It seems an appropriate time to reflect on the past year and make some resolutions for the new one, so let’s indulge in both.
The dysfunctional aspects of builder licensing across Australia are known to many. The push to make uniform building regulations and implement a National Construction Code that is now freely available online is a good example of what can be achieved when we all work together. This is a fundamental reason for COAG to exist.
Unfortunately, a uniform approach to developing builder licensing remained as dysfunctional as ever in 2015. Let’s hope an innovative approach to our national governance recognises that uniformity of a national builder licensing scheme is a seamless and strategic link to the NCC’s performance objectives and would be of great benefit to the building construction industry and its consumers. It is achievable and should be viewed as a significant catalyst in achieving better standards of building construction within the contemporary built environment.
There is also great concern about the diminishing quality standards within the vocational education and training (VET) sector. VET is intrinsically linked to the qualifications recognised by our builder licensing regimes. Many would be aware of media reporting on the failure of government to properly regulate businesses operating as registered training organisations (RTOs). The ACCC is only now moving to prosecute the most obvious predatory businesses that placed profits before quality educational outcomes.
The deregulated environment has generated strong interest amongst private RTOs that offer building qualifications in construction trade and post-trade courses from Certificate 3 through to advanced diploma levels. These are core qualifications for licensing in many states and territories. Clients of privately operated providers aren’t likely to enrol with them because of an offer of a ‘free’ laptop computer. The highly motivating factor is the opportunity for clients to obtain ‘fast-tracked’ qualifications, often in as little as six weeks of ‘online training’ with no rigorous assessment of their proficiency.
The validity of their training and assessment outcomes is seriously compromised. It is largely facilitated by ‘recognition of prior learning’ or ‘RPL’ to rapidly progress students in their course of study. The motivation of persons making claims for RPL and the subjective nature, reliance and judgements made as to the type of ‘evidence’ provided and the relevance of such evidence to establish prior learning by assessors must be highly questionable. Whenever fast-tracked qualifications are associated with training organisations whose main objective is to sell the qualification to their clients as quickly as possible, there exists a significant risk of a major conflict of interest.
The ability of ASQA to regulate against this has been absent. Even where significant and highly dubious practices have occurred, ASQA has demonstrated that it cannot be relied upon to guarantee quality standards of any private RTO issued qualifications. When those qualifications are directly linked to the building licences granted by state and territory statutory authorities, the scenario exists for a corresponding increase in a growing cohort of poorly trained and technically unskilled but ‘licensed’ builders emerging onto the market.
A correspondingly higher number of consumer complaints and an incremental rise in risk to the health, safety and amenity of all building owners, occupants and users should be expected. This contravenes the Performance Objectives as stated in the NCC’s Building Code of Australia – Vol. 1&2. Let’s hope the government acts rapidly to fix the entire VET system, which was recently described by our PM as a ‘shambles.’ They must end market manipulations that have seriously damaged the quality standards of courses and qualifications operating under this highly flawed system.
In the interim, a glimmer of hope has appeared that might create better standards for NSW licensed builders. The Minister for Innovation and Better Regulation, Victor Dominello MP, has established a review of the former Home Owner Warranty Insurance scheme, rebadged as the Home Building Compensation Fund. Older builders will remember the Building Services Corporation. It ran the predecessor insurance scheme for until 1997. The scheme functioned so well that it accumulated tens of millions of dollars each year. The economists advising the government of the day decided to divert reserves into consolidated revenue and restructure the system by opening up the scheme to the market.
Promises were made that insurance for building works would become cheaper through competition and the system would benefit consumers and the building industry as a whole. Most other states and territories followed suit. There’s no point trawling over the disasters of FAI and HIH that subsequently infected the entire insurance scheme beyond stating that it became an increasingly expensive and practically useless insurance product for consumers and an impediment for most builders. It was initially a good money maker for the insurers as is any ‘compulsory’ product and it certainly lived up to its expectations and status as a ‘last resort.’ When government adopted strategies to allow consumers easier access to make claims, the few remaining insurers exited the market.
State government had to re-enter a system they had left behind after an 18-year odyssey. But this time around, the scheme isn’t the profitable venture it once had been. Claims have skyrocketed and the HBCF in NSW is said to be unsustainable in its current format. You would have to be very ignorant not to consider the causal link to the impact of a deregulated VET sector that delivers very low quality standards of training, resulting in ‘licensed’ builders who are neither able to complete their contracted works or who are willing to walk away from the massive defect rectification lists that accumulate on their poorly managed projects.
There’s a raft of proposals being put forward, including abandoning compulsory insurance altogether. You can access a copy of the Reform of the Home Building Compensation Fund discussion paper from December 2015 from www.fairtrading.nsw.gov.au.
“You can comment on all of the topics or just those of particular interest to you," Dominello said. "We are keen to hear your views and your feedback will assist us in dealing with the challenges ahead.”
Let’s hope he pays particular attention to the problem identified under Part 8 - Reforms to the licensing system. At long last, consideration is being given to the use of incremental classes of building licence that better recognise the differing scale and associated risks related to different building construction projects.
The document goes on to state:
“Contractor licences for general building work in NSW allow builders to perform a range of building work. While there are some restrictions on these licences, such as those relating to specialist work, there are no limits on the type of dwelling the licensee can build or renovate. This approach does not place emphasis on the varying degrees of difficulty, skill and business acumen required for different types of residential construction work. For example, there are significant differences between building a single level standalone dwelling compared to building a multi-unit, multi-storey housing complex.”
It doesn’t take a rocket scientist to recognise that a one-size-fits-all approach to builder licensing is entirely inappropriate when it comes to the requisite levels of skill, knowledge and professional qualifications a person should hold to construct the more complex buildings of the 21st century.
The document goes on to state:
“Queensland and the ACT are two examples of systems with tiered building licences. The tiers are based on the degree of complexity and risk of the work, and cover residential and commercial building. While Queensland’s licence tiers are linked to National Construction Code building classes, the ACT has developed their own licence tier criteria.”
NSW is at the bottom of the heap compared to Queensland and most other states. No wonder there are so many claims being made for incomplete and defective building work. NSW builders are simply not up to scratch because their licensing system doesn’t require them to be appropriately trained and professionally qualified to manage construction of today’s more complex and challenging building projects.
The document further states:
“If NSW introduced a tiered licensing system, changes could also be made to licensing eligibility requirements. As the complexity of building increases, so do the risks associated with it. In order to reduce risk, financial management and building project management capabilities are important. A tiered system could require qualifications in financial management and building project management for licences for more complex building. Directors of companies holding contractor licences could also be required to hold these qualifications, whether or not they are the nominated qualified supervisor.”
I encourage everyone with an interest in achieving a better, more professional building construction industry to send Minister Dominello the strongest possible message. An online survey is available or you can email your comments to HBCFreform@finance.nsw.gov.au. The closing date for submissions is Friday 12/02/16, so get cracking.
My personal advice for Dominello would be to look to Queensland for some immediate guidance on a new licensing system. But before the next scheduled COAG meeting, he should tell Premier Baird to raise the stakes and put forward a logical, coherent and appropriately tiered set of qualification standards aligned to a nationally recognised builders licensing scheme. We are well into the 21st century and we have an ‘innovative’ Prime Minister proactively seeking out good ideas for Australia’s future. This would indisputably be a very good idea for our building construction sector to start in 2016.