Part 3: Effectiveness of the home-repair programme

Earthquake Commission: Managing the Canterbury Home Repair Programme.

3.1
In this Part, we assess whether the home-repair programme is achieving the intended results. We have looked at:

what the home-repair programme has delivered to date;
how EQC has carried out damage assessments;
the scoping of works;
how EQC has managed the quality, safety, and timeliness of repairs; and
the prioritisation of repairs.

Summary of our findings

3.2
EQC's management of the home-repair programme has been effective in:

reducing the need for large numbers of homeowners to individually co-ordinate and manage the repairs to their homes and compete with each other for tradespeople and building materials;
completing a large number of repairs and starting quickly – by the end of June 2013, more than 40,000 homes had been repaired, just over half of the total repairs to be completed; and
promoting safe work practices, with the focus becoming more formal as the home-repair programme has progressed.

3.3
In our view, there are risks with the way in which EQC has managed repair quality in the programme to date, due in a large part to the late implementation of some important controls and the need for some of these controls to be fully embedded and functional. However, there is now regular auditing of the quality of a sample of completed repairs against repair standards prepared by EQC for the home-repair programme.

3.4
We have not formed a view on the appropriateness of the repair standards because we do not have specialist trade qualifications. However, we are concerned about the way in which compliance with the standards is scored to produce a composite measure.

3.5
In November 2012, EQC began actively allocating "repair slots" for repairs to vulnerable people's homes. In our view, this was too late – it was about two years after the home-repair programme started. This allocation happens only after the work has been scoped. Our analysis of claims management found no end-to-end prioritisation of repairs in the home-repair programme.

3.6
EQC expects to complete the most difficult repairs and the remaining repairs to vulnerable people's homes by the end of 2013. In our view, increasing the use of cash-settling to meet this deadline could be counter to the objectives of the home-repair programme if it contributes to cost inflation or the offer to cash-settle is made to a homeowner who does not have the capacity to manage repairs on their own.

Programme delivery to date

More than 40,000 home repairs have been completed, and homeowners have not had to directly compete with each other for tradespeople or building materials.

3.7
By the end of June 2013, more than 40,000 homes had been repaired as part of the home-repair programme.

3.8
On average, 1200 repairs have been completed each month from the start of the programme to the end of March 2013. The monthly average increased during this period. Between March 2012 and March 2013, an average of about 1900 repairs were completed each month (see Figure 4).

3.9
As at August 2013, the home-repair programme would need to average about 2250 repairs each month to be completed by the end of 2014. This calculation assumes that EQC will not cash-settle large numbers of remaining claims.

Figure 4
Actual and anticipated number of completed home repairs, March 2012 to March 2013

Source: Our analysis, based on information provided by EQC. Notes: There were fewer repairs in January 2013 because it is the summer holiday period. In May 2011, EQC planned an upper repair rate of 2350 repairs each month and a planned lower repair rate of 2250 each month. These repair rates assumed available trades resource and no further significant earthquakes.

Carrying out damage assessments

About 430,000 damage assessments have been completed. The training for assessment teams has increased during the programme. For some assessments, the assessed cost of damage is less than the scoped cost of work. Although the main reason for this difference is multiple earthquakes between assessment and scoping, the accuracy of some assessments has also contributed to the difference.

3.10
Damage assessments are critical to the operation and management of the home-repair programme. This is because damage assessments:

set up homeowner expectations about what will be repaired;
indicate whether the cost of repairing the damage puts the house in the home-repair programme;
indicate the range and quantity of different types of repairs required; and
in aggregate, indicate the overall cost of the home-repair programme.

3.11
By April 2013, EQC had completed about 430,000 damage assessments. Assessments have not involved invasive practices such as lifting floor boards or removing floor or wall coverings. Many homes have been assessed more than once because subsequent earthquakes have caused more damage. EQC assessment teams comprise two people: an assessor (to verify the claim and manage the homeowner's expectations) and an estimator (a licensed building practitioner). As well as having a well-developed understanding of the Act, assessors are expected to have strong communication and listening skills and the ability to remain calm.⁶

3.12
Full damage assessments were carried out after the 4 September 2010 earthquake and before the 22 February 2011 earthquake (about 20% of all assessments). The assessors and estimators received two days' training informed by EQC's practice and experience in the previous nine years. The training included 150 scheduled minutes of training on the damage inspection process and a three-hour damage inspection practical. About 500 assessment teams were deployed.

