Is the Project Remediate Mouse Trap Being Sprung?
DEFECTIVE: Issue 2021.005
As more details and information about NSW’s Project Remediate become available they make a cynic like me worried for strata buildings and strata owners.
[10.5 minutes estimated reading time, 2128 words]
Last week in ‘DEFECTIVE: Cladding Matters: What’s Project Remediate in NSW all About?’, I explained the structure and approach to the NSW Government’s program to assist high-rise strata [and other] buildings with high-risk combustible cladding.
I also promised to provide updates on Project Remediate as I learned more.
Well, it didn’t take long as Andrew Heaton at Sourceable interviewed the NSW Building Commissioner, David Chandler OAM, and the Project Remediate Executive Officer, Matt Beattie, about their thoughts and ideas regarding the combustible cladding project and reported what they said in the article ‘Fixing Cladding on 214 NSW Apartment Towers’.
Some of the things they’re reported as saying [and that they haven’t said] are very instructive about how Project Remediate will operate.
So, let me highlight, interpret and comment on 8 concerns I have about the statements and missing information. Plus, I’ll give you a cynic’s view at the end.
1. There’s up to date and more detailed strata building numbers
After the NSW government’s audit and work so far on Project Remediate here are the latest reported numbers.
3,755 buildings have been cleared.
372 buildings remain under review, assessment, or in remediation.
Of these 372 buildings, 214 are multi-storey residential buildings (Class 2 buildings).
Of these 214 multi-storey residential buildings:
79 buildings are high-rise (nine storeys or greater),
129 are mid-rise (four to eight storeys), and
6 are low rise (up to three storeys).
On average, there are about 76 apartments per affected building.
It’s good to know more details about the affected buildings but with those details come some sobering realisations.
Almost all of the affected strata buildings are more than 3 storeys which means they don’t have Home Building Insurance protection.
Plus, it also means that more than half of the affected strata buildings are medium-sized [not high rise] so will have to share the cladding remediation work costs over a proportionately smaller number of strata lots [so each strata owner will pay proportionately more].
And, despite this new information, we still don’t have public visibility of the affected buildings as no list of the 214 strata buildings is available.
2. Strata buildings are [apparently] unsophisticated cheapskates
David Chandler OAM is reported as saying the following things:
‘Unlike commercial property funds who own commercial real-estate, typical owners corporations of residential apartment buildings tend to be less sophisticated regarding construction and less able to make sophisticated decisions about their buildings or to adopt a nuanced approach toward risk management.’
‘Amongst owners corporations who have undertaken remediation thus far, there have been tendencies to spend insufficient money up-front and to seek the cheapest possible solutions to identify the scope of the works.’
Whilst, many strata owners I know would disagree with those characterisations about them, that’s not the key thing I hear from those quotes.
Rather, they evince a paternalistic attitude to strata buildings, strata committees, strata managers, and strata owners that other people know what’s best for them and will ‘help’ them get to the ‘right’ outcomes.
Whilst, it’s true that many strata buildings make poor decisions, the answer is information and education, not paternalism.
3. Solutions need to [and will] be more complex and expensive
Speaking further on the scope of cladding remediation works David Chandler OAM is reported as saying that:
‘this can lead to the scope increasing as work progresses and owners being exposed to nasty surprises regarding the final cost.’
‘owners corporations thus far have generally spent around half of one percent of the remediation value in upfront scoping, the Office of Project Remediate intends to allow around two and a half percent for projects which are remediated under the program’
So, there’s going to be a lot more time and money spent on scoping cladding remediation work for strata buildings under Project Remediate by all the people and organisations I’ve identified in item 5 below. And, there’s a lot of them.
That will inevitably result in more works being specified, more complex work being specified, longer project durations, and higher cladding remediation project costs.
If there’s going to be five times as much investigation and scoping works, will there also be five times as much work to be done at five times the price?
