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

MARTIN, Mr Wade, National Technical Manager, Halifax Vogel Group Pty Ltd

RAYMENT, Mr Bruce, Chief Executive Officer, Halifax Vogel Group Pty Ltd

CHAIR: Welcome. Thank you for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so.

Mr Rayment : Yes, please. HVG employs 200 people and imports a diverse range of semifinished goods, including building facade products, which have been the subject of intense recent interest. Our division of Alucobond Architectural is the exclusive Australian distributor of Alucobond aluminium composite material, commonly referred to as ACM or ACP. This is all manufactured in Germany by 3A Composites. We are the largest importer of ACM panels for use in building facade construction in Australia and have a well-established reputation for quality product, technical knowledge and technical support in the industry. Today the only ACM panel that Alucobond Architectural sells for multistorey construction is the fire-resistant Alucobond Plus product. As a responsible industry participant, we want to ensure that all stakeholders—not least end users—can have confidence in the safety and quality of our built environment. In light of the Grenfell Tower and Lacrosse building fires, we are aware of concerns that have been expressed about the suitability of polyethylene cored ACM panels for high-rise construction. We share many of those concerns.

Since 2010, we have been advocating for changes to the National Construction Code to clearly resolve certain critical issues relating to the use of ACM as a building facade. Our proposed changes include explicitly mandating the use of fire-resistant ACM in high-rise building facades. Our submission to this inquiry contains our concrete recommendations for improvements that we believe should be adopted immediately in the form of an amendment to the 2016 Building Code of Australia. In summary, they are: (1) Australian Standard 5113 to be immediately referenced in the BCA; and (2) a tightening of the deemed-to-satisfy provisions of the code to prevent untested products being used on building facades. Unless the deemed-to-satisfy provisions are tightened, the new Australian Standard is irrelevant. We're also calling for improved monitoring of the CodeMark certification process, which is the current verification method for the industry. I am happy to expand on those recommendations in the time we have.

Before I take your questions, I would like to respond to something that was said last Friday in Melbourne, if I may. Since I got here today, it's been brought to my attention that Mr Neil Savery, the general manager of the Australian Building Codes Board, appeared on Friday. The Hansard draft that has been published was brought to my attention. He was asked by the chair:

How do you respond to the claim that this matter was raised with you in 2010?

That is, polyethylene cored panels. Before I quote Mr Savery, I assume you have our submission in front of you. I would ask you to go to the first page of appendix 2 of our submission. You will see that is our 2010 proposal for change to the Building Code of Australia. It is the first page of the proposal for change.

CHAIR: It is from the ABCB?

Mr Rayment : It is the ABCB form that is filled out for the proposal for change. To quote Mr Savery from last Friday, he said:

That is a different matter. Our going back through our records would suggest that we became aware of this issue as a result of a proposal for change to the code from a product manufacturer who had potentially a combustible wall cladding or wall cladding system and wanted to change the code in order that the product could be used more universally. The PFC itself was not agreed to.

You can see that, firstly, the proposal for change was on behalf of ourselves, Alucobond Architectural, and also our industry colleagues, SGI Architectural, and we were working with a fire consultancy called Defire. It was not a proposal for change from one industry participant; there were two, plus a fire consultancy. Also, Mr Savery said that the proposal for change was so the product could be used more universally, meaning a polyethylene cored product. That is incorrect. You will see that, further down the first page of the proposal, under point 1, it says, 'What is the proposal?' and, under point 2, it says 'The mineral filled core contains not less than 70 per cent non-combustible material.' Our proposal for change in 2010 was clearly calling for fire-resistant ACM to be made a mandatory part of the Building Code of Australia.

CHAIR: I am struggling to see the page you are referring to.

Mr Rayment : It is the first page of the second appendix. It should have been appendix 2A when we sent the email through.

Mr Martin : I have a copy here, if that helps.

CHAIR: That might be helpful. Thank you, Mr Martin. It is in a different form to what you provided.

Senator KIM CARR: We appreciate it. You have corrected the record.

Mr Rayment : Yes. Since 2010, we have been calling for fire-resistant ACM panels to be made mandatory in the Building Code of Australia. We were also calling in the same submission for the rules and the code around fire-stop cavities to be cleared up and tidied up. The proposal for change at the time, whilst we'd put considerable time, money and effort into it, for some reason was not considered adequate.

