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PhD's research faults building policies as pushing up costs, reducing quality

A former electrician who has just completed a PhD at age 43 says his research shows a causal link between competitive procurement and the poor performance of the construction industry.

Dr Mark Hinton, who worked as an electrician for more than 25 years, did his studies at the University of Canterbury. He says rather than competition being good for the industry and consumers, in fact the opposite is true.

“I found that contractors, whether they are main contractors or subcontractors, have developed strategies to effectively improve their own position both during and after the tender process,” he says.

“The net effect of this is that the consumer is penalised by often paying higher prices than necessary for construction projects, while at the same time receiving an inferior product."

Dr Hinton says many if not most working within the industry would be aware of numerous poor practices. However, it is rarely in the best interests of anybody working within the industry to highlight such practices.

“Main contractors are reliant on subcontractors for market pricing. Subcontractors can generally only access the market by working through a main contracting company,” he says.

“My study identifies many behaviours and strategies that are mostly in response to the competitive procurement model, which often engenders mistrust, opportunism, power and ambiguity.”

He says productivity has been poor for decades and construction lags dramatically behind many other industries such as manufacturing.

The UK government commissioned reports in the 1990s that called for a move away from the competitive procurement model to one of a more collaborative nature within the supply chain.

“Initially, my research focus was directed toward understanding why the construction industry was so heavily focused upon the competitive model of lowest price wins. I interviewed 50 senior staff that included clients, architects, consultants, main contractors and, importantly, subcontractors.

“While my study at first looked at collaborative procurement, the direction changed after around two years as many issues relating to ethics and the morality of the industry began to emerge from the data collected.

“There is a need to reconsider the role that main contractors play in the construction industry. Most of the work is undertaken by relatively small subcontracting companies, with very little industry representation.’’

Dr Hinton’s research was supervised by Professor Bob Hamilton and was partly funded by The Building Research Association of New Zealand.

Comments and questions

"There is a need to reconsider the role that main contractors play in the construction industry."

That is the symptom, not the cause. The cause is that our building industry is hopelessly mired in vastly costly and labyrinthine bureaucratic control of it. The immediate consequence is that only big players can afford to negotiate and lobby this maze of power plays and corruption. The secondary consequence is that these big players can monopolize and squeeze to death everyone else.

Add to that the demise of the apprenticeship system and you have a sloppy workforce.

Classic example is EQC / EQR - working to a budget not a standard. Cosmetic repairs being done to homes when there is knowledge (and occasional acknowledgement) that the damage is far more than cosmetic. It's all about EQC's time frame and cost, not standards.

Probably why EQR is becoming known as "Claytons EQR" - Earthquake Repairs you get when you're not getting repairs.

Aside from current disputes over current repairs: Anyone having their house fixed by EQC / EQR who then sells it - if the new owner finds damage caused by the earthquake that should have been fixed, the owner is still involved, as the insured party at the time. What a nightmare!

"Squeaky Home Syndrome" will make "Leaky Home Syndrome" look like a drop in a bucket by comparison (no pun intended).

Some people are already predicting that the No.1 professional occupation pursued by school leavers in Christchurch will be law, with years of court cases already starting to build.

Some might argue that the cost of repairs was too much for EQC and insurance to bear. From personal observation of my own repairs and those of others, over 50% of the time was spent muddling and incompetence on part of EQC / EQR and subsequently contractors. Delays, doubt and vague scopes, required constant revisits and multiple reworks to clarify or fix was was extremely obvious, and agreed to on the first inspection.

If the work and management had been done to the correct standard all the way through, the cost would have been far less and the work done to a higher standard.

Competition is good. What is missing is standards.

And as Alan says, there is too much bureaucratic control.

No surprises here. But good to finally have, what we've all known, on the record. A litany of waste and greed. Shameful..