04 October 2017

The Senate Economics References Committee interim report on aluminium composite cladding in Australia - What can we learn about further reform?

This article was written by Anna Judkins and Katherine Vines.

On 6 September 2017, the Senate Economics References Committee handed down its interim report on aluminium composite cladding.  A copy of the interim report can be found here.

The interim report forms part of a broader effort by industry and government to address non-conforming and non-complying building products in the construction industry.[1]  Following the Grenfell Tower fire in London, the Senate Economics References Committee was asked to expedite its work in respect of aluminium composite cladding. 

The recommendations of the interim report are intended to prevent use of combustible aluminium composite cladding in Australia as follows:

  • a total ban on combustible aluminium composite cladding
  • establishment of a national licensing scheme, with requirements for continued professional development for all building practitioners.  Introduction of such a national licencing scheme would apply to all building practitioners regardless whether they use aluminium composite cladding or not
  • increased accountability for participants across the supply chain.  Queensland has already introduced ‘chain of responsibility’ legislation that will ensure greater accountability across the supply chain[2] and the Committee encouraged other jurisdictions to develop similar approaches
  • making all Australian Standards and codes freely available
  • imposing a penalties regime for non-compliance with the National Construction Code such as revocation of accreditation or a ban from tendering for Commonwealth funded construction work and substantial financial penalties
  • better resourcing of the Federal Safety Commissioner
  • expediting introduction of Director Identification Numbers to prevent directors from engaging in illegal phoenix activity
  • introduction of a statutory duty of care for end users in the residential strata sector.

The interim report also provides very useful insights on current issues in the construction industry in relation to non-conforming and non-complying building products and what further reforms may be required to address these.  In this Alert we summarise some of the more important insights.

Loopholes in the regulatory regime and need for reform – the National Construction Code is a performance based code meaning it does not prescribe particular materials, components, design factor or construction method.  This discretion encourages innovation but also leaves room for ambiguity.  This ambiguity left open the possibility that combustible aluminium composite cladding complies with the NCC.  Issues arising out the lack of clarity are exacerbated by other changes in the industry over time that have reduced supervision and oversight (discussed further below).  We anticipate that any further reform will include more revisions to the NCC.

Weakness in the current building product certification system – two weaknesses were identified, first, there is no single organisation responsible for certifying products for compliance with standards and second, certificates of conformity with the Building Code of Australia performance requirements are not explicit in respect of the range of uses and circumstances in which a product may be relied upon to be fit for purpose.  We believe the industry should expect reform to product certification to address these two issues.

Lack of independent on-site supervision and oversight – many factors were identified as contributing to a lack of supervision.  First, most building surveyors’ functions are now fully privatised.  This has created significant conflicts of interest for building surveyors as often the building surveyor needs to have an ongoing commercial relationship with the owners and developers that appoint that building surveyor.  Second, deregulation has meant a reduction in mandatory inspections over the past 30 years.  The Committee noted that the Building Ministers Forum had commissioned an experts report to examine broader compliance and enforcement problems within the building industry.  The Committee stated that it is ‘evident from the evidence received that there needs to be a central oversight role independent from industry to provide assurance to the public that structures are built according to national standard’.  This suggests that any further reform may include measures to reregulate the building industry, at least to include mandatory independent on-site inspections.

Imported products supplied with fraudulent or misleading certification – the Committee heard evidence of many cases where fraudulent and/or misleading certification being provided with building products.  The evidence was that third party product certification was the only way to avoid fraudulent documentation.  Third party product certification, random auditing and testing of high risk products is being considered by the Senior Officers Group of the Building Ministers Forum.  The Senior Officers Group was due to issue its final report in May 2017 but has been delayed.

Failure to enforce existing regulation – the Committee heard evidence that the existing regulations are not enforced.  Examples given include the fraudulent certification discussed above and builders substituting compliant products for cheaper non-compliant products in order to make savings.  The Committee acknowledged that greater enforcement of existing regulations is needed, however, queried the benefit of this while the loopholes in the NCC remain.  The Committee didn't make any specific recommendation on enforcement as this is being considered as part of the Building Ministers Forum experts report.  But we believe the industry should expect reforms intended to increase enforcement including additional powers and funding for regulators and increased penalties for non-compliance.

Industry and government are grappling with how to stop the use of non-conforming and non-complying building products in the construction industry.  The Senate Economics References Committee’ interim report, although directed at combustible aluminium composite cladding, provides many key insights into the use of non-conforming and non-complying building products more generally and from these insights we can get an idea of what any future reform may include. 

[1]See Chapter Two of the Interim Report for a summary of the other steps being taken by industry and government to address non-conforming and non-complying building products in the construction industry

[2]Non-conforming Building Products—Chain of Responsibility and Other Matters Amendment Bill 2017

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