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Economics References Committee
19/07/2017
Non-conforming building products - the use of non-compliant external cladding materials in Australia

IRELAND, Miss Talissa, Senior Client Liaison Officer, CertMark International

THORPE, Mr John Charles, Chief Executive Officer, CertMark International

[11:29]

CHAIR: Welcome. I invite you to make a brief opening statement, should you wish to do so, and then we'll open it up for questions.

Mr Thorpe : Firstly, I would like to thank the Senate for allowing us to address you today. We're the largest certifying body under the CodeMark Scheme in both Australia and New Zealand. As a consequence of that, we certify most of the products that have been mentioned here today. We would like to propose an argument for mandatory certification of particular building products, and I think we have a reasonably succinct presentation on why that can be done within the framework that already exists.

This washer that I purchased from Bunnings yesterday is WaterMark approved. It costs $2.50. If a plumber fails to install a WaterMark approved $2.50 washer he can quite literally lose his licence. That is covered under the actual WaterMark Scheme, which is legislated in exactly the same way as the CodeMark Scheme. Conversely, this aluminium composite panel does not fall into the same regime. So, the question needs to be asked: why do we have in place a system whereby something as simple as a tap washer is covered with a mandatory certification—that there are consequences, as has been talked about today, or ramifications for the licensed installer—whereas there is nothing similar that would affect an aluminium composite panel? And I am not singling out ACPs; many other products fall into that category.

The CodeMark Scheme and the WaterMark Scheme have both gone through a bit of a rebirth recently. They've both been enhanced. One of the things that's been enhanced in the CodeMark Scheme is the removal of the mandatory requirements for the certifying bodies, such as us, to inspect the factory. We don't need to go and look at the product being made. That may seem counterintuitive, but the logic is that on any day I can send any of my staff, and Talissa can send any of her inspectors, and they can be making the golden sample. What's important is what is actually—

Senator XENOPHON: Could you just put on the record what the golden sample is?

Mr Thorpe : A golden sample is basically when you go and look at a factory and the sample that's been tested and the sample that has actually been manufactured is to spec. You walk out of the factory, and what is going to go into the container that's going to be shipped to Australia may not be of the same quality as the actual golden sample. So, it's basically product substitution.

CHAIR: If you didn't give advance notice of when you were going to be at the factory, that minimises the risk of that, doesn't it?

Mr Thorpe : Indeed, that would minimise the risk of it. The scheme has been changed to require the certification body to conduct market sampling and testing of the certified product when it actually arrives. Some comments have been made that we see these container loads of products coming into the country and we have no idea what they are. So, what we see is that the CodeMark Scheme has in place the mechanisms that allow for this type of supervision of the products. You then have to say, 'Well, if CMI is sitting here and saying let's have a system where we have mandatory certification, what do we certify?' The CodeMark Scheme has levels of requirements—level 1 and level 2, and I think level 2 is being phased out—but basically it looks at the risk factor associated with the product. The building code itself has a risk factor scale in it—a risk matrix. The risk matrix is broken down into two sections, and I am happy to leave all this written material here with you. It looks at the risks associated with the manufacture of the product and, probably more importantly, the risks associated with the installation of the product.

When somebody comes to our company and asks to have their product certified, we run the risk matrix and we look at things like the nature of the materials, the extent of the requirement for sampling and testing and the number of sites involved in manufacture of the product, and where they are. Issues of public safety is one of the major ones. We look at the nature of the certification holder: are they an importer? Are they a manufacturer? We look at things like ease of rectification. They're all things that we look at on the manufacturing side of things. The risks associated with installation are the nature of the materials and, most importantly, as we heard earlier here, how they interact with other building materials. We look at the extent and nature of the product verification of compliance—what's actually required to be able to verify it on-site. We also look at the number of trades involved in installing the product and we look at, once again, the nature of the certification holder: are they accountable?

The revision to the CodeMark Scheme has added, as part of the contract we enter into with the certificate holder, that there is a product quality plan. It is legislated in this and it has gone through the ACCC; it's been approved. We also have a new addition in there that there is a requirement under the product quality plan for a product recall system that meets the ACCC's requirements. So, all of this exists. It's all here. The only thing that isn't here is the fact that the CodeMark Scheme is voluntary whereas the WaterMark Scheme is mandatory. We say that if a product is evaluated and it's evaluated as high- risk then that should be moved in to the mandatory certification system that's available within the CodeMark Scheme, because when we issue these certificates of conformance they have mandatory acceptance under the building code.

