Survey shows contracting model contributing to poor construction outcomes

The growing prevalence of novation as a procurement model for how buildings are constructed has been revealed as a contributing factor to deteriorating construction outcomes, with flow on impacts to the community and consumers.

While recognising that novation does have merit and should be retained, the Australian Institute of Architects says a national survey of its members has identified a number of concerning issues that need to be addressed.

Victorian state-based survey results were released today, ahead of the broader national results.

Chapter President, Amy Muir, said the insights, drawn from more than 158 projects delivered in Victoria between 2009 and 2019, should inform government reform in the wake of last year’s Shergold-Weir Building Confidence report.

‘The findings from our survey add to the growing body of evidence that more independent oversight and greater accountability are needed to improve quality in our built outcomes,’ Ms Muir said.

‘This must start with reform of the procurement process.

‘Severing the direct contractual relationship with the client, as happens with novation, can lead to some quite serious unintended consequences for all parties as our survey has clearly documented.’

Novation occurs when an architect’s contractual rights and obligations to the clients are transferred to the building contractor, as is generally the case in Design and Construct contracts.

Key survey findings include:

  • 71% of survey respondents reported that novation had a negative impact on the finish and durability of projects and 63% said it negatively impacted the use of locally sourced materials.
  • 74% of survey participants believed novation had a negative impact on aesthetics and design.
  • After novation, only 10% of respondents reported that they were always included in strategic decision-making processes at project control group meetings, while 35% said they were never included.
  • 67% of architects believed that contract negotiations during novation impacted negatively on their ability to deliver quality outcomes for the general public and end user.
  • 45% of architects did not know if the monthly reports prepared for the clients were being passed onto the clients during novation.

‘The way these contractual arrangements have evolved are negatively impacting the ability for architects and consultants to undertake their roles in an effective manner,’ Ms Muir said.

‘Our aim in conducting this survey was to better understand the issues and use the findings to work across industry towards solutions.

‘We know product substitution is a problem and our survey results showed that it was more likely to occur under a novated contract.

‘Even more disturbingly, the survey findings included incidents of architects being denied access to the site to undertake inspections at certain stages of the building process. This can have safety ramifications for end users and compromise our ability as architects to properly fulfil our functions and responsibilities.’

Documentation was another area of concern with the survey showing a major trend toward novation earlier and earlier in the design process, with less complete documentation.

‘This leaves a greater proportion of design choice in the hands of the contractor and misses the opportunity to effectively lock in design quality for the benefit of the principal, and ultimately the end user,’ Ms Muir said.

‘The optimal point for novation to occur is at either 100% of the design development or after more than 51% of the Construction Documentation has been completed.

‘Such a change would vastly improve the built outcomes and align with the tighter more stringent processes that we expect – and hope – will be required through the current reform process.

‘The clear message to the Victorian Government from these survey results is that an industry-wide code for novation must be created and legislated.

‘An overwhelming 83% of respondents were in favour of this proposal because they believe it would help improve the quality of projects being delivered.’