3.13
Rapid assessments were carried out after the 22 February 2011 earthquake (about 40% of assessments) to identify repair priorities and where emergency work was needed. Assessors and estimators were provided with iPads and trained to use them to assemble information. Rapid assessments were carried out on a property regardless of whether a claim had been lodged for that property.

3.14
Full assessments were also carried out after the 22 February 2011 earthquake (about 40% of assessments). Between June 2011 and October 2012, more assessors and estimators were recruited and trained. During this period, the training programme lengthened to six days. The last intake of assessors and estimators was in October 2012. The six days' training included more time for practice and assessing houses, and an assessment of skills at the end of the training. Newly trained assessors were initially paired with more experienced assessors.

3.15
In practice, repair costs in the home-repair programme are, on average, higher than the originally assessed damage costs. The main reason for this is that houses have sustained more damage from earthquakes in the intervening period. Sometimes, the original assessment does not identify all the earthquake damage that a house has sustained.

3.16
Internal audit work commissioned by EQC suggests that additional earthquakes and damage hidden until repairs began have increased costs between the original damage assessment and the final scope of work in 60% of the claims looked at. The average increase in costs was about 15%. In October 2012, the PCG was informed that the average variance between the original assessment and approved work scope for repairs costing $10,000-$50,000 was 11%. For repairs costing more than $50,000, the equivalent figure was 35%.

3.17
Increases because of inaccuracies with the initial assessment or because EQC had carried out a subsequent assessment were found for another 23% of the claims looked at. Feedback provided by Fletcher Construction to EQC identified similar matters with the accuracy of initial damage assessments. EQC told Parliament, in December 2012, that initial assessments were not always accurate, particularly after the September 2010 earthquake when assessors were less experienced.

3.18
The reasons identified by EQC and Fletcher Construction for any differences between the original assessment and the final budget for repairs were evident when we reviewed a sample of property files⁷ from six repair hubs. The sources of differences that we saw in these files included:

further damage to houses in the period between the original assessment and the start of repairs;
damage that was originally identified as earthquake damage being reassessed as not earthquake damage;
earthquake damage that was not apparent when assessments were made; and
alternative repair strategies being used to those originally proposed.

3.19
To get a better understanding of the reasons for variance between the assessed and scoped cost of work, EQC's May 2012 internal audit referred to a project to split current cost variances into detailed categories and use those categories from then on. This would have enabled EQC to better understand why costs change during the repair process. Without routinely recording this information, EQC can analyse only the amount of cost changes and not the reasons for them.

3.20
In May 2013, we asked EQC for information summarising the reasons for cost changes during the repair process, based on the categories to be used after the May 2012 internal audit report. EQC responded that the project had improved the visibility of the types of cost increases but not the reasons for the increases. This means that it is not possible to quantify (other than through a survey) the extent to which any specific factor, including those outside of EQC's control, has increased costs after the assessment stage.

Scoping of work

Joint scoping meetings confirm the damage caused by earthquakes and the strategy to repair the damage to the house. There are not enough EQC staff to attend all joint scoping meetings.

3.21
After assigning the contractor, contractor supervisor, and hub-based EQC representative to a claim, the hub organises a meeting (called joint scoping) between the homeowner and these three people. This joint scoping meeting confirms the damage caused by earthquakes and the strategy to repair the damage to the house. The meeting will also discuss other matters, such as whether the homeowner needs to move out during the repairs.

3.22
Homeowners can request a copy of the scope of works and any subsequent changes to the scope. EQC will not include costs in the information provided.

3.23
Joint scoping started in June 2012 in a pilot project and has been progressively implemented by all hubs. Previously, the contract supervisor and hub-based EQC representative would separately visit an earthquake-damaged home.

3.24
The joint scoping process is not always followed. In some instances, EQC allows Fletcher Construction contract supervisors to approve the scope of work and EQC's staff are not involved. This is because there are not enough EQC staff to attend all joint scoping meetings.

3.25
EQC has acknowledged that there is "insufficient resource" to jointly scope all claims. But in instances where the scope of work is outside a 75%-100% range of the cost already recorded by EQC, or where there are scope variations once work has started, EQC staff and not contract supervisors have to approve the work.

