An inquiry isn’t going to fix Australia’s broken construction sector

In the wake of the UK’s Grenfell fire scandal, there have been multiple calls for inquiries and audits of buildings across Australia that may contain flammable aluminium panelling.

However, an inquiry has been running since 23 June 2015. The outrage associated with Melbourne’s Lacrosse fire sparked the non-conforming building products inquiry. The inquiry’s terms of reference were altered on 13 October 2016. More outrage – asbestos. The Senate Economics Committee dealing with this appears to have cranked back into action in January 2017, some months after last year’s election.

There is a lot going on in Canberra these days, but one would imagine the inquiry into non-conforming building materials and asbestos may have been a priority, given the outrage?

The construction industry is treated like an oily hinge

David Chandler

The construction industry in Australia is treated like an oily hinge. It always seems to be throwing up a variety of complex issues that politicians seem comfortable to avoid – inquiries into industrial lawlessness, security of payments, injuries, compliance and certification, home owner warranty insurance, declining productivity and out of control costs are not the dilemmas that a budding minister would wish to have portfolio responsibility for.

Hence the abandonment of ministers of construction and public works long ago. And, in most jurisdictions, the abandonment of public works agencies and virtually all the “informed buyer” capabilities within government. Better to outsource to industry and pay the price.

At a time when many governments worldwide are recognising the need to make their construction industries more competitive and productive in the face of forces reshaping the industry, Australian governments seem to be headed in the opposite direction.

Despite the efforts to achieve a more unified approach to modernising the industry up to 2013, this was dealt a significant blow soon after the election of the Coalition government led by Tony Abbott. The first COAG communique in December 2013 stated:

“The Commonwealth respects the States and Territories … are sovereign in their own sphere. They should be able to get on with delivering on their responsibilities, with appropriate accountability and without unnecessary interference from the Commonwealth.”

The Australian and New Zealand construction industries represent about three per cent of global construction turnover, which is expected to reach US$15 trillion (AU$19.8 trillion) by 2025. Some industries such as steel account for far less.

Increasing offshore procurement

The national accounts do not fully reflect the full scope or impact of the industry in the economy or on jobs. For example, forestry and wood products are accounted with fish. This is despite the growing trade deficit in value added wood products such as Cross Laminated Timber now exceeding $4 billion a year.

For Australia to turn around some of these business flows, it would take 20 years of determined forest policy and planting. That seems unlikely.

But, wood products are not the only construction input losing out to the growing trends to off-site-manufacture and offshore supply channels. Most of Australia’s large construction and engineering companies have dedicated offshore procurement offices. This momentum is not about to change.

The Victorian and South Australian governments are trying to salvage something from the scrapheap of the motor vehicle industry by trying to transfer advanced manufacturing capabilities into construction. The progress is slow and uncertain. These strategies lack any measurable purpose to demonstrate how a modern construction industry will deliver “more for less”.

For now, these strategies seem more about a glad-bag of research grants and vendor driven offerings that mostly avoid the rigour of a serious value proposition or business plans. There is no national approach to modernising the Australian construction industry.

A dysfunctional status quo at the root of non-conforming materials inquiry

At best the Australian construction industry is characterised by the sometimes-united federation of Australian states and territories, and the various industry associations who fight for the preservation of a dysfunctional status quo, which goes to the root of this inquiry.

It is no wonder that the public utterances in the case of events like the fires in Melbourne and more recently the UK are left to the more opportunistic and self-justifying spokespersons that the media are happy to deliver, along with graphic accounts in the evening news.

The reality is that the challenges confronting the issues of standards, compliance and certifications today are very complex. They need a very deep understanding of a construction industry that has been broken for a long time. The issues are systemic and go well beyond materials. They include non-compliant construction work and shoddy businesses. And they include unproductive work and procurement practices. They include governments and industry prepared to sweep serious issues and risks under the carpet.

Everyone I have spoken to is cynical about this inquiry being able to make a difference, as with any inquiry past. There is a lot of noise about the need to raise standards and lock down the borders to non-compliant and, dare it be said, also more competitive construction inputs – many better that our own.

