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Building crisis: we need a joined up functional system

Building crisis: we need a joined up functional system

The traditional professional, trade and governance demarcations in construction are no longer relevant. They are dysfunctional and there are too many cracks that can no longer be papered over.

The battle lines between construction professions is destructive and self-serving. These battle lines are embedded in archaic approaches to organising and performing construction. They are reinforced and mystified in our education institutions. 

These battle lines provide sustenance to a plethora of industry associations and legal advisors who feed off the systemic cracks that are evidenced in projects like Lacrosse in Melbourne and Opal in Sydney. These projects display the symptoms of construction’s problems not their cause. 

Building Confidence co-author Bronwyn Weir said:

The construction industry is equally accountable as regulators. They should be hanging their heads in shame.” 

“..Without prescribed change including greater registration of practitioners, better design documentation and more compliance, more apartment buyers would be left with problem buildings and little way to fix them.

It’s time to look at the industry’s demarcation lines.

Over the past few months, reports and judgements into these projects have drawn many narrow and often self-serving comments. Others evidence the professional snobbery that endures in an industry that is still operating in last century mode. 

Two of the most pointed comments offered was that “consumers had more rights if they purchased a toaster than an apartment.”

And another:  “Funny how the clattering consultants have gone somewhat quiet.”

And, “So shocking is the Lacrosse judgement to architects that the national president of the Australian Institute of Architects suggested in an email to members that they might need to seek counselling”.

Indeed. And, in an Australian Institute of Building circular said:

This is the first case in Australia brought against a member’s company, in relation to aluminium composite panels (ACPs), VCAT apportioned zero costs directly to the builder. 

In the AIB’s mind the Lacrosse non-compliance and consequences were not their members’.

The AIA summarised the Lacrosse professional ramifications in their circular. 

They said:

Following the fire at the Lacrosse building, the Victorian Building Authority referred the building surveyor, fire engineer and builder for disciplinary action by the Building Practitioners Board. The architect was referred to the Architects Registration Board of Victoria. The matter was reviewed by two members of the board who found “the evidence before the Board did not support the allegation of professional misconduct as to warrant referral to the [Architects] Tribunal.” 

So, in AIA’s mind, it was not the architects’.

Engineers Australia weighed in after the Opal Towers independent engineering report with the conclusion that

The report states that if the first three recommendations (in the report), including an engineers’ registration system, were in place it, “would have significantly reduced the likelihood of, or avoided, the Opal Tower damage.” 

One wonders what the Opal Towers engineers WSP who were engaged for design and supervision by Icon would have to say about that conclusion. 

EA went on to say that: 

At the moment, anybody can call themselves an engineer. Thankfully most people working are professional and have the right skills and competence, but there’s no guarantee of that.” 

So, in EA’s mind, if building ministers and their regulators had done their job, all would have been well.

And in the background, the insurance companies factor the costs of all this dysfunction by increasing premiums or excluding covers. This dysfunctional model is unsustainable.

In a linked article, EA noted that it had provided a previous Engineers Australia report from three years ago around NSW’s building certification system: 

The NSW regulators appear not to have acted on this. The report found 85 per cent of new strata units were defective on completion and the system in NSW had “broken down”. Bronwyn Weir’s tip of the iceberg.

None of this makes any sense. It all sounds like a cacophony of – ‘Sir, it’s them, not me!’

There are two key areas that construction stakeholders should reflect on at this juncture:

  • What does the VCAT judgement really demonstrate?
  • What are the key elements of a construction bargain?

The VCAT judgement – understanding cause before symptom

There needs to be a greater understanding of construction contracts and their purpose.