Managing the quality, safety, and timeliness of repairs

In our view, there have been risks with the way in which EQC has managed repair quality in the home-repair programme. However, there is now regular auditing of the quality of a sample of completed repairs against repair standards prepared by EQC. We have not formed a view on the appropriateness of the repair standards because we do not have specialist trade qualifications. However, we are concerned that a repair can "pass" even if it requires remedial work and takes so long that the homeowner is significantly affected.

Quality of repairs

3.26
EQC has identified substandard repairs as a main risk to the home-repair programme. The risks of substandard repairs include:

damaging the programme's reputation;
extra costs that might not be recoverable; and
in extreme instances, further damage to a house and/or safety risks.

3.27
There are now four main streams of work in the home-repair programme that relate to quality assurance of repairs. These are:

site monitoring by contract supervisor staff;
monthly auditing of about a quarter of all completed repairs against repair work standards set for the programme;
a post-repair completion survey that EQC started in February 2013 and intends to regularly administer; and
a quality assurance team, set up in March 2013, to review quality concerns. This team receives referrals from the complaints management process.

3.28
The findings of the monthly auditing of completed repairs are reported to the PCG.

3.29
Performance against the quality criteria is reported as a composite percentage. The individual questions and the weighting given to each question when calculating the composite percentage are shown verbatim in Figure 5. For example, a score of 3 out of 4 for the first question would contribute 18.75% to the overall composite percentage score.⁸

3.30
In our view, it would be more appropriate for the scoring against each question to be on a 0-3 scale rather than a 1-4 scale. We consider that the inadequate situation described in the lowest score category should not contribute to the composite quality measure.

3.31
EQC considers 50% or more to be "effectively a pass". A score of one or two against an individual question requires follow-up action. There are many combinations that would mean a result of 50% or more. For example, a repair could "pass" even if it required remedial work and took so long that the homeowner was significantly affected.

Figure 5
Earthquake Commission's description of the repair-quality standards used in the home-repair programme

Question	Score				Weight
Question	1	2	3	4	Weight
The repairs undertaken within EQC scope are	Shortcuts, poor substrate preparation	Meets minimum requirements of reinstatement	Meets owner expectations while remaining within scope	Exceeds owner expectation by taking care of minor blemishes	8
The workmanship quality of the repairs	Requires remedial work	to brush hand quality	Is done to a tradesman-like manner	Is to tradesman quality plus takes care of other minor defects voluntarily	8
The protection of the property during the repair process is	E.g. paint stored on drop sheets. E.g. access to room being painted is not protected	E.g. Drop sheets over carpet	Appropriate floor protection e.g. plastic coating and/or drop-sheets	Plastic laid and taped to skirting, furniture etc. Protected from dust.	5
The urgent repairs are	Fails to meet objective e.g. weather tightness	Temporary repairs which require ongoing maintenance	Repair suitable for 12 years	Emergency repair resolved matter permanently	3
The timeframe for repairs is	Long term overrun which significantly affects homeowner	Small overrun, minimal additional cost	Repairs progressing within agreed time frame	Completed in a shorter timeframe, homeowners thrilled	8

Source: EQC. The wording of the repair-quality standards has been reproduced verbatim. Note: These standards are part of a wider package of quality assurance measures used by EQC to assess repairs.

3.32
A 75% result for the "workmanship" question has been reported in each of the eight months to the end of April 2013. It is based on EQC's audits of 467 completed repairs.

3.33
A pilot review of completed repairs, reported in November 2012, found that 12% of repairs in the pilot needed remedial work (primarily painting and plastering).

3.34
We asked Fletcher Construction and EQC whether those results were the expected industry norm for rates of remedial work. They told us that the rates were about normal and that people with considerable industry experience had been involved in setting the quality standards. We were not provided with documentary evidence of industry norms for rates of remedial work.

Liability for substandard work

3.35
One of the main risks that EQC identified for the home-repair programme was the risk that EQC would be accountable for substandard repair work. EQC obtained legal advice on the scope of this risk, whether the risk could be mitigated, and the best way to do that.

3.36
EQC originally aimed to transfer the primary risk of liability for substandard repair work to the party appointed to manage the home-repair programme. The request for proposal for project management services envisaged that the project manager would:

… contract with trades-people and others in such a manner as to avoid any EQC exposure to further claims including for poor work and defects.

