黑洞社区

Next month marks the fifth anniversary of the Grenfell Tower disaster and while in many ways it does not seem long ago, in others it seems like an eternity given the sheer amount of stuff that has happened since.

Since the fire that killed 72 people on 14 June 2017, we have had Brexit, a global pandemic, worldwide materials shortages and now the war in Ukraine. Debates about the need to make our buildings safe meanwhile have been dominated by the issue of who pays for the removal of cladding from tower blocks, with leaseholders, developers, and more recently product manufacturers, making their case for fairness in the way costs are apportioned.

However, as many of the findings from the ongoing Grenfell inquiry have shown, the building safety issues in the construction sector have been much bigger than just that of unsafe cladding. Few would disagree that the construction industry is in need of much more radical change.

One person who has been watching the industry鈥檚 efforts to change itself over the past four years and quietly seething about the lack of progress is Dame Judith Hackitt, whose seminal 黑洞社区 a Safer Future report in 2018 laid the foundation for much of the 黑洞社区 Safety Act which passed into law last month.

Hackitt told UK Construction Week last week that she has spent four years trying to get the construction industry to improve building safety but has met with 鈥渕ixed success鈥� as too many have their 鈥渉ead in the sand鈥�.

Hackitt, who advises the government on the act鈥檚 passage and implementation, later spoke to 黑洞社区 about her concerns. Visibly frustrated, she rattled off several areas that she thinks the industry should be moving more quickly on. These include being too cautious about insurance concerns, not providing sufficient funding for building safety training, and not engaging enough on moves to establish the 鈥済olden thread鈥� of information sharing as required under the act.

鈥淲hat everyone seems to come up with,鈥� she says, 鈥渋s 鈥業鈥檓 waiting for everybody else; I can鈥檛 do my bit until they do their bit鈥�.鈥� She says the industry is too often 鈥渨aiting to be told what to do.鈥� In simple terms, she thinks the industry is 鈥渨aiting to be told what to do鈥� through legislation and regulation rather than working as hard as it can to develop solutions ahead of the game.

Context

But how fair is all of this? Philip Pamment, head of residential (South) at consultants CPC Project Services, does not downplay the need for change and says Hackitt鈥檚 comments are 鈥渦nderstandable鈥�, but says the scale of the changes and the current context needs to be recognised when judging the industry鈥檚 progress.

Pamment says: 鈥淭he changes enacted in the 黑洞社区 Safety Act are substantive, strategic and structural. However, they are being driven through at the same time as the construction sector has been dealing with the significant headwinds created by Brexit, covid and now the war in Ukraine.

鈥淭hese headwinds have disrupted supply chains, driven up costs, increased risks and created a range of unprecedented contractual challenges. The effect of these headwinds has then been magnified by a programme of substantive regulation change to Approved Documents part B, F, L, O, S and Z. This combination is an unprecedented challenge for the sector.鈥�

On top of this, suggests Pamment, there is significant uncertainty about how some of the detail yet to be brought through in secondary legislation will work. These include how the gateway points, which govern building control approval and completion certificate approval, will operate and what happens between now and when this part of the act comes into force in 12 to 18 months鈥� time.

鈥淕iven that developers and clients are currently negotiating contracts that may be subject to these new gateway rules, it is important that the government clarifies the transition arrangements and residual uncertainties as quickly as possible,鈥� says Pamment.

He adds that all this 鈥渟till needs to be finalised before the sector can confidently implement the changes envisaged by Dame Judith more than four years ago鈥�.

But doesn鈥檛 this just back up Hackitt鈥檚 point that the sector is waiting to be told, rather than leading on safety?

One industry legal expert, who did not wish to be named, says it is understandable if some have been waiting for the act to get Royal Assent in case planks of the legislation changed, and some may already have wasted money by moving too early. She says an example of this was the relatively late decision to remove the requirement for blocks above 7m to have a fire safety manager. 鈥淎 lot of clients have been appointing building safety managers on the understanding it was going to be one of the core tenets of the regime. These clients did get on with it and now have people with job titles they need to repurpose.鈥�

She says this may not leave firms massively out of pocket because the people moved into other similar roles, but she adds 鈥測ou can understand the reticence of people to just get on and do things on building safety without an act in place鈥�.

Training

This uncertainty may be behind another of Hackitt鈥檚 observations, that not many people have been trained up to improve their competency, despite work being done to set up competency frameworks.

