Christchurch Earthquake Repairs Fiasco

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Our 2017 ed 2 of BoB, for builders, did a review of the history of the Christchurch Earthquake Repairs fiasco. Now it’s really hitting the headlines…Read on…

The Quality of Earthquake and Disaster House Repairs in Christchurch

By Alan Muxlow

Cover story from our BoB 2017 ed 2 – the fiasco of the Christchurch Repair…

Hearing or seeing news on house damage as the result of a natural disaster such as an earthquake or flood is becoming a regular occurrence in New Zealand and, in fact, worldwide. Builders are at the centre of this. If you’re doing earthquake (or other disaster) repairs, even though your work may be done legitimately without a consent, your LBP status is still at risk if your work is found to be substandard.

The Christchurch earthquakes exposed problems with the repair system that has let down thousands of homeowners. And while EQC has questions to answer regarding its approach to prioritising speed over quality, this has also brought into sharp relief inherent cultural problems within the building industry that are seen every day – just not quite as pervasive as in Christchurch.

How can it be that our industry accepted such a huge number of sub-standard repairs done to people’s homes? These are our families, our friends and our neighbours – and yet the industry’s focus in many instances was in making money, not looking after people.

We’ve summarised some of the history and content from various sources focusing on the quality issues of post-disaster house repairs, starting with the most detailed reviews by the Auditor-General.

AUDITOR GENERAL REPORTS
In 2013 the Office of Auditor-General became involved following a directive from Gerry Brownlee, probably after the continuous negative publicity that was occurring. They released an audit titled Managing the Canterbury Home Repair Programme. Extracts from their 2013 report, focusing only on the Repair Quality recommendation section follows:

“Repair quality

What we recommended that EQC should do:

Continue to improve its approach to auditing repairs in the home-repair programme so the Commission is well-informed about the scale and type of repair quality risks, can mitigate those risks where possible, and can match the resourcing of its quality assurance processes to the significance of those risks.

Findings in our 2013 report

Positive findings:

  • Site monitoring was carried out by contract supervisor staff.
  • Monthly auditing of about a quarter of all completed repairs against repair work standards set for the programme.
  • EQC started a post-repair completion survey in February 2013 that it intended to regularly administer.
  • A quality assurance team was set up in March 2013 to review quality concerns. This team receives referrals from the complaints management process.

Negative findings:

As at December 2012, quality controls were “yet to be fully embedded”.

  • The controls for ensuring compliance with the Building Code were not consistently followed.
  • There were risks with the accreditation process because there was no centralised database containing all of the data relevant to contractors.
  • Some contractors were accredited and inducted before criminal, credit, and conflict of interest checks became a routine part of the accreditation process. (A May 2013 internal audit report described these checks as “only recently” implemented.)
  • The issuing of performance improvement notices (or PINs) to contractors had not been centrally recorded for most of the programme, with only six contractors (out of about 1200) losing their accreditation.
  • There had been instances where the cost of fixing defects evident during the warranty period exceeded the amount of money withheld from the contractor until the end of the warranty period. (Paragraph 3.39.)”

In December 2015 The Office of Auditor-General again became involved with a follow-up audit. Extracts from their 2015 report, again focusing only on the Repair Quality recommendation section, follows:

“Part 3: Repair quality

Earthquake Commission: Managing the Canterbury Home Repair Programme — follow-up audit.
Summary

We found it difficult to assess EQC’s overall performance in managing repair quality, even though EQC has improved its understanding of repair quality. EQC’s survey of customer satisfaction immediately after repairs have been completed shows high levels of customer satisfaction with the quality of repairs.

However, some of the programme’s repair work has not met the requirements of the Building Code. There is a level of rework in the programme, but there are no definitive directly comparable benchmarks to compare this against. EQC does not have a formal process for learning from complaints.”

The Auditor-General also assessed, in Feb 2017, the effectiveness and efficiency of the now-defunct Canterbury Earthquake Recovery Authority (CERA):

“The report found while CERA did well early on in the recovery, it did not maintain momentum…it became more challenging for CERA to maintain momentum as the recovery moved into the reconstruction phase.”

Other Feedback on Repair Quality

An MBIE report dated August 2015 into Canterbury residential repairs was based on 101 homes randomly selected from more than 2,700 addresses provided by EQC, Housing New Zealand, Southern Response and IAG.

