Undermining 200 Years of Confidence in Aussie Construction 23

Thursday, July 9th, 2015
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Who will be the public voice of change? Hopefully, it will not come from professional organisations or unions looking out for their own best interest.

It doesn’t look as though that voice will come from an industry association as could be construed from the ABC’s Madeline Morris interview with the MBA’s National CEO Wilhelm Harnisch who said, “the buck obviously has to stop with someone, but finding out who that someone is is very complex in a legal context. Yes, the builders do have a responsibility, but so to do the designers, so do the people who install it, so do the people when they finally approve it. So you know there are all these checks and balances along the way.”  

So who should give the public a single of point assurance about construction in 2015?

The current enquiries into construction materials and building certification are a shambles and they don’t appear likely to serve the public or the construction industry well. Their proponents are well-intended but their objectives are in my view ill-informed. Let’s be very clear. The federal government will eventually have no choice but to establish a Royal Commission into Australia’s construction industry to deal with a national undermining of public confidence in construction’s performance. It’s a national problem and one that cannot be left to the states, the industry associations or CFMEU to fix.

The current state of construction shortcomings has been years in the making. I estimate that there are hundreds of millions of dollars of questionable work and materials already in service. Their root cause has been the declining quality of trades and supervision, weak quality assurance and certification practices, a lack of investment in the modernisation of building codes, fraud and a failure to hold anyone to real account. In this day and age, there is no defence for these shortcomings. Ignorance is certainly not one, and nor is indifference.

The government was quick out of the blocks to call on an enquiry into pink batts following the calamitous roll-out of the home insulation program by the Rudd government. The government was less enthusiastic to call on an enquiry into the systemic defects and project certification failures identified in the $13.4 billion BER school building program and from the industry whispers about the $6.4 billion social housing program. The government will have discovered the widespread substandard work that has been done and paid for in the NBN rollout, but little has been said about it and no one has been held to public account.

Construction customers and the public are getting a far from acceptable deal. The public is not only being fleeced by paying for substandard and non-conforming building and infrastructure work, they are also being exposed to buildings that are not as fit for purpose as they should be. And they they are not being adequately informed of findings about safety or compliance failures when they are identified. Here are some examples:

  • The new SCG Member’s Stand was initially occupied without complying with the conditions of consent. There was evidence of substandard work and life safety systems that would not have functioned if tested
  • The crane fire at the UTS Broadway construction site has been investigated but NSW Work Cover is coy about publishing its report
  • There are dozens of Victorian public school building roofs that do not conform to the manufacturers’ installation recommendations and will fail years ahead of their contracted life expectancy
  • There are wide-scale installations of prefabricated buildings that have been certified as compliant when they may not be

The industry is rife with plenty of other examples, as well.

While there is a good mix of imported materials going into construction these days, there are many homegrown system failures. These should form part of the Senate enquiry’s terms of reference if any real physical or cultural change is intended.

I recently gathered observations about some of these practices. I showed photographs of a pre-fabricated building I had just inspected to an industry association CEO to ask if they had a position on dealing with member activities that would in time bring their association into disrepute. I was told there was no policy and that if there were, it would make it harder to retain existing members or to recruit new ones. I believe this is not an issue confined to one association or professional body. When challenged, many industry professionals paid to inspect and certify work assert that their clients only get what they pay for. “If prices are screwed down, then so is the level of service or product,” they say.

The global construction industry is going through massive transformation. The industry is becoming digitised, industrialised and its goods and services sourced from all over the globe. The Senate and NSW enquiries need to understand that the Australian construction industry is only a $300 billion drop in a $15 trillion global market. It is projected that 60 per cent of all global construction will occur in the Asia Pacific by 2025. Irrespective of the free trade momentum now being touted across these markets, the pace and movement of sophisticated materials, sub-assemblies and modules is way ahead in response to trends in sourcing modern construction projects and their growing assembly off-site. It will go faster.

The Australian construction industry is unprepared for what is happening now and for what lays ahead. Australia’s starting point is that its domestic labour and material inputs are far too expensive. The industry has become conditioned to accepting its high-cost nature in a market which just does the business and passes its costs on to clients. The major construction companies and the industry associations who represent them are holding onto the status quo because they know how hard it will be to adapt when the time comes. But that time cannot be long away. For now, they are indifferent to the long-term well-being of a capable, innovative and competitive industry at home. Its easier to go off-shore and source more and more construction inputs elsewhere.

