The Building and Construction Industry shows that the light-handed regulation often does not work.

With well-established businesses collapsing, New Zealand’s construction and building sector is not covering itself with glory. The focus here is the quality of its work.

Of course, one cannot say anything about the current situation because it usually takes time for quality failures to become apparent. But we can look at the past record.

The first serious example I came across involved leaky buildings. It was an almost perfect storm of things going wrong. I shant go into all the intricacies but, importantly, since the late 1980s there have been rapid changes in building technology which the industry was quite unprepared for. Innovations were often installed using traditional methods without awareness that old approaches did not apply. .

A simple example is that ‘monolithic cladding’ requires greater precision during the erection process. Traditional installation standards led to leaky buildings. It may involve more than 100,000 houses; one estimate suggests the total cost has been $47b. (That is equivalent to all New Zealanders working for eight weeks and not getting paid a cent.) Additionally commercial, industrial and public buildings suffering from similar defects have to be added to the score.

Today the term ‘leaky buildings’ is used more widely to refer to all poor workmanship so that, for instance, the remediation of badly installed decks is included.

I first wrote about this in early 2010, some months before the Canterbury earthquakes exposed another major construction failure. Buildings collapsed or became unusable. Obviously there were failures of some junk buildings built long ago, like those along Manchester Street, and also some old stone buildings like the ChristChurch Cathedral. But the list of failures also included many modern buildings built in the previous twenty-five years which the innocent might have expected to survive at least as well as many of their predecessor buildings did.

Before we start claiming that this was a particularity of the Christchurch earthquakes, the 2016 Kaikoura Earthquakes did not do as much damage to buildings away from its centre, but when the engineers began investigating in Wellington and elsewhere they concluded that many buildings – over 100 – were earthquake-prone. Some were relatively easily remediated, but others had to be pulled down to be replaced by new ones. Again constructions from the last (now) thirty years constituted a high proportion of the failures.

I have not seen the comprehensive account of why so many recent buildings are earthquake-prone. Some have been demonstrated to be badly designed and built – Christchurch’s CTV is an exemplar – but given the numbers involved there has to be a systemic explanation.

Allow me to assume, until someone provides an alternative explanation, that once again it was the introduction of new technologies. This time however, as far as I know, it was not so much poor workmanship, but that engineers pushed their designs beyond the limits of the technologies they were using; probably trying to maximise the building within a tight cost budget. Once more, the effort to save a penny cost us two and more.

If this is right, then something happened in the late 1980s which is contributing to the thirty years of failure in the construction and building industry. One factor I gleaned from my reading about leaky buildings was that technological change in the industry seems to have accelerated. At least some of the new approaches were lurking around in the 1970s but they could not be easily implemented because was regulatory framework, including import licensing, was extensive and conservative. .

As these were wound back, we entered an ‘anything goes’ era. It was called light-handed regulation: cynics said that it was really ‘light-headed’, ‘light-fingered’ and even ‘light-hearted’. The basic notion was that there was no need for onerous public regulation of an industry. Private businesses would ensure the high standards themselves, despite the additional costs to them, because their public reputation would suffer if they did not preserve high quality and safety standards.

Yeah, right. The builder sells you a badly constructed home. You do not know that because you do not have the assessment skills and in any case the failures are hidden from view. Some years later, the mould has built up to the point that it is compromising the residents’ health. The builder may have retired or moved on (including to Australia) and even in the unlikely event they are still in business and have not got legal shields to protect them, they are unlikely to be able afford the remediation.

This is true outside the construction industry. The relatives of the miners who died at Pike River had no redress against the mine company which went bankrupt (not that funds would have compensated for the loss of loved ones).

It seems likely that a major factor in the construction industry failure was the disestablishment and privatising of the Ministry of Works and Development (MWD) in 1988. I do not want to defend every part of the MWD, but its abolition meant there was now no public professional leadership in the construction industry. Had that core activity been maintained, its tradition of developing the skills of the young engineers who joined it and later went private would have raised the standard of the nation’s engineering profession. Another function was to sign-off the private engineers’ designed roads, bridges, water supplies and sewage treatment plants. That meant engaging with understanding, educating and regulating new technologies.

This is not to say there that would have been no failures in the industry had it been properly regulated, but there would have been fewer deaths and less destruction and waste. And when such events did happen, the government would have turned to the MWD for high quality professional advice instead of scrambling around for ad hoc advisers. (Perhaps this is a bit optimistic. Under the present state sector leadership, even an MWD would be probably be packed with generic managers, who would be as useless as assessing earthquake resilience as I am.*)

When we do have a regulatory failure, which happens quite often, the government usually imposes a heavy-handed regime. That’s the way we do things in New Zealand; loudly slamming the stable door after the horse has bolted. There is no government centre responsible for forward thinking about how we should regulate industry. Instead, the default position which underpins policy thinking is light-handed regulation with reactive ad hoc responses when it fails. There will be more failures – more deaths, destruction and waste – in the construction and building industry and elsewhere.

* There are ‘Building Systems and Performance’ and ‘Construction and Housing Markets’ divisions in the Ministry of Business, Industry and Employment. They seem to have neither the reach nor the expertise of what would have been their MWD equivalent. Their general managers are third level.

Instructively, the just released Construction Sector Transformation Plan says nothing about better regulation of the industry. It does, however say it is going to do something about upskilling the industry.

The Opposition spokesman welcomed the report, but complained that it had taken too long to produce. He said two years of the Labour Government , omitting to mention that for nine years his National Government did nothing.