a project is far from certain.

If an architect had certainty that they would be engaged for the life of a project, they would have more power in advocating for the end user. Placing rules that limit the removal of architects mid project without sufficient cause, would also stop the well-known practice of using a premium architecture practice for the planning approval and then dumping them and getting the cheapest possible team to finish the project.

Many of these ten items might seem like drastic steps. Big reforms that give Government agencies a bigger role and places some restrictions on the free market. The obvious rebuttal to this wish-list is that this will cost taxpayer money. However, with cladding rectification works alone likely to run into billions of dollars, the result of leaving industry to regulate itself is not likely to be a cheaper choice. It certainly isn’t a safer choice either.

Architecture is for everyone.

Michael Smith is an architect and co-founder of Atelier Red + Black, an emerging architecture practice in Fitzroy, Victoria. Michael has a Bachelor of Architecture and Bachelor of Construction Management from Deakin University. He was a founding member of the Australian Institute of Architects National Committee for Gender Equity (NCGE). Michael is also a prolific writer for Domain.com and his own blog The Red and Black Architect.

This article was originally published on The Red and Black Architect, and has been republished here with permission.