Cutting Red Tape: Cause and Effect 22

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Thursday, August 18th, 2016
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Much has been said in the past regarding the prospect of cutting red tape, and the defence is always there are cost savings that benefit home affordability. That may be the case on the surface but what is the real cost to the industry, and where are the impacts?

Government argues 95 per cent of consumers benefit from the removal of red tape, and only five per cent may be adversely affected. Yet the Chairman of the ACCC, Rod Sims, has now agreed privatization that underpins the removal of red tape has not worked.

The hidden cost and flow on effect is far more reaching and is undermining the whole community.

We can target many sectors that are suffering today, such as compliant materials, training, consumer protection, apprentices, skill sets to name just a few.

Yet the benefit from the cutting of red tape is isolated to an illusion of cost savings to home affordability. Those who benefit are the insurance industry and the brokers, such as the industry associations who support the status quo, and are often responsible for concocting schemes to benefit their income streams such as the current Last Resort Builders Warranty Insurance.

One of the biggest losers are the building consumers, as the regime that delivers our consumer protection is in total disarray. This is reinforced with endless stories in the media that demonstrate regulatory failures which continue to amaze everyone. Although every state and territory government has launched enquiry after enquiry, rebadged their building regulator, made all the right noises, the trajectory of regulatory change at the moment will never catch the rising J curve of complaints and building failures.

Tokenism and spin continue to be today’s buzzwords, with very little real change ever occurring. Those brave enough to challenge or push for change walk a sometimes-lonely but well-worn path that many before them have travelled.

The government and regulators’ doors open and close with the passing of time, and most give up the crusade, tired and worn out. Those who have endured the journey inspired by hope of effective change are let down again and again with either change of government or CEOs moving on. And thus, the lobbying, meetings, stakeholders groups fall into the basket of tokenism and are really a muse for your newly elected politician.

Therefore, the pathway via the corridors of government and the regulators is a time-wasting journey which has been proven to waste everyone’s time over the last two decades.

We have had Senate, Parliamentary, Ombudsman, and Attorney General enquiries and review after review, and still the J curve of disharmony continues to grow.

What will it take for real effective regulatory change to regain control of a once proud industry? We must clearly illustrate the cause and effect. We have heard and seen the many stories and epic failures. The consequences of red tape removal have continued to make headlines across Australia. So why does the public continue to accept ongoing regulatory failures?

  1. The majority of so-called industry stakeholders have little interest in genuine consumer protection.
  2. Stakeholders/peak bodies have more interest in revenue streams and profits at any cost to the public.
  3. Very few of the industry peak bodies represent those who actually work at the coalface – less than 15 per cent.
  4. Fragmentation of the industry is an ongoing problem.

Thankfully, with enough public outcry, we have seen that change can be forced in any situation. How can we do it? Obviously, the media has an important role to play and can be a powerful tool if used effectively.

So we must draw the landscape with clarity and show the real consequences. It does not stop with the consumer. The cutting of red tape has destroyed long standing family businesses in the building industry and many today question the viability and credibility of the industry as a whole.

The building industry’s playing field has seen many of its rules and umpires removed, giving those chasing profits at any cost succeed ahead of our quality long standing building firms. Does the public understand this consequence? Probably not.

Add to this the warped and grossly unfair chain of responsibility for litigation when things do fail. What intelligent human being would ever enter this industry?

Unfortunately, due to most consumers being isolated via the current system and put through so many hoops, they feel hopelessly lost and fall by the wayside through litigation fear with nowhere to turn for help.

Then we have building products being imported without checks and balances, and when these products fail, a scapegoat must be found. This is typically the builder or the surveyor, as is the case with the Lacrosse building and its fire-prone exterior panels or the faulty infinity electrical cable that’s been installed in thousands of homes which could be a disaster waiting to happen.

The list of detriment goes on and on, and the damage to industry escalates, but those at the helm who allow the issues to flourish are not embracing change.