Senator KIM CARR: Can you just explain the difference between 'mandatory' and 'voluntary' in these circumstances? For how many of the products that are certified is it actually on a voluntary basis?

Mr Thorpe : For every product that we have certified under the CodeMark Scheme, because it is a voluntary scheme, the companies have come to us voluntarily and asked us to certify them against the CodeMark Scheme. Once we've certified them, there is a mandatory acceptance of these certificates of conformity.

Senator KIM CARR: Your submission says that there is a considerable price difference between the flammable PE core material and the fire-retardant and fireproof core material. That is the aluminium honeycomb core material, which is the focus of what we are doing here. Are you able to tell us whether there is also a considerable price difference between the mineral and PE core materials?

Mr Thorpe : There is. As with anything, you get what you pay for. I believe—and a couple of our clients are coming along later and can probably give you exact figures—the difference between a PE core and, say, a fire-retardant core would be something in the range of about $7 to $10 a sheet. So, if you're putting a high-rise building up and you're using several thousand of these sheets, then there is a considerable cost saving to be had.

Senator KIM CARR: What sorts of percentages do you think a $7 to $10 a sheet difference would be?

Senator XENOPHON: Based on the difference between the non-fire-retardant and the fire-retardant sheet.

Miss Ireland : Because we're involved in the process prior to that we don't actually know.

Senator KIM CARR: Well, we might have to try to find that out. But is it a significant price difference?

Mr Thorpe : Yes, there is a significant price difference. I think Fairview Architectural are coming in later, and they could possibly give you exact figures.

Senator KIM CARR: I'm just wondering whether there is a significant financial justification in the use of the flammable materials.

Mr Thorpe : Yes. I think that has historically been proven to be the case. We've looked at many buildings since the Lacrosse fire in 2014. We've actually gone onto high-rise properties where the body corporate has shown us the plans and the plans specifically state that fire-retardant material is to be used and there's been a substitution for a PE.

Senator KIM CARR: How does that happen? How does that substitution occur?

Mr Thorpe : Substitution occurs, from our perspective, when a builder, or somebody in involved in the purchasing process, is looking to save money. Basically, what's happened is there's been a tender go out for the building, a company's won the tender and the first thing that happens is they look to find savings.

Senator KIM CARR: Cheaper products. Has someone signed-off on that building?

Mr Thorpe : Yes. Somebody would have signed-off on the building.

Senator KIM CARR: Has anyone ever been held responsible for a non-compliant building?

Miss Ireland : The problem with that is that you can look at it at face value and you won't know.

Mr Thorpe : Indeed, and that's where—

Senator XENOPHON: Until something goes wrong.

Miss Ireland : That's right.

Mr Thorpe : This is where the people, who have come before us, have been pointing out there is a need for a stronger look at how this is actually done. If I can just go back to the example of the humble washer here: we produced a few weeks ago—along with the submission that you've got there—a notation to all of our clients who manufacture aluminium composite panels. The suggestion that we made was that they should be branded. In a similar way to the way these ones are branded. We suggested that the branding should mention the name of the product, the dimensions, the batch number and, most importantly—because we're talking about aluminium composites panels—what the product is. If it was PE, there should be a warning that it's combustible and it should actually state the class of building that this product can be used on.

If we use these two examples here, we have got a PE product, which we've certified for the Vitrabond company. Under the conditions and limitations, it states, 'This product may only be used in Class C construction.' Under the Building Code, it clearly states that Class C construction is basically a single-storey residence. This is a case where this product is combustible, but there is a place where it can be used.

If we move to their FR material, it states quite clearly that it can be used, 'In type A, B or C construction.' Most buildings are type A ,B or C. By incorporating that, we've had very positive feedback to our company. I think you'll find that a lot of them have actually adopted it. Just yesterday one of the companies sent through their actual designs for the labelling that they're going to put on.

