A house on a fish hook / Risks and negative sides of buying a house concept

NSW Building Commissioner David Chandler is making promises for change in 2020 that he intends to keep.

By 2030 the NSW construction landscape will be very different, and it won’t much matter what the industry’s past gatekeepers think they can do to maintain the status quo. The forces driving this are different. Here are some reasons why:

  • Loss of confidence – Construction’s customers have lost confidence in both the industry’s public and private institutions
  • Hype – Promises of how new legislation, the latest construction technologies and changing construction methods would change the game have underdelivered
  • Global and digital forces – The influence of local jurisdictions has been permanently diminished by the changing forces of a global marketplace, smarter buildings and the digital economy
  • Educational failings – Outdated vocational and tertiary education models have failed to adapt to deliver a modern construction workforce. These short comings have been aided by professional bodies who have tolerated these indifferent offerings

The origins of many conversations about these issues have been well canvassed in The Fifth Estate, as the industry’s current crisis has unavoidably unfolded. Our industry, now entering the 20th year of the 21st century, is still self-facing and risk adverse. These conditions have contributed to a situation where risk has never been higher. The impact of this risk adversity has made the making of our built-world uncertain. It is time to rectify that uncertainty, but first a future landscape needs to be described.

Here is a map of how the legislation journey, construction tech and off-site manufacture has tracked over the last 20 years.

This conversation is around the challenge to define a medium-term NSW construction landscape for 2025 and beyond. This landscape must be measurably different. The key stakeholders will need to focus on what an end state should be like and set aside short-term self-interests in order to achieve this transformation.

Legislation is important but it is not the sole driver of change

The NSW Design and Building Practitioners Bill, which is still working its way through the state’s parliament, contains important new consumer facing commitments.

For example, the bill includes new duties of care for designers to declare that their designs are properly developed by qualified, accredited professionals in accordance with the Building Code of Australia.

The legislation also requires that at the completion of a project, builders produce as-built drawings and manuals and declare that construction has been performed in accordance with the declared designs as well as the Building Code of Australia.

It’s intended that both the designs and as-built records be available to customers and emergency responders through publicly viewable digital platforms.

These initiatives would position NSW ahead of all other states within the next two years.

Respected industry practitioner and commentator Ross Taylor recently pointed to the lack of readily available information for consumers as key to improvement in the industry. He said:

The Minister for Better Regulation introduced the Design and Building Practitioners Bill in October. It was strong legislation. Not perfect, but it hit the mark. It was sunk in the NSW Upper House. That leaves the consumer to make do with the meagre resources at hand. There is little information readily available for a new buyer. This remains the single most important barrier to real improvement in the industry.

Taylor’s full article is worth reading in The Sydney Morning Herald.

Achieving the full potential of any legislation in a modern society will require a number of complementary levers to be exercised. These days, most levers will involve sharing data, now enabled by the digital economy. Improved regulatory governance of any industry must pursue new collaborations between trustworthy public and private sector players.

There are many moving parts driving any industry and construction is no exception. And the days of one-size-fits-all industry governance and risk management is no longer viable.

In addition, it makes no sense to apply operational burdens on customer-facing players, who value their brand and offer longer term value propositions, as opposed to the risky, self-facing snatch and grab players that have mostly contributed to the construction crisis the industry now faces. Customers need transparent trustworthy insights to inform their investment choices.

New risk rating tools are underway

These days there are very able risk rating agencies that could work with public regulators to develop a powerful new breed of tools that will change the game.

This kind of result is outside the scope of local public jurisdictions as today’s key industry players span multiple market sectors and have varying value propositions that require clear analysis.

A recent article by McKinsey & Co provides some useful insights. In today’s world, common understanding about what an organisation is and who is part of an organisation are being upended.

This is a useful conversation in the context of building powerful new tools to help drive change and build certainty in an industry with a pressing urgency to lift its game.

The development of a risk rating tool for NSW developers, builders and certifiers is being tested. This tool will be deployed to help target the riskiest players and their projects going forward. In the interim, Ross Taylor makes four useful recommendations in his article.

Developing a future-fit regulatory capabilities and operational models

Regulators in the past have reacted to industry shortcomings by legislative patches and organisational bolt-ons. These are like the analogue practices of organisations yet to transform and embrace the modern tools available today.

The result is to seriously undermine their latent talent; the talent that has deep knowledge and in the case of the NSW regulatory platform, deep public interest. It would be impossible to rebuild these capabilities.

Overlaying them with a new governance regime would diminish their potential to adapt and do better using new tools and guidance. Throwing the baby out with the bathwater is not the answer.

Better Regulation and Innovation Minister, Kevin Anderson, recently outlined the NSW government’s endorsement of the state’s building confidence reform strategy to industry and customer advocates.

The government has been laying the foundations for a strategy to rebuild confidence and capability in the NSW construction industry for some time. The new e-planning portal will be an early enabler.

This capability is now ready to receive all future planning and design declarations. Local government will be closely involved as a growing collaboration enables bringing once disparate information onto a common platform occurs. The same for as-built construction documentation. The potential to link development consent and subsequent certifications references with developer, builder and certifier details creates powerful new risk tools.