3.37
None of the bidders for the project management services were willing to accept liability for substandard repair work. Therefore, EQC relies on other risk mitigation strategies, such as:

having an accreditation process to reduce the risk of engaging tradespeople with substandard skills;
requiring Fletcher Construction to regularly monitor the work of contractors, including requiring remedial work during a repair;
requiring contractors to provide a 90-day warranty on their work;
withholding full payment to contractors until the warranty period has expired and any defects have been remedied;
relying on the building consent process and the obligations on tradespeople in the Building Act 2004; and
cash-settling where there is potential for EQC to become involved in weathertightness or deferred maintenance matters with a property.

3.38
Fletcher Construction told us that it requires contractors to repair defective work at no additional cost to EQC when this is required under the repair contract, warranty period, or the Building Act's 10-year obligations on tradespeople. The possibility of future and ongoing work within the programme is also, in effect, a security against defective work by contractors.

3.39
However, EQC has identified that:

as at December 2012, quality controls were "yet to be fully embedded";
the controls for ensuring compliance with the building code are not consistently followed;
there are risks with the accreditation process because there is no centralised database containing all of the data relevant to contractors;
some contractors were accredited and inducted before criminal, credit, and conflict of interest checks became a routine part of the accreditation process (a May 2013 internal audit report described these checks as "only recently" implemented);
the issuing of performance improvement notices (or PINs) to contractors has not been centrally recorded for most of the programme, with only six contractors (out of about 1200) losing their accreditation; and
there have been instances where the cost of fixing defects evident during the warranty period exceeded the amount of money withheld from the contractor until the end of the warranty period.

3.40
EQC has also identified that its Complaints Investigation Team received 791 complaints (about one complaint for every 27 houses repaired) on the quality of repairs (the largest category of complaints) under the home-repair programme from September 2012 to August 2013. We note that a higher proportion of surveyed homeowners have expressed dissatisfaction with the quality of repairs carried out under the home-repair programme.

3.41
It is difficult to gauge the scale of the risk of substandard repairs. In our view, EQC needs to improve its approach to identifying and managing the risk of substandard repairs.

Recommendation 1 We recommend that the Earthquake Commission continue to improve its approach to auditing repairs in the home-repair programme so the Commission is well informed about the scale and type of repair quality risks, can mitigate those risks where possible, and can match the resourcing of its quality assurance processes to the significance of those risks.

Homeowner feedback on the quality of repairs

3.42
EQC carried out telephone surveys of people who had home repairs completed between February and August 2013. The results showed that 79%-85% of people were satisfied with the quality of repairs (see Figure 6). EQC does not have information about people's satisfaction with the quality of repairs completed before 2013.

Figure 6
Percentage of surveyed homeowners who were satisfied or very satisfied with the quality of home repairs, February to August 2013

Date repairs were completed	February to April 2013	22 July to 28 July 2013	29 July to 2 August 2013	5 August to 10 August 2013
Percentage satisfied or very satisfied with the quality of home repairs	84%	79%	85%	85%
Number of respondents	769	100	112	109
Margin of error	+/- 3.0%	+/- 9.8%	+/- 9.2%	+/- 9.3%

Source: EQC.

3.43
The people who were dissatisfied or very dissatisfied with the quality of the repairs identified a range of matters. The main matters were work still to be completed or work of a quality not acceptable to them. Where people expressed a concern about repair quality, about half of those concerns were resolved satisfactorily.

Safety of the repair process

3.44
The provider accreditation and safety management processes for the home-repair programme are extensive. The focus is on reducing the probability of injury or fatality.

3.45
EQC and Fletcher Construction have jointly run a "safe6" campaign, introduced from February 2013. The campaign focuses on the six risks most likely to result in a fatality. The six risks are:

falls from height;
working in confined or restricted spaces;
electrical dangers;
unsafe use of motor vehicles;
personal threats to workers; and
asbestos exposure.

3.46
Under the PMO Services Contract, EQC is the "principal" for the purposes of the Health and Safety in Employment Act 1992. Contractors also have a responsibility under the Health and Safety in Employment Act for maintaining appropriate safety standards when carrying out home repairs.