The Competency Steering Group 鈥� a pan-industry body of more than 300 organisations or individuals 鈥� was set up to look at competency and in October 2020 published its final 164-page report, called Setting the Bar, outlining how a competency regime should look.

Despite this, Hackitt says few people have been put through training alongside the competencies framework and suggested firms do not want to pay to train their staff 鈥� 鈥渢hat鈥檚 the bit that requires a hand in the pocket to pay for it鈥�.

[The 黑洞社区 Safety Act is] going to mean safer, higher-quality buildings, with designated people to ensure that happens and a building safety regulator as well

Andrew Harrison-Sleap, Howden Group

Hackitt says though that now there is an act on the statute book, this 鈥渙ught to be the sign鈥� for everyone to get on with training. Draft regulations have been published which will impose a requirement on principal contractors and designers and anyone carrying out any design or building work to be competent for their roles.

Graham Watts, chief executive of the Construction Industry Council (CIC), says he largely agrees with Hackitt that the industry鈥檚 efforts on competency have not yet led to the introduction of training to meet the new standards. However, he says: 鈥淚鈥檓 sure that Judith is partly right but I also think that the industry is ill-prepared for the new legislation and businesses are not sure what they need to do.

鈥淟ast minute changes to the legislation, such as the removal of the statutory requirement for a building safety manager have not helped because they have increased the feeling of uncertainty.鈥�

Insurance

Another, area of uncertainty, perhaps the biggest, is insurance. Hackitt says the thing she has heard 鈥渕ore than anything else鈥� from the construction industry is that insurers are 鈥済etting in the way and won鈥檛 give liability cover鈥� for the necessary changes. Hackitt suggests rather vaguely that construction should crack on with culture change and then the insurers will follow suit as once they see the new culture emerge, confidence will follow.

This reading of the situation, that construction firms are blaming insurance companies for holding back building safety and preventing progress, is strongly disputed by Andrew Harrison-Sleap, executive director and global deputy head of construction at insurance brokers Howden Group. Harrison-Sleap says it is 鈥渟urprising鈥� if the insurance industry is being blamed, given that the government did not have a regulatory regime in place in the first instance.

He says: 鈥淚f you look at professional indemnity insurance (PI), insurers are there to indemnify their insureds 鈥� for example, a contractor 鈥� for the legal liabilities they incur, but the legal liabilities they incur will not only be determined by their practices but also by the legal regime that they sit within. So, to hear that the insurer has a handbrake on this, and they are being brought into question is surprising.鈥�

He says the insurance industry faced an 鈥渁bsolute avalanche鈥� of claims or potential claims following Grenfell and many are still trying to provide PI, although he says there is a difference in size of firm seeking insurance. 鈥淭he larger contractors with very, very large programmes, large excesses and larger premiums will have a better ability to get coverage for cladding and fire safety claims. Smaller contractors and subcontractors might struggle a bit, but the insurers have generally been pragmatic.鈥�

Rebecca Rees, partner at law firm Trowers & Hamlins, suggests the idea that construction could simply march on without taking into account insurers鈥� concerns, in the hope that they buy in later on, is not feasible as the 鈥渟ector won鈥檛 move without insurance鈥�.

People need to have insurance, we live in an insurance-based service regime, don鈥檛 we? Architects will not do something where they have unlimited liability and they鈥檙e not insured

Rebecca Rees, partner at law firm Trowers & Hamlins

The 黑洞社区 Safety Act brings in a duty holder regime which places statutory responsibility for the safety of higher-risk buildings on key individuals at different stages of a building鈥檚 life cycle, namely on those who procure, plan, manage and undertake building work. These duty holders will be clients, principle designers, principle contractors and contractors. Rees says these duty holder roles will not be embraced or delivered to their fullest extent if they are not 鈥渦nderpinned by reasonably robust and affordable indemnity insurance鈥�.

She says: 鈥淧eople need to have insurance, we live in an insurance-based service regime, don鈥檛 we? Architects [for example] will not do something where they have unlimited liability and they鈥檙e not insured. So, you have to be cognisant of what is insurable and what isn鈥檛 when you set out that duty holder role, or seek to bring insurers with you in the roles鈥� design.鈥�

Ultimately, Rees believes that if affordable and effective insurance does not become available, the government 鈥渟hould step in and resolve the market failure鈥�, rather than designing a less effective building safety regime that may well be insurable.

The dutyholder regime is not expected to come into force for another 12 to 18 months, and the regulations setting it out only exist in draft form, which again adds some uncertainty into the mix.

