by rob@elementsofhome.com.au | Apr 2, 2023 | builders | 1 comment
I am saddened to hear about the recent news of Porter Davis, as well as other high profile residential volume building companies around the country, going into liquidation. While this is undoubtedly an incredibly difficult time for their clients, staff and other connected parties, it highlights the risks of relying on volume builders to design and construct your dream home as well as the ongoing challenges faced by many smaller builders.
The building industry faces many challenges, some of which are more pressing than others. One of the main challenges is the high cost of materials and labour, which makes it difficult for builders to keep their prices competitive while still maintaining quality workmanship. In the current economy, volume builders and builders in general are facing a number of financial challenges that make it difficult to survive. The COVID-19 pandemic has had a significant impact on the construction industry, leading to delays and cancellations of projects, as well as a decrease in consumer confidence.
The building industry has faced a significant challenge due to the increasing costs of materials. This trend has been on the rise in recent years, making it challenging for builders and developers to maintain profitability while delivering projects on time and within budget.
The rising costs of materials have been attributed to several factors, including global supply chain disruptions, increased demand for raw materials, and the impact of trade tariffs. These factors have caused prices for building materials such as steel, timber, and concrete to surge, making it difficult for builders to remain competitive in the market.
Choosing a builder for your construction project is one of the most important financial decisions you will ever make, and it is essential to ensure that you select a reputable and reliable builder.
While it is impossible to guarantee with absolute certainty that a builder will not go into liquidation, there are several steps you can take to minimize the risk and increase your confidence.
- Check the builder’s registration:
Before selecting a builder, it’s essential to do your research and check their credentials. Check if they are a registered builder with the relevant authorities and whether they have any outstanding complaints or legal issues.
Link here to check on Victorian building practitioners: Find a practitioner | Victorian Building Authority (vba.vic.gov.au)
- Check the number of projects they are working on.
A builder with many projects exposes themselves to risks. This is no different to any business. Unless the proper processes and procedures are in place cashflow can dry up very quickly. This is the number one reason why a business usually fails. And in the case of volume builders they carry a much higher degree of this type of risk.
- Look for online reviews and ask for references from current and past clients to get a sense of their reputation and experience.
It is important to ask your builder for the contact details of the owners of projects currently on site, projects that have finished within the past 12 months and projects from at least 5 years ago. That way you can get valuable information about the quality of their workmanship, their professionalism, and their ability to complete a project on time and within budget.
- Get a written contract
It’s crucial (and legally required) to have a written contract with your builder that outlines the scope of work, timeline, and payment terms. And that this contract is checked by your preferred independent specialist, whether that is your architect, lawyer or independent contract inspector.
- Ask for references from suppliers and subcontractors
In addition to references from past clients, ask the builder for references from their suppliers and subcontractors. These references can provide insights into the builder’s payment practices and financial stability.
- Hire an independent project manager
Consider hiring an independent project manager to oversee the construction process. The project manager can provide an objective assessment of the builder’s work and help ensure that the project stays on track and meets the agreed-upon standards. They will check the contract, check up on progress payments and keep you informed along the way. Often your architect, draftsman or building designer can provide this service. Just ask.
- Check for builder’s insurance
Check whether the builder has appropriate insurance coverage for the project, including liability insurance, workers’ compensation insurance, and builder’s warranty insurance. The warranty insurance is mandatory in order to obtain a building permit as is their liability insurance for ongoing registration
- Engaging an independent architect, registered draftsperson or building designer such as myself, who has personal experience and long term relationships with a number of local, registered builders can be beneficial for several reasons.
- I can provide you with insights and advice on selecting a reputable builder with whom I have a track record of successful projects.
- I can check the contract prior to signing and advise on cost saving options
- I can provide oversight during the construction process and help ensure that the project is completed to the agreed-upon standards.
- I can monitor the construction progress, including weekly site meetings to check progress
- I can review any design or construction issues that may arise
While no one can control a builder’s financial stability or the external factors that may impact their business. Using someone to help you manage and navigate the process will limit your liability.
In my 20 years of architectural design and building experience here in Australia I am proud to say I have only worked with and recommended builders that have proven themselves to be honest, reliable, professional and trustworthy. Not one has gone into liquidation. I often have conversations with some of the younger builders about processes and procedures and how best to navigate lean times. I will continue to operate this way and refer these builders to my clients.
Yes times are tough and builders are struggling. But the good ones, the honest and reliable ones, will work it through with you and won’t leave you high and dry.
If you have any questions or concerns about any aspect of the building industry please contact me at rob@elementsofhome.com.au
Rob Harris is a UK Registered Architect since 2002 with the RIBA (Royal Institute of British Architects), RIAS (Royal Institute of Architects in Scotland) and ARB (Architect Registration Board). In Australia registered with the VBA (Victorian Building Authority) since 2005.
