Domestic Building Oversight Part 1: Regulation

Why we did this review

The Victorian Building Authority (VBA) was set up in 2013 to regulate the building and plumbing industries. It plays a central role in making sure buildings and homes across the state are safe. Its job includes: 

• registering, licensing and disciplining builders and plumbers
• inspecting building and plumbing work to make sure it meets relevant quality and safety standards.

Since 2021, 3 separate reviews have made recommendations for VBA to improve:

• how it targets inspections to focus on higher-risk buildings
• its workplace culture 
• its information and data systems to help it become a better regulator. 

Targets and recommendations for VBA

We assessed VBA's progress against 48 recommendations it received between September 2022 and May 2023 to improve its performance. 

Figure 1 lists where the recommendations are from and when VBA or the government accepted them.

Figure 1: Recommendations for VBA

Note: *The Stage One Report made 16 recommendations to the entire building sector, not just VBA. We looked at 9 specific parts of the 16 recommendations that were for VBA and possible to action without sector-wide reform. 
Source: VAGO based on the Stage One Report, Better Regulation Victoria's VBA health check and the independent inquiry.

We also assessed VBA’s progress against 14 performance targets from the Minster for Planning's Statement of Expectations for Victorian Building Authority 2021–23 (2021–23 SOE). 

Our key findings

Our findings fall into 2 areas:

Progress against recent reviews

VBA told us it is committed to addressing all the recommendations. It has:

• already completed 5
• started working on 31 
• not started 12.

This is good progress given VBA only got some recommendations as recently as May 2023. But it still has a lot of work to do because the remaining recommendations involve major changes.

Progress against the 2021–23 SOE

VBA only fully met 6 of the 14 2021–23 SOE targets. It partially met 3 and did not meet 5. 

It also did not meet the Minister for Planning's requirements to publicly report its progress. 

VBA is in a better position to meet the next statement of expectations because it has made good progress on recommendations to become a better regulator. 

VBA told us it expects to receive its next statement of expectations in October 2023.

Examples of work VBA still needs to do

Despite its recent progress, VBA still has a lot of work to do to become a best practice regulator.

Some examples of significant changes it still needs to make are: 

• setting up a risk-based building inspection program that targets high-risk buildings and construction sites
• improving how it communicates with builders and plumbers to make them more aware of common issues across the sector and how to avoid them
• upgrading its outdated information and data systems to help it track and manage inspections and complaints.

Monitoring progress

VBA does not consistently monitor its progress against all the targets and recommendations. And it has not identified specific risks to completing each of them. 

Consistently tracking its progress against all the targets and recommendations would:

• give VBA a better overall picture of its progress and what it still needs to do
• allow VBA to accurately report its progress to internal and external stakeholders
• help VBA understand the risks it needs to manage to successfully improve its performance.

Public reporting issues

The Minister for Planning required VBA to report its progress against all the 2021–23 SOE targets in its annual reports. But we found it did not do this. 

This means VBA has not been transparent about its progress against the SOE targets with the public.

VBA’s new evaluation framework

VBA has developed an evaluation framework for its 2022–27 strategic plan. 

This is a positive step towards improving how it tracks its performance. 

But it is not clear if VBA will use this framework to monitor and report its progress against all the targets and recommendations. 

What VBA does

VBA is the main regulator for the building and plumbing industries in Victoria. Councils also have a role in enforcing standards. 

VBA is responsible for:

• registering, licensing and disciplining builders and plumbers
• inspecting building and plumbing work
• managing complaints
• investigating, auditing and enforcing compliance with the Building Act 1993, Building Regulations 2018 and Plumbing Regulations 2018
• overseeing building surveyors’ work and Victoria’s building permit system
• doing statewide cladding audits with Cladding Safety Victoria to identify buildings with combustible cladding.

VBA’s structure

VBA’s board governs VBA and makes sure it is an effective regulator. It is directly accountable to the Minister for Planning.

Under the Building Act 1993, the board consists of: 

• a chief commissioner
• a deputy chief commissioner 
• at least 3 other commissioners. 

The board, with the approval of the minister, appoints VBA's CEO. The CEO is responsible for VBA's operations and performance and is accountable to the board.

VBA’s leadership change

VBA’s new CEO started on 3 July 2023. 

The new CEO was the previous Commissioner for Better Regulation and Red Tape Commissioner. They also chaired the expert panel for the building system review.

Department of Transport and Planning

The Department of Transport and Planning advises the Minister for Planning on legislation, regulation and policies associated with Victoria’s building sector. 