The conclusion that a design and construct (D&C) contractor can be all but exonerated, as it seems in Lacrosse is in my view confounding. Under the standard forms of D&C contracts there are some fundamental warranties. And ignorance or reliance on third parties is not necessarily a defence. Under the Australian Standard AS 4300 these warranties include that the contractor:

  • executing and completing the work under the contract in accordance with the contract, shall at all times be suitably qualified and experienced and shall exercise due skill and care and diligence in the execution and completion of the work under the contract
  • shall engage and retain the consultants identified in the contractor’s tender that are suitably qualified and experienced. 
  • will have carefully examined the preliminary design included in the client’s project requirements and that such preliminary design is suitable, appropriate and adequate for the purposes stated in the clients project requirements. 
  • shall execute and complete the contractor’s design obligations and accept (where elected) the novation of and retain the client’s former consultants.
  • shall execute and complete the work under the contract in accordance with the design documentation so the Works, when completed shall be:  fit for their intended purpose, and comply with all of the requirements of the Contract and all legislative requirements. And, that these warranties are unaffected by design, by or on behalf of the client and included in the preliminary design and included in the clients requirements, the novation of any prior contract between the client and a consultant and thereafter retained by that consultant in connection with the work under the contract, including any review or comment or direction on the design documents by the superintendent and any variation.
  • Under the contractor’s responsibilities, the contractor shall not subcontract any part of the works without the written approval of the superintendent. 
  • Approval to subcontract shall not relieve the contractor from any liability or obligation under the contract. 
  • Except where the contract otherwise provides, the contractor shall be liable to the client for the acts and omissions of subcontractors and employees and agents of the subcontractors as if they were acts and omissions of the contractor. 
  • Claims for payment (for the works) shall include the value of the work carried out by the contractor in the performance of the contract to that time. 
  • The final payment certificate shall be evidence that the works have been completed in accordance with the contract – except in the case of fraud, dishonesty or fraudulent concealment relating to work performed under the contract.

Is the implication here, that the contractor is not entitled to claim for non-compliant work? 

Is there a further question that asks, ‘is ignorance of non-compliance a defence?’ 

Are improper claims for payment or of certifications given, in fact fraudulent? 

Given the warranties offered by the contractor to the client as described above, is a D&C contractor more culpable for a share of damages than those awarded in the Lacrosse judgement? 

His Honour Judge Woodward set out in his ruling:

Since the introduction of legislation allowing for the apportionment of damage. Courts readily recognise that there are concurrent (wrongs) and, in the same vein, the New South Wales Court of Appeal in Gaskin versus Ollerenshaw used the example of individual grains of sand put in a balance against a one-gram weight. While noting that each individual grain, on a purely common-sense assessment would not be sufficient to tip the balance, the Court of Appeal said that: “Each grain of sand may constitute a material contribution to the tipping of the balance.

His Honour pointed out that his judgement should not automatically set the precedent for others. 

Nor have there been any early mentions of appeal by the parties. 

One would assume that the parties will be turning to their respective professional indemnity insurers in regard to any appeal and for cover of the costs awarded. 

Perhaps the judgement brings an efficient closure of this matter, given its profile and potential for further litigation expense. In the Lacrosse matter the developer declared insolvency and has since been would up. 

Would a surviving developer as in the case of the Opal apartments and possibly others look to their D&C contractor more closely in the context of warranties given, claims made, and certifications provided under the contract if the Opal apartment owners seek wider damages than those considered in the Lacrosse judgement? Only the sands of time will tell.

And considering the matters discussed to this juncture, will regulators look more carefully at the root cause of the industry’s current capability crisis through a wider lens than either the Lacrosse judgement or the Opal apartments engineering reports, shed only partial light on? 

Will the regulators pause and consider the enquiry proposed in the article in The Fifth Estate that called for 20 case study projects to be investigated (with proposed data sources) to inform what they might do to rebuild confidence in what is demonstrably a broken industry.

A construction bargain – the demarcations between the professions seem to miss this 

At some point in the construction procurement chain, someone has to make it clear what the client wants. 

This will include project requirements and design obligations. At some point in the process a single reference point must be found that makes these matters clear.

Once established, a contract will need to be entered into in order to realise a project or part thereof. There are a number of basic choices that clients have to procure a project.  They typically include:

  • A Build Only contract where the client provides the complete project requirements and the completed designs. This procurement envisions an agent of the client or lead designer taking single point responsibility for organising these inputs to enable a tender and subsequently a contracted performance, or
  • A design and construction contract where the client provides only partially developed designs to contractors for pricing, with the operational obligations set out above. Here the contractor assumes the single point responsibility for what follows.

There are variations of these principle procurement models such as construction management where there are justifying factors such as time pressures, project complexity or available resources would not permit a project to be delivered as described above. 

