Lianne Dalziel: Address to Master Builders

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11 April 2003

Sunday, April 13th 2003, 2:28PM

by The Landlord

Duxton Hotel
Wellington 8.30am

On 1 January 2003, I assumed responsibility for the Building Act as Minister of Commerce.

As I said to another forum recently, there are those who believe I have been handed a hospital pass, however, this is not how I view it at all. I regard my role as a challenge, and one that I am determined to deliver on. My desire to come to speak to you today is to express gratitude to the Master Builders Federation that you are as committed to meeting this challenge as I am. You have been strongly identified as a key stakeholder that wishes to be part of the solution. I was pleased when I read that the Conference theme was ‘Back to the Basics’ because in many respects it is in the basics that we will find the solutions we are looking for.

There has been much going on over recent months.

August 2002: the Hunn Report on the weathertightness of buildings
Late 2002: Building Act Review – deferred while scope of review broadened December 2002: Open letter of John Scarry referred to government
March 2003: Discussion Document Better regulation of the building industry
March 2003: Select committee Report into the Weathertightness Issue, and Financial review of the BIA tabled in Parliament
April 2003: decision to fold BIA into government department announced

It is my expectation that the Ministry will take about a month to review the submissions and take into account all of the other reports and reviews, and develop proposals for the government to consider. That might seem an optimistic timeframe, however, the MED officials have adopted a proactive approach, talking to key stakeholders during the submission process. In my view, it is vital that we maintain the momentum that has developed over recent weeks.

Neither do I want us to take our eyes off what is truly at stake here. Next week the BIA will publish a draft acceptable solution on durability. This will focus attention on the use of treated vs untreated timber. It is important that everyone who has an interest in this matter puts up their case. I know that some parts of the industry would prefer that the draft represent their position. But if we are to rebuild confidence in the industry, then the burden of proving that the approach is too stringent, must surely lie with those who maintain that position. Produce the research and the evidence to back up the position – that is my advice. The process is robust, and the evidence will determine the result. It is not, and never will be, a political decision. The science, the experience and the best knowledge that is available today will produce the most reliable result. Science, experience and knowledge may change over time, and that is why we retain flexibility.

I mention this because there are those who say that the weathertightness issue is the problem, and by simply addressing the Acceptable Solutions and standards relating to durability the problem will be resolved.

That is not my assessment of the situation. The weathertightness issue is a symptom, and treating the symptom alone will not treat the problem.

If we focus solely on one symptom, and weathertightness is not the only one, then we run the risk of constantly attaching bandaid solutions on an ad hoc basis. A fundamental assessment of the problem enables us to consider how we ‘front-end load’ the solutions, so that we minimise the chance of building failure.
It’s better that we build it right first time. It is an approach that puts the fence at the top of the cliff. That being said, there will always be cases of failure, and that is why we need to consider the professionalism and accountability of the industry and the regulators.

So what is the problem? For me the following quote from the Hunn report says it all:- “the majority of New Zealanders know more about the pitfalls of purchasing a used-car than buying a house and the used-car market has better regulation in terms of safety and quality performance, ongoing warranty and consumer protection.”

The process of defining the problem led us to reflect on the purpose of the Building Act itself. It refers to the need to make sure that buildings are “safe and sanitary and have means of escape from fire”. The Building Act requires other values to be taken into account in the Building Code, such as protection from loss of amenity, protection of adjoining properties from damage and provision of facilities for people with disabilities. The important value of durability – ie that a building will continue to meet that standard throughout its normal life – is not mentioned in the Building Act.

The Hunn report focused specifically on housing and suggested that insufficient attention had been paid to the requirement that people’s homes meet ‘the basic human need for shelter and protection from the elements’.

This has led to the recommendation in the Discussion Document that we include amenity and durability as primary purposes of the Act; review the definition of amenity to ensure that it covers the important values that go beyond strict health and safety issues; and provide that the interests of consumers must be taken into account in all aspects of the Building Code’s requirements, administration and enforcement.

Once we have established this new baseline for the Building Act, many of the other proposals fall into line. They are designed to ensure greater clarity and guidance through the better specification of the Code, more approved documents, more building product certifications and more information from a proactive building regulator; more attention to competency and capability among building professionals, certifiers and inspectors; and stronger regulatory teeth to ensure compliance.

I have learned more about the building industry in the past 12 weeks than I have known in my lifetime. It has been an eye-opener to me just how much faith has been placed in the market, when there are so many players. The regulator, the BIA, is responsible for developing the Building Code, which is a performance-based model. Compliance with the Code is mandatory for all buildings, and enforcement is the responsibility of the relevant TLA, which issues the building permit. However, there is no specification for Code compliance, although the use of an Acceptable Solution, approved by the BIA, if met in practice, demonstrates compliance. In the absence of an Acceptable Solution, or even if there is one, TLAs can approve Alternative Solutions covering product, method or design. In the case of doubt or dispute over an alternative solution the BIA can issue a binding determination.

