Enormous Brother is Watching

Michael Chesterman May 16, 2018
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The goal is to turn data into information, and information into insight.”

This is a well know quote by Carly Fiorina, former chief executive of Hewlett-Packard. Reflecting on this quote and all of the fuss of late over Zuckerberg fronting up to Congress to get a grilling on what he is up to with our data, got me wondering about the power of Big Data in shaping the future regulation of all Australian industries, but in particular the construction industry.

What is big data?

The term Big Data is very well explained by SAS, a company that is a leader in business analytics software:

Big Data is a term that describes the large volume of data — both structured and unstructured — that inundates a business on a day-to-day basis. But it’s not the amount of data that’s important. It’s what organisations do with the data that matters. Big data can be analyzed for insights that lead to better decisions and strategic business moves.” (Software company: www.sas.com).

A high tech future

Innovation is rapidly transforming the construction industry. New products, services and construction methods are being released to the market in unprecedented numbers. However while there are some amazing and exciting innovations resulting in improved performance of buildings and reduced construction costs, there will be some concerning issues that emerge demanding suitable and timely regulatory responses.

The challenge for regulators

In my recent article Regulation v Innovation I outlined how traditionally the construction industry has been regulated on a reactive basis.

Reactive regulation is not suitable for industries that are rapidly transforming due to innovation. Industries affected by digital or other forms of disruption need to be regulated on a “future fit” basis.

Consequently all regulators are under enormous pressure to get in front of the next wave of disruption affecting their industry by timely identifying significant emerging issues in a proactive manner.

Regulators are attempting to be more proactive in the performance of their roles by seeking to rely on significantly enhanced and upgraded data intelligence, analytics and the sharing of information with other regulators, government agencies and mining publicly available information.

A regulator who is reforming its operations around making better use of data is the QBCC. In an article entitled QBCC embraces the benefit of hybrid cloud, it was stated that to promote organisational flexibility the QBCC has switch to a hybrid cloud solution “to better utilise data to enable it to adopt an insights-driven approach to its work”.

The QBCC has further advanced its operational reforms in this regard by issuing a Insights Driven Regulator-Strategy and Business Case Tender where it is stated:

“Through recent significant legislative reform the QBCC was given extended powers to enhance the integrity and probity of the building and construction industry. Consequently, this reform will rely heavily on data intelligence and analytics. A critical dependency to achieve the Government’s expectations for implementation of the new laws is the ability to be an “insights driven regulator””.

The tender has now closed.

Looking to the future

If you have heard the saying, “Big Brother is Watching”, well it may well be for contractors that “Enormous Brother is Watching” as key regulators in the construction industry join together to collect more information on licensees in Queensland than Facebook has on election outcomes.

There is absolutely no doubt that for regulators to be relevant and effective during the fourth industrial revolution, which we are currently experiencing as a result of unprecedented technology-driven change, they will have to be able to make better decisions, prioritise their compliance and enforcement efforts, better identify regulatory risks and automate as many processes as possible.

It is a huge challenge for regulators to get ahead of significant industry disruption. In fact we have all seen a local regulatory model virtually collapse overnight when an existing industry ‘protected’ by a licensing regime came under intense pressure from Uber.

We all know the major industries which have been changed forever by digital disruption. Personal transport, accommodation, finance, media, music to just name a few. However there is industry disruption happening all the time. It feels as if everyday there is a new product or service being offered to us and where regulators are scrambling to be relevant and effective.

Case in point

Uber Eats. The ACCC has signalled an intention to look at alleged unfair contract terms between restaurants and Uber Eats. Australians have really taken to Uber Eats since it launched in 2016 and it’s estimated we spend $2.6 billion on it each year.

Now by any assessment, Australians embracing this new service so quickly is a major disruptive factor in the restaurant industry. However, according to this article when asked about this issue, Rod Sims, chairman of Australian Competition and Consumer Commission stated “Certainly, we’ll have a look at it.” For my mind, getting ahead of the disruptive curve means more than taking a look at “it” after commercial forces have changed things forever.

Other examples of new disruptors are online platform sites like Airtasker which allows people to post jobs for other users to bid on. Concerns have been raised in a recent online article about the potential for “unlicensed cowboy tradies’’ to operate in the building and construction industry.

In this article Unions NSW secretary Mr Morey said “Businesses who work within the law, pay for safety training and safety equipment are being undercut and sent broke because of these platforms”.

Mr Morey also indicated that he believes the gig economy has outpaced traditional regulation and wants the creation of a dedicated body to ensure safety and licensing standards are met in this new era.

This is the elephant in the room. Is it possible to effectively regulate the gig economy?

Digital platforms can be established anywhere in the world. While countries can establish cooperative regulatory regimes, let’s get real in terms of acknowledging how difficult it is to enforce regulation of this nature. Globalised trade and commerce leveraging off digital platforms means that states and countries ability to effectively regulate what is happening within their jurisdictional boundaries is severely diminished.

Consumer education is one of the most practical and effective responses to digital marketplace disruptions. Informed decisions by consumers will result in “digital cowboys” failing and exiting the market.

Data sharing by regulators

As I have already pointed out, one thing regulators are increasingly doing is sharing data where they have common objectives.

An example in this regard is the establishment of the Phoenix Taskforce that comprises 28 Federal, State and Territory government agencies, including the ATO and Australian Securities & Investments Commission to combat illegal phoenix activity.