3.47
Under the PMO Services Contract, Fletcher Construction is required to help EQC meet its obligations by:

requiring each project to have a health and safety plan – individual contractors must take responsibility for all aspects of health and safety on work sites;
raising health and safety matters with contractors, property occupiers, and any person in control of a workplace, to ensure that they have addressed the health and safety matters; and
acting in keeping with the Statement of Intent: Safety in the Earthquake Recovery Project (EQR) document;⁹ and
administering a contractor accreditation process.

3.48
Fletcher Construction employs six specialists to provide a safety advisory and monitoring service for the home-repair programme.

3.49
The accreditation process for contractors does not cover subcontractors. It is a contractor's responsibility to ensure that subcontractors work safely and to the required standard.

3.50
Fletcher Construction carries out health and safety audits of contractors. These audits look at non-compliance against four dimensions of health and safety requirements: policies and procedures, equipment, people, and the environment. About 4600 health and safety audits have been completed in the programme to May 2013 (about 12% of completed repairs to that date). EQC has estimated that between 35% and 40% of site audits lead to one or more major or minor corrective actions. The audit findings have included:

failure by contractors to wear identification;
failure by contractors or subcontractors to sign a site induction sheet or site-specific safety plan;
poorly erected scaffolding;
not complying with an asbestos removal or repair management strategy; and
incorrect use of ladders.

3.51
Compliance with health and safety expectations is increasing over time, as is the number of health and safety audits carried out.

3.52
One measure of contractor safety is the total recorded injury frequency rate. As at May 2013, the 12-month rolling average for this measure was 5.6 injuries for each month. However, EQC has noted that the actual rate is more likely to be between 10 and 15 injuries for each month because injuries are under-reported to Fletcher Construction. If accurate, this would be higher than the target rate (10 injuries for each month). EQC and Fletcher Construction are continuing to use an educative and coaching approach with contractors to improve safety practices.

3.53
EQC also identified a failure to manage contractor and staff well-being as an important risk. Many of the contractors and staff have had direct experience of the earthquakes and associated disruption to their lives. There has also been a high level of media, public, and political attention paid to EQC's work and its staff. EQC has identified a range of health and wellness activities to reduce this risk.

Electrical incidents

3.54
PCG meetings in February and March 2013 included discussions about quality and safety matters with electrical repairs. There have been 93 "electrical incidents" in the home-repair programme to June 2013.

3.55
Although the number is proportionately small, electrical incidents have had the potential for significant injury and property damage. In some instances, property has been damaged.

3.56
As a result of the electrical incidents, an Electrical Safety Guideline was produced and updated in 2013. It requires an electrical safety assessment to be carried out for houses meeting certain criteria, and a registered electrician must be engaged for any prescribed electrical work.

Homeowners' feedback on health and safety and site management

3.57
EQC telephone surveys of people who had repairs completed between February and August 2013 showed that most people (90%) were satisfied with the on-site management of health and safety matters (see Figure 7). EQC does not have information on satisfaction with the on-site management of health and safety matters before 2013.

3.58
The surveys also found high levels of satisfaction with other aspects of the site management (see Figure 7).

Figure 7
Percentage of surveyed homeowners who were satisfied or very satisfied with elements of the management of repair work, February to August 2013

Date repairs were completed	February to April 2013	22 July to 28 July 2013	29 July to 2 August 2013	5 August to 10 August 2013
Manner and politeness of staff	94%	85%	95%	95%
Management of health and safety matters on-site	94%	72%	89%	95%
Consideration of you and your neighbours' needs	92%	73%	90%	96%
Care of your property	87%	77%	84%	92%
Skill of the staff	85%	75%	83%	90%
Timeliness of project	81%	68%	78%	75%
Cleanliness and tidiness of the site	80%	75%	76%	79%
Overall management of on-site work	87%	86%	85%	89%
Number of respondents	769	100	112	109
Margin of error	+/- 3.0%	+/- 9.8%	+/- 9.2%	+/- 9.3%

Source: EQC.

Timeliness of repairs

3.59
Timeliness of repairs is one measure of the home-repair programme's performance. The timeliness of repairs has been of major interest to homeowners. In late 2011, EQC set a target to complete 80% of the repairs by December 2014. During our audit, EQC brought the target completion date forward for all repairs to the end of 2014.

3.60
Normally, EQC has a year to settle a claim after it has determined the amount of damage. This requirement has been waived by an April 2012 Order in Council for settling home-repair claims in Canterbury. The Order in Council applies retrospectively from 4 September 2011.

