Problems with Product Substitution
How product substitution can
hit you in the pocket
There’s been a huge influx of new building products in New Zealand in recent times, and the building boom here seems to be trumpeted in the media as gathering momentum by the day.
But the reality is that the combination of these factors is creating a bit of a nightmare for building inspectors and increasing financial risk for builders. ITM surveyed councils recently to get a handle on the scale of product substitution and the problems builders can face, which include lengthy project hold-ups, costly re-dos and legal issues due to breach of contract.
Keep the project moving
All the inspectors we spoke to report a rising trend in product substitution, and estimates suggest it can affect up to 30 percent of the products used in a typical home.
Because of high demand, some traditional building products have become more difficult to source, and builders have been turning to alternatives to keep the project moving.
At the same time, there has been a boost in new products coming on stream, so builders have more options.
"While there are some great new products on the market, the boom has attracted a few cowboys trying to cut corners and some importers trying to bring in cheap, substandard products.” – Council manager of inspections.
Same product, different brand
If you want to substitute a different product than the one specified, you need to first ensure that it is code compliant.
But just as important is to make sure the designer and homeowner agree with the change.
While building inspectors can sign off a change on site if an equivalent product is code compliant, building contracts define that the building will be “constructed as detailed using the materials specified.”
If you use a different product or brand to that specified, you are technically in breach of the contract.
Building inspector comments:
“You need to have that discussion up front when you’re signing the documents. The client might be a die-hard no bullshit GIB person and that’s what they want for whatever reason.”
“If you don’t get agreement from the client, they’ve got you by the short and curlies.”
Extra costs and penalties
One substitution with disastrous results involved insulation. The builder used a different brand to that specified, and while it was fully code compliant and had the same R-values, the owners objected when they discovered the change.
The insulation originally specified had certain antiallergenic properties, which the owners were very keen on, and they insisted the alternative insulation had to be replaced.
That was after the linings had been fixed.
Most building contracts also include provisions for damages if a project is not completed by a specified date. So if a re-do means you miss the completion date, you could be further penalized.
Subcontractors face the same issues. And while the responsibility is on them to ensure they have used the specified product, it can still impact on the builder.
A stop work order or any delays to a project due to a subcontractor substituting product could mean that you miss the completion date in your contract.
While the subcontractor is ultimately liable, you as the builder could easily be caught up in a messy, drawn-out legal dispute.
One council inspector cited substitution in pipework as an especially worrisome trend.
“There are quite a few fancy new systems on the market and they get swapped around quite often. Most people will go with the traditional product until someone comes along with something cheaper."
“What builders and subcontractors need to realise is that if we don’t record product changes, the council is in breach of its obligation and open to legal challenge.”
Unseen by the owner, wiring falls into the same category. Auckland council reported a case where electric wiring in four homes had to be removed after being deemed non-compliant.
Stop the job!
Another recent case came about because of a homeowner’s insistence on sourcing alternative window joinery, one inspector recalls.
“It was probably a decision made over a beer and a pie on Friday afternoon. They brought in Chinese windows, and while they were half the price of local equivalents, they had no kind of appraisal or certification and so we’ve put them on notice and stopped the job.”
Most common substitutions
“It seems like a small thing, but if a specific brand is in the specifications, then that’s what we look for.”
“Most tradies go and find a special. If I’m the owner of the home, I might want a certain type of insulation, so you really can’t change it without talking to the owner.”
“We see this usually hot on the heels of a product rep going through town. Builders will change a whole houselot of plasterboard from the standard choice (GIB) to another type.”
“There are a number of new fibre cement cladding systems, which look remarkably similar, and they get swapped out quite often.”
“Brick substitution is common. Same type, shape and look, but a different company. If they’re the same colour, everybody’s happy, but we have to make sure the owner agrees to the change.”
“Cladding substitution is also related to the shortage of licensed applicators as well.”
Other commonly substituted products cited by building inspectors include ceiling battens, laminated timber framing, pipework, waterproof membranes in showers and basements.