Serious questions at the Senate inquiry into building materials. Answers still pending
David Chandler, Western Sydney University, Western Sydney University | 27 July 2017
The Sydney Public Hearing by the Senate Economics Reference Committee into Non-Conforming Building Products (NCBPs) confirmed much of what the construction industry already knows. The focus on combustible cladding materials and asbestos is just the tip of the iceberg. But, there were some fresh perspectives that should be of interest to those following this matter. The insurance industry gets a bad rap from construction.
The focus on combustible cladding materials and asbestos is just the tip of the iceberg. But, there were some fresh perspectives that should be of interest to those following this matter. The insurance industry gets a bad rap from construction.
There were three senators in attendance. Labor senators Chris Ketter (chair) and Kim Carr, and independent Nick Xenophon. There was no-one from the government. You can draw your own conclusions about this lack of presence as: the possible paucity of government senators to go around; an underlying lack of interest in a matter that should be left to the states to sort out; or external pressure to make the enquiry a small target so is stays narrowly focused and goes away as soon as possible.
This, despite acclamations of concern and the urgent need for action from all sides.
The construction industry is risk averse. It has so many concerned interest groups that all claim a seat at the table but none of which are prepared to stand up and accept responsibility for what gets built, how it complies with the law and functions after construction.
A recurring prospect during the hearing came from insurers, electing to make inflammable cladding an excluded risk for new and existing buildings. Clearly such a position creates a dilemma for owners of non-compliant buildings. But, what about the future?
There seemed to be four main themes dominating questions asked by the senators of those who presented at the hearing. These included:
- Would it make a difference if all non-conforming or non-standard materials were banned from importation into Australia? (The border strategy)
- Has deregulation and devolvement of certification by government over the past 20 years been the root cause of the current situation? (The back to the future strategy)
- Has the impact of global trade agreements eroded national sovereignty and the ability of the industry to push back when it chooses? (The protection strategy)
- When did false claims ignoring obligations under a construction contract become accepted norms and not treated as fraudulent? (The accountability strategy)
Senator Carr was the stand out performer. His experience in industry portfolios as a minister and his own passion for industry capability building in Australia ensured short shift of waffle from those who presented.
Carr’s insights into the need for consistent industry policy and leadership are well founded. In response to a statement by one presenter about industry frustration with a lack of government direction in this area, he pointed to three ministers in the industry portfolio over the last two and a half years.
His harshest observations were for public agencies that fail to enforce the full intent of construction contracts, that fail to apply the law when false claims have been made for work that is not performed as contracted and that fail to make those who breach their obligations build in accordance with Australian standards and regulations accountable.
There were four presentations at the enquiry that evidenced why continuing with the status quo is unsustainable.
These had little to do with adopting a back to the future or protectionist strategies. They all pointed to the fact that materials sourced in Australia or off-shore were then subjected to variable post manufacture processes on and off-site.
Non-compliant work is just as rife as non-compliant materials
Non-compliant construction work was just as rife as non-compliant construction materials in an industry that draws a long bow in applying deemed-to-comply certifications and product substitution in a bid to maximise profits or to shift risk.
The Owners Corporation Network pointed to evidence that 75-percent of new residential buildings had significant defects.
Using New South Wales as an example, there are more than 72,000 registered strata schemes in this state, with a combined asset value of more than $350 billion.
Strata schemes represent a store of our national wealth, exceeding $1 trillion nationally. Across NSW, two million people live in strata title dwellings. In 20 years it is expected that half of this state’s population will live or work in strata or community title schemes.
Non-compliant construction contagion presents a growing and expensive post construction risk for owners who do not benefit from any meaningful duty of care obligation from the contractor of record.
AFAC is the Australia and New Zealand national council for fire, emergency services and land management, creating synergies across the emergency management sector. The council represents 31 member agencies, comprising permanent, part-time and volunteer personnel, totalling around 288,000 fire and emergency service workers.
They have no legislative power. Fire authorities are independent of the certification system. Their interest is in maintaining and upholding public safety. They argue that AFAC must remain part of the approval process. They said, “the more we can focus on engineering out the high risk of high-rise fires, the less fire services will need to respond to emergencies—and that is in everyone’s interests.”
Australian fire authorities have an expectation that new buildings are constructed in accordance with the National Construction Code and that developers, architects, builders, building surveyors, fire engineers and others involved all check and certify that construction meets the required standards.
AFAC expects these processes are in place to protect the health and safety of building occupants and also firefighters, who may be required to enter burning buildings and search for occupants during fire events. The accountability strategy.
CertMark International (CMI) presented an overview of the CodeMark Certification Scheme. This is a voluntary building product certification scheme that supports the use of new or innovative products.
CMI claims to provide confidence and certainty to regulatory authorities and the market through the issue of a Certificate of Conformity, which is one form of evidence that can be used to demonstrate that a building product complies with NCC. CertMark is the active Australian member of the World Federation of Technical Assessment Organizations.
CMI is currently involved in CodeMark certification of several Pre-Fabricated housing systems from China.
Recently, CMI signed a cooperative agreement with the China Building Materials Federation (CBMF), which asserts that through its members it supplies 68 per cent of the world’s building materials.
CMI’s job is to make sure that the materials that land in Australia and NZ from China are fit for purpose, and cooperating with CBMF is aimed at fostering the testing and accreditation of product in line with our strict acceptance standards.
CMI is also acquainted with the Lloyds Build Off-Site Assurance Payments Scheme (BOPAS) through WFTAO. This scheme provides a whole of construction compliance assurance not limited to materials.
BOPAS accredits and risk rates the whole of the construction value chain on a builder of record and individual project basis. This is clearly not a protectionist strategy.
The Insurance Council of Australia (ICA) presented the case, that the most appropriate way forward is through a national approach to building material certification, compliance and regulatory enforcement.
The ICA argues that assessment or product compliance and suitability should be administered and controlled in Australia.
While lacking any centralised capacity, for example how this matter is addressed in New Zealand, there is a range of commercial entities throughout Australia that have the capability to conduct appropriate testing and certification of compliance with Australian standards of imported products. ICA was unaware of the BOPAS underwriting product and undertook to investigate.
For now, the insurance industry is left to deal with the construction industry in its risk averse parts.
This ensures the continuity of flawed product warranties and work assurances that are far from what the owners of constructed buildings and those who must know what they are dealing with when responding in emergencies or seeking to assure public safety expect.
On investigation, readers will be able to review the conditionality of industry product warranties by simply looking them up on the relevant websites.
Most will be effectively voided by what happens to manufactured products as they are subsequently worked for inclusion in construction projects or very shortly after as they go into service or repair.
It would be wrong to direct these shortcomings at the insurance industry, even if it is often the last responder with the seemingly deepest pockets. There is a lot more to mapping a way forward as the Senate Enquiry into NCBP’s and work, confronts the bigger picture.
As Senator Carr observed, why should the insurance industry be demonised for not being prepared to take on insurance risk for buildings that have incorporated hazardous building products and non-conforming work?
Why should the insurance industry be asked to carry the risk for an industry that wants to continue avoiding accountability and embracing available ways to manage and assure the minimisation of construction performance risk?
And it will be interesting how the government responds when the Senate report is tabled.
David Chandler is adjunct fellow and industry engagement lead at Western Sydney University’s Centre for Smart Modern Construction.