You will understand why I have described the problems we are facing as systemic. So let us return to the early 1990s to look at the variety of factors that have culminated in this systemic breakdown.

I understand that the prime motivation behind the 1991 Act was to create a system that encouraged innovation and flexibility in product, process and building design. Prescriptive requirements were seen as inhibitors to what was a rapidly advancing industry. But in the haste to avoid prescription, have we ended up with a toothless tiger? The BIA certainly developed a hands-off approach right from the outset, in line with the prevailing wisdom of the market. The development of approved documents, containing Acceptable Solutions, has proved to be a time-consuming process.

But it is an important process, because of the quality of what is produced. Nowhere have I read of concern about the detail of Acceptable Solutions – all of the concerns appear to relate to issues characterised by the absence of Acceptable Solutions. There is, therefore, considerable reliance on Alternative Solutions, which do not have the same level of scrutiny as Acceptable Solutions.

Another point to remember is that Standards NZ, which is pivotal to the development of Acceptable Solutions, found themselves thrust into a self-funding environment. Unshackled from dependency on direct government funding, they were reliant on persuading industry to fund the standards development process. They sought to develop a standard for cladding systems in the mid 1990s, but the market did not produce a buyer for their services. You will understand why we have focused on the funding requirements of Standards NZ in the Discussion Document.

I often say that timing is everything in this world, and at the same time that the Building Act was in its infancy, so to was the demise of the apprenticeship system, which had underpinned for generations the professionalism of builders and related tradespeople. There was a shift away from occupational regulation, and the identification of work that should only be carried out by competent tradespeople.

Add these factors to the rapid increase in the development of medium density housing and the introduction of new construction methods and materials, and the result is: Let the market determine the price and the quality of the work. Let the regulators become little more than market observers. And let the consumer carry the can for market failure.

It is no wonder that certain people want to focus on the symptom of the weathertightness issue and to blame the Building Industry Authority for everything that has gone wrong.

It is my assertion that the prescription for disaster was written well before this issue came to light.

So those who would name, blame and shame as their only contribution to this debate, have nothing to offer by way of an Acceptable Solution. The only solutions that are acceptable to me are those that that include the broadening of the purpose of the Act; strengthening the role of the regulator and giving it some real teeth; and clarifying the obligation to provide information and advice to consumers, the industry and the TLAs. You will have noticed that this proactive role has already been adopted with the warnings issued over the safety of balconies.

One of the key changes proposed is of utmost importance to you – mandatory registration for building professionals.

The Hunn report into Weathertightness identified capability of building practitioners as one of the deficiencies in the building industry. It recommended that national registration of builders and building related trades be explored given concerns about standards.

The Ministry has been talking to stakeholders, including Master Builders, in developing just how this recommendation should be progressed.

One of the proposals in the paper is the establishment of a register of key building practitioners. It also suggests that only people from this register should do or supervise building and design work.

This proposal has gained the most support and raised the most concerns, the latter from the “do-it-yourself” home builder. However, as I have said to those home builders, who have spoken to me directly about these concerns, the home that is built will be on-sold one day. And there is a duty to a future home-owner that needs to be taken into account.

Supervision is clearly the answer to the problem that is highlighted in this regard.

The Discussion Document is only the first stage, in terms of what will be an evolving process. The detail of any requirements will be consulted fully with the industry and will be introduced over time. Obviously there will have to be transitional arrangements put in place, as people upskill and demonstrate ongoing competency. This also clearly raises some challenges for the building industry training organisations, and I hope that they are willing to take up that challenge.

This proposal should be regarded by building professionals as an exciting opportunity to restore confidence in the profession and to ensure that the ‘cowboys’ do not retain the foothold they have obtained to the cost of the industry as a whole. Competent builders will thrive in the new regime, because the consumer will have better information about competence and about standards.

I hope that what I have given you is a flavour of the factors that lie at the heart of the problem and that there is a real urgency about getting legislation into the House to begin the process of restoring confidence in the building industry and the regulators. The pendulum has swung too far one way, and it will be our challenge to ensure that it doesn’t swing too far the other way. A position of balance is what I am seeking. That being said, there are those who overstate the “innovation” versus “prescription” line, implying that they are opposites. They are not. Innovation cannot be used as an excuse not to do the independent research and evaluation that is necessary to give the consumer the assurance they ought to be able to rely on. The BIA, now firmly focussed on its role as a proactive regulator, will make that call when there is doubt or dispute, and will undertake determinations upon referral.

Thank you for the opportunity to open your Conference, I thank you for your encouragement and support, and I wish you all the best as we work together to find those acceptable solutions, which will benefit consumers and the industry as a whole.

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