3.61
To complete all of the repairs within a year would have required the completion of about 1600 home repairs every week or more than 300 homes every working day. An enormous trade and building material infrastructure would be required to support that volume and speed of repairs.

3.62
Because of the scale of the repair task and fixed resources, it is inevitable that many people will be waiting a long time for their homes to be repaired. In our view, it is critical that arrangements in the home-repair programme enable:

homeowners to be kept adequately informed while they are waiting;
the available repair capacity to be fully and effectively used, to minimise the time taken to complete repairs; and
access to repairs to be effectively and fairly prioritised in the circumstances.

3.63
In our view, EQC has not adequately kept homeowners informed between an assessment of the damage and the start and completion of a repair.

3.64
EQC cannot readily provide complete information on the time taken for a claim to progress through the full repair process. Instead, we have had to rely on small samples of information taken at different times and collected in different ways.

3.65
These samples indicate that there is considerable variation in the time individual repairs take to progress through the different repair stages, and in the time taken for repairs to be completed. Our sample of 24 claim files from six repair hubs shows that, as at December 2012, the average number of days from carrying out a damage assessment to completing a repair was 334 days. When broken down to repair stages, the averages were:

204 days between carrying out a damage assessment and scoping of work;
58 days between scoping of work and issuing a work order; and
158 days between issuing a work order and completing a repair.¹⁰

3.66
Figure 8 shows the average number of days between repair stages, as at May 2013, for six hubs in EQC's sample (90 claim files). The six hubs in EQC's sample are not all the same as the six hubs in our sample.

Figure 8
Average number of days between repair stages, as at May 2013

Source: EQC.

3.67
There are many reasons for the variation in time taken to complete repairs. Factors to some extent within EQC's control include:

lack of controls on dates and time frames for each stage of the assessment and repair process – these mean, for example, when a repair that a contractor has said would take three weeks actually takes two months, there is no automatic flag to highlight the difference, question the appropriateness of the initial three-week time frame, or identify the reasons for the longer time frame;
disagreements between claimants and EQC about damage assessments where EQC needs to obtain further information and/or specialist technical advice;
disagreements between EQC and contractors about the cost of repairs (in one instance, we saw a disagreement that led to a delay of at least eight months);
reassessments of damage being required because of the quality of initial damage assessments; and
the need for Fletcher Construction to check the claims after receiving them from EQC because of the quality of data.

3.68
Factors outside EQC's control include:

the complexity of repairs, including multiple claims and multiple earthquakes;
damage reassessments that are needed because additional earthquakes have occurred or the damage was not apparent before repairs started (in one instance, we saw three damage assessments for one dwelling within one year);
the need to obtain technical guidance, and technical guidance that emerges during the assessment and repair process, especially for foundation work;
disagreements between claimants and EQC about damage assessments where the claimant needs to obtain further information and/or specialist technical advice; and
the time some homeowners take to make repair decisions – Fletcher Construction told us that, as at July 2013, more than 3000 repairs in its computer system had "homeowner delay" noted.

What homeowners expected

3.69
EQC has not known enough about homeowners' experiences of the home-repair programme. One of the recommendations of an internal audit report was for EQC to survey all homeowners whose repairs had been completed. In 2013, EQC began telephone surveys of homeowners with recently completed home repairs. Figure 9 shows the percentage of people who said they were satisfied or very satisfied with the timeliness of their repair.

3.70
The surveys did not include people who were still waiting for repairs, had repairs in progress, or had repairs completed before 2013. We note that EQC's Complaints Investigation Team received 260 complaints from September 2012 to August 2013 about the time taken to repair houses. Given how many houses were awaiting repair during this period, the proportion of homeowners with recorded complaints about the timeliness of repairs could range from 0.4% to 0.6%.

Figure 9
Percentage of surveyed homeowners who were satisfied or very satisfied with the timeliness of repairs, February to August 2013

Date repairs were completed	February to April 2013	22 July to 28 July 2013	29 July to 2 August 2013	5 August to 10 August 2013
Percentage satisfied or very satisfied with the timeliness of the repair project	81%	68%	78%	75%
Number of respondents	769	100	112	109
Margin of error	+/- 3.0%	+/- 9.8%	+/- 9.2%	+/- 9.3%

Source: EQC.