Senator KIM CARR: We should ask for clarification, given the evidence you've presented today. Mr Chairman, do think that's appropriate?

CHAIR: Yes, we'll do that. Senator Carr, do have some questions?

Senator KIM CARR: Yes, I have. The Alucobond products were sold for some time prior to 2010. That is correct, isn't it?

Mr Rayment : Alucobond was the first aluminium composite material imported into Australia. It was the original invention of the product category in Germany in 1969 by Alusuisse and BASF.

Senator KIM CARR: You have suggested here: 'There are many examples where our product was supposed to have been installed on a project as part of the specified materials for that project only for us to find that a substitute product was used, resulting in a quality issue of some type.' Is that correct?

Mr Rayment : Correct.

Senator KIM CARR: So there was substitution of your product. Is that the evidence?

Mr Rayment : Yes.

Senator KIM CARR: What did you do about it when you found out that your product had been substituted for an inferior product?

Mr Rayment : Generally, we would only find out some years after a building was complete when there was a quality issue. Often our sales team would be called to look at some project and they would say, 'This is your material' and we'd say, 'Sorry, that's just not our material.'

Senator KIM CARR: Who was responsible for that? Were you ever able to establish who was responsible for the substitution?

Mr Rayment : No, by that stage we aren't able to. Obviously some period of time has passed when a building is complete and we are not able to determine that.

Senator KIM CARR: I presume people would put substitute material on and make a claim that it met the deemed-to-satisfy provision of the code—would that be correct?

Mr Rayment : I think it's important to make sure we distinguish between non-conformance and non-compliance. There is some non-conformance, but it is not from the reputable suppliers in this industry. The issue of compliance is a very grey area which everyone has a different opinion on.

Senator KIM CARR: Sure. We're interested in the bad performers. How many are there?

Mr Rayment : They come and go. The established players in this market in the supply of aluminium composite material have been in it for decades and the fringe players come and go. It might be someone who has a little capital and imports a container load of product or something, and tries to flog it around the market and then disappears after a while.

Senator KIM CARR: The problem for us is how to stop this activity. Why shouldn't we just ban it outright if it is non-compliant? Presumably, you will tell me it's because it's within the standard and you use it for low-rise buildings.

Mr Rayment : I think there is an important differentiation to be made here in two parts of the major areas of use of aluminium composite material in Australia. The first major use is as a building facade product. I would estimate that market to be worth about 1½ million square metres per annum. My colleagues from SGI who are here today in the audience told me earlier they thought about 2½ million square metres or so.

Senator KIM CARR: How much is that worth in money terms?

Mr Rayment : About $150 million wholesale. The other bigger part of the market for the use of aluminium composite material in Australia is in the signage, display and digital print market. That market would be worth three-plus million square metres per annum. That market is totally dominated by polyethylene core material. I would caution against a blanket ban on the importation of polyethylene core aluminium composite material into Australia because it would be a massive disruption to the sign, display and digital print markets.

Senator KIM CARR: There is no other replacement product that can be used for that?

Mr Rayment : There is in that some fire-resistant versions of the building facade products could be made, sourced and procured over time.

Senator KIM CARR: Can that be made in Australia?

Mr Rayment : No.

Senator KIM CARR: Why not?

Mr Rayment : The cost of manufacturing is way too high.

Senator KIM CARR: What is the difference?

Mr Rayment : Between making the product in Australia and importing it?

Senator KIM CARR: Yes.

Mr Rayment : I do not know. We are not a manufacturer.

Senator KIM CARR: I've heard this argument before that it costs too much to make it here.

Mr Rayment : I'm not a manufacturer. I'm not in a position to—

Senator KIM CARR: We have spoken to manufacturers and the advice I am getting is that there's not enough demand because people are using this cheap, highly dangerous product.

Mr Rayment : There's only one company trying to manufacture fire-resistant ACM in this country and I don't believe they have been very successful.

Senator XENOPHON: We need to distinguish between it being used for signage and being used as a cladding material—correct?

Mr Rayment : Yes.

Senator XENOPHON: We're talking about the polyethylene core.

Mr Rayment : The sign market could include a small sign at the entrance to a room in a hotel—

Senator XENOPHON: What do you mean; there's a polyethylene core in there?

Mr Rayment : Yes.

Senator XENOPHON: The sign physically could be how thick?

Mr Rayment : Three or four millimetres.

Senator XENOPHON: It has a polyethylene core?