The Australian construction industry’s problem does not just stem from China. The Chinese construction market has its problems with standards, corruption and capability, but that’s changing rapidly. Yes, we need to be on the look out for shoddy stuff when it hits our shores, but that is just a passing phenomenon. The Chinese and their developing country counterparts are getting a lot better by the year. In Australia our standards and capabilities are falling further behind each year. In my view, our problem is an “inside out one” more than it is an “outside in one.” The current Senate enquiry will make no difference unless it widens its reference framework and tackles the issues that no one is keen to have exposed.

Australia is going to have to face up to the reality that it will be unable to sustain a domestic construction standards and compliance regime which all vary in measure and application across a federation of states. The rate of construction method modernisation, composite materials, new assemblies and management technologies is beyond the ability of our domestic institutions to support or keep up with. It’s creating an alarming compliance framework often built on deemed to comply assessments made on behalf of proponents who shop the market to get what they want to hear, not to look after the public interest.

There is a lot of stuff being made and installed in Australia that has not been adequately stress tested or tested to assure customers that what is being offered is fit for purpose and that it will stand the test of time. It’s a very concerning trend. It will affect exports in time.

I attended an industry expo just recently and enquired about the robustness of some of the external cladding systems that were on display. There seemed a general acceptance that if an external finish or installation could last 10 years, it was good enough. I hear the same type of comments about embedded plumbing and electrical services in prefabricated modules. That’s despite buildings constructed in Australia over the last 200 years typically serving for 50 and more years. It’s a reasonable continuing public expectation. Its certainly reasonable for the public to expect buildings that are structurally sound, safe and adaptable.

This public expectation is counter to the risk-adverse nature of the construction industry these days and their advocates who lobby for reduced red tape. This often means reduced accountability and warranty obligation. Construction contracts look to pass unmanageable or unable to be verified risk down to the supply chain. One industry association has even succeeded in promoting a policy for the industry’s customers to pay for a warranty insurance levy to pay for defects. Imagine getting away with that in any other industry.

This was captured on a recent construction site whereby 60% of the columns appear to be on a 70 degree sloping site.

This was captured on a recent construction site where 60 per cent of the columns appear to be on a 70 degree sloping site.

A regular contracting method observable in the industry in recent years is for suppliers of products like pre-fabricated modules such as student village multi-unit apartments to be engaged as a nominated supplier by the client. This means the client has also to engage a “builder of record” who has the statutory obligations to ensure the conditions of consent are met for the entire project, including the modules. The supplier then just drops off the modules or installs them oblivious to any surrounding or enabling prior work. The “builder of record” also operates in a similar oblivion, assuming that all the hype about off-site quality assurance is true. I have inspected projects where these demarcations have created unacceptable outcomes, but they have been certified and the caravan moves on. There is little care and no responsibility about what lays ahead for customers or the public.

Those on the client side know how assurances of quality in the industry these days are thin at best. This is equally so for state and federal governments who hollowed out their informed buyer capability years ago. The custodians of public interest in construction have been effectively neutered, at considerable loss to the community. There are few if any resources available or able to investigate shortcomings in public project delivery. The prospects for private observers of these shortcomings to make a difference is made almost impossible with public interest disclosures being shrouded in process, commercial confidentiality, expense and affront.

To help address the changed public capability playing field, the Senate and other enquiries into the integrity of the construction delivery process could help to enable such disclosures and look to whistle-blowing options such as those in the US. These have become an important partnership between skilled practitioners in the private sector and governments in getting a better deal for taxpayers. Under the US False Claims Act (FCA), whistle-blowers play an important role in helping government to get value for money and, in the context of this enquiry, enhance the prospects for identifying substandard work on behalf of the community. Under the FCA, whistle-blowers are rewarded for successful exposures.

There is further reason to consider the FCA legislation. Most major public projects these days are consented under special ministerial powers as “projects of state significance.” As a result, these projects have different governance and accountabilities to the mainstream construction market. Given the scale and pace of major public infrastructure spending now and in the pipeline, there would have to be merit in reviewing the legislature covering these projects to ensure they meet the highest standards. Governments contract these projects to private sector organisations who will have competing interests with the public. Some of these companies are majority owned off-shore. Most have been in multiple ownerships over the last 10 years. These will take some complex and expensive sorting out if their contracted standards come up short or if those organisations cease to operate here.