More seriously is the approach of the Victorian Building Authority (VBA) – ‘the regulator’ – which allows issues to languish for over 18 months, such as the property that is a potential breeding ground for Legionnaires’ disease, or the Rangeview Estate, where over 60 homeowners have been impacted. The VBA and the Building Practitioners Board have been less than helpful in seeing appropriate justice take place.

The VBA has now been in existence for the past three years and  has firmly established its operation, but what has it achieved?

New seats at the various VBA boards have been filled by public servants (mostly from WorkSafe), lawyers, and obscure so-called consumer groups. The missing technical expertise continues to be a third tier consideration.

Nothing has changed except possibly the VBA’s shameless Teflon approach to the many serious building disasters occurring day in and day out, clearly demonstrated in a press release where the VBA suggests you should do your homework if you are thinking of buying a house or a building, and recommending you consider a professional inspection to make sure it is safe and meets the building regulations before you buy.

Their comment raises another area of detriment: the building consultant that is unregistered and unaccountable, and who in fact in many cases causes more pain for the consumer or builders through unprofessional conduct that sometimes could possibly be akin to extortion.

All that said, what on earth is the role of the VBA?

Highlights of the last 12 months have included explaining to multiple innocent new apartment and house owners they will need to pay for the rectification of their properties due to legal shortfalls, and explaining to the innocent house owners adjacent to the MT Waverly excavation disaster that their house will need to be demolished due to the 10 statutory check measures which failed to be put in place or monitored by the regulators.

We have existing buildings that are ticking time bombs wrapped in flammable cladding on high fire watch. We have construction workers and passers-by having walls collapse on them. These occurrences are just the tip of an iceberg which has slid into our day-to-day lives, and most members of the public have not joined the dots as to its root cause – the cutting of red tape.

At some point, we will have a major disaster as the ice is getting thinner and thinner.

The real cost of cutting red tape far outweighs any of the so-called savings as our industry edges closer and closer to third world standards, with “buyer beware” warnings coming directly from VBA CEO.

How can we continue to accept the current regulatory regime after being promised so much and receiving nothing? I challenge anyone to bring forward any intervention or any effective protection the VBA is providing to any consumer.

Industry duty of care from the remaining professionals is all that has kept all of us from further peril.

After 2 decades of engaging multiple governments and traveling the length of our country, we believe it will only be public outcry that can achieve any real change. Therefore, the building industry needs to unite and paint a clear landscape for the public to join all those dots.

Because to this point, nothing has changed to end the misery that is leading to many more good and long-standing people being forced out of a contorted shambolic building industry.

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22
  1. Lana

    Dear Phil.

    Thank you to bring up such an important matter and to confirm again and again that we –the building consumers have nowhere to go to seek any justice.

    It a is a horrible and a disastrous situation for us, who cried and hoped for the justice and cannot get it.

    Our building disasters can go for years , we have no hope to see any light at the end of the tunnel.

    Many of us who believed that we can get some consumer protection and help and tried to seek any Justice from the VBA( a regulator) were failed by the regulator.

    Many of us got destroyed financially and emotionally over the years trying to seek the consumer protection from the regulator.

    It is not a system that failed us, there are people and the Authorities who run the system with the powers given to them by Parliament and appears that they are not interested to implement their powers and obligations to the community and to the damaged building consumers.

    We , building consumers are made to be powerless and voiceless.
    In light of the above I raise my concern – How this could happen today in Australia in 21st century when every responsible politician regardless of their political persuasions talk about fairness and justice in our society and the role of the Government and its departments in protecting our citizens from injustice

  2. beverley-jane

    When cutting red tape enables the significant number of dishonest and incompetent thugs in this industry to increasingly damage consumers (entire families), it can hardly be seen as a means of reducing the cost of housing! Leaving punch drunk homeowners with huge costs attempting to salvage what they can of their defective homes as builders and trades move on to their next victims.
    Fleeced homeowners seeking support and justice are fed to the so called regulators and consumer protection bodies only to be spat out the other side facing financial and emotional ruin. Nothing short of a betrayal and destruction of strong, contributing families.

