Substandard construction work has been identified by the University of New South Wales in 85 per cent of apartment buildings built since 2000.
The New South Wales Government wants to impose a new two per cent levy on construction on all new developments over three storeys, with money from the levy helping to pay for rectification works to proven defects by the developer.
The cost of this levy will be passed down the line from developer to builder to subcontractor. The subcontractors are the ones this levy will have the most impact on, as it will add another layer administration, compliance and cost. In such a competitive low margin sector, there will be a great deal of commercial pressure applied by developers and builders for the subcontractor to absorb it.
In commercial construction, subcontractors already provide the principal contractor, or builder, with retentions of 2.5 to five per cent of the cost of the contracted works in the form of either cash or by bank guarantees. These retentions are held as security during the construction period and then for 12 months after the practical completion date. The subcontractors also provide very comprehensive, in some cases very onerous, warranties conditions up to 25 years.
The proposed scheme by Government may possibly be another administrative disaster. You only need to speak with people who have battled through claims with the Home Warranty insurance scheme to understand how dysfunctional that process is.
I’m skeptical of the scheme, as I believe there are bigger issues at play such as the decreasing support by Government for effective trade training, TAFE funding and ineffective Government enforcement of BCA and Australian Standards.
We have a multitude of Government agencies (the Department of Planning and Environment, The Building Professionals Board, WorkCover, Fair Trading, Australian Building and Construction Commissioner and others), a hoist of laws, legislation, codes, standards and industry bodies that could deal with construction quality standards. But where are they? I’m sure they have wonderful websites with amazing announcements and graphics, but what is needed are the boots on the ground - building inspectors and certifiers who are truly independent and not in the developer's pocket, WorkCover and BCA inspectors onsite advising and enforcing standards. There could be a lot done with existing resources if the mandate was there and the leadership empowered.
A new levy will impose an additional burden on business. Will it really deliver or will it be yet another convoluted scheme with sketchy outcomes for the consumer? Or could Government get back to basics and utilise exiting agencies and collaborate with industry bodies to advice, patrol and police industry?