Lifting the bar in NZ’s building sector

Dec 2019

New Zealand’s building sector is grappling with capacity, risk and financial issues. Some of the answers lie in builders, regulators and others having greater knowledge and assurance on the products that go into our buildings. SCAN talks with David Kelly, Chief Executive of the Registered Master Builders Association about the issues and standardised product information.

David Kelly knows the building sector from all angles. His previous roles have included Deputy Chief Executive for the Department of Building and Housing, Director of the Canterbury Recovery Programme for the Ministry of Business, Innovation and Employment, and Chief Executive of the South Waikato District Council. David has a Bachelor of Engineering degree from the University of Canterbury. He joined Master Builders in 2014.

 

Q. Lots of issues out there. Which are top of mind for you?
The issues vary across the sector. With larger commercial contractors, we’ve been making headway on the most significant concerns, and they’re now saying, ‘we need to change our behaviour and commercial approach’. With residential builders, the issues are more mixed. It’s very apparent, for example, that consumers are much more demanding, and some would say more assertive about their rights, and that’s not necessarily backed up with enough understanding. People are much more prepared to sue and it’s a much less forgiving environment for the small or medium-sized builder. They are really battling with issues like, ‘how do I communicate better, how do I manage the stresses around each job?’ We and others have a role in helping builders manage stresses, improve communication and ensure they’re running good businesses as well as being great tradespeople.

Q. How important are issues of building product quality and assurance?
I think these have been undercooked for too long. Manufacturers and suppliers have been able to put products on the market without them being properly researched and without appropriate assurances. Even among those which are specified for use, some products are very good but others lack evidence. I think clarity on building products is a fundamental part of lifting our game.

Q. Government has released its views on how building legislation could be strengthened, and these include changes in regard to the representations suppliers and manufacturers can make on products. What are your views?
We totally support lifting the bar as a matter of principle, providing more comprehensive and evidence-based information on the performance of particular products, and getting suppliers and manufacturers to provide proper warranties. We need clarity about what a product is for, its testing and certification and so on. That still leaves plenty of questions on how rules should be designed and applied. When it comes to regulation, there is always the question to be asked, ‘what is the size of the problem and where’s the evidence behind that?’ When I was a regulator, exactly that question was asked about certain building products and in fact, no-one was able to provide hard evidence in dollar terms. Questions on problem size and the cost-benefit analysis of regulating always exist. But today we do have greater recognition from industry and government that there are problems with certain attitudes and behaviours. By raising the bar generally, we can start changing those behaviours. Certainly, there’s more acceptance that those making and supplying products should take more accountability for them.

Q. In 2017, BRANZ estimated the cost of addressing faulty buildings at up to $230 million. Does that sound about right to you?
I’m not able to interrogate it, so I accept the number. It’s significant and leads you to say, ‘OK there is a case for lifting the bar but how do you do that without becoming too heavy handed so that the costs outweigh the benefits?’ What will be the benefits exactly, given that the $230 million can’t be removed completely.’ There are, of course, going to be costs imposed by regulation and these need to be weighed very carefully against the benefits.

Q. To what extent can territorial local authorities (TLAs) be called on to exclude some products through their building consents processes?
The idea that you rely on each council to work out the answers on particular products is wrong. That’s asking them to do things they are not equipped for. Councils are put in that position now only by default because we don’t have a more comprehensive system and we’re not clear about the standards that suppliers or manufacturers should meet. In my view there’s a staircase approach, ‘how proven or unproven is a product, and for what particular purposes will it be used?’ There may be some products that are fundamentally important to building integrity and so we will focus on those. Singapore, for example, concentrated on steel, concrete and glass as the most fundamental elements in any building and it had lesser tests for other products that might be important, say aesthetically, but were not going to threaten someone’s life if they failed. I think we need to do that sort of thing. There are real concerns today about TLAs being too risk adverse in the building consent process. That’s one of the behaviours that needs to change.

Q. Easy access to the right information on product quality and assurance is a big issue in itself. How do you view the BRANZ recommendation that we have standardised data on building products available in digital form to all parties in the same way?
Absolutely we need standardisation. It’s almost a no brainer. How do you work out whether a product is fit for purpose if you don’t have some standard to measure it against? Likewise, traceability systems are important for authentication of the product when identified for particular use in a particular location. That requires standardised information. I don’t think that the cost of having such information on an individual product is so massive that people have an excuse not to provide it. We have the technology like GS1 Standards and I think it’s a reasonable cost for people when bringing products to market.

Q. Keeping all the parties properly informed on how products are authenticated and used must be part of the challenge. Does standardised information make that easier?
It does. And in particular it helps with discussions going on right now over risk management and risk sharing between the parties in any project. If any one player doesn’t understand the risk they are taking on and set their price accordingly, they will get into trouble sooner or later. We would say that risk affects the whole building eco-system – the client, the designer and other consultants, the contractors and subcontractor, and the insurers and funders. All of the parties need to understand that and take responsibility for their behaviour. It’s part of moving from a transactional approach to procurement, to a more strategic approach which isn’t all about lowest price and shifting risk to the other parties. One of the tools for helping us move to strategic procurement is shared knowledge about products and what has gone into a particular building. That would help determine, for example, the whole-of-life cost of the building. We can think of strategic procurement in terms of ensuring we have a strong building industry capable of responding over time. In contrast, the transactional approach, which has been dominant, leads to low balling in price tenders, lower quality buildings and a general lack of knowledge and of knowledge transfer. But we are seeing the change start to occur.

Q. What role does government play in all this?
There’s a role for the right regulation. As someone said, ‘as much regulation as necessary but as little as possible’. But more importantly, we need to think about the role that commercial contracts have in changing behaviour and in getting people to accept responsibility. When it comes to government, central and local, there’s always a question about regulation vs leadership. Surely government can show leadership with its own procurement of buildings, and mandate what it wants from suppliers. There are big ministries with extensive property holdings and ongoing maintenance programmes, they can apply the standards and they can lead the way of strategic procurement that isn’t all about lowest price. I think government actors inevitably set the bar, higher or lower, and I would prefer behavioural leadership rather than regulation as a starting point.

Q. GS1 Standards including the National Product Catalogue could play a big role in this. Would you like to see these embraced across the building sector?
Yes, absolutely. And you can think about that, for example, in context of identifying and authenticating building components which are being manufactured off-site, big wall panels and so on. The question arises for banks who finance such building projects, ‘how do we maintain security over the products and components that are being manufactured away from building site itself? If a supplier-business goes into liquidation, who owns what? Authentication systems are going to become a lot more important in that respect. GS1 needs to help with that.'