  3. Ron O'Neill

    Phil,

    This is an excellent piece, congratulations.

  4. Pam Mulready

    Well said Phil, all so true and disgraceful that governments fail to engage responsively and protect innocent consumers and workers, and restore integrity to the industry and public service. I would be interested to identify any consumer representative on any any authority who engages with any building consumers to represent them? The maze of authorities be it the BACV, the VBA, the BPB, the ESV, the Ombudsman etc. all routinely point to each other, or blame the consumer for the incompetent industry failures is a human tragedy, that this reality is not represented is grossly unethical. All of these authorities are financially sustained by consumers and state taxes, as they dismissively watch over the human collateral damage of this building regime. The powerful interest groups such as the building associations fail consumers completely as does the usless last resort insurance. This is a world where financially strong big builders are laughing all the way to the bank and beyond in full confidence that VCAT is inaccessible for most building consumers. They can comfortably trash homes and lives without fear. The present dangers to building consumers, workers and occupants in this industry is a health and safety minefield that remains neglected by the Governments in this country. The processes that consumers currently experience is a human rights issue as sadly our system denies a fair process, as many can testify.

  5. Peter Pike

    Well done Phil great snapshot of the building industry landscape littered with casualties & disasters. John Faine captures this nicely when he explains we did not have these issues occurring prior to 1997. End of story!
    Self certification & self compliance along with privatisation of all the control check measures have not worked. Clearly profits, greed have reined over our building industry at the expense of consumers & Long standing building & plumbing professionals who have refused to cannibalise their once proud industry. Unfortunately most are disappearing everyday unable to compete with the shonksters. Unfortunately the ice will break soon & once again they will spin it out over years of investigations until the hurt has diminished & the public only have a distant memory of the catastrophe.
    Meanwhile our insurance underwriters ride the wave & bypass the VBA themselves using their own adjusters to determine what claims go forward & who drowns!
    The perfect storm for big business & misery for small businesses, consumers & apprenticeships!

  6. fiona

    Thanks Phil,
    I concur 100%. The VBA did a survey last week of customer satisfaction and I don't think they will find one consumer that has had a good experience let alone an efficient outcome. It is a failure of government when they allow such a system to continue unabated without their proper scrutiny. How many reports have we had on the Building Commission and the VBA, VAGO1, VAGO2, Ombudsman when will government finally get it that there is a problem! Their failure to act just damages more and more families, with all paths leading to VCAT and huge expense with vast delays.
    It is a real tragedy that families are left holding the remains of their life savings after being trashed by rogue building practitioners that serially offend, some 20 sites at a time and they get a reprimand? Seriously both sides of politics need to get their act together on this very important issue.

  7. Margaret Singleton

    Good article Phil. Justice principles and ethical benchmarks are not operating as a guide and brake to excessive consumer exploitation within building industry codes of conduct. Instead the whole process is geared to protect (and financially reward) a cartel of industry stakeholders. Namely, unethical builders, surveyors, consultants, insurance brokers and profiteering legal apologists at the top of the gilded pyramid who actively work to sustain their own vested interests. How can any consumer navigate a system so devoid of integrity?

    Despite the rhetoric put up on screen on a daily basis, the VBA has evolved into a bloated dysfunctional bureaucracy that is secretive and largely inaccessible to consumers. Renaming a crooked organisation will not alleviate wrongdoing. The solution has more to do with individual integrity, proper governance, the enforcement of regulations and adherence to building and administrative law. Politicians of all persuasions know how critical the situation has become but lack the courage and will to initiate change. Relevant Ministers avoid dealing with this matter by directing genuine complaints to departmental gatekeepers who forward gibberish replies to placate rising consumer anger. In effect, the Victorian Government and Opposition are enabling systemic malfeasance. This cannot be allowed to continue. Too many families are suffering.