Extending the period of limitation

One late change to the bill that has caused widespread fears about the availability of PI is the government鈥檚 decision to extend the time period for compensation claims for retrospective defective building works under the Defective Premises Act from six to 30 years, rather than to 15 years as first announced.

The Royal Institution of Chartered Surveyors (RICS) has warned that this change could result in insurers 鈥渁ssessing their involvement鈥� in the construction market. It said: 鈥淭he retrospective extension of the period of limitation will not be viewed positively by insurers, who have been concerned by changes to building regulations, and brings back into scope previously discounted risks which have not been priced into their reserves for claims or into the premiums of the risks that they are currently underwriting.鈥�

See also>> The 黑洞社区 Safety Bill is now law - here鈥檚 what you need to know

The CIC has warned that the move could lead to smaller construction firms struggling to get cover and potentially exiting the industry as a result.

Rees also says there are uncertainties about building insurance and how insurers will get comfortable with aspects of the new regime. The act requires buildings to be assessed by the new building safety regulator every five years in order to receive a building assessment certificate. 鈥淲hat happens when you get to that year where your building assessment certificate runs out half way through?鈥� Rees says she is sure the government has thought about this and has a solution, but it would be helpful if this were publicised as soon as possible

However, when it comes to the longer-term picture, Harrison-Sleap has little doubt that the new regime will be welcome by the insurance industry as it should lead to fewer defects in buildings. He says: 鈥淚t is going to mean safer, higher-quality buildings, with designated people to ensure that happens and a building safety regulator as well.鈥�

But in the short term, the lack of clarity, the fact final regulations are still being worked on, look likely to prolong the hesitancy in the market, and it is difficult for construction firms to progress in some areas as a result. Rees goes as far as to say that she fears 鈥渢hat the implementation of the act in its fullest may be hampered by the lack of availability of appropriate insurance鈥�.

Information sharing

Hackitt also slammed the construction sector for being behind the curve on developing information-sharing through use of technology, compared with other industries. The act requires dutyholders to create and maintain a 鈥済olden thread鈥� of information. Rees says 黑洞社区 Information Modelling (BIM), is too often seen as an optional expense to a project and construction therefore remains a traditional sector. She also says the use of BIM and digital solutions are usually seen as the preserve of the offsite and net zero agendas.

One reason construction may be finding it difficult, it has been suggested, is the fragmentary nature of the industry, with its large numbers of different organisations involved. This also creates problems for procurement. Stephen Greenhalgh, the building safety minister, told 黑洞社区 earlier this month that there needs to be a greater focus on quality and then safety will naturally follow. 鈥淧eople have just been thinking about speed and cost,鈥� says Greenhalgh.

However, as Rees and Harrison-Sleap both point out, construction operates a low-margin, highly competitive model, with costs tended to get squeezed down the supply chain. Harrison-Sleap, while saying that construction should be less adversarial in this way, also points out that the government itself procures based on cost. 鈥淭hey want the highest quality at the cheapest cost, don鈥檛 they?鈥� he says.

鈥淚t鈥檚 a fallacy that if you focus more on quality then the price becomes less relevant,鈥� says Rees, who wants to see the government legislate against the 鈥渞ace to the bottom鈥� pricing model for higher-risk buildings 鈥渂ecause it is that that sets the agenda鈥�.

See also>> Decay, delay and deregulation: what we have learnt from the Grenfell Inquiry

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Across construction it will be difficult to find anybody who disagrees with the ultimate aim of the 黑洞社区 Safety Act, which is to prevent us ever again having to witness horrific scenes like those of 14 June 2017.

Hackitt is commendably impatient to see the industry cracking on with changing its culture. But it is understandable why change has not been at breakneck pace so far given the challenging trading conditions, insurance concerns, the fragmented operating model and a great deal of uncertainty around how the act鈥檚 regulations will work. Hackitt believes that now, with the act on the statute book, the changes will start to feel real and there will be much more attention paid to the huge changes coming down the road.

鈥淭here will be an explosion in the number of conferences, not for just the construction industry but for investors, directors at the very top of the pyramid and lawyers will be on their case now saying 鈥榯his is coming get ready for it鈥�,鈥� she says.

鈥淚s that a good thing? Yes, of course it is because it means that everything Stephen [the building safety minister] and I have been saying for the last four years is going to get amplified by other voices.鈥�

One thing is for sure 鈥� the industry will have to get its skates on soon when it comes to building safety, otherwise an increasingly agitated Hackitt will be the least of its worries.