The disaster known as regulation of the Victorian building industry keeps creating and spitting out victims and has gone on now for well over a decade.
We have all been impacted in one way or another by the cutting of red tape. Many other commentators have spoken at length on the same topic.
So we all know the shortfalls and all the survivors are on the same page.
So how do we fix it?
Like any major disaster, we must look at root cause and look back at how it went so wrong.
Many of the shortfalls started when we rewrote legislation in 1993, which created change in terms of regulation. This was compounded in 1997 when we embraced self-certification, dumped the HGFLtd and embraced privatisation of the consumer protection. In 2001, HIH collapsed and in July 2002, we railroaded in the Last Resort Warranty Insurance (BWI) for domestic builders and excused all commercial projects from any of the regulatory constraints suffered by the domestic builders.
No doubt there are hundreds of other well-documented contributing factors, along with governments who refuse to invest any funding whilst maintaining their cost neutral regulators. The majority of people involved had little hands on experience in our industry and at best were peripheral to our mainstream industry.
Add to the mix our legal fraternity and our insurance underwriters just to make sure we had a perfect storm. Hence the tail started wagging the dog.
We currently see the VBA coming out of their third year and struggling to manage their authority in an industry worth more than $20 billion. Their budget of around $50 million is self-funded by the building industry, with roughly $18 million from the plumbing industry and $32 million from builders. Some 75 per cent of the VBA is spent on building, and 60 per cent of that is on governance of commercial projects. So clearly others are paying for the management of a non-paying sector.
An easy example is the VBA certificate of compliance for a hot water unit installation, which is worth $33.87. The cost for the certificate of compliance for a newly built school is $33.87. So clearly we see major issues in how our industry can be properly regulated by anyone with such significant financial constraints completely skewed by poorly written legislation.
As we see the introduction of amendments of the Victorian Building Act focusing mainly on consumer protection, it appears nothing is going to change.
Once again, peripheral players from the insurance industry seem to have most of the say in our building industry.
A look at home warranty insurance cover offers an insight as what is required to access the current insurance model. It is not an easy process and requires specialized legal counsel.
Still, it's hardly insurance at all, and is only accessible for the wealthy or naive. We once again see the current mooted amendments relying upon the VCAT process, which has been widely accepted as flawed from start to finish. An example of how the insurance underwriters have contributed can easily be illustrated with the recent changes in how basic fascia gutter is installed. A recent directive from VBA says all that is required is a minimum 10-millimetre gap between the fascia and the back of the eaves gutter.
So how did this come about as we have been installing gutters directly on facia from the late 1800s? Did industry play a role? Why was everyone surprised when this directive came out?
Did they consider other overflow measure shortfalls, storm water pipe design and sizing, council discharge points or rewriting formulae for load calculations? It sure doesn't seem like it. The insurance industry drove the issue due to excessive claims, which is a clear snapshot of how we have ended up here.
There will be many who will complicate and put a variety of reasons why we can’t make quick changes. As we previously stated, the J curve of non-compliance and regulatory failures is currently impacting our industry with devastating effect.
Everyone wants proper regulatory governance, which maintains a level playing field for all. Currently, the diligent, highly skilled practitioner is suffering in work allocation due to the ravages of poor regulatory compliance allowing our industry to continue its decline with building failures and disputes occurring in over 90 per cent of works. Uber provided a solution for the festering taxi industry issues and consumers have embraced and enjoyed the change it brought. We too can achieve this change! But how?
For starters, our industry cannot be regulated with its current budget of $50 million. At best this is tokenism. Government’s propensity for increasing this to $200 million will be determined by the ability to remain cost neutral. How do we achieve it?
A) A user pays system for certification. The above example of the cost of a certificate of compliance $33.87 regardless of the work involved demonstrates this. A sliding scale of certification costs can be introduced as a statutory charge for large projects and commercial licensing.
Example: a new hospital would incur a charge based on budget and duration of the build - let say $200,000. In this cost, it would allow for one day a week for an on-site inspector (clerk of works) for the duration of the build that would monitor all works as the construction took place. This would then not only limit post construction defects and costly legal claims but also monitor permits and statutory requirements covered by the BCA and PCA. Due to many of the VBA’s current inspectors being very green, it would also improve the inspectorate’s skills set on a user pay basis.
B) Currently we have each council running building departments, which interpret the BCA, and the relevant local council-planning permit. This is duplication and is one of the many problems and seen as problematic with many misadventures. The recent Mt Waverley excavation site is a clear example with much finger pointing and no doubt a long legal journey to unravel. Clearly, planning departments have local council uniqueness, but the building department could clearly be centralized via the VBA. This would add cost saving to councils and introduce further revenue at the VBA.
C) Building surveyors' conduct has been well documented due to commercial relationships with their builder. This has clearly been proven to compromise their roles and lead to many complaints, deserved or otherwise. A simple solution is to set up the cab rank, centralized via the VBA register with building surveyor classification and locality determining who is dispatched to what job. This will maintain impartiality and centralized governance. It will also provide a further revenue stream whilst quickly overcoming many of the issues.
D) Those who have long histories and experience in the building industry are often precluded from any real input. As we all witnessed, trade groups have continually been compromised by focusing on securing revenue streams. They have fallen asleep at the wheel regarding regulation, much to detriment of the their membership. To this day, most of the relevant chairs on the various boards are filled with people rarely engaged or informed properly on our industry.
The VBA itself has very little technical prowess in building knowledge until you get to their third tier of their corporate directory. Our industry needs to take back the many chairs and stop the cronyism each minister has facilitated in appointing these people. The PAC and BAC boards sit outside the VBA and purely report to the Minister. It appears this is a mandated part of the Victorian Building Act. We have continually tried to find the Plumbing Advisory Council's agenda or minutes, but it appears to meet rarely, with its agendas largely unseen. Until the Minister takes this aspect seriously, nothing will change.
E) Training pools were once a fall-back for the disengaged apprentices who were struggling to complete their four years, not a commodity and revenue stream for cherry pickers. Bring back proper incentives for the employers. We will then get proper vested interest in outcomes and skill sets.
F) Many experienced highly skilled practitioners have asked for diploma level attainment. Rather than the mooted CPD with button boot course, which are purely revenue streams, redevelop proper training options for those who want to further their industry skill sets. Sanitary engineering, fluid mechanics, advanced CAD drawing, advanced estimation and quantity surveying and the like should be areas of focus.
G) Licensing and registration is currently unclear and needs proper criteria and engagement with the RTOs. Many facets of the industry are still unregulated, such as the geo techs, hydraulic engineers, building consultants and so on.
Although the above may seem simplistic it clearly can be achieved. The current three-year cycle for minor change will never regain proper governance and the decline will continue to occur if we don’t step up to the plate.