Tools with potential to join up information such as planning, strata registration and insolvencies

These tools have the potential to apply a series of data validation and matching capabilities to join up elements such as planning consents, strata plan registrations and insolvencies with developer, builder and certifier histories.

Stage two of this data matching is anticipated to extend to consultants, registered training organisations and manufacturers.

In a test sample a developer was found to have paid-up capital of only $3, and a single director, who was also a director of
more than 20 other companies. In addition, there were payment defaults including an outstanding loan amount for $30 million.

Imagine a tool like this being able to join up all construction phases from development applications, coming strata plan registrations, settlements and past defaults.

Life for those habitual phoenixing players would become sharply more difficult.

Beyond these risk tools are those that can create assurance of supply chain trustworthiness and certification.

By 2025, it should be possible to provide a high level of compliance and resilience confidence for new buildings.

This will further reinforce the ability of customers to make more informed choices and for insurers and financiers to consider new products such as the possibility of 10-year insurance for buildings made by the least risky players may be offered.

These developments would open up an amazing field of new business innovations and customer facing services.

It is inevitable that increasing urban density will prevail. There will be both high-rise and low-density models of density.

Both will involve increasing scale and complexity of privately-owned infrastructure. A modern regulator is duty-bound to be forward-looking and facilitate governance and services that embrace the best options for public and private sector inputs.

Those who reform their business value propositions early to become longer-term, customer-facing players will surely thrive over their shorter-term self-facing counterparts.

No need to license developers

In this context, there will be no need to license developers. The forces outlined above will be more than enough to make it clear that the same old game is coming to an end. The clear message in the NSW construction industry will be “build it right or be accountable”.

The future for industry advocates and professional bodies

In a global, digital and customer-facing market place the relevance of traditional industry bodies will be challenged.

The edges between traditional organisations and those that represent them are blurring.

In the NSW context this will require reframing the role of industry advocacy and representation.

Other industries are well into this journey. Industries like defence, mobility, health services and education are looking to what their future eco-systems will look like in just a few years from now. Similar transformations will certainly play out in the construction industry by 2030.

Imagining and understanding the essential sovereign capabilities that the makers and operators of NSW’s built world need, will be the task of special working groups to be appointed by Minister Anderson and the Building Commissioner in 2020. These working groups will have 2023, 2025 and 2030 outlooks.

For now, the challenge for those organisations that envisage expanded offerings and relevance will be what they propose to bring to the table.

Those that have an enduring belief in business as usual will need to think again.

The NSW Design and Building Practitioners Bill calls out the need for properly qualified and accredited players to perform the making of the state’s buildings.

Initially, this will be high rise residential, as described by the minister in his second reading speech introducing the new bill. Other classes of construction will follow over the next few years.

The ultimate changes will be systemic and beneficial.

Those who influence the capabilities and accountabilities of the key players will need to be clear of their own value propositions and practices.

Those who claim public interest as part of their industry advocacy function will need authentic, transparent credentials. These credentials will need to be relevant across the global marketplace in which the industry transacts. They will need to enable the trustworthy making, operation and maintenance of the existing and yet to be delivered in the built world. Most will be challenged by the barriers that have historically existed between the professions and internal power struggles.

All will be challenged in re-defining how they engage with traditional education institutions and how they accredit their programs.

All will need to embrace the shaping of multi-skilled micro-credentialing that will enable the state’s workforce (both technical and professional) to enter and stay-in a rapidly changing sector. Driving an adaptive learning culture across the state’s construction related workforce will most likely require over 75,000 new entrants and the reskilling of a similar number of existing workers to occur by 2030.

Re-branding a more confident and respected industry will be a centrepiece to this endeavour if the number of new players needed to underpin its future are to be attracted.

The role of the Professional Standards Council (PSC) should have an increasing importance in helping to develop capable, mature and ethical industry advocacy and representative organisations. It is pleasing that a number of existing industry associations have already sensed these winds of change. A relevant seat at the table in reshaping the NSW construction industry’s future will require a rethink for some, who have yet to separate the club from practice.

The link here to the benefits of the PSC Professions’ conversation is a useful pointer. This includes customer advocates.

Unanimous industry and customer advocacy support

The NSW construction industry has seemingly arrived at a unique moment in time. The mood is one of “let’s not waste this crisis”. It is also one of “let’s not waste this opportunity” to rebuild confidence in our industry and make the future one of inspiration and attraction to tomorrow’s entrants.

There is universal enthusiasm to shake out the risky players, who have become a contagion to the industry’s public standing. There is a desire to see a regulatory framework to support this, where the best players have privileges that are rightfully earned and not burdened with one-size-fits-all constraints. There is acknowledgment that these are long overdue reforms and there is a unanimous desire to get it done.

There is a view towards a more trustworthy way forward, accepting that all of the pieces and parts that will make up the final mosaic cannot be fully coloured before the journey starts. This seems to be a fair summary of the conversation to this point.

David Chandler OAM BSc Build (UNSW) is the NSW Building Commissioner. Contact the office of the NSW Building Commissioner.

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