  • 90 of the 101 homes met the repair criteria for exemption from council inspection and of these 32 had structural repair work carried out that was non-compliant with the Building Code — 30 were “jack and pack re-levelling”.
  • An additional 23 homes were assessed as having minor repair defects.
  • A further finding was that the repair work to at least nine of the 32 non-compliant homes was supervised by a Licensed Building Practitioner that MBIE is now investigating.

Adrian Regnault, GM Building System Performance, MBIE said “The level of non-compliance is disappointing. ‘Jack and pack’ is a relatively simple repair job when done correctly and properly supervised. More complex structural repairs inspected in the survey were generally done well, which suggests some corners were cut on the smaller jobs and they lacked adequate supervision and oversight.

“It’s not uncommon in boom times to see tradespeople being exposed to work they may not normally do because of the sheer volume. During these times, greater vigilance is needed by Project Management Officers and contractors, to check that work is being carried out in accordance with their guidelines and repair specification, and that only staff experienced or trained for particular repair work, are doing that work.”

The report included a further recommendation for agencies and/or their PMOs to review all completed repair work that has been exempted from a building consent, targeting houses where the repair works involved jacking and packing, to ensure Building Code compliance.
…And another report…

EQC defends Christchurch repairs (The National Business Review, November 2016)

There were concerning statistics quoted by Duncan Webb, a partner at Christchurch law firm Lane Neave and the Christchurch Central candidate for the Labour Party, in his presentation to the finance and expenditure select committee about his petition calling for a royal commission of inquiry into EQC’s repairs in Christchurch. This report noted:

  • Some 167,000 homes were damaged by the earthquakes which struck Canterbury in 2010 and 2011, and about 70,000 houses were repaired without a building consent as they did not require consent under the Building Act.
  • “There was no third-party scrutiny of the repairs, and a lot of those were very significant repairs,” Mr Webb said. “There’s continuing research being done and an alarming proportion simply didn’t comply with the Building Code. The act allows replacement without the need for a consent provided the replacement is not substantial,” and Mr Webb said some builders had been “pretty enthusiastic” with their interpretation of substantial.
  • Mr Webb said the issue is not confined to repairs that didn’t require and gain a building consent, with some cases of consented work also defective. A shortage of qualified people who can properly identify damage done to houses by the quakes meant some “hopelessly unqualified” people had assessed damage, meaning inadequate repairs have been done.
  • Further statistics quoted at the hearing, this time by the Earthquake Commission chairman Sir Maarten Wevers, defended the building repairs. He noted in a survey of 2174 properties where unconsented underfloor repairs had been done found that 476 repairs met the building code, while 839 required remedial repairs, of which 200 have been completed. Another 844 inspection reports are still under way, he said. [Ed. That’s 63% required remedial work – almost 2/3rds!]

We were horrified at these statistics – twice as many failures as passes and these only related to underfloor work.

Surely the red flag should have gone up at this stage – and what about repairs to other normally consented damaged structure work such as the framing and the roof? Under a normal situation you can’t even remove internal linings to insert insulation without a building consent so why an exemption to such a wide range of repairs including structural repairs on earthquake damaged buildings?

We also note some issues with the math, here: The EQC survey noted 2174 properties, but 476 (ok) + 839 (required repair) + 844 (not yet assessed) = 2159. 15 seem to have fallen through the cracks! (excuse the pun)

Sir Maarten Wevers also told the committee there were a number of assertions in Mr Webb’s petition that he “would certainly not concur with” and the hurdle for calling a royal commission was quite high.

“We do not contest for a moment that there have been shortcomings in some repair work, and there is a range of reasons for that,” Wevers said. However, “consenting would have created unnecessary delays”…
“If we had gone through and consented all the matters we followed regulation not to consent, we would have a much longer tail now of homeowners.”

So – speed over quality is the driver.

EQCfix.NZ formed to address quality issues

This website was established in May, 2016, following a Declaratory Settlement between EQC and the EQC Action Group and its formation is obviously from ongoing concerns about EQC’s performance.
From their website https://www.eqcfix.nz/about/ we learn that EQCfix.NZ is an independent public justice project whose overarching goal, in a post disaster environment, is to:

“Ensure that EQC meets its obligations under the Earthquake Commission Act 1993. The project intends to achieve its goal by working with central and local body representatives such as legal, insurance, land, engineering, surveying, and quantity surveying professionals; as well as building-industry practitioners and tradespeople.

