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Economics References Committee
15/02/2016
Non-conforming building products

MULHERIN, Mr Peter, Founder, ProductWise

[14:26]

CHAIR: Welcome. Did you wish to add anything about the capacity in which you are appearing here today?

Mr Mulherin : Yes, I have a background in construction, manufacturing and sustainable practice.

CHAIR: Would you like to make a brief opening statement, before we ask questions?

Mr Mulherin : Good afternoon and thank you for this opportunity. I founded the ProductWise business three years ago while I was studying sustainable practice. I currently have a research project at RMIT, which closely aligns to what we are talking about today.

What I would like to talk about is a future-focused innovative business model that addresses the changing market forces. I say that because what we are looking at is an emerging global digital supply chain crashing into a traditional regulatory environment. I say that because nonconformance in that environment is a symptom of a problem. My study in sustainability and life-cycle analysis et cetera suggests that if we do not address the root problem then we are addressing the symptom as opposed to the problem. I can go into more detail later during questions.

ProductWise has a proposal to address the waste of nonconformance and lower the risk and raise productivity in both manufacturing and construction. We are currently independent and we are focused solely on the solution to this. I emphasise that independence—we are not aligned to any industry groups, manufacturers or builders et cetera. I think that is an important aspect. On that, I should note that I am a member of the Global Product Stewardship Council and recently a member of PrefabAUS, which is a distinct group—they are in manufacturing.

Our system works like this: a product supplier enters data and demonstrates compliance to a hierarchy of codes and laws that conforming products need to comply with and that are relevant to that product. The product consumers search this information for conforming products and the regulatory bodies interface with this information and verify the content. The system has appropriate levels of access and security for all the people who are entering and drawing down on data and nonconforming product does not get through, but it does potentially attract alarms or notification of issues. This provides transparency across the industry supply chain and enables consumers to make informed choices. The technology uses regulations, so they do not need to change at this stage. We are using the existing regulatory environment. There are significant efficiencies for responsible stakeholders, and values generated widely. The current regulatory framework, I believe, needs to be baselined so we understand what we are working off before we make changes to an already onerous, and in some cases fragmented, system.

The government spends 25 per cent of GDP on, and the government can lead, responsible procurement. As members of the public we trust the government and the regulatory environment with our safety, our investments and the environment. We need buildings and infrastructure that last, and we need secure investments and we need to minimise the risks to people and the environment.

Our system brings all the industry stakeholders together on a common platform, and, importantly, this includes the public—the end user who ultimately pays for nonconformance. The platform mimics the rules of the current system but closes the gaps and achieves third-party objectivity. So, if we layer the existing sets of codes and standards onto a digital platform; if we apply the principle of stewardship, which is shared responsibility across the life cycle of the product; and if we create an agile and collaborative environment, we have what our current Prime Minister might call an innovation system.

The platform was conceived when we applied to administer arrangements under the Product Stewardship Act. That was about three years ago. We have invested heavily to arrive at this design and to address a number of the concerns of this inquiry. The risk of further delay is not necessary, as we believe we can pilot this system in a short period of time for a fraction of the cost of this inquiry. But—and it is a critical 'but'—we need government and industry collaboration to create and operate a level playing field. The submissions and hearings clarify the problem that existing systems create a fragmented approach and a barrier to the solution. All of us can collaborate on, focus on and share in these benefits, and we can restore the trust of the public and prepare for a future circular economy. We believe the opportunity is now, immediately, for the government to create demand, for industry to lead the innovation and for the consumer to renew their trust.

That is my opening statement, but I look forward to your questions.

CHAIR: Thank you, Mr Mulherin. I will go straight to Senator Xenophon.

Senator XENOPHON: Can you give examples of how it will work? My understanding of what you are trying to achieve is that people can log on, see whether a product is under the ProductWise umbrella and find out pretty quickly whether a particular product—and this could be a builder who is seeking to buy a product—complies with certain standards, and whether there is a black mark or a green tick against it. Or have I got that wrong?