Mr Rayment : Correct.

Senator XENOPHON: The old sheet of steel does not cut it anymore?

Mr Rayment : The old sheet of steel does not cut it anymore because it is nowhere near as flat as a sheet of aluminium composite material.

Senator KIM CARR: This is an argument why we shouldn't ban it?

Mr Rayment : I would caution against a blanket ban on it because of the disruption it would cause to that part of the industry. From a personal point of view, we're in an extremely good commercial position to benefit from that. I believe we've got the best supply lines in the world, and we'd probably do—

Senator KIM CARR: Is there a public safety issue here are not?

Mr Rayment : I'm not really sure.

Senator XENOPHON: Would it depend on the nature of the sign? If it's a small sign—for example, half a metre by one metre or a couple hundred millimetres by a metre—for the local fish and chips shop, presumably that might be flammable, but could that pose a risk to the rest of the building, potentially? Or, are you saying that it's used in such small quantities that it doesn't pose a risk? Are you aware of what the potential risks are? We're not talking about building cladding material now.

Mr Rayment : Yes, I understand. Generally, where it's used in the sign market as one individual sign, I don't think it would be perceived by certifiers or builders to pose a significant risk.

Senator KIM CARR: Our concern is external cladding, which is a safety risk. We've heard a series of arguments about the failure to actually get a regulatory regime in place that can be enforced. One response is to say, 'Why do we need to import this material at all?' The only ones who have said that we should maintain them, in effect, is you by saying it will disrupt the signage industry. I'm having a bit of trouble following this line of argument.

Mr Rayment : I'm saying I would caution against that as an immediate reaction because I don't see that there's very much, if any, polyethylene cored ACM being used for building cladding in this country any more. The buildings that people are concerned about are ones that were built many years ago.

Senator KIM CARR: So it's no longer a problem—is that the evidence?

Mr Rayment : Yes, if the building is built by a reputable builder with reputable contractors.

CHAIR: What's the $150 million industry that you mentioned earlier?

Mr Rayment : At the wholesale level, the market for building facade cladding ACM in Australia would be worth—

CHAIR: So it's still being used?

Mr Martin : Absolutely—

Senator KIM CARR: The question is: why should we allow it into the country? What are the options available for people to say, 'We don't need to have this imported'? Your suggestion is that it will disrupt the signage industry.

Mr Martin : Yes. At the moment, with the signage industry, the actual product meets the requirements in the code. That's another thing. So unless the—

Senator KIM CARR: There's two questions here. There's the question of the adequacy of the code, but then there's the question of the enforcement of the code. We're hearing a lot of evidence that it's almost impossible to enforce the code because the regulatory regime is so weak. That's not to mention the adequacy of the standards, which the authorities tell us are very clear. There will not be flammable materials used on the outside of buildings unless they're one-storey high. Why should we have a provision in our code that says you can put a flammable material on the outside of a building if it's only one-storey high?

Mr Martin : The term 'non-combustible' is the issue within the industry.

Senator KIM CARR: I'm old fashioned. I think 'non-combustible' means it shouldn't catch fire and it shouldn't be a fire hazard. Is that what you think it means?

Mr Martin : Yes.

Senator XENOPHON: What's the difference between 'non-combustible' and 'fire retardant'?

Mr Martin : 'Fire retardant', or 'FR', has no reference in the code. It's not called up. There is no level of combustibility.

Senator XENOPHON: What standard is non-combustible then?

Mr Martin : The standard is AS1530.1. There is no such thing as a panel that passes AS1530.1 as the product would be supplied.

Senator XENOPHON: What do you mean by, 'no such thing'? We have a standard, but no-one can comply with the standard? Can you explain that to me? So there's a standard for non-combustible material—AS1530.1—but no-one actually complies with that at the moment?

Mr Martin : As the material would be supplied. So, if you supplied a material, the product would not pass that test.

Senator XENOPHON: Sorry, I'm being a bit slow here. What are you saying? So there's a standard that we can't comply with?

Mr Martin : Correct.

Mr Rayment : Correct.

Senator XENOPHON: Why can't it be complied with?

Mr Martin : For one, it's because the actual test itself is not intended for these types of products.

Senator XENOPHON: So we have a standard that can't be complied with?

Mr Martin : Yes.

Senator XENOPHON: It's not much of a standard then, is it?

Mr Martin : No.