3.71
Without trend information about the experience of homeowners in the home-repair programme, we have looked at EQC's information about the satisfaction of all claimants (land, dwelling, and contents claims arising from the earthquakes and other natural disasters). Claimants in the home-repair programme are not separately identified, so the information is indicative at best.

3.72
Figure 10 shows that people with settled claims have identified the time EQC takes to settle claims as an aspect that could be improved. The proportion of claimants identifying this as an aspect to improve peaked in the second quarter of 2011 at 17%. It has fluctuated between 5% and 17% of claimants. It is important to note that these are the responses of people who had their claims settled during a given quarter. It does not include people whose claims have not yet been settled.

Figure 10
Percentage of surveyed EQC claimants identifying claims settlement time frames as an aspect to improve, 2010-2012

Source: Our analysis, based on information provided by EQC.

3.73
For all claims types (contents, land, and dwelling claims) there is a difference between some claimants' expectations of how quickly their claims will be settled by EQC and how quickly the claims were settled in practice. Using information from the fourth quarter of 2012, Figure 11 shows that, although about 10% of claimants expected that settling their claims would take longer than six months, in reality more than 30% of claims took longer than six months to settle.

Figure 11
Expected and actual time taken to settle claims for all earthquake claims settled during the fourth quarter of 2012

Source: Our analysis, based on information provided by EQC.

3.74
Similarly, in the fourth quarter of 2012, only about 40% of EQC's claimants were satisfied or very satisfied with the time it took to settle their claims. Satisfaction with the time taken dropped from 52% to 42% between 2010 and 2012.

Timeliness relies on sufficient trade capacity and capability

3.75
Without the necessary people, particularly tradespeople, it will not be possible for the home-repair programme to be delivered in the anticipated time frame, which is to complete the programme by the end of 2014.

3.76
Failure to retain the necessary people and skills is identified by EQC as a main risk to the home-repair programme. This risk will become greater as the anticipated end-point of the programme nears and contractors and staff seek opportunities beyond the home-repair programme.

3.77
Retention schemes for staff and contractors have been considered in the home-repair programme. EQC has decided that it is not yet necessary to implement these schemes. We support EQC having a clear strategy and tactics for ensuring the home-repair programme can operate effectively until it is completed.

3.78
The implementation of any retention arrangements needs to be reasonable and comply with the Commerce Act 1986 and the Government's procurement policies.

Prioritisation of repairs

Because there are many homes to be repaired and resources are limited, it is important that repairs are prioritised. Effective prioritisation allows homeowners to know where they are in the repair queue and resources to be allocated to repairing homes with vulnerable occupants sooner. Active allocation of "repair slots" for repairs to vulnerable people's homes started in November 2012, two years after the start of the home-repair programme. In our view, this was too late. There is no end-to-end prioritisation of repairs in the home-repair programme.

3.79
The two main categories that have been used in the home-repair programme to prioritise the timing of repairs are whether a repair will cost more than $50,000 and involves structural damage, and whether the repair is for a home with a vulnerable occupant.

3.80
There are a number of stages during the repair process where decisions can be made that could affect the relative priority given to a claim. The processes and the factors that could influence the prioritisation of a claim include:

EQC's processing of a claim before the claim being transferred to Fletcher Construction – completion of assessments, including apportionment and technical investigations, is the main factor determining when a claim will be transferred to Fletcher Construction;
Fletcher Construction's processing of a claim before the claim being transferred to a repair hub – available hub capacity and location are the main factors determining when a claim will be transferred to a repair hub; and
processing of a claim within a repair hub before the claim being transferred to a contract supervisor and contractor – available contractor capacity and capability are the main factors determining when a claim will be transferred to a contract supervisor and contractor. These factors also influence whether a contractor is allocated work worth more than $50,000.

3.81
EQC told us that it "is neither necessary nor practical" to prioritise claims throughout all three of the stages described in the previous paragraph. Because of this, there is no end-to-end prioritisation of a home-repair claim.

3.82
Vulnerable people's claims are transferred to the "Priority Hub".

Repairs costing more than $50,000 involving structural damage

3.83
The home-repair programme target is to complete repairs on homes with structural damage that will cost more than $50,000 to repair by the end of 2013. This date is later than was originally targeted and, based on the progress to date, is unlikely to be met unless EQC settles many of the remaining repair claims in cash.

