The NSW Con­struc­tion Indus­try – where are we at in 2020?

No-one could have antic­i­pat­ed the impact that so many unre­lat­ed, but col­lid­ing events, has had on all indus­try sec­tors through­out Aus­tralia in 2020. Whilst the long-term eco­nom­ic impact of these events on the con­struc­tion indus­try is unknown, this indus­try is one sec­tor which has been able to con­tin­ue work­ing, even longer hours than usu­al, dur­ing the recent enforced busi­ness shut­downs in New South Wales.

It is the inher­ent prob­lems in the indus­try which may impede a ​‘bounce­back’, which many oth­er busi­ness­es may more quick­ly be able to achieve when things return to normality.

What did the experts say? 

Over the past 12 months, I took the time to inter­view six expert build­ing con­sul­tants in dif­fer­ent facets of the indus­try.[1] Whilst all of the experts had their own clear views on what the short­falls are in the con­struc­tion indus­try and where things can be improved, there was an over­whelm­ing trend in their views and opinions:

• the con­struc­tion indus­try is in a state of disrepair
• it is a cost dri­ven mar­ket –short­cuts are tak­en to ​‘win’ the job and increase the bot­tom line
• leg­isla­tive reform may have a bet­ter chance of address­ing the imme­di­ate con­cerns in the con­struc­tion industry
• pri­vate cer­ti­fiers are fail­ing to inspect works at crit­i­cal stages of construction
• pro­fes­sion­al reg­is­tra­tion sys­tems need reform
• inad­e­quate train­ing and education
• lack of on-site supervision
• lack of inde­pen­dent verification
• devel­op­ers and builders need to be made more account­able for their actions
• an inad­e­quate insur­ance sys­tem to pro­tect consumers
• per­for­mance require­ments in the Build­ing Code of Aus­tralia (BCA) do not go far enough in describ­ing the work required to build a good building
• stan­dards are out of date and do not cor­re­late with the types of defect com­plaints present­ly being heard in the Courts
• quick fix is to ​‘increase insur­ance pre­mi­ums’ for high risk builders – this will not fix any future claims
• con­cern with­in reg­u­la­to­ry author­i­ties about addi­tion­al costs bur­den on indus­try to get it right the first time…this may be ben­e­fi­cial for devel­op­ers but not for the con­sumer who ends up bur­den­ing the cost of the defects

Has there been progress? How has the NSW Gov­ern­ment responded? 

Since the release of the Sher­gold Weir report[2] high­light­ing 24 rec­om­mend­ed reforms in Feb­ru­ary 2018:

• the NSW Gov­ern­ment respond­ed to the rec­om­mend­ed reforms in Feb­ru­ary 2019[3]
• the NSW Build­ing Com­mis­sion­er, David Chan­dler, was appoint­ed in August 2019
• the Build­ing and Devel­op­ment Cer­ti­fiers Act 2018 has been passed (not yet com­menced)[4] (BDCA)
• the Design and Build­ing Prac­ti­tion­ers Act 2020 was assent­ed to on 11 June 2020 and part­ly in effect[5] (DBPA)
• the Res­i­den­tial Apart­ment Build­ings (Com­pli­ance and Enforce­ment Pow­ers) Act 2020 has been passed and com­mences on 1 Sep­tem­ber 2020[6] (RAB (C&EP) Act)
• the Con­veyanc­ing Leg­is­la­tion Amend­ment Act 2018 com­menced on 22 Novem­ber 2018 bring­ing in changes to the Con­veyanc­ing Act 1919 for res­i­den­tial off the plan con­tracts effec­tive from 1 Decem­ber 2019[7]
• The Office of the Build­ing Com­mis­sion­er has issued a ten­der to ​‘cre­ate a dig­i­tal build­ing assur­ance solu­tion which will pro­vide an aggre­ga­tion of cer­tifi­cates from a com­pos­ite of all build­ing inputs and their risk pro­file to deter­mine a ​‘Trust­wor­thy Index’ for a build­ing or ​‘Prop­er­ty DNA’ with intent for this solu­tion to be used by pri­vate insur­ers, con­sumers or reg­u­la­tors to assess the future risk rat­ing for a building.

