The governance, trade and professional demarcations in construction industry appear not to be relevant anymore. They don’t function the way it was intended, and this current state of things can’t go on.

Construction professions seem to be engaged in some sort of war that is going on for a while. Every side participating is suffering consequences. The problem, according to experts, might be the archaic approach, taught in our education institutions and later embedded in the system.

Projects like Opal in Sydney and Lacrosse in Melbourne show that there are many problems that need to be solved. However, the two projects are the results of those problems, not their cause.

Bronwyn Weir, the co-author of Building Confidence, said that both the regulators and the construction industry should be equally accountable. Weir believes that more and more apartment buyers will be left with problems in their buildings if there is no change that leads to greater registration of practitioners.

Demarcation lines in the construction industry

Reports about the projects with problems have drawn many comments from different people. At the same time, the current state of the industry shows that it still works like it was in the last century. Two comments stood out, though: first being that someone who buys a toaster has more rights than someone who buys an apartment and second is that the consultants have become quiet.

Furthermore, someone pointed out to the email written by the president of the Australian Institute of Architects, which suggested that their members might need to seek counselling because of the Lacrosse judgement to architects. The Australian Institute of Building stated that the first case brought against a member’s company, in relation to aluminium composite panels cost the builder nothing.  

The AIB believes that their members are not guilty of issues in the Lacrosse case.

The AIA has a similar conclusion. In their circular, they published their point of view. They said that the two members of the Architects Registration Board of Victoria reviewed the Lacrosse building matter and came to the conclusion that there is not enough evidence to support the claim of professional misconduct by the architect.

In the independent report about the Opal Towers incident, Engineers Australia claimed that there was a possibility to avoid the damage if the first three recommendations were already in practice, including the engineers’ registration system. It would be interesting to hear comments of WSP engineers who worked on Opal Towers. EA added that the problem is that anyone can call themselves an engineer, but, luckily most of the people have the right skills and competence.

Another problem of this dysfunctional model is that the insurance companies are increasing premiums or excluding covers to cover the cost of all the dysfunction.

Engineers Australia published a report three years ago that stated that 85 per cent of all new strata units were defective as soon as they were completed. Furthermore, they found that the NSW system had broken down.

It appears that everyone is just transferring blame to someone else.

At the moment, the construction stakeholders should reflect on these two areas:

  • What is VCAT judgement about?
  • What are the most essential elements of a construction bargain?

Why we should try to understand the cause before consequences – the VCAT judgement

Experts agree that we need to understand better the construction contracts.

If you take the Lacrosse as an example, it seems that design and construct (D&C) contractor can’t be exonerated. The D&C contracts come with certain warranties, and you can’t base your defence on reliance or ignorance on third parties. The warranties under the Australian Standard AS 4300 state that the contractor:

  • Must find consultants that are experienced and qualified
  • Will execute the work stated in the contract with all skill, care and diligence
  • Will examine the design included in the project and check whether that design is adequate to the purpose stated by the client’s project requirements
  • Will execute the design obligations
  • Will complete the work under the contract, so that it fits for the intended purpose, comply with all the legislative requirements and requirements of the contract.
  • Will have to get written approval of the superintendent if they want to subcontract any part of the works
  • Will not be relived of obligations and liabilities if they get approval to subcontract
  • Will be liable to the client for the omissions and acts of the subcontractor and all the subcontractor’s employees unless the contract states otherwise
  • Will include the value of the work and performance of the contract in claims for payment
  • Will get the final payment certificate only if the works have been completed according to the contract

Does it look like the contractor is not entitled to claim for non-compliant work? Also, can ignorance of non-compliance be used as a defence? Can an improper claim for payment be considered as fraudulent?

His Honour Judge Woodward shared another point of view. In the Gaskin versus Ollerenshaw case, the ruling was that even though each grain of sand, measured against a one-gram weight is not enough to tip the scales, it still contributes to tipping the balance. However, His Honour said that this example should not be used for all cases.

It should be expected that the parties involved might turn to their insurers to cover any costs. Although, the developer in the Lacrosse case ended up declaring insolvency.

Should the developer of Opal apartments look up their D&C contractor, if the owners of those apartments seek more extensive damages?

The time has come to fix this broken industry. The regulators should look beyond the two cases in question (Lacrosse and Opal apartments). There was also an idea to investigate 20 case study projects to see what can be done to improve the state of the construction industry.

What are the demarcations missing?

It seems that in the construction procurement chain, they forgot what the client wants. This should include both design obligations and project requirements. There must be a single reference point so that everything can be transparent. There must be a contract for the project to be realised. These are the basic choices that clients have to choose to procure a project:

  • A design and construction contract – the client, provides a design that is only partially developed for the contractor to determine the pricing. In this case, the contractor assumes all the responsibility.
  • A build only contract – in this case, the client provides complete design and project requirements. The single responsibility is on the lead designer or an agent of the client.

There are also variations of these procurements, like the construction management where the available resources wouldn’t allow any of the two mentioned above or where there is time pressure to finish within the deadline. The client usually chooses based on the price or guaranteed fee.

Often the edges become blurred between the main contract delivery choices. The main reason for this is the fact that none of the professions doesn’t want to take single point accountability.

Modern design tools, like BIM and many other digital project technologies, promised to change the current situation. However, it seems that the industry itself fails to contribute in making it modern and smarter. To be able to lead modern projects, constructors and construction design professionals need to improve their skills. Furthermore, it is becoming obvious that only a few professionals have the skills to tackle challenges imposed by off-site manufacturing processes and the DFMA (design for manufacture and assembly) procurement process.

The global building and construction industry is always changing. The contractors and workers are moving away from their traditional roles and are going toward the future of the industry. They will have to learn new skills to be able to work on the construction sites of the future.