All the while, the Australian construction industry sustains a culture that places not enough emphasis on “good,” settling instead of “good enough.” Well “good enough is not good enough. The time has come for some serious corrective action. The current NSW review of building professionals’ performance like the Senate enquiry really misses the point in the depth of problems and the risk to public confidence in an industry that underpins much of the nation’s wealth.

Be assured that the whole of the industry is aware of the thin ice on which it is skating. Most, however, have a self-centric view of what the root cause is and who is responsible. None have any faith that any enquiry or regulatory response will have the insights or the metal to do anything about it, so they just batten down while construction remains one of those unfathomable riddles. But for how long can the riddle play out? How long before a future government faces up to “I told you so!”

I remember well the words of US construction industry advocate Charles Cowan who said if you are always going to do what you have always done, then you are always going to get what you always have gotten, and some!” The Senate might keep this in mind.

Let’s hope that Michael O’Connor is not able to grasp at a new CFMEU straw of public respectability based on building standards and compliance, just as Jack Mundy did in the 1970s using Green Bans to shelter the BLF’s unlawful and disruptive behaviour back then. Surely the Australian construction industry and our policy makers can do better in 2015.

The continuance of 200 years of public confidence in construction depends on it.

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  1. beverley-jane

    As an exhausted victim of this lawless, money grabbing industry and the devastating consequences which this government, previous governments and no doubt future governments choose to ignore, I believe there is a case for overwhelming negligence on the part of all parties. The dishonesty and legal manipulation utilised to escape accountability is gob smacking. It will be a rare politician who can show the back bone and integrity to make a stand and start protecting consumers and their families risking their life savings attempting to provide shelter and security for their loved ones. Neither politicians or this industry are apparently interested or accountable for their actions.

  2. Pam

    A very interesting article David, and we clearly have some entrenched practices that must be deconstructed for any change to occur. VAGO and the voices of the many damaged consumers illustrate there is no justification for confidence in the Victorian Building Industry, and possibly more widely. Clearly we need leadership by governments to rectify the mess. Government could be greatly aided by the implementation of disruptive technologies to cut across the consortia of industry cultures to cut red tape, not to reduce regulation, but to better manage and regulate projects. The wide distribution of industry governance and regulation reflects entrenched cultures rather than a progressive industry that can implement world’s best practice let alone effective governance and regulation. For change to occur, it will require good people across the industry to step forward and recognise that change will ultimately good for all and for confidence to be restored.

  3. Dr Hans

    Hello David,
    It is good to see that you are still around (after NPH) and writing about our construction deficiencies. I am currently writing a large paper on testing (mainly on stone) to try to expose the numerous unintelligent procedures and interpretations. But no-one listens and no-one really cares. They continue to make the same mistakes as always and don't want to (or don't know how) to change or rectify the problems.

  4. Bruce Christopher

    Well said David. Thanks for the continued efforts to expose mass ignorance on this issue. Unfortunately it seems that some traumatic failures from the effects of this trend over the next decade or so will be what it takes to finally stop the rot and ensure compliant, safe and fit for purpose (including reasonable building life expectations). Hopefully well before the quality operators give up through lack of support for what they offer.

  5. Peter Wolfe

    I have worked in construction for 45 years in 13 countries including Australia. My title was Quality Manager or Welding Engineer and I operated QC not QA which is a paperwork exercise rather than examining the physical work. If the client writes a comprehensive contract and is not satisfied with the quality he can complain or withhold payment. Government intervention is not likely to help because many of their own projects overrun.

    • Pam

      Interesting to hear a quality perspective.. From an innovation and cultural change perspective, I know we can overcome entrenched diverse interests with better systems . The present self serving towers of influence could be better drawn together for effective and more efficient regulation. This must be led by government and not just for the sake of the industry overall, but for the Australian consumers who are so badly damaged and short changed presently, let alone the workers. Where is the feedback loop in this industry for quality? What is the point of quality standards if they are not regulated and outcomes end for those who can afford in the courts alone? The frontloaded unfair contracts common in domestic building provide little influence? Where is the regulation and where are any corrective consequences and more importantly where is the learning and innovation for world best practice?