The former Department of Environment of Land, Water and Planning played this role before machinery-of-government changes on 1 January 2023.

Timeline

Figure 2 shows a timeline of events relating to the recent reviews that involved VBA.

Figure 2: Events relating to the recent reviews that involved VBA

Source: VAGO.

Statement of expectations

The Minister for Planning issued the 2021–23 SOE on 26 September 2021. It was effective from the date the minister issued it to 30 June 2023. 

The statement required VBA to: 

• meet 14 performance targets 
• report its progress against all targets in its annual report. 

VBA told us it expects to get its next statement of expectations in October 2023.

Expert panel on building system review, stage one

In December 2019, the Victorian Government appointed an expert panel to review how it regulates the building sector. 

The review aimed to outline potential improvements to the sector's legal frameworks. 

The Victorian Government published the Stage One Report in March 2023. 

The Stage One Report made 16 recommendations to the government. We identified 9 parts of these recommendations that: 

• are directed at VBA 
• VBA can implement without legislative reform. 

One of these recommendations is specifically for the government to ‘actively support the improvement of the VBA's capacity so that it is a contemporary best practice regulator’.

The government accepted all the recommendations in May 2023. But it has not publicly released a response to its findings.

VBA’s independent inquiry

In May 2022, VBA’s board commissioned the independent inquiry into VBA’s workplace culture.

The independent inquiry made 2 reports:

• The inquiry finished the first report in September 2022. 
• The inquiry finished the second report in March 2023. 

The independent inquiry made 9 recommendations, which VBA accepted.

Better Regulation Victoria’s VBA health check

Better Regulation Victoria is part of the Department of Treasury and Finance. Its role is to make sure regulators work in the best way possible.

Better Regulation Victoria did a health check of VBA in 2022. It compared VBA’s performance against its best-practice guide for regulators – Towards Best Practice. 

Better Regulation Victoria finished its final report in October 2022. It made 30 recommendations, which VBA accepted. 

VBA’s progress by theme

We grouped the 14 SOE targets and 48 recommendations into 5 themes. 

Figure 3 shows VBA’s overall progress by theme.

Figure 3: VBA’s overall progress against the 5 themes

Note: See appendices D to F for a list of all SOE targets and recommendations from the Stage One Report and Better Regulation Victoria’s VBA health check. The appendices also outline VBA’s progress against the targets and recommendations. 
Source: VAGO.

Progress summary

VBA has a responsibility to provide a safe workplace for its staff. A positive workplace culture is also important to ensure VBA can effectively and efficiently deliver its regulatory services.

VBA is improving its workplace culture. It has made significant improvements in response to the independent inquiry’s 9 recommendations.

Despite only getting the recommendations in late 2022 and early 2023, it has already completed 4 and started the other 5.

Key issues and improvements

It is important that VBA:

• inspects buildings and construction to make sure they comply with relevant quality and safety standards
• makes sure builders and plumbers meet quality and safety standards. 

Recent reviews found VBA was not a best-practice regulator because it was not consistently targeting its inspections based on risk to the community. 

The table below summarises the key findings and improvements in this area from the reviews.

Progress summary

VBA has started to address recommendations to make sure builders and plumbers comply with quality and safety standards. 

VBA started most of this work recently because it got most of the recommendations from late 2022. 

This means VBA still needs to make significant changes in this area to become a best practice regulator.

Virtual inspections

In May 2023, the media reported concerns over VBA using technology, including iPhones, to remotely inspect buildings and construction sites after the COVID-19 pandemic.

We found that VBA got and followed legal advice to do this. VBA had to keep inspecting buildings during the pandemic while protecting its staff and following public health requirements. 

VBA told us that it only used virtual inspections for some low-risk plumbing inspections and had not used virtual inspections for mandatory or proactive building inspections. 

Key issues and improvements

Recent reviews found VBA was not:

• effectively communicating with plumbers and builders to help them improve their work and comply with their legal obligations
• promoting positive behaviour and good practice across the building and plumbing industries. 

The below table summarises the key findings and improvements in this area from the reviews.

Progress summary

VBA has started to address these issues. But its progress has been slow. VBA did not fully meet 2 of 5 2021–23 SOE targets in this area. And it has not started 6 recommendations from Better Regulation Victoria’s health check.

Key issues and improvements

Recent reviews found VBA’s information and data systems were too outdated to meet the needs of a contemporary regulator. This is because they did not let VBA:

• use data to track emerging risks to the community 
• monitor and report on its enforcement activity, such as inspection results
•  effectively communicate with builders and plumbers.

