The real reasons for the Opal Tower fiasco – the ‘corruption’​ of standards in the Australian building industry

Why should everyone take note of the lessons of the ‘cracked building’ the Sydney Opal Tower? Why is this such an important warning sign of dodgy practices and loss of basic accountability in the Australian building industry?  What does this tell us also about the loss of accountability in the business and corporate sectors of our country, and the growing corruption in different local, state, and national levels of governance and bureaucracy in Australia?

Sydney’s Opal Tower (containing 392 apartments) at Olympic Park was only opened earlier in 2018. Yet the day before Christmas (24/12/2018) it suffered cracks in its precast concrete panels which lead to 3000 residents from the building and nearby being initially evacuated (1) – with all residents displaced following a second follow-up evacuation (2). Follow-up inspections confirmed that the cracks were symptomatic of possibly deeper structural issues (3). So, a couple of weeks later people are still not being allowed back into the building as it is being braced for currently uncertainty levels of repairs required to effectively fix the problems. And it will be at least another six weeks before residents will know if they can then return (4)

Many owners and residents fear they have lost their investment with one report projecting a 50% drop in the value of apartments if and when it is official re-opened and people are allowed back (5). Many are now fearful about returning – and would not trust any assurances they might be given down the track, either about the safety or the future value of their property (which will inevitably be compromised in a big way). The same report indicated there had been a  meeting recently where ‘owners were discussing launching a class action against the builder and developer, while tenants discussed their options, including breaking their rental contracts” .

Very quickly the spotlight has turned to how and why such an apparently unusual event could happen, and so soon after the building was completed. This is especially so given that where apartments are concerned at least (aside from the growing problem of rogue home builders) (e.g.6), the Australian building industry has traditionally had reasonably high standards. In a nutshell the Australian building industry has become notorious for non-payment and a high-level of insolvencies. One focus for appreciating this is how both developers and builders tend to deflect accountability onto the other. In relation to the Opal Tower the developer Ecove and the builder Icon have been in dispute for some time about a $2.5 million payment (with an initial judgment to Ecover overturned in a Supreme Court appeal) (7),  which points to a basic denial of responsibility by both (8).  And then there is the common event of sub-contractors either not being paid or shortcuts being taken in the expectation they might be treated badly again.

These issues of shortcuts increasingly being taken by Australian builders and sub-contactors is reinforced by a more pivotal problem. This is how in recent years certifiers of developer building plans no longer need to physically inspect – and have  been allowed to sign off on the approval of building plan implementation on paper only (i.e. an issue of how ‘self-regulation’ has generally failed in this industry and others) (9). This is how discrepancies between developers and builders have regularly arisen in the Australian industry in recent years – with suggestions that the Opal Tower is an indicator of widespread problems and a growing likelihood of many other issues. (10). No wonder the NSW government has got nervous and trying to appear in terms of threatening the ‘full weight of the law’ (11) despite how various Australian governments from both political parties are equally to blame for the decline in standards over the last couple of decades. And its not just in Sydney – as a 2016 media report noted “All across Melbourne, new apartments riddled with faults have been sold to investors and residents. Some of the problems are so costly to fix that it would be cheaper to build the apartments again.” (12).

Also over the last decade or so home owners have become “increasingly more vulnerable to loss caused by defective building work” (13 in terms of insurance and compensation cover. Home building compensation cover has not been required for work involved in the construction of new multi-story buildings over three stories in Australia. Whilst owners are covered by certain statutory home warranty protections the actual extent of protection has been increasingly complex and less effective. The basic statutory warranty period for major defects to large buildings has been reduced to six years. This is despite how many serious problems often only come to light much later.  For instance, a common issue internationally in building industry shortcuts  has been the taking of shortcuts with the mixing of concrete or use of materials for ensuring building structural integrity. It appears the cracking of precast concrete in the Opal Tower may have been due to ‘CSR HEBEL for non-structural walling’ being used instead of the proper concrete for ‘structural walling’. This may be why so many apartments have been ‘ripped apart’ to allow for the bracing of the building whilst inspections are going on (14). 

Aussie Watchdogs has been made aware of a related issue that is also yet to be made public. This concerns information that the builder’s Icon’s quote to build Opal was known to be unsustainable and likely to lead to short-cuts and loss of required standards. Icon’s quote significantly undercut that of another builder Probuild who had quoted for only a 3% margin on profit over costs. The Probuild people knew straight away that Icon would likely be tempted to take extensive shortcuts with the building, so were not so surprised when the cracks appeared (and so soon).  It is also not widely known that Icon is owned by Japanese construction juggernaut Kajima and that they merged Icon with another company Cockram when this was purchased in 2017 (15). It is believed that if had not already started to cut off the funding to either or both entities, then it is now likely Kajima may let them both ‘die’ as it removes itself from the sphere of accountability.

