Improving governance and contracts in NSW construction
In 2022, the Office of the Building Commissioner commissioned a report by Corrs Chambers Westgarth to identify financial, contractual and governance risks within class 2 building projects in NSW.
Key information
The report reviews a sample of 10 development projects to analyse common financial, contractual and governance risks.
The report highlights the importance of financiers being aware of risks so they can encourage the remediation of deficiencies at an earlier stage of construction.
The research forms part of the Construct NSW strategy to reform the building and construction industry.
Key trends
A range of common behaviours, trends and risks were found for these projects including:
- Corporate linkages, shared directors or relationships between directors of contracting entities with a lack of governance protocols to manage those relationships.
- The use of inappropriate delivery structures for complex multi-storey developments.
- Developers and financiers lack clarity that contracts have been properly reviewed, are compliant and are consistent with good market practice.
- Financiers and quantity surveyors and/or project superintendents lack visibility that works have been completed to a quality standard before authorising payment.
- Financiers lack visibility of the progress of any contractual or legal action taken against developers and builders, with minimal attendance at meetings in connection to occupation certificate audits.
About the report
The report makes four recommendations to support the delivery of better quality projects:
1. Developers and financiers should adopt a system which certifies that contracts have been properly reviewed, and are compliant and consistent with good market practice.
2. Financiers, quantity surveyors and project superintendents should be more involved in verifying that works have been completed to the required quality standard before authorising payment.
3. Financiers should request details of consultancy arrangements to ensure quality of work.
4. Financiers should regularly be notified of the progress of developments and any contractual or legal action taken against developers and builders, so they can attend meetings in connection to occupation certificate audits.
The report was commissioned in 2022 by the Office of the NSW Building Commissioner.