Mr Mulherin : No, that is close, but we will not be putting black marks against things.

Senator XENOPHON: Okay. Close but no cigar!

Mr Mulherin : It is a demonstration of compliance. It is not a demonstration of nonconformance.

Senator XENOPHON: Of noncompliance. In other words, it is a bit like—I am thinking of another bad analogy—the Heart Foundation tick or something like that. It is one of those positive affirmations.

Mr Mulherin : It is a positive affirmation but it is not a certification, because we also believe that there are a plethora of certifications, third-party certifying bodies and government regulatory bodies that are operating in the environment, and the customer is confused. Builders and manufacturers are unsure about where to go to get the appropriate code. This basically creates a platform on which all of those existing bodies and certifications operate in a transparent manner, so it creates a level playing field.

Senator XENOPHON: So the idea is that it would encourage people to come forward to seek out this certification. There would be some kudos. Presumably, it means you could sell more of your product or be seen as a person to go to, if you have this ProductWise tick of approval. Is that right?

Mr Mulherin : Yes, close. But we are still not offering a tick of approval, because the industry is doing that.

Senator XENOPHON: So you are just an information clearing house, in a sense?

Mr Mulherin : That is right. It is a data and product clearing house.

Senator XENOPHON: Isn't there a risk, though, with that? In the absence of a more comprehensive approach, you are seeking to try and improve the system significantly—trying to reduce that information, that symmetry between consumers and what is on offer. Would you have a caveat as to whether—you cannot verify how robust the standard is, particularly the Australian standard, can you?

Mr Mulherin : No. And we have heard today that that is what Standards Australia and various industry bodies are grappling with. However, it would highlight where there is a weakness there. Of two glass manufacturers—and I am off the cuff here from hearing this today—one is using the automotive glass standard and one is using the other one. The consumer then has a preference or an option to select a glass manufacturer that is using the more robust standard, and that is in a transparent environment. That can be applied to any product.

Senator XENOPHON: It is an information clearing house that makes it easier for consumers or builders and the supply chain to get information.

Mr Mulherin : That is right. I will just add that it makes it easier for people supplying into the market to understand what they need to comply with. It makes it easier for government to demonstrate the regulation that producers, suppliers need to comply to. It makes it easier for people drawing down on that information to have a third-party veracity, because you have all the stakeholders of the industry working together.

Senator XENOPHON: So you need a bit of government cooperation and you need the cooperation of various sectors, because then you will actually want consumers to be able to plug in to get access to this. How far have you gone?

Mr Mulherin : We spent a lot of time last year—I should go back, if you like. Three years ago we applied to administer product stewardship accreditation. The Product Stewardship Act established a demonstration of best practice across products and services. We went through that exercise. Six months ago, we were informed that we would not be going down that line with the current government. So we have taken that framework—

Senator XENOPHON: What do you mean by that—that the government backed away from that approach?

Mr Mulherin : They have not backed away from the approach. I believe—and it was not made painfully clear—that they are reluctant to take the Product Stewardship Act at a propriety limited or a single product approach. So they are more interested in the industry association level. But, from my reading of the act, that does not demonstrate best practice; that demonstrates industry standard. We have used that framework. We have three years of intellectual property, if you like. Then we have said stage 2 of this business was to demonstrate best practice against at a product level, and put it into a digital platform.

Senator XENOPHON: So it is still early days for you yet.

Mr Mulherin : Yes, it is early days, but the methodology and the—there are a number of blocks in place. We have the technology and what is called the schema, and the architecture of the digital platform. We recently had some cooperation from a research institute and an industry association. We need industry to draw down on that information. We need to put the information in, we need funding and then—

Senator XENOPHON: So you have the building blocks?

Mr Mulherin : We have a number of' building blocks.

Senator XENOPHON: What are the roadblocks?

Mr Mulherin : Roadblocks are government and industry interest to trial this thing at a reasonably expedient approach.

CHAIR: So you have called for expressions of interest?

Mr Mulherin : Yes.

CHAIR: That is to test the pilot scheme on the building products registry.