The table below summarises the key findings and improvements in this area from the reviews.

Progress summary

VBA has started using its data better. For example, it has made dashboards to track staff workloads and high-risk builders and plumbers. 

But it has not made significant progress in digitising its enforcement processes.

Key issues and improvements

VBA relies on registration fees that builders and plumbers pay to fund its work. To be sustainable VBA needs to:

• set fees that cover all the costs associated with its regulatory activities
• do its work efficiently to get the most out of available funding. 

But the Stage One Report noted that VBA was struggling to sustainably fund its regulatory activities, including inspections. 

VBA also told us that it sees a lack of resources as a barrier to actioning recommendations from the recent reviews. 

Progress summary

The 2021–23 SOE required VBA to review registration fees and comply with all the Victorian Government’s procurement requirements.

We found that VBA partially met this target because it reviewed registration fees but did not comply with 2 of the Victorian Government's 18 procurement requirements. It did not:

• have plans to manage all contracts
• monitor when its contractors’ insurance expired during the work they were doing for VBA. This meant VBA could not ask them to renew it.

Separate monitoring and reporting processes

VBA separately monitors and reports its progress against the targets and recommendations. 

The board is responsible for making sure VBA is an effective regulator. But it does not get a consolidated report that outlines: 

• all the changes VBA needs to make to become a better regulator 
• if VBA is on track to make all the changes
• any significant risks associated with VBA making these changes. 

This means it is difficult for the board to: 

• oversee VBA’s improvements
• make sure VBA accurately reports its progress to internal and external stakeholders.

Public transparency

The Minister of Planning required VBA to report its progress against all the 2021–23 SOE targets in its annual reports. The minister said VBA’s annual reports should outline:

• VBA’s starting point for each target
• what VBA is doing to meet each target.

But VBA did not meet these requirements. This is because its 2021–22 annual report: 

• did not clearly outline the targets
• did not include VBA's starting point for all the targets
• only reported its progress against one target.

This means VBA has not been transparent about its progress against the SOE targets with the public. However, VBA told us that it would include specific reference to the 2021–23 SOE in its 2022–23 annual report.

Accuracy of reports

We found differences between VBA's internal reporting and our assessment of VBA's progress.

In January 2023, the board received a report that said there were minor risks of VBA not meeting 3 of the 14 targets by 30 June 2023.

But in September 2023, VBA told us it did not fully meet 4 targets. And our assessment of the information VBA gave us indicates that it did not meet 5 targets and only partially met 3. 

This means the progress report VBA gave its board did not accurately outline the risk that it would not meet more of the targets.

See Appendix D For more detailed information about these targets.

Identifying and linking risks

VBA has not identified risks to specific targets and recommendations. Instead, it told us about 4 organisation-wide risks that could affect its progress: 

• It may not have enough resources to make all the improvements.
• It is not sure if future building sector reforms will lead to more changes.
• The scale of the improvements it needs to make is significant.
• Many of the improvements depend on each other, so if one change does not happen or is not effective it may impact others. 

VBA has not linked these risks to individual targets and recommendations. This limits its ability to:

• understand how significant the risks are for specific targets and recommendations 
• fairly and accurately report on the targets and recommendations it can or cannot complete
• develop achievable strategies to address the risks.

Improving VBA’s risk management system

VBA met its 2021–23 SOE target to improve its risk management system. VBA told us it is working to further improve it and expects to finish this work by March 2024. For example, VBA is:

• working to include risk assessments in all its systems and processes
• seeking guidance and support from relevant public sector agencies, such as the Victorian Managed Insurance Authority.

Evaluation framework

In February 2023, VBA developed an evaluation framework for its 2022–27 strategic plan. A key part of this plan is to improve its performance as a regulator.

The framework outlines how VBA will consistently evaluate its progress. But it is not clear if it will use this framework to monitor and report its progress against all the targets and recommendations.

Gaps in the framework

VBA's evaluation framework is a positive step towards coordinating how it monitors and reports its performance. But we found gaps in the framework: 

VBA told us it is developing an evaluation plan to go with the framework. This plan may address some of these gaps. 

Board and executive team review

In June 2023, VBA started a review to assess if its board and executive team have effective processes, policies, practices and structure. 

The review also assessed VBA's progress against past recommendations from a similar review in 2021, which an external firm conducted. 

VBA’s board approved an internal review of its effectiveness for 2023. VBA told us it is not required to use an external firm to do this.