So what impact will all of this reform have on the con­struc­tion industry?

• The Build­ing Com­mis­sion­er under the RAB (C& EP) Act 2020 (in force on 1 Sep­tem­ber 2020) will now have the pow­er to issue stop work orders, build­ing rec­ti­fi­ca­tion orders and pro­hib­it the issu­ing of an occu­pa­tion cer­tifi­cate along with imple­ment­ing var­i­ous noti­fi­ca­tion require­ments for devel­op­ers of res­i­den­tial apart­ment (Class 2) build­ings — some­thing the com­mis­sion­er is cur­rent­ly lack­ing despite his appoint­ment to the Office of the Build­ing Com­mis­sion­er in August 2019
• Under the DBPA, Design­ers will need to be able to pro­vide dec­la­ra­tions that their designs com­ply with the BCA and oth­er reg­u­la­tions, Builders will need to build in accor­dance with those designs, take all rea­son­able steps to ensure the work com­plies with the BCA and seek fur­ther dec­la­ra­tions in respect of var­ied reg­u­lat­ed designs
• Per­sons car­ry­ing out ​‘con­struc­tion work’ may be liable for eco­nom­ic loss aris­ing from the rec­ti­fi­ca­tion of defects by sub­se­quent own­ers includ­ing own­ers cor­po­ra­tions with an exten­sion of duty of care pro­vi­sions under the DBPA
• The reforms include require­ments for builders, design­ers and cer­ti­fiers to be reg­is­tered and ade­quate­ly insured 
• Penal­ties and enforce­ment pow­ers will be in place for offences under the DBPA
• Cer­ti­fiers will need to be reg­is­tered to car­ry out cer­ti­fi­ca­tion work under the BDCA along with being under greater scruti­ny in per­form­ing cer­ti­fi­ca­tion work

What else is in the pipeline? Are the oth­er prob­lems high­light­ed by the experts being addressed?

It is com­fort­ing to see the reform being imple­ment­ed, but what is hap­pen­ing in oth­er areas with­in the con­struc­tion indus­try sector: 

• Build­ing Code of Aus­tralia – the ques­tion remains, if you build in accor­dance with the BCA – will you end up with a good build­ing? There are still short­com­ings in the process under the BCA and the way all the var­i­ous doc­u­ments, exist­ing leg­is­la­tion and the lat­est reforms are intend­ed to work togeth­er, there is still a mis­di­rec­tion between the two and until the inher­ent prob­lems in the BCA are fixed, this dis­cord will continue.
• Train­ing and edu­ca­tion – we per­haps get once step clos­er to impos­ing some high­er thresh­old on the impor­tance of train­ing and edu­ca­tion with reg­is­tra­tion require­ments under the DBPA and with the intro­duc­tion of the RAB ( C&EP) Act 2020 com­ing into force on 1 Sep­tem­ber 2020. But, there is still a dis­con­nect with the BCA itself, in the BCA still allow­ing unde­fined per­sons to sign off on build­ing work which needs to be addressed.
• Mr David Chan­dler com­ment­ed in a recent arti­cle ​‘This week the con­struc­tion edu­ca­tion sec­tor was put on notice that future grad­u­ates should be under no doubt that they will need to place a high val­ue on their integri­ty going forward…In future all con­struc­tion pro­fes­sion­als and prac­ti­tion­ers who must be accred­it­ed and licensed in NSW will have a dig­i­tal twin. It will fol­low them wher­ev­er they work and what­ev­er projects they build…’[8]
• Mr Peter Sher­gold (the co-author of the Build­ing Con­fi­dence Report) has called for ‘…uni­ver­si­ties to report on the amount of under­grad­u­ate fees actu­al­ly spent deliv­er­ing their con­struc­tion, archi­tec­ture and engi­neer­ing programmes…Its time to raise the grad­u­a­tion achieve­ment bar…the con­struc­tion indus­try has been treat­ed as a cash cow for too long. It is now time to invest in the capa­bil­i­ties that will be need­ed to make trust­wor­thy and resilient build­ings…’.[9]
• On-site super­vi­sion – this is a prob­lem which rests with the devel­op­er’s bot­tom line. A high­er lev­el of super­vi­sion and train­ing on site for trades­men is des­per­ate­ly need­ed – with the abil­i­ty for trades­per­sons to gain ​‘qual­i­fi­ca­tions’ with min­i­mal edu­ca­tion, we will see ongo­ing prob­lems in the qual­i­ty of work unless super­vi­sion of works on site occurs. 
• This is a dif­fi­cult hur­dle as obvi­ous­ly this cost lies with the devel­op­er – per­haps the intro­duc­tion of the new reforms relat­ing to noti­fi­ca­tion and the pow­ers of stop work orders and rec­ti­fi­ca­tion orders may be enough to con­vince devel­op­er’s to spend the mon­ey at the front end of a project rather than suf­fer the con­se­quences at the end with defects and leave con­sumers to foot the bill if the developer/​builder is no longer around.
• Insur­ance – What will be ade­quate insur­ance under the DBPA? Will the insur­ers actu­al­ly pro­vide cov­er for the required insur­ance? The reg­u­la­tions are yet to reveal what will be required for a prac­ti­tion­er to obtain ade­quate insur­ance and there is no indi­ca­tion that insur­ance providers will be avail­able.
• Reg­is­tra­tion gov­ern­ing body – some work is required to set up appro­pri­ate reg­u­la­to­ry bod­ies to gov­ern the reg­is­tra­tion process for prac­ti­tion­ers to ensure it oper­ates effi­cient­ly – the reg­u­la­tions are yet to reveal fur­ther infor­ma­tion regard­ing reg­is­tra­tion requirements.