    What is urgently needed is an independent Inquiry into the domestic building industry. Only in a court of law with proper rules of evidence can the extent of consumer detriment be revealed. It's obvious the system is broken. We collectively must find a way to fix it.

    Margaret Singleton

    • Phil Dwyer

      Thank you Margret. Your observation is spot on. The only comment I will make is that around the nation there has been a total of 55 reviews and inquiries so far into Builders Warranty Insurance as it is the product itself that manages our industry and thats where the problem is.

      The issue is simple BWI does not work but it is an income stream for those few that don't give a dam for the industry or its consumers and builders, being the trade associations, insurers, and Governments.

  8. Robert Timms

    That's a great diagnosis of some of the problems. But I must ask, what are the solutions?

    It's all very well to articulate the problem, but we need to talk about the solutions as well.

    • Margaret Singleton

      There is much to be done in order to bring about real change. A proper professional survey to determine the full extent of consumer detriment and the experience of dealing with current regulatory processes would be a good staring point. Simultaneously survey builders and surveyors. There are many ethical builders in Victoria and their contribution to the discussion is vital. Gather the data so good decisions can be made.
      Introduce a totally independent complaints process that is transparent and accountable. Relevant Boards and committees should have high consumer representation.
      No more junk insurance! It is imperative to push for a separate consumer First Resort insurance that covers all their building work. Insure the construction of our home as we would a new car.
      Return the role and responsibility of building inspectors to Shires and Councils. Privatizing this process has been an absolute disaster.

      Margaret

    • Brett Bates

      Hello Rob. Phil has focused on the Victorian experience but there are common threads connecting similar problems right throughout Australia. The state and territory building consumer bureaucracies and the various laws they operate under contribute to the dysfunctional status. The Gillard government buckled under state government and union pressure to junk the move being made to develop high quality national building licensing standards in 2011/12. As I've said many times. If you want better outcomes such as no defective work and less time consuming, money wasting tribunal hearings then you should start at the source. Make certain that any persons being issued with a licence to build are highly skilled and qualified by a formal and rigorous training regime. None of this Recognition of Prior Learning nonsense and the ability to 'buy' a qualification from the many dubious private training providers who plague the industry. I think that would be at least the start of a solution to provide better and more consistent outcomes. At the moment, the system is a complete shambles and getting worse each day.

    • Phil Dwyer

      Robert, the solution is simple but there are those that want to complicate the issue, and muddy the waters.

      Consider the Government run first resort HGFLtd prior to privatisation that worked well, and the Queensland model is much the same but more refined and its operation is considered the best available.

      Every time it is the trade associations that convince governments to privatise the consumer protection and they structure it as an income stream for themselves, and every time they fail dismally but this one has virtually drained every bit of credibility and integrity from our industry and it will take years to recover.

      Yes there is a solution, and governments know it. They need to step up to the plate and act and stop exploiting our industry.

      We pay huge sums for an illusion of consumer protection and industry management. If those sums of money were directed for the intended purpose we would not have the issues we have today.

  9. Anne Paten

    Phil, you have outlined some of the core issues that have caused our massive consumer disaster, one that threatens lives and has resulted in a third world built environment. The industry is totally out-of-control and this so well documented and on the public record for 20+ years and consumers cannot do any 'buyer beware' homework – truthful, accurate information is not accessible. And consumers have been deprived of oxygen – locked out, silenced and voiceless – they are all vulnerable to serious harm and helpless to prevent it.
    Robert rightly asks about solutions. This is a no-brainer! We need builders who know how to build, with real qualifications and skills. We need real 'discipline for the offenders', with penalties commensurate with the crime. Serially offending is endemic because there is no punishment – and hence no deterrence. We need the biased legislation changed to give the consumer half a chance of a fair go – e.g. unfair contracts for a start. We need to get rid of the artificially created disputes by cleaning up the industry and severely punishing the rogues. We need to get rid of the rort insurance and the commissions to all in the chain. And it should go without saying that the key to any meaningful reform is to provide a fair legal framework whereby consumers have a real means to seek proper redress – a justice system that is quick, honest and fair. If we had a clean industry, competent and ethical practitioners, with offenders actually punished there would be of course be few disputes. Most importantly, consumers as the primary stakeholders need to be consulted, represented and they are the key to any real and lasting solution. It is doable! All who are decent must get a voice and reclaim our rights.

