The beleaguered Canadian Home Insulation Program (CHIP), which first came under attack in 1980 when it was charged that government officials had ignored reports about the dangers of urea-formaldehyde foam, is in trouble again. Evidence that the government has failed to correct abuse of CHIP’S subsidy formula has now come to light with claims that unscrupulous contractors and landlords are jointly defrauding the program. Over the past three years Winnipeg businessman Wayne Cole, president of Ener-Corp Management Ltd., a caulking and airsealing firm, has run an exhaustive information campaign. Early last month Cole, who also sits on the Manitoba Energy Council and the implementation advisory board of the Canadian General Standards Board, placed a full-page ad in the Winnipeg Sun under the caption ANATOMY OF THE PERFECT CRIME, which alleged that ripoffs have reached mammoth proportions. CHIP officials are now acknowledging that loopholes in the funding and inspection procedures have been exploited by wily ripoff artists. But, according to the department of energy, mines and resources, which administers the program, no important changes are expected sooner than early 1983. As new homeowners rush to buffer their dwellings against what is predicted to be one of the worst winters in history, the prospect of shady schemes and often shoddy workmanship unsettles Cole and other
homeowners who have, in the past, been unwittingly roped in.
Cole has already threatened a classaction suit on behalf of consumers and legitimate contractors if changes are not soon made. “The program is wide open to abuse and fraud and has done nothing to raise the consciousness of Canadians about energy conservation,” he says. These are harsh words for a five-year-old program that aimed to
slash domestic space-heating costs by 30 per cent. Since then, the program, which pays individual homeowners as much as $500 toward insulation, has already cost $447 million. Of that, Cole claims that at least $20 million has so far found its way into the pockets of opportunistic contractors, often working in tandem with apartment block landlords, property managers or individual homeowners.
The scam involved a deft juggling of invoices by contractors. CHIP, for example, will pay as much as $150 per suite in a block of six or more for insulation materials such as fibreglass, cellulose, vermiculite and styrofoam board, plus 33 per cent of labor costs, to as much as $65. But some contractors have made it possible for landlords to claim for the whole job from CHIP by inflating the estimate and claiming for labor and material costs far beyond what they actually supplied. “It’s true that all contractors bill right up to the maximum allowable CHIP grant and there is abuse,” confirms Ruth Crowther, co-ordinator of CHIP for Manitoba. “On paper the breakdown of labor and material costs looks good, but we know some landlords aren’t being charged their share.”
In Burlington, Ont., Bob Vasily, president of RQ.V. Retrofitting Ltd., cites a dramatic example. “I know one block where a contractor quoted the insulation job at $11,000. The job was [later] requoted at $40,000, with the landlord paying just $2,000. CHIP paid the rest.”
Solutions are not immediately apparent. One problem, says Crowther, is that the government is not willing to fix prices. CHIP sets only broad ranges for material costs and for the percentage of billed labor. Vasily argues, on the other hand, that the government does not funnel enough money to the landlord in the first instance, reducing the incentive for energy conservation. “With a greater financial involvement, the consumer would get quotes and check the material and workmanship,” he says. Cole partly blames a lack of enforcement: “Originally, the aim was to have a specialist inspection system run by the Canadian General Standards Board. In reality, CHIP just gets regular CMHC inspectors to do a quick check of insulation work along with their other inspection duties.”
Beyond problems with monitoring, there are charges that the projected energy savings of 30 per cent amount to only 15 per cent or less. National Re-
search Council studies attributing as much as 40 per cent of heat loss in homes to air leakage through cracks and windows—CHIP originally discounted the findings—has sparked a new push for air-sealing, which CHIP then agreed to subsidize. However, Cole says that much of the insulation paid for by CHIP in the early days may have been only marginally effective in cutting energy use because some floors and vapor barriers were not first sealed off. Worse, many incompetent contractors air-sealed houses on the outside instead of the inside, with the result that trapped moisture ruined existing insulation and the house structures. The government paid for as many as 80,000 such jobs before cracking down. The results of a federal study of energy savings on CHlP-insulated homes, due early next year, should answer some of these charges.
Air-seal operators have, in turn, come in for abuse. Cliff Strassburger, sales manager of 33-year-old Strassburger Insulation Ltd. in Waterloo, Ont., says some contractors are shameless: “I have seen jobs where the government has paid $150 just to have one door weatherstripped. In some cases the government is being charged $35 for one tube of caulking, which costs $6.50. They’re also paying for materials never used—inspecting an air-sealing job is much more difficult than checking the insulation in an attic. Much of all the work is hidden if it’s done at all.”
Former energy minister Marc Lalonde recently raised hopes that something would be done when he gave verbal approval to a major overhaul of the system. According to Cole: “They decided CHIP would pay a flat 60 per cent of insulation and air-sealing costs up to $500, with the consumer paying the rest. They also decided to insist on minimum insulation standards of R32 [almost three times that of the average house].” The cabinet shuffle last month may prove to be a setback for the approval of such plans, but officials at Energy, Mines and Resources allow that changes are still in the works, including a proposed plan to inspect newly insulated premises before the grants are issued.
Wayne Cole is pleased, although he would go one step further. While admitting his vested interest in air seals, Cole proposes that consumers seal houses at their own cost before applying for a government grant to install insulation. Such stringent measures are not likely to appeal to all consumers, but Cole has already gained strong support from other legitimate contractors for his argument that, though the chips may be down, the stakes are high.
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