Clos­ing com­ments…it has been a big year of reform in the con­struc­tion indus­try, many inher­ent prob­lems still need to be addressed and there is still a lot of uncer­tain­ty as to how far the reform will extend with reg­u­la­tions still to come…but it is at least com­fort­ing to see the Build­ing Com­mis­sion­er with his ​‘boots on the ground’ and reform being introduced. 

This is not a time to be com­pla­cent in your oblig­a­tions in the con­struc­tion industry! 

[1] NSW Con­struc­tion Indus­try — An Expert’s Per­spec­tive Series

[2]https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf

[3] https://​www​.fair​trad​ing​.nsw​.gov​.au/​r​e​s​o​u​r​c​e​-​l​i​b​r​a​r​y​/​r​e​p​o​r​t​s​/​n​s​w​-​g​o​v​e​r​n​m​e​n​t​-​r​e​s​p​o​n​s​e​-​t​o​-​t​h​e​-​s​h​e​r​g​o​l​d​-​w​e​i​r​-​b​u​i​l​d​i​n​g​-​c​o​n​f​i​d​e​n​c​e​-​r​eport

[4] https://​www​.leg​is​la​tion​.nsw​.gov​.au/​#​/​v​i​e​w​/​a​c​t​/​2​0​1​8​/​6​3​/full

[5] https://​www​.leg​is​la​tion​.nsw​.gov​.au/​#​/​v​i​e​w​/​a​c​t​/​2​020/7

[6] https://​www​.leg​is​la​tion​.nsw​.gov​.au/​#​/​v​i​e​w​/​a​c​t​/​2​0​2​0​/​9​/full

[7] s66ZM-s66ZT Con­veyanc­ing Act 2019 and Clause 19A of the Con­veyanc­ing (Sale of Land) Reg­u­la­tion 2017 

[8] https://www.linkedin.com/pulse/its-just-universities-who-need-lift-game-rebuild-david-chandler-oam/?trackingId=R4Tyh%2BMHGAN4yJWUKLjcdg%3D%3D

[9] https://​www​.linkedin​.com/​p​u​l​s​e​/​m​e​e​t​-​y​o​u​n​g​-​c​o​n​s​t​r​u​c​t​o​r​s​-​w​h​o​-​h​a​v​e​-​j​o​i​n​e​d​-​c​o​n​s​t​r​u​c​t​-​n​s​w​-​c​h​a​n​d​l​e​r​-oam/