Mr Rayment : The bottom half of page 3 of our submission talks about the AS1530.1 test and how, going back as far as 2000, the Fire Code Reform Project report of 2000, said that 'this type of test was developed over 50 years ago and has shortcomings'. The Melbourne Fire Brigade report on the Lacrosse building also said:

… the MFB is not aware of any competitor … produce which has been successful in being determined as non-combustible when tested under AS1530.1.

The difference here is that the AS1530.1 test is taking small pieces of product and dipping them in effectively a furnace. We are calling for full-scale facade testing of building façade products.

Senator XENOPHON: How would you do that?

Mr Rayment : You construct a mock facade and put a fire underneath it, in simple terms.

Senator XENOPHON: Maybe I am missing something here. You are concerned about the use of signage—about three million square metres being used for signage in Australia—of the polyethylene material.

Mr Rayment : Correct.

Senator XENOPHON: So about 1½ million square metres is being used for building—

Mr Rayment : Facade cladding.

Senator XENOPHON: With the building facade cladding, does it come as the same material and then it is shaped or—

Mr Rayment : There are slightly different specifications. Building facade products is a standard four millimetres thick. The sign market is a two, three and four millimetre thick product. There is a slightly different thickness of aluminium skins.

Senator KIM CARR: And there is no other product that can be used for signs?

Mr Rayment : There are plenty. There are substitute products.

Senator XENOPHON: Take for example the local fish and chips shop with a sign that is no more than one square metre—and that might be right if it is in a strip shopping centre. How much extra is it going to cost to have a fire retardant or non-combustible material?

Mr Rayment : I would have to take that question on notice.

Senator XENOPHON: What is the difference in price? Are we talking about another 20 bucks or 50 bucks?

Mr Rayment : No, we would be talking a few Australian dollars a square metre.

Senator XENOPHON: A few dollars a square metre?

Mr Rayment : Yes.

Senator KIM CARR: I am not certain that is a big argument in favour of not banning.

Mr Rayment : What I am trying to say here is that a blanket ban that was immediate would disrupt the sign industry and something that was not a blanket ban and there was a transition would enable industry to adapt.

Senator KIM CARR: Sure. Does your company ever install PE core products?

Mr Rayment : We have never been the installation business. The business, through its current ownership and previous ownerships, has only been an import and distribution business.

Senator KIM CARR: So you have never actually installed anything?

Mr Rayment : No, we have not installed one panel.

Senator KIM CARR: Have you supplied any PE products to anyone?

Mr Rayment : Yes.

Senator KIM CARR: So up until 2010 you actually supplied them?

Mr Rayment : We fully changed over in our product offer in 2013. In 2010, when we were calling for change and improvements to the Building Code, it was in anticipation of the 2012 update for the Building Code for Australia.

Senator KIM CARR: That is fair enough; you have made that clear. But your point is that you were selling the product until 2013.

Mr Rayment : Yes.

Senator KIM CARR: Do you know where the product went?

Mr Rayment : In some cases, yes; in many, no.

Senator XENOPHON: For signage or for buildings?

Senator KIM CARR: No; for buildings.

Mr Rayment : For both.

Senator KIM CARR: Are you able to identify any buildings in which this product has actually been installed?

Mr Rayment : Yes.

Senator KIM CARR: Do you know that there has been a discussion about the need for a national audit?

Mr Rayment : Yes.

Senator KIM CARR: Are you prepared to provide that data to audit authorities?

Mr Rayment : Yes; without question—no problem.

Senator KIM CARR: Thank you. Has there been any advice given to any of the owners of any buildings where your product has actually been installed, where they actually have this product on their buildings?

Mr Rayment : Not from us. We are aware of the audit that has gone on in the Melbourne CBD.

Senator KIM CARR: Is any of your product on that building?

Mr Rayment : I am not aware personally of exactly what buildings were or weren't audited, but I'm sure there was some.

Senator KIM CARR: The point is that you are prepared to provide the authorities—

Mr Rayment : Yes, definitely, without hesitation. We have been reaching out to the state building ministers in the last couple of weeks, and various other people, and we're actually meeting with the new CEO of the Victorian cladding task force next Wednesday in Melbourne.

Senator XENOPHON: There's the Baillieu inquiry as well, isn't there?

Mr Rayment : That's the Victorian cladding task force.