4. Remediation solutions need everyone’s approval
David Chandler OAM is also reported as saying the following things about who’s making decisions:
‘the standard of remediation must be acceptable not only to owners but also to the Insurance Council of Australia and to first responders such as emergency service personnel’
‘the Office has worked closely with the ICA on the program’s design to ensure that remediation once complete enables buildings to be insured for their replacement value without carve outs in respect of cladding’
‘remediation must be undertaken to a level which minimises the risk faced by first responders when attending a scene’
So, it looks like a key aspect of Project Remediate’s work is to satisfy:
insurer’s risk concerns and exposures, and
fire services authorities’ safety concerns for their staff.
That’s very nice, but why then don’t those groups share some of the financial burdens of cladding remediation if they’re making approval decisions and benefitting from Project Remediate?
Plus, since both the insurers and fire services aren’t paying for the cost of cladding remediation work, they can and are likely to want more [and more] risk reduction measures incorporated into the remediation work. After all who wouldn’t?
5. Plenty of experts, panels, managers, contractors, certifiers, etc
Here’s the list of people involved in Project Remediate’s approach to the work necessary to investigate, design, scope, consider, approve, document, cost, certify and deliver the Project Remediate program for each strata building.
Project Remediate staff, who run the project for Government.
The Cladding Product Safety Panel [8 members], who decide on technical matters.
A managing contractor, who will oversee everything.
The global façade consultant, who will be the principal design engineer.
5 pre-qualified panels of service providers as follows:
Building investigators, who will perform investigations and undertake project scoping
Designers, who will walk owners corporations through design options, work with OCs to select the best solution for their building and prepare design documentation.
Contractors, who will carry out the work and deliver upon designs
Assurers, who will certify that the work has been done correctly according to the designs.
Superintendents, who will ensure that the contract is properly administered and that design documentation is correct
That’s a lot of resources most of which are not actually doing the remediation work that need to be managed, co-ordinated, and paid for.
In my experience, this level of process complexity rarely progresses things quickly or efficiently.
6. No Ticky, No Laundry !
It’s not entirely clear yet who is paying for what in Project Remediate since David Chandler OAM is also reported to have said that:
‘owners corporations themselves will directly engage designers, contractors, assurers, superintendents and building investigators from prequalified panels as outlined above, with the managing contractor performing a coordination role’
Clearly, the NSW Government is paying for the Project Remediate staff and resources, the Cladding Product Safety Panel [8 members], and the managing contractor. And, the strata buildings will pay for the façade remediation works.
But, the quoted statements mean that it’s possible that strata buildings will also be paying for a significant number of all the people and organisations I’ve identified in item 5 above like the global façade consultant, the designers, contractors, assurers, superintendents, and building investigators under direct supply contracts.
So, if the strata buildings have to pay for more than just the remediation works, they’ll inevitably end up facing the challenge so eloquently expressed by Jack Nicholson’s character in The Departed when those bills start rolling in:
‘No Ticky, No Laundry!’
7. There’s still no funding or loan information
Apart from general statements about no-interest 10-year funding for strata buildings under Project Remediate, there’s no real detail. Plus, no one’s saying anything about the cost of Project Remediate itself or the expected cost of cladding remediation work to the strata buildings.
Without that information early, strata buildings are embarking on a long, complex, and costly process towards major works in their buildings without clear paths about what they are paying for, how much and how it will be funded.
I’ll keep an eye out for more on this.
So, can you begin to see the risks for worried, vulnerable, and potentially gullible strata owners?
8. What happens when the strata building says no to the plan, works, cost, etc?
As I learn more about the details of Project Remediate I am becoming increasingly worried about it. Let me explain.
Do you know the Hasbro game Mouse Trap?
https://en.wikipedia.org/wiki/Mouse_Trap_(game)
It’s a board game first published by Ideal in 1963 for two to four players. It is one of the first mass-produced three-dimensional board games. Over the course of the game, players at first cooperate to build a working Rube Goldberg-like mouse trap. Once the mouse trap has been built, players turn against each other, attempting to trap opponents' mouse-shaped game pieces.