Our aims are:

  1. to provide information, and if appropriate, education programmes, for property owners that better enables them to navigate, understand, and manage the EQC process(es) from claim to reinstatement,
  2. to co-ordinate and support groups of homeowners to work collectively to address EQC’s failures to meet its statutory obligations,
  3. to investigate and, if possible, to provide homeowners with access to a group solution which is affordable and realistic, whenever a potential EQC performance issue is identified by interested groups / individuals
  4. to advocate for an independent inquiry into EQC’s performance, handling and management of Canterbury earthquake claim and reinstatement processes,
  5. to review and monitor EQC procedures and processes to better ensure that EQC learns from past experience and changes accordingly.”

Their terms of reference are to be applauded and from some of their own research and reports they have initiated (that are on their web site), quality issues are high on their agenda. They provide an excellent summary of recent history surrounding this issue.

It’s interesting their board is made up of business and legal personnel and their suggestion that if you have a question, or need assistance then we suggest a ‘first port of call’ might be Community Law (www.canlaw.org.nz). They have a unique email address, info@eqcfix.nz, a process for insurances claim questions through an ‘Ask us’ form link, and an opportunity to share information about EQC anonymously through their special form.

They are funded by donations and provide a focused source of information and sharing. However, because of their legal links, any supporting influence may well cost any inquirer in the long run.

Independent Blogs also identify quality issues

With Blogs being the layman’s opportunity to express their side of any discussion, it’s interesting to read the blog responses to all these articles being published. Mostly are from dissatisfied homeowners quoting their personal experiences and are not for the faint hearted as they identify vivid examples of the short-comings that have and are still occurring. More evidence of the major shortfalls in quality issues comes through loud and clear:

Other Supporting Developments…

The appearance of the unique EQ Recovery Learning website  means there is a serious intent to attempt to resolve current EQ issues. This website states:

The service has empowered homeowners to move forward. The key fundamental is to give them the skills they need to engage with insurers.

But, while it’s great that this support is now available, there’s still the difficulty with the quality repair issues which again are not specifically covered on this site.

So where does the Government stand in all these problems?

“Construction ‘cowboys’ who did shoddy repairs for EQC will have to pay for their mistakes,” Gerry Brownlee said in August 2015.

Minister Brownlee on 8 February, 2016 commented that The Office of the Auditor-General report into CERA’s effectiveness must be viewed in the context of New Zealand’s most significant natural disaster,

“I believe the report as a whole is unbalanced at times and doesn’t compare CERA with other recovery agencies or post-disaster experiences worldwide”.

The Minister, September 2016, was “concerned and annoyed” after the Earthquake Commission (EQC) failed to pick up 2200 extra requests to re-repair damaged Christchurch properties. This followed an internal review that revealed EQC’s system had not correctly interpreted some of the data held across EQC and Fletcher EQR.

So, while the Minister has responded to issues as they get raised, the resulting new legislation still doesn’t adequately address the issue of standard of repair.

Legislative changes affecting EQC

In September 2012, the Government announced the Earthquake Commission (EQC) Act 1993 would be reviewed, with “legislative amendments” expected to be made by 2013. Fast forward to July 2015 – almost four years after the big one, Treasury released a raft of proposed law changes for public consultation. Later a Treasury spokesperson acknowledged the EQC Act review had “taken longer than expected due to the complexity of the issues and ongoing engagement with insurance industry stakeholders.”

In December 2016, The Government drafted three new Bills in the wake of the magnitude 7.8 earthquake on 14 November to ensure affected communities can respond quickly and efficiently to disaster. This legislation recognises the extraordinary situation faced by earthquake-affected communities, particularly in the Kaikoura and Hurunui districts.

A Beehive media release dated 26 June 2017 stated that after the next disaster, claimants will be able to go to their private insurer in the first instance. The insurer and the claimant will find a suitable repair strategy, and the insurer will then go to EQC for coverage of the first $150,000 in cost.

In July 2017, government introduced new legislation relating to the identification and handling of earthquake prone buildings. This sets out the responsibility of the Territorial Authority and the building owner but this is not related to the standard residential building.