Senator XENOPHON: Okay, so the former Victorian Premier's been asked to chair it. Can you take on notice what the difference in price is between—

Mr Rayment : I don't need to take that on notice.

Senator XENOPHON: You said you couldn't tell us what the difference in price was for a square metre.

Senator KIM CARR: What is the price difference?

Mr Rayment : For the building facade cladding—and I heard this question asked of Mr Thorpe from CertMark earlier today—for us the difference in price between the polyethylene cored material and the fire-resistant material, at a wholesale price, is A$3 a square metre.

Senator XENOPHON: I'm confused. I thought I asked that earlier.

Mr Rayment : No, that was in reference to the sign market product.

Senator KIM CARR: But it's $3 a square metre. That's the difference.

Senator XENOPHON: Therefore the difference for the sign market would be $3 a square metre, would it not?

Mr Rayment : Not necessarily. The current premium from our supplier in Germany for the sign market product, in an FR specification, is more expensive.

Senator XENOPHON: How much more?

Mr Rayment : I would have to check, but we're buying that in smaller quantities.

Senator XENOPHON: But, if you were buying it in larger quantities, presumably the price differential would come down, in terms of greater supply.

Mr Rayment : I'm sure it would.

Senator XENOPHON: So it wouldn't be unreasonable to say it might be $3 or maybe $4 a square metre?

Mr Rayment : It would probably be in that ballpark.

Senator KIM CARR: That doesn't seem to me to be a major impost to provide a safe product, as distinct from an unsafe product.

Senator XENOPHON: If we're talking about three million square metres of signage, we're looking at potentially $10 million a year extra as a ballpark figure.

Senator KIM CARR: What's it going to cost to take it down? What's it going to cost if someone gets burnt to death?

Mr Rayment : I think we need to look here at trying to be sort of a link of all PE panels on all buildings being non-compliant, and that's not the case. Anywhere we've sold PE cored product in years past, we were compliant with the code. It was fire engineered in many instances, and the buildings were certified.

Senator KIM CARR: That's actually part of our concern. The buildings were certified, but they were not compliant. We're having trouble coming to terms with that.

Mr Rayment : Yes, and that's ultimately where the differences of opinion lie. I think there's also been a paradigm shift here from 10 years ago to where we are now over what is compliant and what is not compliant.

Senator KIM CARR: I think it's a bit more than differences of opinion. The overwhelming body of evidence to this committee is that there have been very significant numbers of buildings that have been certified that are not compliant, and it's not just a question of changing attitudes over the last 10 years; it's a more substantive problem than that. That is a statement of the bleeding obvious. I am surprised it costs so little. The cost difference is so small. You are certain of your numbers on that?

Mr Rayment : Yes.

Senator KIM CARR: How many other suppliers have there been in Australia apart from you for the non-conforming product in the past that you are aware of?

Mr Rayment : We have always supplied conforming product.

Senator KIM CARR: Sure, but the PE product—

Mr Rayment : As a business, we have only ever sold conforming building products. We have not sold anything at any time that has not been what we said it was and that has not performed exactly as we purported it to be.

Senator KIM CARR: When you were selling the PE product, how many other suppliers were there in the market at that time?

Mr Rayment : Probably another two or three major suppliers and probably 20 or 30 minor suppliers—probably more.

Senator KIM CARR: Do you have any idea of how much product would have been sold? You said you were the first to import the product, so do you have any idea what the national consumption has been in that period?

Mr Rayment : I would only be guessing to give you any sort of number. The original concept for aluminium composite material was developed in Germany in 1969. As of today, there would be 200 to 300 aluminium composite material production lines and production factories in China. The vast majority of the low end of the market is all drawing that product out of China. The reputable end of the market comes out of Germany and Japan.

CHAIR: There have been fires in the Middle East that you may be familiar with—fires in a number of towers in Middle Eastern countries. What types of materials have been used there? Do you know?

Mr Rayment : I really don't know. Like everyone, I've seen videos at different times of building fires in the Middle East, but I don't know and couldn't comment on what may or may not have been on those buildings.

CHAIR: So it potentially could have been a product made by the German manufacturers—or not?

Mr Rayment : I couldn't comment. I really don't know. It would only be speculation. But certainly the Lacrosse Tower fire in Melbourne was not Alucobond, and the Grenfell Tower was not Alucobond.

CHAIR: Thank you very much for appearing before us.

Mr Rayment : Thanks for your time.