  10. L Smith

    I think its better that all consumers got together and sue the State government for its failure and lack of regulation. For me, I'm gathering as much evidence which is required and then sue the state government in Victoria and my money will be better spent on white collar crime.

  11. David Chandler

    Phil, you have your finger on a red hot issue, as does Anne Paten in her regular covers of this subject. The challenge in my view will not be solved by governments suddenly having a consumer epiphany in the housing market. There are too many conflicted interests to be tackled, the most significant being the various 'Home Warranty Insurance' schemes that have been designed to accommodate the lowest common denominator builders while providing rivers of gold insurance premium incomes to the industry associations who bleat most about cutting red tape. Alas, I believe that governments have missed the opportunity to make a difference and other more hopeful forces are at work. There are now clear signs that construction 'first movers' are starting to appear who are not waiting for the rest of the industry to move. They are tapping into the housing community's long standing dissatisfactions. I can now see 2 – 3 game changers who have great potential to disrupt the status quo. Unfortunately, these are foreign owned businesses who have already made the cultural and intellectual shift in their thinking that puts customers at the front of the bus. If its foreign constructors that are going to shake up the status quo, then I say bring it on. The result will be more imported construction inputs as these busineses have long established global supply chains who 'get it' and make a commitment to the 'sum of the parts' that the mainstream housing sector in Australia evades. It is too early to name these 'first movers' as I see them, they will soon speak for themselves. I have visited over 40 houses under construction this week and the difference is chalk and cheese. I expect social media will be fast to tell these new experiences soon.

  12. Paul T

    I concur entirely with your realistic observations. The same is happening in the Plumbing Industry. We are trying to halt the 'careless' pathway but it will be a long hard path. I think it went off the rails over 20 yeras ago when a great deal of experiance was removed from the cold face. Education needs critical review. Standards looks inwards poorly. Many cry for change providing the spotlight is focused on them. Several major regulartory bodies want information to fit their pathways rather than pathways to fit information.
    We are arrogant and we don't care because the overview is out of focus.
    Never-the-less, evil succeeds when good people do nothing.
    Keep punching with passion.

  13. Sherrill Towner

    Dear Phil,

    What an outstanding article, being involved in the industry, I totally agree and indeed sympathise, with the lack of involvement from our Goverment,and authorities, whom need to address the pitfalls in our industry

  14. Mark Whitby

    Ripper article Phil… and great comments too.,

    Here's a set of grass roots ideas for real and immediate improvement.

    1. Define SPECIFICATION to include workmanship clauses including difficult areas for each trade.
    2. Define DEFECT to embrace time related and real life expectancy issues plus minimum manufacturer requirement
    3. Make soil engineers accountable for ignoring Appendix D of AS code 2870 by requiring registration and professional indemnity insurance.
    4. Make building consultants become registered and accountable for an inadequate definition of defect and subsequent wrong advice.
    5. Make Building Warranty Insurance First Rate (as you say) as it was prior to July 2002 with insurer acting as policeman
    5.

  15. Roger Lambie

    Red Tape like anything, to much of it is not good thing; a lack of it can be disastrous.

    A service that was provided prior to 1997 by what was the then Gas & Fuel Corporation of Victoria (GFC) that very few consumers were aware of was what GFC called Gas & Fuel Appraisal (GFA)

    The GAF appraisal scheme was in addition to a gas appliance approval certification that approved appliances for use in the domestic market all around Australia which all sounds like a lot of unnecessary Red Tape.