3.84
Homes with repairs costing $50,000 or more make up about 20% of all repairs being managed in the home-repair programme. As at May 2013, 6528 repairs costing more than $50,000 had been completed, about 39% of the total in that category. A further 10,165 repairs costing more than $50,000 were still to be completed or resolved through other means.¹¹

3.85
At the same date, about 47% of all repairs estimated to cost less than $50,000 had been completed.

Vulnerable people

3.86
EQC has identified vulnerable people not being appropriately looked after as a main risk. EQC told us that the home-heating and emergency-repair initiatives were aimed at reducing the vulnerability of people to the cold and damp.

3.87
EQC told us that it has received information about vulnerable people in the course of its work, including in the following ways:

people identifying themselves as vulnerable when talking to EQC's call centre staff;
EQC identifying people as vulnerable when they are talking to EQC's call centre staff;
the occasional identification of vulnerable people by assessment teams;
information provided to EQC at public meetings;
networks of community groups; and
identifying which land has been the worst affected (because EQC considered that occupants in those areas would be vulnerable).

3.88
EQC has prepared a set of criteria, in consultation with other agencies, to identify vulnerable people based on health conditions, dependency on a carer, and age. The specific criteria are explained on EQC's website.¹²

3.89
From November 2012, EQC had set a target of 100 vulnerable people's dwelling repairs for each month. Information provided by EQC indicates that, since that date, it has achieved that target every month with the exception of January 2013. Information EQC has provided also indicates that it achieved that target before November 2012.

3.90
The number of completed home repairs by month for houses with a vulnerable occupant is shown in Figure 12. Figure 12 also shows the completion rate that would be required to complete repairs of homes with a vulnerable occupant by the end of 2013, assuming EQC cash-settles about half of the remaining claims.

3.91
Information available on EQC's website in May 2013 showed that EQC intended to cash-settle about half of all dwelling claims from vulnerable people. More recently available information on EQC's website indicates EQC's intention to settle vulnerable people's claims by the end of 2013.

3.92
In our view, this might mean that many of the home-repair programme claims are to be cash-settled, given the allocation of 100 repair slots each month. Increasing the use of cash-settling to meet this deadline could be counter to the objectives of the home-repair programme if it contributes to cost inflation or offers are made to homeowners without the capacity to manage repairs on their own.

3.93
In our view, deciding to cash-settle a claim rather than manage repairs should include an assessment of the homeowner's capacity to manage the repairs. Some elderly, disabled, sick, and otherwise vulnerable claimants might not be in a position to manage the repair without help.

Figure 12
Number of repaired houses with a vulnerable occupant against target rate, January 2012 to May 2013

Source: Our analysis, based on information provided by EQC.

3.94
Although EQC has been meeting its target number of repair slots for vulnerable people for each month, as at May 2013, EQC was not completing repairs to properties with vulnerable occupants any "faster" than repairs to other properties. EQC has said that the reason for this is because its "process for prioritising the vulnerable has yet to fully bed in", in part because EQC did not know who its vulnerable claimants were until they had submitted a claim.

3.95
We have also noted, based on information that EQC gave us, that each month about 150 properties with vulnerable occupants are identified. There are 100 repair slots allocated for vulnerable people each month.

3.96
As at May 2013, EQC's call centre had started to contact vulnerable claimants to discuss repairs to their homes.

3.97
In our view, the active allocation of repair slots to vulnerable people started too late.

6: There have been allegations of conflicts of interest during EQC's 2012 recruitment of assessors. EQC took these allegations seriously, had the recruitment process independently reviewed, and publicly reported the review's findings. The independent review found that there were "no major causes for concern about the processes used" and that "EQC went to some lengths to ensure the processes were as fair as could be".

7: We examined 30 property files from six repair hubs. The owners of six of the properties had opted out of the home-repair programme, so our analysis of differences between the original assessment and the final budget was based on 24 files.

8: The example has been calculated using this formula: ((score/4)*weight for question)/sum of weights for all questions)*100). The specific calculation is ((3/4)*8)/32)*100) = 18.75%.

9: The document can be found at www.eqr.co.nz.

10: The average number of days for each repair stage does not add up to the total average number of days from carrying out a damage assessment to completing a repair because the timeliness information was incomplete in some files.

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