The message to NSW Developers and Builders is - become visibly trustworthy

Over the last two weeks we have presented to over 1000 NSW developers, constructors, certifiers, lawyers, insurers, financiers and consumers. It would be hard to imagine any in the industry missing our messaging. We want to get the industry's customers confident to do business with the trusted players. We are working with a growing group of developers and builders who have had enough of unbranded players operating in the shadows, doing so much damage. That is not to say that everyone else doesn't need to lift their game.

The key messages are;

• Developers are the people with most influence - they hire the designers, they appoint their builders and they appoint their certifiers. Developers are the single interface with the industry's customers. They make the promise to deliver quality, compliant buildings
• The NSW Building Regulator is now deploying powerful new digital and data analytics capabilities to proactively drive a more capable and compliant industry than ever before
• The full kit of new regulations that underpin these changes will be in place by July 2021
• The industry's professional associations need to become professional and take a shared responsibility to ensure their members are capable, ethical and accountable
• When all developers demand that designers and constructors use qualified practitioners the demand for good players will follow. If they continue to shop the lowest priced rogues who will only do what they can get away with, there will be consequences
• The cost of doing it right, is way cheaper than the cost of doing it again, as a number of developers and constructors are now finding in NSW - no apologies

Who should be concerned?

The pre-OC Audit program was enabled by the NSW Residential Apartment Buildings (Compliance and Enforcement Powers) Act on the 1st September 2020. This has already provided great evidence based insights into many of the fault lines that will attract priority attention from here on. The RAB Act as it is known provides important new powers to the regulator. Those who will now receive priority attention are unbranded developers who operate behind addresses of convenience such as accountant and lawyer offices. Many of these developers come and go at will, leaving behind some of the most poorly constructed buildings. They engage the lowest priced builders to undertake design and construct contracts where they lack the professional capability, ethics or intent other than testing what they can get away with. And, developers who have failed to give the 6 month notice of their intent to obtain an Occupation Certificate required by the RAB Act from September 2020.

There are a group of certifiers who have been complicit in enabling these players to carry on with business as usual. On current estimates approximately ~350 projects are due to reach an OC stage on a rolling 6-month basis in NSW. This could increase to +750 pa when the pre-2019 market returns. Its a great time to be sorting out the chaff. Our data analytics indicate that the 6 most risky, repeat offending certifiers act for 29-percent of all class 2 residential projects. Historically the regulator has had the challenge of dealing with risky certifiers after they have done their damage and consumers have been stuck having settled on buildings these certifiers have been complicit in creating. We are now able to deal with them, early.

Of course there have been calls by developers for us to name these certifiers so they may steer clear. Our response is that the industry knows who they are and using them is a choice. What's pleasing is that financiers have already started to move and ensure these players are not approved on projects for which they are the lender. And there are a group of first mover developers who want to be identified as trustworthy who are working with the Office of the NSW Building Commissioner (OBC) to map out what might be the criteria that will help set them apart from the chaff. Suddenly being a trustworthy brand has become a valuable asset. Most realise that this is not an overnight accomplishment - it takes 5 to 10 years. We fully expect that consumers will eventually be able to see a trustworthy tag for each development.

For now consumers will still need to check out the brand of the developer project that they may be considering buying an apartment off. Ask to see these developer's recent projects going back up to 6 years, and ask their owners to share their experiences.

An informal ratings methodology will be deployed to get this all rolling

It is often hard to work out which is the cart and which is the horse in driving change. Those following the NSW construction reform program will be aware of the weight that we place on industry taking the lead and creating market driven solutions. Ratings systems in our view are not for regulators. Last year we conducted a tender process to test the market for a viable ratings system. Its pleasing to see that Equifax has advanced their rating tool along the lines reported by the Australian Financial Review. Others will follow. To accelerate momentum to sort out the trusted from the unrated players we have proposed a way for developers and builders to commence this journey. In this context it will not be simply a case of white washing the past. Those players with legacy buildings with serious defects will be required to commit to rectifying residual serious defects in the common property of those buildings first. Again, it is pleasing to see that a number of players have put their hand up.