Here the choices typically involve a guaranteed maximum fee or price. The project then becomes an open book where the project essentially becomes cost plus. Only clients with a suitable risk appetite and financial backing should consider this delivery choice.

For a range of reasons, the edges between how the main contract delivery choices play out become blurred. A principle reason for this is that none of the professions seems able to take the lead to provide the single point accountability for adequate project requirements and design obligations. 

Client project managers and their lawyers attempt to overcome these inadequacies. The mix becomes more challenging in the case of self-performing developer builders as described in the FifthEstate’s recent article addressing the way construction industry clients procure buildings. 

It is at these inflection points that any enquirer into the root cause of the construction industry’s reported shortcomings, will be most observable.

Despite the promises of modern design tools such as BIM and other digital project integration technologies it is clear that the professions of construction are coming up short with the fundamental skills to contribute in more meaningful ways to a smarter, modern industry. 

Construction design professionals and constructors need better skills and applied experience to successfully lead modern projects. No more so than the skills needed to competently lead design management either for BO or D&C contracts. 

And it is clear that few professionals have the necessary skills to lead projects involving increasing off-site manufactures and the design for manufacture and assembly (DfMA) procurement process.

There are many insights to be shared about the transforming nature of the global building and construction industry. These point to the disruptions that the surviving professions, contractors and trades will need to navigate as the traditional edges between what they have done in the past and what they will be doing in the future blend. One of the more instructive insights into this is Rex Miller’s, The Commercial Real-estate Revolution. 

Despite all of the calls for a more collaborative industry, never lose sight of the fact that someone still has to sign a construction contract to make a project happen. For now, a builder.

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Summary

There is little value in the obvious rock-throwing reported at the start of this article. There will be no simple Band-Aid fixes to traditional regulatory processes. The Australian construction industry is nearly 20-years into the Construction 4.0 era and is still operating in last century mode. 

The culture at every level is wrong. It is risk adverse and unaccountable. 

The education model that prepares construction professionals and trades has failed long ago. Redressing this will not occur by amping up an effort to backfill business as usual. There are new and almost ready technologies that can offer trustworthy chains of custody to assure construction customers that their buildings are what they profess. 

These chains of custody can underpin the systemic changes that are needed to make more resilient and sustainable buildings. They will redefine what has been tolerated from a broken industry.

Hopefully the next governments at state and federal levels will see the way ahead and lead the exciting transformation of an industry ripe for modernisation. That leadership will then be able to report to the public that Australia’s construction past, has turned the corner.

David Chandler is a construction industry practitioner and an adjunct professor at Western Sydney University.


Spinifex is an opinion column open to all, so called because it’s at the “spiky” end of sustainability. Spinifex may be inconvenient or annoying at times, but in fact, it’s highly resilient in a hostile environment and essential to nurturing biodiversity and holding the topsoil together. If you would like to contribute, we require 700+ words. For a more detailed brief and style guide please email editorial@thefifthestate.com.au

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Comments

2 Responses to “Building crisis: we need a joined up functional system”

  • Chris Tourogiannis says:

    I am dumbfounded that a common denominator has not been identified. In my opinion we need to ban the Design and Construct contract. A D&C contract means that the architect’s preliminary documentation lacks detail, an engineer cannot design the structure or the services. The client provides a bucket of money and the builder somewhere down the bottom of the bucket must make a profit. The Building Surveyor is approving a set of documentation with little or no detail. Somehow this project will be completed within time and budget and more importantly comply with the regulations. Who are we kidding?
    The solution is simple. Ban the D&C Contract. Developers will pay a little more, the community will pay anyway, but at least people’s lives and livelihood are not at risk.

  • In many ways this article is far too polite! In my opinion it has been evident – glaringly evident – for a long time that our university education model and our VET model are outmoded and hidebound by a strange mixture of learnt practice, burocratic regulation at all levels from professional bodies, through government and into the institutions of learning that make change well nigh impossible other than by stealth and gorilla tactics: not a satisfactory or sustainable process. The construction and design industries need to recognize their points of intersection, identify areas for collaboration and importantly identify, respect and make an effort to understand the nature of contributions [or the culture of] of each member of the “team”: making buildings and places is not a singular autocratic process – it never has been however much some members of the process from client to architect to engineer to builder – would like to have it

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