Alternatives to resolve quality issues

Earlier we noted a key statement regarding quality by the Earthquake Commission Chairman Sir Maarten Wevers “If we had gone through and consented all the matters we followed regulation not to consent, we would have a much longer tail now of homeowners.” (NZ Herald, 16 November 2016)

We feel this statement falls short of ideal and on the statistics of quality issues identified we interpret this as Mr Wevers basically accepting that shoddy repair work may result if the work is to be done quickly. EQC disputes this and says the quote was taken out of context, but didn’t supply additional context for us to include. Without that, it’s hard to interpret Mr Wevers’ comment in any other way.

A Stuff report from October last year states:
“‘Another reason poor underfloor work was being completed was because the Government signed a contract with Fletcher EQR ridding it of responsibility for poor repair work,’ Craig said.

The agreement between EQC and Fletcher Construction, signed in 2011, stated Fletcher was not responsible for the design of any works, the construction of any works or work of any contractor or consultant.

Since then EQC had fielded more than 10,400 complaints and concerns about poor repair work by contractors by the start of the current financial year.”

From my brief research there are a couple of current but not clearly identified options for the builder (or homeowner) to ensure the quality of their repair work is monitored.

Firstly, even if the disaster repair building work is exempt, you can still choose to apply for a building consent and The Building Consent Authority (BCA) must process your application – there’s anecdotal reference to EQC over-riding this option so maybe this needs to be checked out!

Secondly, if you are a building owner and are unable to obtain a consent because building work has to be carried out urgently, you can still apply to the BCA for a Certificate of Acceptance as soon as practicable after you have completed this work (under section 96 of the Building Act). We believe this means you can action repair work immediately as it can be checked later.

As a builder, you may be called in to do disaster repair work and passing this information to a client would be most helpful and re-assuring to them. It will also improve your status by your client knowing that your work will be of a standard and quality that expects inspection through the full consenting process.

Builders’ requirements as repairers of future disaster damage

Earlier in this article we made reference to a request for a Commission of Inquiry into concerns about the quality of disaster repairs being made without a building consent. We have also identified numerous other reports and information that supported and justified this concern.

If there is pressure on you as a builder not to follow the consenting process, ask ‘Why?’ — but more importantly, insist on a robust quality control/post or staged work inspection of some sort before sign-off. While it’s easy to shrug this off and say ‘but it will probably never happen in our area’, the one thing even the disaster experts agree is that disasters will continue to happen everywhere, as evidenced by EQC continuing to settle 5,000 to 8,000 natural disaster claims it receives on average every year, right around the country.

The big question is, will the government continue to allow earthquake and disaster damaged house repairs to structural and other restricted building work that normally requires a building consent to continue without any quality control inspection process? If not, then why not, when the statistics referenced in the various articles above all highlight the extent of the risk of doing nothing?

Maybe Master Builders and Certified Builders should be challenged to lead the way in making changes as to how their members must operate in such circumstances. Why not start discussions between the construction industry, the insurance industry, EQC and consumer representatives? Agree on putting something in place that can apply to current or at least future claims and avoid a repeat of the numerous complaints about quality issues that previously occurred in Christchurch as disasters will continue resulting in repairs to the residential sector.

So where do builders stand as repairers of future disaster damage?

  • Your License could well be lost on the quality of any disaster repairs you make and this concern should be a major factor in any repair contract that you become involved in. The factors that need to be identified in any such contract from the outset include:
  • A person who, on a specific project, is the single and only communication link for any matters and who will provide documented answers to questions raised,
  • Realistic time frames and deadlines especially for communicating answers to questions,
  • The expertise of assessors who determine the extent of the damage,
  • Regular payment process for recouping fair and reasonable costs for the work involved,
  • The quality process that is to be followed to ensure best practise is followed and where any quality issues can be raised and handled,
  • A set procedure for the situation when opened up work reveals more damage to be repaired than had been identified,
  • A clear procedure of how owner/occupier concerns are handled,
  • Systems and processes that will identify and eliminate the “cowboys”.

As a builder looking at setting up a process to action earthquake or disaster repairs, you want a system that allows you to be able get on and complete your job efficiently and effectively, to be realistically reimbursed and that the outcome is to the satisfaction of all parties – and maintain a commitment to quality work.

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