Here is what the criteria might look like. It is still a work in progress. The principle is that it is voluntary and for those who do not wish to participate they would simply remain unrated.

This is a work in progress and will be further reported in due course. It is envisaged that developments that might attract an A - to + rating will be those with a B-, B or B+ rating who have an independent Equifax like iCERT rating pointing to the developer's financial, governance and trading risk. Those envisaging this journey would need to start sooner than later. These sorts of transformations are unable to be achieved overnight. They take at least 2 to 3 years and they do not result from poaching the best players from others to solve the problem. Sorry. These sorts of transformations require repeat business processes and an embedded customer facing culture that embraces the brand that consumers should expect.

Data will be at the heart of modern regulator capability

This update reports on parts of the NSW construction industry reforms. We will be releasing ongoing reports that will be viewable in the Office of Building Commissioner newsletter. There will be much more on the new data matching capabilities of the regulator and examples of how these analytics have been applied such as the new licensing platform for designers and constructors that will accompany the introduction of the Design and Building Practitioner's Act on the 1st July this year. The NSW Government's ePlanning Portal will be a powerful new addition to the tools and single source of truth available to the regulator. All of these capabilities are being joined up under a massive NSW investment in digital.

Reporting on the NSW OC Audit program is now part of a data network that integrates over 142 million lines of data source. This data sourcing grows dramatically on a monthly basis.

Over 45 OC Audits have now been commenced, 36 of these are pre-OC Audits. We are on target to achieve 200 audits by the end of 2022. OC Audits are now essentially selected using data analytics. Not as some have hypothesised, as a result of having a differing opinion to me. However our 'go any where any' time audits can be more reactive to reported maters that are now being received through the Office of Fair Trading complaints for Class 2 buildings platform. This capability is still in development and is available for authorised representatives of Strata Owner's Corporations to register serious defects in their common property. These complaints may be lodged irrespective of legal proceedings having commenced by Owners Corporations against developers and builders of faulty developments. Our goal is for Owner's Corporations to first report serious defects to the Office of Fair Trading early, before expensive expert and legal costs are incurred. Notwithstanding Owner's Corporations must take and rely on expert legal advice.

The early OC Audits confirm what most know. The most repeated serious defects are related to waterproofing. This includes basements, podiums, wet areas, balconies and roofs. The cause of these ongoing defects are inadequate designs and coordination before construction commences, followed by very little understanding of the Building Code of Australia and Australian Standards. There will be a low tolerance of these causes going forward. And there will be consequences when viable designs are ignored during construction. There are now a number of Building Work Rectification Orders being issued that reflect this problem. If these non-compliances are not attended to, they will result in OC Prohibition Orders.

Where to from here?

While our priority efforts are focused on dealing with serious defects before and after OC's have been issued there are many initiatives that need to occur in parallel to ensure the momentum for change is locked in. We must also imagine what a transformed NSW construction industry will look like and how the capabilities to get their are built. There would be little value in not knowing where this one-time effort to reset a positive future for all, must end up. While news stories of actions against the risky players are important this cannot be the enduring narrative. We have set the following aspirations for our work.

Building capability and locking in transformation momentum is a critical

Building capability is a central plank to delivering on the work the OBC team and over 125 active industry stakeholders. There is a growing amount of important product being delivered. Our collaboration with TAFE NSW, the University of Technology Sydney, Western Sydney University and key industry associations is very valuable. Here we are translating what we are seeing as capability gaps that generally apply to all, fed back into lifting teaching and industry practice. Again the OBC newsletter will keep you informed of this.

There are links below to the growing amount of resources to help industry and consumers as we work towards a market where the trusted players are identifiable and the chaff, is what it is. Our OBC and regulatory teams are available to attend industry forums to engage with our key stakeholders directly. They can share their work and answer your questions.