Written evidence submitted by the Federation of Master Builders (FMB) [BSB 321]
1.1. The Federation of Master Builders (FMB) is the largest trade association in the construction industry, representing around 7,500 small to medium-sized (SME) firms across the UK. These firms operate predominantly in the domestic repair and maintenance and house building sectors. One fifth are involved in public sector contracts, and a smaller proportion form the supply chain of larger infrastructure projects.
1.2. The FMB’s mission is to continuously push for improvements in building standards and quality. As such, each new applicant to the FMB must pass business and technical competency checks upon joining. A site inspection is conducted by an independent third party, and firms must have been trading for at least one year. FMB members are reinspected on a three-yearly cycle.
1.3. The FMB Group also comprises FMB Insurance Services (IS). FMB IS provides insurance policies to both builders and homeowners, providing expert customer service and striving to help both parties make the right choices for their building projects. FMB IS is authorised and regulated by the Financial Conduct Authority.
1.4. The FMB Group strongly welcomes the objectives of this legislation, including a step-change in the building industry towards greater accountability, safety and a more joined-up regulatory system. While the majority of FMB members will not typically build projects of over 18 metres, they may complete remedial works on these buildings. Furthermore, it is noted that the Bill aims to empower the Regulator to extend its scope where necessary, and the FMB is therefore keen to share its thoughts on the implications that this Bill will have for the wider industry. Around half of the FMB’s members build new homes, and therefore will be within scope for the New Homes Ombudsman.
1.5. FMB IS provides a New Homes Structural Defects Warranty and is a Registered Code User of the Consumer Code for New Homes, which has been approved by the Chartered Trading Standards Institute.
2.1. With regards to the New Homes Ombudsman policy, clause 108(1)a in the draft Bill, the FMB Group strongly welcomes the proposal to require all developers to participate in the Ombudsman scheme. This is necessary to achieve effective change and stronger consumer protection. The FMB Group recommends amendments to the definitions used in the draft Bill, however, to ensure it captures the full diversity of actors in the house building industry. This includes distinguishing between a ‘developer’ and a ‘contractor’ in clause 107 and in the draft Bill in general. This is because a house building model comprises both parties. The ‘developer’ owns and funds the project, and the ‘contractor’ is paid to complete the building works only. From a warranty-provider point of view, the contractor will have different responsibilities to the developer and the contractor is typically liable. It should be clarified as to where the responsibility will lie with regards to redress through the Ombudsman.
2.2. Furthermore, with reference to clause 106(9)b of the draft Bill, the definition of ‘developer’ must be expanded to account for the common practice of setting up specific short-term companies to oversee each development, also known as Special Purpose Vehicles (SPVs). These will often be closed once the building works have been completed and the properties are sold. In its definition of ‘developer’, the Bill should account for the scope for parent companies of SPVs to register for the Ombudsman scheme.
2.3. We recommend that clause 109 be amended to include the fact that the code of practice that will be issued or approved by the Secretary of State should be brought into the remit of a public body to protect competition between insurance providers. The Bill should also mandate that any insurance provider wishing to join the Code must be supported by an A rated (or better) insurance company. This is important because FMB IS applied to join the Consumer Code for Home Builders multiple times and were systematically rejected, despite fulfilling the requirements stipulated by that Code. This is prior to FMB IS becoming a Code User for the Consumer Code for New Homes. This is anti-competitive and the code should be independent of the warranty bodies.
3.1. The FMB Group advocates for the draft Bill to extend the scope of powers afforded to the Regulator as set out in clause 6(1) such that it not only ‘facilitates’ improvement in competence of industry and building inspectors but also ‘mandates’. This will establish the potential for the Regulator to mandate a licensing scheme for construction firms in order to drive up competency in the industry.
3.2. In your 2019 report ‘Building regulations and fire safety: consultation response and connected issues’, the Committee calls on the Government to reflect on the causes of low levels of competence in the built environment, and to support the industry in addressing issues that could help to attract higher-calibre individuals into the sector. The FMB argues that a mandatory licensing scheme that applies to all UK construction firms would speak to this recommendation and would help to drive up competency and the reputation of the building industry, thus attracting a greater diversity of new entrants. This would also offer a much higher level of consumer protection. The draft Bill could go much further in its ambition in this arena and we would be happy to supply further details on the licensing scheme to the Committee on request.
3.3. In 2018, the FMB published a report researched and written by Pye Tait Consulting called ‘Licence to Build’. The report reviewed international examples of licensing schemes, including in states in Australia and the USA, and set out a proposal for how a scheme could operate in the UK. It also published and gathered evidence that this change would be supported by industry; 77% of FMB members agree in principle with the idea of licensing, and 76% said that licensing would improve quality and professionalism in the built environment.
3.4. The report identified six potential benefits to the introduction of a mandatory licensing scheme. They are:
3.4.1. Removing the scourge of incompetent and rogue builders from the industry
3.4.2. Offering a much higher level of consumer protection
3.4.3. Increasing construction output through greater client confidence
3.4.4. Acting as a mechanism to drive up quality and professionalism, and improve productivity through mandated continued personal development (CPD)
3.4.5. Helping to improve health and safety compliance, especially among small firms
3.4.6. Dramatically improving the image of the building industry
3.5. The FMB has now established a Construction Licensing Task Force which is developing the principles of a scheme and seeking to achieve consensus from organisations that are representative of all corners of the construction industry and consumer groups. The committee on industry competence referenced in clause 10 should work with the Task Force to develop and mandate this licensing scheme.
3.6. Clause 51(6)(a) talks about the need to ‘secure the provision of adequate insurance cover in relation to any work to which an initial notice relates and is work to which the scheme applies’. The FMB Group believes that the scope for this element of the draft Bill could go further in its ambition, and create the potential for the use of insurance, specifically warranties, to be mandated on a wider range of building projects that may fall outside of the remit of this scheme. The advantages of mandating the use of warranties on all work that requires building control approval include providing a more comprehensive level of consumer protection, reducing the scope for incompetent and rogue builders, and putting an end to the cash in hand economy and VAT avoidance. In the FMB’s report, ‘Raising the Bar’, the Group advocates for a minimum 24-month warranty by any warranty provider with a code of practice that meets the Chartered Trading Standards Institute’s standards.
4.1. The FMB Group believes it is important that home owners who may be captured by some provisions in the Bill as currently drafted, are given sufficient support to determine whether each individual completing building works is competent. It is not our experience that home owners in the main possess the level of knowledge that would be required in an unregulated and complex industry. We would draw the Committee’s attention to aspects of paragraphs 359 and 362 of the Bill’s Explanatory Notes, if applied to individual home owners who may commission building works.
5.1. The FMB Group endorses the Committee’s recommendation that the Government ‘ensure that new burdens funding is made available where it expects public bodies to take on new responsibilities. We would welcome clause14 providing greater clarity as to how the Regulator will be provided with adequate funding to secure the necessary skills base. Clarity as to how the supporting ‘relevant authorities’ will be provided with funding secure skills and greater capacity would also provide greater assurances. This is especially the case with regards to Building Control. The FMB Group has concerns regarding where they have witnessed recent examples of non-compliant projects being signed-off by Building Control, and that this indicates that there is an existing deficit in funding for skills development. Additional funding is needed for skills and training, but also a strategy that sets out how this will be implemented and within the necessary timescales.