Everyone knows that our construction procurement practices are outdated, and so are construction contracts that accommodate defects and the acceptance of non-compliant work. In fact, one major public client with a recurrent procurement running at $3 billion a year-plus told me they were going back to directly hiring clerks of work to try to arrest the poor quality of construction compliance on their projects. How about that for back to the future?

Australia’s compliance institutions are impotent

Australia’s domestic construction compliance institutions (both public and private) are impotent in trying to turn the industry around. Their efforts are inconsistent and continually dumbed down by pressure from noisy, influential advocates looking to improve efficiency and cut red-tape – code for less accountability and capitulation.

Everyone knows it, and no one expects this to change.

The current off-site manufacturing moves should be good for construction productivity, innovation, new jobs and quality assurance – but not on the current trajectory.

The domestic industry remains in denial of the deep transformation of business models and culture needed to be part of a digitised, industrialised and global industry where traceability, chains of custody and quality assurance will become the norm.

It is already possible for the level of construction impairment, on a project-by-project basis, to be identified. The impact of digitisation, the Internet of Things, big data and smart construction translating into smart buildings are reshaping how global construction supply chains will operate in only a few years from now.

Once the level of impairment, compliance and resilience of buildings occurs on an individual building basis this information will enable future insurance risk premiums to be set on a per building basis. This data will enable their ongoing maintenance compliance to be tracked and the risk beta for each building priced accordingly. It won’t take months to investigate buildings at risk – they will be known. This will then determine their quality and value when assessing lending by financial institutions.

Two options for the inquiry

The current Senate inquiry has two options. One is to take stock – to look at what must be done to enable the Australian construction industry to punch above its weight in a modern global construction industry – a market from which we already import as much as 30 per cent of all construction inputs today. It is the same focus that the Farmer Review into the UK’s industry applied in mapping what needed to be done to turn around its future.

The alternate is to allow the current noisy opportunists and conflicted self-interests to chart the ongoing demise of an industry that is fundamental to the nation-building challenges that a modern industry should be meeting. In doing so we should be very careful of “living in a glass house and throwing stones”.

This will not solve the cause of this inquiry. The government should make sure it runs this inquiry on more than ad-hoc reaction.

David Chandler is adjunct fellow and industry engagement lead at Western Sydney University’s Centre for Smart Modern Construction.

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Comments

6 Responses to “An inquiry isn’t going to fix Australia’s broken construction sector”

  • Anne Paten says:

    You are correct, David. Everyone knows that the industry is totally non-compliant. There is no enforcement of any regulations, no punishment or penalties – hence no deterrence to offending! All in building can do as they please – AND THEY DO! Because you can make lots of money following the ‘profits over people’ mantra. The only losers are all of the Australian people who pay for all our non-compliant, defective and hazardous buildings – and live, work and reside in them. Vic Minister Wynne commented after the London Grenfell Tower inferno that it could not happen here. It did in Wynne’s own Melbourne in November 2014! It was the Lacrosse apartment building bonfire – hardly a forgettable event for the Minister in ‘control’ – or not – of ‘BUILDING’!

    More misleading, Wynne said we have the “strongest building codes of any first world country”! More than ludicrous given we live in a third world country as regards our buildings – and with each passing year our building stock more appalling, more dangerous and more deadly.

    This is the very problem – the ‘Wynnes’ of our world making denials to help the buddies in business and pretend to the Australian public all is AOK. We at the Victorian Building Action Group have been trying to be heard for 10 years – but we are locked out, ignored and discounted – made invisible! Just as all those who tried for years in London to be heard but were ignored – their fiery fears realized on 14 June this year.

    Of course it is because we the ‘people’ do not count. Our role is to serve business and their partners in public office. We, and our lives, are worth nothing!

