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. 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- standards are out of date and do not correlate with the types of defect complaints presently being heard in the Courts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 highlighting 24 recommended reforms in February 2018:
- the NSW Government responded to the recommended reforms in February 2019
- the NSW Building Commissioner, David Chandler, was appointed in August 2019
- the Building and Development Certifiers Act 2018 has been passed (not yet commenced) (BDCA)
- the Design and Building Practitioners Act 2020 was assented to on 11 June 2020 and partly in effect (DBPA)
- the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 has been passed and commences on 1 September 2020 (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
- 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…’
- 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…’.
- 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!
 s66ZM-s66ZT Conveyancing Act 2019 and Clause 19A of the Conveyancing (Sale of Land) Regulation 2017