As part of the Construct NSW strategy, the Office of the Building Commissioner has released a five star-rating system known as the Independent Construction Industry Ratings Tool (iCIRT). Created by global rating firm Equifax, iCIRT is a voluntary tool that allows construction professionals to rate the risk level of their project. There are currently 19 developers and builders listed on the public register.
Building defects have been in the spotlight after multiple tower evacuations, including Sydney’s Opal Towers. Project Lawyers acted for the Owners Corporation in NSW Supreme Court proceedings concerning Opal Tower. It comes as no surprise that lifting the standards and the roll-out of a public ratings regime will ensure builders and developers continuously maintain a high degree of quality in their construction work.
What is the rating criteria?
The star-rating is formed from an objective and independent assessment of the following categories:
- Character: assesses the transparency and trustworthiness of the business and its key persons, such as the business’ commitment to commercial, financial, and regulatory requirements.
- Capability: assesses the tenure and trading history of the business and previous track record on other similar projects. This category will also consider the business’ insurance and claims history, certificate of eligibility, and the history of insurance cover.
- Conduct: assesses the business’ commercial record, court judgement, industrial disputes, tribunal decisions, subcontractor payments, as well as any pending litigation and contingent liabilities.
- Capacity: assesses the business’ project pipeline, commercial performance, financial capacity, credit enquiries, and the size of the development relative to the business’ current scale of operations.
- Capital: assesses the funding sources, levels of debts and borrowings, as well as the type, number and trend of credit enquiries sought within the last 12 months.
- Counterparties: assesses the business’ exposure to related parties and capacity to withstand unforeseen disruptions. This category will also consider the business’ structural complexity, corporate sponsors and dependencies.
In addition to the overall ratings, there will be three main assessment levels to accommodate for a range of parties seeking to use iCIRT. These levels indicate the scope of information provided by the construction professional and the limitations of the rating provided.
- Gold Ratings: detailed review with participation and enduring consent.
- Silver Ratings: standard review with financials and background check.
- Bronze Ratings: brief review using non-consensual data.
Who will this apply to?
iCIRT is being released in a staged approach. Currently at stage one, iCIRT is available to builders, developers and certifiers. Government regulators can order single-party or multi-party ratings, whereas construction industry professionals can only order self-ratings on their business.
The multi-party ratings will be derived from the weighted scores of single-party ratings to reflect the overall iCIRT score for the project or build team. This process can be used to identify potential projects or build team conflicts.
In stage two, iCIRT will be available to rate construction industry consultants including designers, architects, engineers, suppliers, and manufacturers.
How will this impact builders and developers?
Builders and developers who participate in iCIRT will be given a rating of between 1 and 5 stars. The higher the stars, the more likely they are to exhibit confidence and credibility in delivering quality projects. Whilst iCIRT is voluntary, it may become mandatory in the future. Builders and developers should be mindful of the assessment criteria and how to best position themselves to achieve higher scores.
It is important to consider that iCIRT cannot identify and report on material building defects. The level of material building defects is not defined or measured in accordance with construction industry agreed terms. Until the building defects can be independently verified, they will only appear as a flag next to the final star-rating.
The iCIRT ratings will be available to the general public and will likely be used by a range of stakeholders including financiers, insurers, and regulators. Risky builders and developers may experience disruptions to their projects and monetary loans if they are unable to achieve adequate ratings.
What should purchasers look out for?
Purchasers are encouraged to check the newly launched database to make better informed decisions about construction professionals selling off-the-plan apartments. This new layer of transparency can help purchasers decide who to engage with when considering a new development.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.