    • Jenna

      Complain? Withhold Payment? Re a domestic building ie. my sole Home, All life -savings at end of work life. Builder selling under home building company name, All work Passed, given Occupancy Certificate by Building Surveyor on local Council recommended list. turns out not registered. With Building surveyors privatised, inspecting the work of Who They're paid by. Discovered after, to not have required structural engineering & proper foundations on steep site, recommended minimum repair bill – $250,000. Depressed, anxious, lost work, on disability pension. Hung up on by building Commission. NOT ONE CENT from Building Warranty Insurance, Fraud Ignored by Consumer Affairs & Victorian Police, & directed to VCAT, All action agreed to by Lawyers I hired. Fraudster given Full Rights in VCAT! Delayed FOUR YEARS, scared for saftey, forced, TOLD by ex-building industry lawyer Mediator to agree to inadequate Settlement & sign confidentiality agreement. Discovered Building contracts themselves totally weighted towards Builders interests! Building Practitioner's Board minor fines & NOT de-registering chronically bad builders NO CONSUMER REPRESENTATION Building 'Authorities' for builders ONLY

  6. Ing. Kelvin Lillingstone-Hall

    Looks like a well thought out and comprehensive article. My first thought is what role can Professional Engineers play to help get the Australian construction industry back on track?

  7. Clive Davies

    One problem we have is the growth in Liquidated Damages if a contractor is late in delivering a project. Often the Client's initial idea of a delivery schedule is unrealistic and the Contractor delivers a construction program that will suit the contract requirements and knows that he cannot meet, hoping to claw extra time with extension of time claims. What happens is the Contractor cuts corners to deliver on time and there you have poor quality product delivered on-time that can be opened for business in line with financial investment requirements.
    The people setting the financial goals are always looking for a quicker return on their money and do not understand how long and complex some of these projects take nor do they understand the impact on quality by forcing a quicker delivery with punitive damages. They always think that suppliers are desperate to sell their products, whereas in actual fact, many of the best supplier companies around the world have full order books. Consequently a lot of sub-standard equipment is installed into construction projects to satisfy the misguided project financial investment requirements

  8. Angel Ioannou

    Thanks David for highlighting further the issues around quality and durability/longevity in construction.

    It is frightening that public funds are sometimes spent without full oversight or ensuring that the infrastructure being publicly funded is not up to standard. Your article and some responses already highlight some of the causes and frameworks for reducing or removing the issues.

    Aside Oz we only have to look at NZ and new legislation/regulations regarding 'leaky buildings' to see an example of how bad it can get and the following expense to rectify, if we don't act sooner to stem these types of bad outcomes.

    The elements of design and quality of materials and quality of construction can never be 'shortcut-ted'

  9. Geoff Fletcher

    I have heard it said that this is a balancing act of regulation vs productivity. I think not – production which is sub-standard is thus defective, & cannot be counted as productivity. This gets worse if the specification itself is lacking. If the industry can't get is its own house in order re delivering what it contracts to do & damages the public or market sectors as a result then expect the Regulators to respond. I like the axiom that "You get get not what you EXpect but what you INspect."

  10. Karen

    A thought provoking article.
    I am often caught lamenting the quality of work that I inspect and regularly end up designing on-the-fly on site due to contractors using structural plans as guidelines (if read at all), rather than instructions. I usually find that a contractor does not understand the "why" a building goes together the way it does, and seems to think that because they can not pull something apart that it is 'good enough'. Building contractors also do not have the responsibility of quality – if something goes wrong, the building certifier or engineer receives all the blame as they signed the final documentation.
    The industry is selling to clients on the promise of a product that is fast and cheap – the positive effects of both are immediate. Only in time, is the pain from a lack of quality felt, and rectification becomes a long and expensive process. It has recently surprised me to realise that most people will not seek out the original supplier when a defect occurs.
    Everyone needs to improve their expectations of quality, but with so many suppliers, in all aspects of building, the fear of losing market share keeps many repeating the same behaviours again and again.

  11. Kirsty Johns

    I think a good start to combat this would be a greater emphasis on using chartered engineers for design and inspection purposes, a system similar to the USA's Professional Engineer status. Unfortunately the unwillingness to invest in infrastructure means competition for work is high and likely to remain so, and that prices will be cut to achieve this. Within the design and construction industries this is leading to changes in methodologies, and reasonable and unreasonable cost cutting. Until the investment increases the cost cutting will become more and more unreasonable, and the issue will not go away.

    • Clive Davies

      I agree with Kirsty, but I would also suggest that at least ALL designs should be checked, signed off and certified by a Chartered Engineer of the correct discipline. That would stop a lot of sloppy engineering designs hitting the street.