If we had a situation where there was a decision made for a mandatory requirement under the CodeMark scheme to certify these types of products because they are high risk and put this sort of branding on it, then, as with the plumbing products, a builder or a tradesman onsite—when the panels were delivered to the site—would see them and say, 'Hey, hang on. This says it's combustible and class C only. This isn't a one-storey building; this is a 24 story high-rise. Hey, boss, what's going on?' There would be that trigger and there would also be the ability for penalties to be levied against the installer, if they installed it incorrectly. It could also be whistle blown back to the regulatory authority. I will use the example of somebody saying to the installer, 'No, don't worry about that. Just stick it on.' All they need to do is—

Senator KIM CARR: And that's the problem here. The industry is full of people being told, 'Just put it on.'

Mr Thorpe : Exactly.

Senator KIM CARR: We're interested to know what we can do to change that, and the evidence seems to suggest that there needs to be some penalty for people who actually don't do the right thing.

Mr Thorpe : Exactly. I have heard a few times today that there hasn't been a case where anybody has been penalised. We have one case that we can use as an example. In 2014 we certified a company called ModakBoard Australia. ModakBoard were importers of a Chinese magnesium oxide board material. Magnesium oxide board, for those who don't know, is a product that's used to substitute plasterboard and fibre cement board. We found out, through a whistleblower, that they were substituting a poorer quality board. These boards were fire rated and they were certified by us to be used as intertenancy walls in high-rise buildings.

We investigated. Once we investigated, we discovered that there was credence to what we were being told. We went on site. Under the CodeMark Certification Scheme and the contract we have with the clients, we're allowed to go on site; we're allowed to conduct inspections. The inspection revealed that, yes, they were substituting the product. We're Queenslanders, so we got on to the QBCC. The QBCC became involved. A long story short: we ended up with the Office of Fair Trading. Fair trading are prosecuting the certificate holders. The certificate holder's certificate was immediately suspended, so there is, within the structure that we have, with the mechanism, if they are a certificate holder, to penalise them for what's going on.

Senator KIM CARR: That's very good, Mr Thorpe. That's one case.

Mr Thorpe : Exactly, that is one case, and I take your point. If there was a problem with tap washers, we'd have hundreds of cases. If we had a mandatory requirement for all high-risk products to be certified at a federal level, which is where we would come through with the CodeMark scheme, we would be able to—

Senator KIM CARR: And the question arises: are people putting lives deliberately at risk by this substitution?

Miss Ireland : How do you prove that? That's the problem.

Senator KIM CARR: It's a judgement question that you have to ask. You deal with this on a regular basis. You're saying it's a voluntary certification arrangement that is able to be counterfeited. That's the first problem. Do you have any experience of counterfeiting?

Mr Thorpe : We have had several counterfeit CodeMark certifications come from China. They don't last very long when they hit the marketplace, because they're generally referred back to the certification body, so it'll immediately refer it to JAS-ANZ.

Senator XENOPHON: But not to the police?

Mr Thorpe : Sorry?

Senator XENOPHON: You don't refer it to the police, do you?

Miss Ireland : No.

Mr Thorpe : No. As has been mentioned, one thing that did come out of the tragic Grenfell incident is the fact that it looks like manslaughter charges may be raised. At issue is that the people who are doing this, the people who are substituting products, are doing so with the belief that they have some sort of anonymity; they can just go on and do it. They can do a drop-and-roll and turn up somewhere else. I believe the only way that this is going to improve is with some sort of a mandatory requirement for the entire chain. We have talked about what the Queensland government is trying to put in place—

Senator XENOPHON: And you welcome the Queensland government measures?

Mr Thorpe : Absolutely.

Senator XENOPHON: Is that the way forward?

Mr Thorpe : I think it is the way forward.

Senator XENOPHON: But other states haven't committed to do that?

Mr Thorpe : No, not that we know.

Senator KIM CARR: Mr Thorpe, that's a lengthy process. There are other things that the Commonwealth surely can do that are more rapid interventions to prevent malpractice?

Mr Thorpe : Indeed. When you say 'a lengthy process', we talked about, or other people have talked about, creating standards and how long it takes to get a standard in and how long it takes for something to actually come through. As a certification body, we produce acceptance criteria for products. Acceptance criteria are something that we go to the company that is supplying for certification of the product. Basically, it details what we require for them to supply to us in order for us to certify the product. It goes above the Australian standards because we consult with industry and we also consult with people like the fire engineers, who were here earlier, on the actual requirements. We can produce one of these reasonably quickly, and what that means is that if we certify a product based on an acceptance criteria—and this is modelled on the American ICC-ES international building codes criteria—we can actually make sure that not only is the standard is met, but that it's also gone well above. This is because in the acceptance criteria there are requirements for what we call a scheme of testing inspection. They agree to what we're going to do as far as looking at how we monitor their annual audits, how we do regular surprise surveillance on the products and things like that.