    Anne Paten
    President
    Victorian Building Action Group

    • Hi Anne,
      one of my organisation’s strategic focus areas is compliance and we often wonder how to engage with consumers. Its great to learn about the existence of the VBAG and Id like to find out more. We are focused on the air conditioning industry and there is a new Australian Standard being developed in relation to residential air conditioning sizing, installation etc. We believe its a critical piece of work to increase consumer protection in relation to this topic.
      Regards,
      Phil

  • Our 2014 National Energy Efficient Buildings Project report, commissioned by South Australia but on behalf of all Australian governments, documented non-compliance, product substitution and uninterested regulators Australia-wide. We made 47 detailed and carefully considered recommendations. Three years later, no government has responded to the report, let alone implemented the recommendations, and – so far as I can ascertain – no state is undertaking compliance audits. As one stakeholder said, “no one cares and no one’s looking”. Until the next fire, perhaps?

    Our focus was energy performance, not fire safety, but what we documented as a broken system – in such a system, poor outcomes must be expected. In the meantime, who’s accepting legal liability for all the non-compliant building work?

  • Tim Renouf says:

    David Chandler’s article is excellent.

    “current noisy opportunists and conflicted self-interests to chart the ongoing demise of an industry”. What a statement! So many Standards have stacked committees full of vested commercial interests. It’s a well known fact.

    Three industries were identified in the Interim Report from the 2015-16 Senate Inquiry – Non Conforming Building Products (the prior Inquiry, now extended in 2017). Glazing, Insulation & Steel industries.

    There are no doubt countless more.

    With Glazing, an impact test method was contested at the 2016 Senate Inquiry, Feb 2016 Hearing in Melbourne, where Industry and Standards Australia got an absolute pounding in cross-examination. I witnessed it. A glazing impact test method was shown to be wrong and threatened the safety of the public. Dangerous shards of glass were handed out to all Senators. Senator John Madigan successfully exposed the fact there was no Consumer representation body on the glazing standards committee. That’s really interesting in light of the YOUTUBE video of last week, where the glass balconies of a Carlton apartment building were spontaneously shattering and sending shards of glass to the pavement below. By a fluke, nobody got injured or killed.

    Standards Australia needs a radical overhaul to ensure better balanced technical committees, reveal the names of all Committee participants on their website, and be more transparent to permit greater public input into Standards development at key stages. All this was written in recommendations by the Productivity Commission in 2006. Currently there is one Public Comment Phase in Standards. This is a wrong when a Standard is highly complex. Coming from the Insulation Industry, I have repeatedly asked Standards to have FRONT and REAR end Public Comment Phases. Of course they are completely disinterested, because Standards are written by Industry, written for Industy’s benefit, not the Public Interest.

    Another key failing of Standards (for those who don’t know) is that a high percentage of the full voting members of committees never participate in the Working Committees. And YES, they then get to finally vote, when they have no idea or understanding of what is written in the document they vote on. Get the picture? The whole apparatus opens itself up to be a closed shop system run by vested interests – just a phone call to get all the lazy (and often completely irrelevant) committees members to cast a vote in the affirmative.

    A guiding light. All building products must be demonstrated to be “fit for purpose” under Australian conditions. Stop using computer modeling and inappropriate testing methods, as what happens in the insulation industry. Then the adopted standards in the NCC must be correctly policed.

    To make massive changes happen, maybe a Royal Commission is warranted for both Standards Australia and the key regulatory body that references the NCC. But virtually all Inquiries and Judicial Inquiries are open to “external influences”. How convenient for all those vested interests.

  • David says:

    What is going to provoke a meaningful reaction to the ills of the construction industry? Do we guess that no one dares to ask the question because they fear the answer…take note of Lacrosse and Grenfell…professional negligence or incompetence that may not be covered by a P.I.policy?
    On his election, Malcolm Turnbull talked about “disruption” but that word is no longer in the vocabulary. Why not?
    We are in a fast changing world and we must embrace, adjust or be left behind. Whatever, certain standards must be maintained and one is accountability. White collar workers are rewarded for taking greater responsibility and so they should be but it’s not a free lunch. With responsibility comes accountability and therein is the problem.
    Don’t duck the issue because you don’t know the answer. Ask, investigate,research,find out and report.And that spells progress!

  • John Smolders says:

    Couldn’t agree with you more David. It is about time our government stop dilly dallying, consult with industry professionals and be proactive. The issues you mention have been known by our elected representatives and regulators for years. Alas it has not been a priority for them!

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