Problem of dishonest contractors

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#3158136 11-Nov-2023 01:06

Handle9:
Geektastic: Having worked in the property industry for a long time before moving here, I was amazed (and still am) at the seeming lack of professional independent supervision provided by the RICS members in the UK, as well as the seeming lack of genuine fixed price contracts.

If you have a fixed price, the contractor agrees to complete the specified work to the appropriate standard and for the exact price in the contract. If he finds it costs him 50% more because he costed it wrong, I’d expect him to foot that extra.

Here, they seem to simply expect the client to write another cheque.

There is no such thing as a fixed price contract just as there is no such thing as a complete specification.

You can expect what you like, if you don't provide a complete specification and choose a contractor based on lowest conforming tender it's your bad luck.

Edit: I should probably add that it is quite literally imposible to provide a complete specification, I've never seen one anywhere in the world on a decently sized job. They are always a basis for design and pricing, not what gets built.

Whilst there are certainly possible variations to a contract for changes made after commencement, it’s certainly possible to write a complete specification and to have fixed price contracts for the work.

I’ve built everything from livestock housing to roads using them and seen contractors take losses running to hundreds of thousands of dollars for making errors or incorrectly costing the work.

If the Chartered Surveyor or Architect who wrote the specification made errors, then the resulting costs are down to them or their Professional Indemnity insurance.

Handle9

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#3158138 11-Nov-2023 01:32

Yet around 70% of UK projects go over budget by at least 10%. Most of the errors are on the client side, not the contractor or designers. It’s gotten worse due to procurement behaviour getting worse. Clients think they can tender the price to zero and entirely contract their way out of risk and it almost always ends up poorly for them.

t’s led to most large general contractors not actually building anything anymore and just being PMs, procurement and lawyers. CPB are the most aggressive in the New Zealand context but there’s plenty all over the world.

Then there’s HS2….

If the contractor doesn’t know how to use the contract then they can certainly take losses if they balls it up but it’s very rare that they can’t be recovered by a good project manager. There all sorts of things outside the contractors control that can be claimed for if the PM knows what they are doing.

tweake

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#3158226 11-Nov-2023 10:42

mattwnz:

A lot of protection when it comes to building and services such as plumbing, seems to be under the CGA. Even though I understand you do have a automatic 10 years of implied warranties under the NZ building act when you build a new home, enforcing that, especially if they builder closes down their company, can be a nightmare. IMO NZ really needs a mandatory 10 year guarantee on new homes https://www.consumer.org.nz/articles/check-your-builders-guarantee-27-master-build-policies-fall-through . Plus better organizations to police tradespeople and strict penalties. The LBP scheme with the code of ethics they have finally brought in is a good start, but doesn't cover all tradespeople.

that opens other cans of worms. nz building inspections are unregulated and full of cowboys. a lot of them simply please who ever is paying. with such a small market a lot of the inspectors will be the builders mates. so dodgy stuff will get past in the warranty inspections. then there is who pays for the inspections. if you want to builders to take responsibility they will increase the build price. thats all assuming they just don't close the company to avoid the whole mess.

networkn

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#3158237 11-Nov-2023 11:38

I do wonder if it was possible to set up a compulsory insurance that each builders needs to contribute to for each house they build, which covers upto 100K per house they build for 20 years? Either build it into the consent process or somewhere along the line so it's not possible to get sign off without having a certificate showing the insurance is in place. It would probably need to be backed by central government.

I know there are things like the Masterbuild etc type insurances, however, I have seen stories of them failing to provide the supposed protections.

tweake

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#3158273 11-Nov-2023 13:31

networkn:

I do wonder if it was possible to set up a compulsory insurance that each builders needs to contribute to for each house they build, which covers upto 100K per house they build for 20 years? Either build it into the consent process or somewhere along the line so it's not possible to get sign off without having a certificate showing the insurance is in place. It would probably need to be backed by central government.