To get something to happen quickly, in our opinion, the quickest way to do it would be to consider taking it to the Building Codes Board and saying, 'Guys, you've got a mandatory plumbing certification scheme; how about there's a mandatory building scheme under the CodeMark scheme that is applicable to high-risk products.' I'm not saying everything needs a mandatory certification—decorative items that are non-flammable, obviously not—but that could be a move that could go ahead quite quickly.

Senator KIM CARR: I can understand that. Given that Victoria doesn't have any regulations with regard to defining what or who a builder is, that might be an interesting question for them.

Mr Thorpe : You then get to the point where you have the national plumbing code, which requires a plumber to install this product there. If we have a situation where these high-risk products are clearly certified and clearly branded, at the very least what you have is a paper trail where you can follow these things back and you can even move it forward. Another example, if I may, is when we talk to our clients in the ACP industries, one of the things we ask them is, 'Do you, as suppliers, ever question when you get a big order?' If they get a big order for polyethylene core, PE flammable core or aluminium composite panel, does somebody ring up and say, 'Hey, we've just won this contract; we want 6,000 sheets,' we ask them if that would ring an alarm bell. They're not going to be sheeting 6,000 domestic single-storey homes in it, because you don't use it for that. You can use it for—

Senator KIM CARR: But who's going to do that? Which company, realistically, is going to take any action to knock back a 6,000-sheet order?

Mr Thorpe : No company realistically is going to do that. One of the things we do, once again going back to the CodeMark scheme, when we do the annual audits is we are required to look at the product they've sold and where it's gone. That's in the scheme. What we do ask is: 'You're using a government scheme. That logo is owned by the government; you're stamping it on there. Where have you sold the product?' This is something that is becoming more prevalent worldwide with certification bodies; the certification bodies are being asked to police what's going on with the actual certified products. If we go in—I can speak for my company; I cannot speak for the other certification bodies—and do an audit and we see that they've suddenly sold an awful lot more polyethylene core material than they have FR core, and we know this material is predominantly used as a decorative facade on the outside of buildings, the question's going to be asked: 'Who did you sell it to?' While we do not have the ability to take punitive action against it, we do have the ability to raise it with the Building Codes Board. We can raise it, as we did with the ModakBoard example, with the state body that's involved.

Senator KIM CARR: Thank you, Mr Thorpe. What do you say to the question that Customs officers should be taking further action to prevent the importation of dangerous building goods?

Mr Thorpe : My answer to that, Senator, would be that—as was mentioned earlier, what happens is companies in Australia purchase these materials from overseas, predominantly from China. Last week I was in China. We signed a cooperative agreement with the China building manufacturers' federation. The China building manufacturers' federation represents just about every manufacturer in China. Through that organisation, they supply roughly 68 per cent of the world's building products, and a fair whack of that comes into Australia. They're particularly concerned that companies in Australia will buy products and they'll come into Australia and those products aren't fit for use.

If I can go back to the example of the ModakBoard, the ModakBoard got certified based on an extremely high-quality magnesium oxide board that was tested and certified in Australia by the CSIRO. The company that was supplying the ModakBoard to that client, that particular company, went to China and saw that that company manufactured various grades of board and actually found they had one that looked pretty similar, but wasn't fireproof. They actually ordered that board. We have documented evidence from that manufacturer in China that they advised them: 'It's not fireproof. If you're going to be selling it as that, it won't stand up to a major fire event.' That product came in on ships. It looked the same. They had fraudulently put the CodeMark stamp on it. I don't think that customs can pick up on that. I think it is too big of an ask. The requirement would then fall to us as a certification body, because we are certifying the product. It has the government CodeMark logo on it. If something goes pear-shaped, it needs to be up to the certification body to work with the state regulatory authorities when it is brought to out attention. Hence, once again, my passion is to have the high-risk products listed as mandatory certification and to have mandatory branding so at least, like my washer here, there is some way of identifying the product.

Senator XENOPHON: I want to go to the question that Senator Carr put to you about whether someone does something deliberately. But let's go back a step. This particular hearing has been triggered by the Grenfell Tower fire tragedy. We are talking about the aluminium cladding with the polyethylene core, which acts as a fire accelerate in a sense. But you are allowed to use that product on single- or double-story buildings—correct?