Illegal phoenixing activity occurs when a company’s directors strip cash and assets from it, hide them, liquidate the company and then restart it, usually under a different name. This is done to deny creditors money owing to them.

According to information contained on the ATO website the Phoenix Taskforce:

“operate under a coordinated and strategic approach to dealing with illegal phoenix activity. We will make examples of the worst offenders and attack critical parts of any phoenix business model. Our strategies include early intervention work, targeting specific industries, and working with key supply chain entities to close off opportunities and temptation. We also have a Top Phoenix Targets program which focuses on the worst at fault and their facilitators to remove their profits and prosecute them to the full extent of the law.”

The Commonwealth government has signalled further attempts to address this major industry issue by introducing a comprehensive package of reforms to address illegal phoenixing, which again involves data sharing between regulators.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP stated:

“The Government’s comprehensive package of reforms will include the introduction of a Director Identification Number (DIN) and a range of other measures to both deter and penalise phoenix activity.

The DIN will identify directors with a unique number, but it will be much more than just a number. The DIN will interface with other government agencies and databases to allow regulators to map the relationships between individuals and entities and individuals and other people”.

Another example of data sharing between regulators is outlined in the Building and Construction Legislation (Non-conforming Building Products — Chain of Responsibility and Other Matters) Amendment Bill, which amongst other things updated the compliance and enforcement powers of the Queensland Building and Construction Commission (QBCC).

In introducing the Bill the responsible Minister, the Hon MC de Brenni stated:

“The bill will facilitate, and in some cases obligate, information sharing on workplace health and safety and public health matters between the QBCC and state work health and safety regulators. The bill will allow the QBCC to take disciplinary action against a licensee. It will allow the QBCC to suspend or cancel a licence where serious safety issues are at stake.”

Data sharing challenges

In all instances of data sharing there has to be in place appropriate governance, rules and control measures.

I also believe that industry stakeholders should be consulted during the development of big data processes and procedures. Furthermore, each regulator should inform persons who they have information on, exactly what information they intend to share with other regulators.

I believe that regulators should adopt such a transparent position regardless of the fact that they will have the legal entitlement to share such data with other regulators.

Regulators just taking the approach of “we have the legal right and we are going to do it”, and offering no further information is not an effective strategy for addressing peoples valid data protection and privacy concerns in 2018.

In my view, it is far better to overservice licensees on issues associated with the sharing of their personal or business information, particularly given the recent Facebook scandal.

What does all this mean for regulators?

I am of the view that if regulators are able to successfully realign their operations based on Big Data, then they should be able to identify any potential product safety or building/product performance concerns. The same will apply to identifying any probity concerns in respect to persons responsible for any of these innovations.

This is not to say that the industry has gone rogue all of a sudden as a result of this wave of innovation. It is purely a consequence of a huge increase in the development of new products and services.

The key issues for regulators is ensuring new products and services are accessed against relevant performance and safety criteria, and then how quickly they will be able to respond when concerning issues are identified.

For example regulators will look to prevent the release to the market of any product or service that does not comply with relevant building standards. Here the National Construction Code (NCC) will play a crucial role.

What does all this mean for contractors?

Contractors will be inundated with change on two fronts.

Firstly they will be confronted with an unprecedented wave of innovative new products, services and construction methods to consider.

Secondly they will find regulators employing new proactive models based on the use of big data in an effort to get in front of this wave of disruptive change.

Contractors will have to pay close attention to these two competing forces. They should ensure that any new product, service or construction method clearly and unequivocally complies with all relevant building codes and standards. Contractors should engage suitable industry experts to provide advice in this regard, and they should do so very early in the evaluation period.

If Big Data assists regulators to timely perform their responsibilities then I am sure all honest and hard working contractors will embrace this initiative.

In terms of construction performance and safety issues, contractors would be aware that one of the most important benchmark new innovative construction initiatives will be assessed against is the NCC. Unfortunately the news is very concerning regarding the current effectiveness and agility of the NCC.

In a online article entitled Probe uncovers ‘significant’ construction industry failings it was pointed out that “an assessment of Australia’s compliance and enforcement systems for the building and construction industry has delivered a damning verdict”.

This review was ordered by the Building Ministers’ Forum following London’s Grenfell Tower disaster last year and it unearthed a number of significant issues and shortcomings with the NCC. The article alleges that a report compiled as a result of this review points out that:

“compliance and enforcement systems need to change ‘as a matter of priority’, but warns there is no ‘silver bullet’ and proposed changes could take three years to implement”.

Clearly this is a major concern for contractors because they are principally looking to the NCC for guidance as to what is compliant in this regard.

Contractors have the right to expect regulators will be fully transparent in their dealings with them when it comes to the use of big data. In this respect I have noted that the QBCC has published a very comprehensive Compliance and Enforcement Policy (version 2 as at 31 July 2017) where they flag the collection and analysis of data from a range of information sources to be a key factor in determining priorities in this regard.

Where once a contractor may have been concerned about big brother watching, thanks to advances in technology and a trend towards data sharing by the regulators in the future I have no doubt with the might of the regulators together, enormous brother will be watching and it is up to each of you in the industry to inform yourself and get your house in order. If you require any assistance in working with the regulators please contact Earl Tan or Michael Chesterman at Helix Legal.

Not intended as legal advice. Read full disclaimer.
Michael Chesterman May 16, 2018

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