    • Kirsty Johns

      Agreed, Clive. This is why I don't like the RPEQ system – to be RPEQ you have to be chartered, why not just specify that requirement, rather than imposing another one on top.

  12. Lachlan McLean

    Hi Kirsty – You do NOT have to be previously EA chartered to be successfully RPEQ assessed. The assessed professional competency standard required by the Board is however similar. As it stands the long running RPEQ system see's more bad engineers being held to account in Queensland for poor performance. I don't have a problem with this.

  13. David Kuhnert

    All I can say is SPOT ON & don`t ask the government to fit it , look at its record B R B , BSA , Q B C C , have they got it right ? I doubt it . It will take a concerted effort by many people in the construction industry like David . I believe in a bit more carrot than stick . As for stick , it should be more education and less fines . I can hear all the industry groups squeal , we need more swill ( money ) in the trough , bring out more fines . There is a limit . Regards David Kuhnert.

  14. Ian Childs

    Well written and well founded article David.
    Much of the issues that I see are not with the NCC or SA deficiencies but with the education of those who fail to grasp the real intent of those codes in their design and installation.
    It is imperative that our designers and installers are committed to their professional development.
    A good example of the need for refreshment is the 25m rule, Where our competitive developers make the economic decision to construct 24.9m height buildings. As most of our Fire & Rescue Services are not equipped with ladders which can attain this height from hardstand, surely anything exceeding the rescue height should be covered by fire suppression systems installed such as AS2118.4. This would mean that staggered buildings without provisions for a ladder truck below should be sprinkler protected throughout.
    Much of the problem issues in NSW also appear to be the Public Buildings "prescribed person" exemptions and those constructing appear to have their own manipulated interpretation of the NCC to justify themselves and whilst some certifiers identify defects and deficiencies, these are never followed through and eventually have to be remedied by others.

  15. L. Dave O'Toole

    Another element contributing to poor construction outcomes is the result of poor construction coordination. It seems the engineers (us) expect the 'Builder' to coordinate the mech & elect services, the architectural requirements with the structural construction drawings) whereas the 'Builder' believes, at the start of each project, that the engineering consultants have done most of this during the design development stage. Nothing could be further from the truth. The low professional fees paid to engineering consultants (as a result of forced competition) prohibit this. The result is an endless RFI stream from the builder (on small jobs in the hundreds – on large projects in the thousands) to the consultants during the construction phase – and experience has shown that trying to coordinate the works (on the fly, so to speak) during the construction phase results in Multiple errors & delays, poor quality & sub-standard work outcomes. Developers & Project Managers take note – You can pay the consultants more up front to coordinate the works (on paper) and get a better outcome in terms of schedule, quality, reduced risks and costs or you will pay later, because poor quality

  16. Clive Davies

    It is the responsibility of the Client to appoint an Interface Engineer. All these problems can be solved and mismatches be a thing of the past if there is a multi-disciplened Interface Manager/Engineer/Co-ordinator who chairs regular meetings.It works overseas, but not adopted here. Unfortunately the clients do not understand their responsibilities.

  17. Michael Kelly

    Client desire for faster, cheaper delivery may be part of the problem, but the client cannot accept less than the "regulated" minimum standard for critical parts of the structure, with or without an Interface Engineer. I think that role has a lot of merit, and balances the role of Project Manager on the delivery side . . . . provided, of course, that the Interface Manager isn't contracted to the lowest bidder as may happen on the delivery side.

  18. Paul Mason

    There is a huge problem out there in terms of construction quality and a lot of it stems from the fact that there are very few engineers around who are capable of distinguishing between good and bad.

    With the demise of the large public sector organisations' in-house capabilities, came the loss of the training grounds for young graduate engineers. I know from my own personal experience that I "learned my trade", NOT through my university degree, but by being mentored for many years by experienced engineers, on the job, designing and constructing high quality projects.

    Tragically, it is now more than 20 years since young engineers had the opportunity to serve a proper engineering "apprenticeship" and we are now seeing the very obvious results.

    Currently, Professional Australia is running a campaign to try and convince our decision-makers that Australia's infrastructure industry is in trouble and needs a boost in knowledge and capabilities. The only way for this succeed is for as many engineers as possible to "get on board".

    • Hugh Hyland

      I couldn't agree more with Paul. Thirty years ago around 80% of engineers worked in governments and were mentored well by by long serving seniors in practical and real engineering works. That's all been dismantled.