Mr Thorpe : Yes, class C, which is basically a single storey. It can go up to a double storey.

Senator XENOPHON: If you could just follow me on this in terms of my logic, which I hope is logical. For those buildings, if you are allowed to have that cheaper material on single- or double-storey buildings at the most, presumably you are not going to be using that much cladding, unless it is a very large commercial building.

Mr Thorpe : Exactly.

Senator XENOPHON: In other words, the quantity generally used is not much by virtue of the fact that it is either a single- or, at the most, a double-storey building and you should not be using them on anything beyond two storeys. So why not just ban them and say, 'Let's not let these products into the country at all'? It's just not worth it. The regulatory compliance enforcing it is almost impossible because if it gets through customs then you need to enforce where it is going to be used. If you are only going to be able to use it on single-storey buildings, why not ban it? The marginal cost of having fire-retardant building cladding on a single-storey building is going to be negligible in the scheme of things. We are going through all of these contortions when shouldn't we just ban polyethylene building cladding materials?

Mr Thorpe : I think there is a very good case for that. The logic behind being able to have a niche market for a flammable product in the building, I particularly think doesn't hold.

Senator XENOPHON: Does that send shivers up your spine—that we are okay with having a flammable product?

Mr Thorpe : I think the simplest way with PE flammable core materials, as with any flammable material that is in a building, is it should be banned; it should be kept out of the marketplace.

Senator XENOPHON: And to make it clear: with something like a beautiful timber product, it is pretty obvious that it is timber. If it is on a single- or double-storey building, that is quite different. Of course, there are ways to make that fire retardant, but that is quite different. My final question goes to what Senator Carr alluded to. I think it was put to you, Ms Ireland, or to both of you. It relates to the thing about 'deliberately'. I think the question was asked about people deliberately putting people's lives at risk. I think the response was: how do you prove it? Is an alternative way of proving it to have offences that if you do not comply with a set of procedures and a set of processes that are robust and transparent then you will be criminally liable?

Miss Ireland : I actually do not think that that is a bad idea—making you criminally liable. If you talk about the QBCC having that chain of custody, I think that that would assist in that greatly.

CHAIR: Finally, you may not be able to answer this question, but I am interested in your view as a certifying body. You have extolled the virtues of the WaterMark. You would be aware that the Aldi tap issue came up recently where it was found there were 15 times the level of lead coming through the tap. I am not sure to what extent you can comment on that, but do you have a view about that? Even where we have a mandatory system, there can still be issues.

Mr Thorpe : I do. One of the situations that has been mentioned repeatedly is the fact that—and the expression sometimes gets used—we have 'leaky borders'. We have products coming in from overseas that aren't subject to the scrutiny that they should be subject to. We have had a case over the last few years where one of our major building and construction companies, John Holland, has been bought out by a Chinese company, CCCC. When you get a situation like that, you are going to get the parent company—and please don't think I'm China bashing—but you get a situation where you have a major contract like the Perth hospital that was let. John Holland had the contract, and all the materials for that contract came from the parent company in China. The amount of scrutiny that went into those products—and there is also asbestos that building as well—being John Holland, you would think a robust system would be in place. That is obviously an ongoing situation, but what has actually occurred there with the lead in the plumbing is that there was substitution of product. There were specifications clearly written to say 'no asbestos' and specifications written to say there was to be watermark-approved products, and some of these products got through. So who is liable for that? You have a major construction company in John Holland, who I know are being very proactive in trying to run down what is going on. But what we are having are situations where there is so much product coming in from overseas that there is so little oversight on that product. Once again, I go back to the need for some sort of mandatory branding of these products. Any wall tiles or sound tiles in the ceiling that have asbestos should be picked up by thorough testing and thorough certification of compliance and inspection as it arrives in Australia and goes in.

CHAIR: Are you postulating that the ALDI taps had fraudulent certificates?

Mr Thorpe : I don't have enough information to be able to comment succinctly on that. I would say that the only way the ALDI taps would have got through would be if there were some sort of certificate of compliance. If they have failed it is due to either a golden sample being tested to get a certificate, which was then replaced with substandard ones, or there was an actual, deliberate attempt to mislead by producing a false certificate.