Defective buildings because the developers tried to cut corners are pretty common in third world countries because of lax standards . A well-known case some years ago involving shortcuts on the mixing of concrete as well as use of structural materials involved the builder of the Sichuan school buildings which collapsed after an earthquake killing more than 5000 students (16). Closer to home New Zealand recently got into terrible trouble because of a similar problem now afflicting the Australian building industry – removing the earlier more strenuous requirements for certifiers. The New Zealand ‘leaky building’ syndrome has already cost the New Zealand Economy 11 billion dollars so far and some estimate will ultimately cost around $22 billion dollars because of the loss of previous standards allowing shoddy work and dangerous practices to become the norm (17). So the question that follows is whether Australia is now starting to identify some similar systematic problem in its building industry (an Australian version of the ‘leaky building’ crisis) has some version of this national crisis of confidence? And might this be exemplified or identified with the Opal Tower case in future? (18).  

In any case it would seem that the real significance of the cracking Opal Tower is how it symbolises the loss of standards of accountability from the top-down in Australia over the last decade or two – not just in the NSW building industry but everywhere in Australia and across many if not most industries. This is as the corporate imperative for profits mean that safety and accountability concerns are increasingly ignored, and the rights and protections of ordinary Australias are sacrificed to the greed and corruption of dodgy operators whilst local, state and national governments turn a blind eye. Rogue builders have been more commonly associated with houses, but now with apartment living becoming the norm in Australia this will be a great concern for apartment owners and renters alike. They will all need to get of their backsides, become more aware of the problems emerging and demand action to help save the building industry from itself.

  • CKR  9/1/2018
http://www.abc.net.au/news/2018-12-30/opal-tower-damage-sparks-nsw-government-crackdown/10673968

References.

1 https://www.abc.net.au/news/2018-12-24/sydney-opal-tower-cracking-building-evacuation/10666734

2 https://www.abc.net.au/news/2018-12-26/sydney-opal-tower-investigation-begins-as-crack-photos-emerge/10668458

3 http://www.abc.net.au/news/2018-12-30/opal-tower-damage-sparks-nsw-government-crackdown/10673968

4 https://www.dailymail.co.uk/news/article-6571077/Opal-Tower-residents-told-live-hotels-six-weeks.html

5 https://www.smh.com.au/national/nsw/fears-of-50-per-cent-loss-in-value-as-opal-tower-owners-consider-legal-options-20190103-p50pgg.html?ref=rss&utm_medium=rss&utm_source=rss_feed

6 https://www.adelaidenow.com.au/business/sa-business-journal/how-my-dream-home-became-a-nightmare-sa-homeowners-share-their-real-life-horror-stories/news-story/ccef169d53aed776db7d6f6d3e2f7ffe

7 https://www.afr.com/real-estate/security-of-payment-opal-tower-developer-ecove-builder-icon-in-25m-stoush-20190104-h19qva

https://www.smh.com.au/national/nsw/nothing-to-do-with-each-other-company-clarifies-it-did-not-build-opal-tower-20190106-p50pvv.html

9 https://www.smh.com.au/national/nsw/huge-pressure-developers-cutting-costs-are-root-cause-of-defects-20181226-p50o97.html

10 https://www.afr.com/real-estate/what-are-australias-other-defective-towers-aside-from-sydneys-opal-tower-20190102-h19n02

11 https://www.smh.com.au/national/nsw/gladys-berejiklian-vows-full-weight-of-the-law-for-any-opal-tower-wrongdoing-20181228-p50ojx.html

12 https://www.theage.com.au/national/victoria/melbournes-highrise-nightmares-taking-a-tall-toll-on-residents-and-investors-20160916-gri6l4.html

13 http://kreisson.com.au/3049/

14 https://www.smh.com.au/national/nsw/absolutely-trashed-opal-tower-units-torn-apart-sparking-owner-fury-20190105-p50psm.html

15 http://www.cockram.com/kajima-corporation/

16 https://www.nytimes.com/2008/09/05/world/asia/05china.html

https://en.wikipedia.org/wiki/Sichuan_schools_corruption_scandal

17 https://en.wikipedia.org/wiki/Leaky_homes_crisis

18  http://lclawyers.com.au/leaky-building-syndrome-will-australia-next-suffer/

.  .

Leave a Reply

Your email address will not be published. Required fields are marked *