Mr Mulherin : That is right.

CHAIR: Haveexpressions of interest closed at this stage?

Mr Mulherin : No. The approach would be we would not close expressions of interest because we could trial it with relatively few representative industry groups or products. But, no, we are not intending to close that. The more you get, the more you can develop the pilot.

CHAIR: Can you just be a little bit more specific as to what you are seeking from government. Are you seeking cooperation or some funding as well?

Mr Mulherin : Ideally we would seek funding. However, we are conscious that it is in industry. Industry will feel the benefits, and it would be good if industry came up with funds. There are a number of approaches to funding this. We are reluctant to go down venture capital, because the motivation is financial return. We are reluctant to go down crowdsourcing for a number of reasons. We are reluctant to get foreign investment, which is an option. We are reluctant to sell it holus-bolus to a major industry player, because then you are dealing with exactly the same motivations—vested interests et cetera—that have potentially caused the problem. Ideally we would get government funding, and a grant, if you like. It is in the interests of industry. Government can maximise the impact by responsible procurement. At this stage we would consider a private-public partnership with government involvement and industry involvement. We need to be very conscious of maintaining transparency and governance. It needs to be equitable and it needs to be answerable.

CHAIR: On Commonwealth government procurement, are there systems in place internally that to some extent mirror what you are proposing to introduce?

Mr Mulherin : I am not aware of any that go to this extent. There is no upper limit to the veracity that you can demonstrate in this instance. As I said, it was based on the Product Stewardship Act, which is concerned about social and environmental outcomes with the prerequisite of compliance with the law. The Product Stewardship Act offers a government certified logo on approved arrangements. That would require a precursor of complying with the law and regulations but without a focus on compliance. It is an assumed compliance, if you like.

We have taken that and said, 'You can continue to demonstrate escalating benchmarks or demonstration of best practice.' The document I have tabled—I believe you have it in front of you—offers an upward hierarchy of demonstration. On the second page it identifies how we share responsibility over the life cycle of the product. At the minute, we have got, we believe, all the responsible bodies, but there are gaps between these certifying bodies, which the products go through. If you remove the market for non-conforming product, so that a builder needs to demonstrate that they comply, your building inspector has a surety when they sign a building off that the products in that building have gone through a third-party veracity. That stifles the market for non-conforming product.

There are always going to be issues such as you have with two different glazing standards, but that will be transparent. There is technology there to allow for labelling—invisible labelling—et cetera. We have discussed this with the IT guys. One of the guys we are talking to has created a product in the food industry which allows certification of food providence. What we are talking about is being able to time, date and potentially geographically stamp products so we know where they are from, what they are made from and how they are made. This goes a long way to delivering against all sorts of commitments made against environmental outcomes.

I might add my background in defence manufacturing. I was at a recent defence innovation forum here in Melbourne. It will be particularly relevant when you are looking at major defence contracts, because you need to know whether it is Australian content, what the product is made from and where the product is going forward. You might have a 30- or 40-year build in a defence project. You need to be able to recover that material.

While I am talking about that, I also tabled a Future Business Council report which I think supports the model that we are proposing here. It is about veracity, social and environmental; it is about limits of resources, which is essentially what were talking about here; and it is about leading into the future business models, of which circular economy is one.

CHAIR: Are you familiar with the Queensland Building and Construction Commission's product model?

Mr Mulherin : I am not familiar with the details, but I am aware that they have looked at it.

CHAIR: There is also the UK scheme Confidential Reporting on Structural Safety.

Mr Mulherin : That is CROSS, isn't it?

CHAIR: Yes.

Mr Mulherin : CROSS, or a similar scheme to CROSS, is potentially part of this. There does need to be confidential reporting. There is also proposed in here an opportunity for peer review. You have people who are manufacturers, who know the most about the product and can identify, in the worst case, fraud or where a spurious claim is made. You are using industry expertise.

CHAIR: We have no further questions. Thank you very much, Mr Mulherin, for appearing before us today.

Proceedings suspended from 14 : 46 to 14 : 55