    At that time the GFC probably sold more domestic gas appliances per year than in all the other States and Territories put together, in turn it was in the best interest of the manufacturer to have their product sold through the GFC, presently these same appliances are sold through appliance retailers and/or trade outlets.

    Gas authorities in a number of the states at the time had their own laboratories, although all working to what were the standards of the day had different people working for them who all had different interpretations of what were the standards requirements, in this circumstance it transpired that not all appliances were acceptable in everyone’s point of view.

    This in one sense was a problem for the GFC as not all the product approved that met standards of the day were always practical in their operation, to protect themselves the GFC invoked the appraisal scheme to prevent themselves from selling a lemon, loosing consumer confidence and subsidising maintenance cost or at worst replacement cost.

    The GFC to ensure there were no repercussions as described, carried out further inspections of these products submitted for GFC appraisal that included covering Installation, Operating and Service instructions and an unwritten requirement, its practicality in meeting these instructions.

    This work was carried out by a team of experienced plumbers/gasfitters/Installers.

    Today there are four companies that inspect appliances for gas appliance approval certification and no GFC appraisal scheme.

    A perusal of instructions that are supplied with gas appliances today reveal in some cases operating gas pressures that may be acceptable in the country of origin where the appliance was made, are not updated to reflect the requirements in Australia, clearance requirements for safe operation of an appliance differ to the standards and even contain photographs depicting incorrect requirements to that of the standard.

  16. Bernie

    clearly self certification has not worked, 5% Audits on plumbing Certificates is incredibly low, but I believe the non compliance rate is high. Imagine if we had 25% Audit!!! Current system is very Broken.

  17. Steve

    @ L Smith. We've just fought the VBA at VCAT on privacy and awaiting the determination. The VBA collect your personal information that is mandatory for the complaint to proceed and hand it over to the BPB, who in turn give it straight to the practitioner facing Inquiry. You cannot touch the BPB due to their quasi-judicial status. The VBA failed to convince the Privacy Commissioner, who due to lack of 'teeth' referred the matter to VCAT. It'll come as no surprise that the VBA, who are publicly funded, threw significant resources at this against us, self-represented; your tax dollars. The VBA claim all their staff receive privacy training, so why do they do it in every case?

    The only reason I can think of is so that the practitioner can sort it out themself and make the complaint 'go away'. The pass the blame approach was the model used by the defendants at Nuremberg. Good luck with your mission.

  18. Anne Paten

    Re Steve's comments, what he has described is the 'governance' norm, with passing of private information of owners to the protected 'cowboys' as required. And then spending hundreds of thousands of dollars at VCAT or in the Courts to protect these cowboys again when they want a 'decision' overturned! The fact is that the 'regulators' are made up of the 'regulatees' – the private and business partnership work together as one – and they have complete control to ensure the protected remain the 'uncontrolled'. Hence why consumer laws are simply words on pieces of paper and without enforcement they are in actuality mythical – non-existent.In relation to /privacy', forget it – along with anything resembling proper building. For about 50% of owners such notions are a pipe dream, just like the 'dream home'; not achievable, not ever meant to be, but the owners kept in the dark until they have 'signed up' and then there is no escap

    As for 'red tape', it is predominantly a lot of spin – laws, regulations, standards that are unadulterated nonsense. Imagine that 96% of Building Permits do not meet minimum building and safety standards – this translates to buildings wrongly sited, built too low, without sufficient reo, with serious 'slab heave', with soil test and site type wrong, with super major cracking, many with seconds bricks and commonly too few articulation joints, with non-compliant, dangerous electrical wiring and health and safety plumbing problems (frequently drainage and sewerage issues) and on it goes. Then we have the as built buildings that do not resemble the 'Approved Plans' – or those erected without any Permit, and those issued after the event by the accommodating surveyor! It is a shameful, scandalous disgrace.