I know there are things like the Masterbuild etc type insurances, however, I have seen stories of them failing to provide the supposed protections.

trouble is the cost of that will be built into the house price, and home owners will complain. also if insurance co or govt bails them out, then builders have no responsibility and workmanship will decline further. there needs to be a feedback to hold builders accountable.

Handle9

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#3158369 11-Nov-2023 17:06

It will just be a line item cost for the client. The dodgy ones will charge it and never actually do the work anyway so it doesn't solve the problem.

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#3158378 11-Nov-2023 18:18

Insurance can work to improve quality, but only if implemented really strictly - and at that point it may as well be regulation (see: insurance industry writing electrical regs and certifying products in the US through UL). You need:

inspectors to verify that everything was done well and who will reject stuff that isn't - even if it annoys the contractor and the client
charges varying depending on the builder's past record - i.e. no claims bonus, to incentivise actually achieving no claims
the right mindset in the insurance industry - they need to think about setting the amount of risk, not just reacting to it

Geektastic:

Whilst there are certainly possible variations to a contract for changes made after commencement, it’s certainly possible to write a complete specification and to have fixed price contracts for the work.

I’ve built everything from livestock housing to roads using them and seen contractors take losses running to hundreds of thousands of dollars for making errors or incorrectly costing the work.

If the Chartered Surveyor or Architect who wrote the specification made errors, then the resulting costs are down to them or their Professional Indemnity insurance.

And that's a big part of the problem - anyone who has worked (at least commercial) construction here has seen terrible work out of architects and engineers. And they don't seem to be paying for it; their own contracts seem to all but absolve them of liability. If the construction company makes a fuss, the architect probably won't employ them again. So the bill gets forwarded back to the customer, who gets told they have to wear it.

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mattwnz

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#3158438 11-Nov-2023 23:29

tweake:

mattwnz:

A lot of protection when it comes to building and services such as plumbing, seems to be under the CGA. Even though I understand you do have a automatic 10 years of implied warranties under the NZ building act when you build a new home, enforcing that, especially if they builder closes down their company, can be a nightmare. IMO NZ really needs a mandatory 10 year guarantee on new homes https://www.consumer.org.nz/articles/check-your-builders-guarantee-27-master-build-policies-fall-through . Plus better organizations to police tradespeople and strict penalties. The LBP scheme with the code of ethics they have finally brought in is a good start, but doesn't cover all tradespeople.

that opens other cans of worms. nz building inspections are unregulated and full of cowboys. a lot of them simply please who ever is paying. with such a small market a lot of the inspectors will be the builders mates. so dodgy stuff will get past in the warranty inspections. then there is who pays for the inspections. if you want to builders to take responsibility they will increase the build price. thats all assuming they just don't close the company to avoid the whole mess.

I was chatting to someone from one of the NZ government organizations about the 10 years of implied warranties and who enforces them. And they admitted that it wasn't a good system because builders are able to just close down their companies and then can walk away. I understand in Oz they do now have some form of warranty scheme on new homes that may prevent this occurring, similar to the masterbuilders or certified builders schemes in NZ. But considering how many Fair Go stories are on this very topic, it could indicate that the system is broken in NZ. Basically there seems to be more consumer protection when you buy a toaster in NZ. I understand the Act party are looking at shaking up the building sector, including the council inspection thing so I suspect there will be private companies doing it eventually. My local council already contracts out consent applications to a third party

tweake

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#3158486 12-Nov-2023 10:22

mattwnz:

I was chatting to someone from one of the NZ government organizations about the 10 years of implied warranties and who enforces them. And they admitted that it wasn't a good system because builders are able to just close down their companies and then can walk away. I understand in Oz they do now have some form of warranty scheme on new homes that may prevent this occurring, similar to the masterbuilders or certified builders schemes in NZ. But considering how many Fair Go stories are on this very topic, it could indicate that the system is broken in NZ. Basically there seems to be more consumer protection when you buy a toaster in NZ. I understand the Act party are looking at shaking up the building sector, including the council inspection thing so I suspect there will be private companies doing it eventually. My local council already contracts out consent applications to a third party

now the scary thing is watching the inspection video's of new houses in oz. thats because their inspectors are private and who pays them, the builders. as i've mentioned before inspectors pander to whoever pays them. so lots of dodgy building work gets passed.