I’m starting to feel that Project Remediate is a bit like Mouse Trap for strata buildings with high-risk combustible cladding: where they work together with the NSW Government and other at-risk stakeholders [local councils, fire services, insurers, certifiers, etc] to build an impenetrable trap in which the strata buildings and strata owners become ensnared.
The strata cladding Mouse Trap game plays out along the following lines.
A. Strata buildings that have been assessed by the NSW Government as high risk are offered and accept [free] help from the government to work out how to fix the problems. Who would say no to that, when they otherwise need to organise and pay for advice and solutions themselves. Plus, it will have the imprimatur of those in charge.
B. Project Remediate and its small army of consultants work on a ‘zero risk’ solution for the strata buildings’ combustible cladding. The solution has to get approved by a series of Project Remediate cohorts and external groups like the local council, insurers, and fire services authorities who keep reducing their risk and upping the remediation scope and cost.
C. The size, scope, and cost of the Project Remediate solution that everyone proposes is significant and probably more than the strata building would have proposed itself when balancing risk, strata owner preferences, time, inconvenience, and cost.
D. The strata building and strata owners are asked to approve the Project Remediate solution, the independent costs, and the proposed contractor. Plus, they have to directly engage [and pay for] a lot of project staff from the NSW Governments panels as well as the cost of the proposed works. And, if the strata buildings can’t pay, they can agree to a loan for all the costs.
E. If the strata building approves Project Remediate solution, their team runs the works and the strata building pays the bills [or uses up the loan funds] and, when finished, they’re told it’s all fine. Even then, it’s not clear what happens if the project works are delayed, there are variations, there are cost overruns, etc but let’s assume none of that happens.
F. The strata building then has 10 years to repay the loan without interest after which they’ll need to refinance into an interest accruing debt for the unpaid balance.
But, what if [for good or bad reasons] the strata building doesn’t approve the Project Remediate solution, doesn’t agree to engage one of more panel service providers, or, can’t or won’t pay for something along the way?
Will project Remediate simply wander off and say ‘well we tried our best? That seems unlikely to me.
And, what will the fire services authorities do when the next annual fire safety statement is due? The answer is pretty obvious, not fire certify the building.
Will the strata insurers keep offering strata building cover at all, or, at anything like commercial rates? There’s no need to try to answer that question.
And of course, the strata building will be in no position to argue about these things since Project Remediate and its cohorts have reams of investigations, reports, approvals, and other material about why they’re right [which the strata building cooperated and/or acquiesced on] to use against it.
The strata mouse is now in the trap!
Can you now see the trap that’s being sprung for by Project Remediate for worried, vulnerable, and potentially gullible strata buildings and strata owners?
My final thoughts
Project Remediate appears to be a worthwhile and generous program by the NSW Government to help address the combustible cladding crisis that’s emerged.
But, a cynic like me would say that Project Remediate’s main purpose and focus appears to be on fixing the Government’s problem rather than the problems faced by the innocent strata building and strata owners. And, it looks like it’s doing that mostly at the strata buildings’ and strata owners’ cost.
After all, the strata building owners of these 214 affected buildings are being forced to spend a lot more of their money than they’d like to solve a problem that was not created by the strata owners, but rather by the developers, builders, certifiers, and government.
Plus, because the NSW government took away home building insurance for high rise buildings and 208 of the 214 buildings are over 3 storeys, almost all of those strata buildings and strata owners have been left without any [or any easy] legal redress for the defective and non-compliant combustible cladding.
It’s hard to see how this is a great outcome for the strata buildings and strata owners.
On the other hand, it’s pretty good for a lot of other people, organisations, and businesses who get to work on Project Remediate.
May 07, 2021
Francesco Andreone