part of it is who carries the liability. builders and private inspectors can fold and walk away but councils cannot. even here there has been a call to get rid of council liability, but pretty obvious what that would cause. then of course is why people want to get rid of liability and thus inspections, its to lower housing standards to give lower house prices so they can increase the profit.

networkn

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#3158491 12-Nov-2023 10:35

Handle9:

It will just be a line item cost for the client. The dodgy ones will charge it and never actually do the work anyway so it doesn't solve the problem.

Yeah, it needs enforcement. It's a cost, but overall, I think it's needed. It's a hugely problematic area and has been for a long time. If we change nothing, nothing changes.

It would need to be managed by central Government. No chance local councils could police or financially manage it.

tweake

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#3158512 12-Nov-2023 10:54

networkn:

Yeah, it needs enforcement. It's a cost, but overall, I think it's needed. It's a hugely problematic area and has been for a long time. If we change nothing, nothing changes.

It would need to be managed by central Government. No chance local councils could police or financially manage it.

exactly. council inspections at the moment are bad enough. plenty of cases have hit the headlines from inspectors looking after their builder mates. councils are to small, they get influenced by the locals.

Bung

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#3158530 12-Nov-2023 11:17

I don't know if it is "looking after". The stories I hear are of incompetence. A neighbour is waiting for compliance sign off. The council have now decided that even though their inspector checked the specified 1m x 1m x 1m holes for the piles before the concrete was poured he wasn't qualified enough and it should have been an engineer. The time for design 2nd thoughts should be before the plans are approved.

tweake

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#3158531 12-Nov-2023 11:35

Bung:

I don't know if it is "looking after". The stories I hear are of incompetence. A neighbour is waiting for compliance sign off. The council have now decided that even though their inspector checked the specified 1m x 1m x 1m holes for the piles before the concrete was poured he wasn't qualified enough and it should have been an engineer. The time for design 2nd thoughts should be before the plans are approved.

there is plenty of "looking after", blind man inspections. eg the case of the house that was signed off even tho it wasn't even finished. houses with broken trusses and other structural defects even tho it passed. mates had it here on his house. the inspector never looked at anything, talked fishing with the builder and that was it.

simple problem is nz is small the inspectors are mates of the builders, especially as many are ex builders.

networkn

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#3158536 12-Nov-2023 11:46

tweake:

there is plenty of "looking after", blind man inspections. eg the case of the house that was signed off even tho it wasn't even finished. houses with broken trusses and other structural defects even tho it passed. mates had it here on his house. the inspector never looked at anything, talked fishing with the builder and that was it.

simple problem is nz is small the inspectors are mates of the builders, especially as many are ex builders.

This is easily fixed. You simply introduce random second inspections by a second inspector. If they find something amiss the original inspector is held to account. Sort of like the internal affairs of the NYPD.

tweake

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#3158539 12-Nov-2023 11:54

networkn:

tweake:

there is plenty of "looking after", blind man inspections. eg the case of the house that was signed off even tho it wasn't even finished. houses with broken trusses and other structural defects even tho it passed. mates had it here on his house. the inspector never looked at anything, talked fishing with the builder and that was it.

simple problem is nz is small the inspectors are mates of the builders, especially as many are ex builders.

This is easily fixed. You simply introduce random second inspections by a second inspector. If they find something amiss the original inspector is held to account. Sort of like the internal affairs of the NYPD.

only works if the 2nd inspector not mates etc and then you also have the problem of many things being hidden eg behind the gib. that would only pick up a major problem with one inspector after the damage is done and the inspector goes fines a new job while the home owner has a nitemare to deal with. the issues need to be found when they can still be corrected.

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