20 Dec 2018

Senate Economics References Committee tables unsparing report on non-conforming building products

By Lina Fischer

The Committee's final report offers a comprehensive appraisal of the structural and other problems that characterise the current building regulatory system and is unequivocal in its call for urgent action.

Some three years after the Senate referred the issue of non-conforming building products to the Economics References Committee for inquiry, the Committee has now tabled its final report, "Non-conforming building products: the need for a coherent and robust regulatory regime." The Committee has reiterated its call for the adoption of meaningful, nationally consistent measures to address this serious public safety issue.

Background

The Committee was tasked with this inquiry following the Lacrosse fire in Melbourne in 2014 and in response to escalating concerns regarding the use of non-conforming building materials in the Australian construction industry. Three interim reports were tabled by the Committee, relevantly, an interim report on aluminium composite cladding in September 2017. That interim report made a number of recommendations, including:

  • a proposed ban on the importation, sale and use of polyethylene core Aluminium Composite Panels (ACPs);
  • a national licencing scheme for all trades and professionals and professionals;
  • making all Australian Standards and codes freely available;
  • the imposition of a penalties regime for non-compliance with the National Construction Code; and
  • the development of a nationally consistent statutory duty of care protection for end users in the residential strata sector.

The Government tabled a response to that interim report in February 2018 indicating support for a limited number of the recommendations but expressly noted the proposed ban on the importation of ACPs was not supported.

The final report's recommendations

The final report now makes a further thirteen recommendations directed predominately at systemic deficiencies in the construction industry's regulatory framework. It emphasises the Committee's concern to see increased momentum in action "aimed at strengthening accountability and compliance" by the implementation of its various recommendations.

In particular, the Committee has advocated "urgent" action on the following of its recommendations:

  • Recommendation 1: noting stakeholder concern that progress to address non-conforming building products has been slow, the Committee has suggested that the Building Ministers' Forum (BMF) should "develop improved consultative mechanisms with industry stakeholders", further, that the BMF should amend the terms of reference for the Senior Officers' Group and the Building Regulators Forum to impose annual reporting requirements on progress so as to "provide greater transparency and accountability"; 
  • Recommendation 3: similarly noting inaction on determining the feasibility of a mandatory third-party certification scheme for high-risk building products and a national register, the Committee has called on the BMF to "expedite its consideration of a mandatory third-party certification scheme for high-risk building products and a national register for these products"; 
  • Recommendation 5: the Committee has recommended that the BMF examine international approaches to the certification and testing of high-risk products prior to importation, including the European Union's regulations and processes; 
  • Recommendation 6: endorsing the action taken in Queensland as an example of how regulatory oversight of the supply chain can be improved, the Committee has urged State and Territory Governments to enact legislation similar to Queensland's Building and Construction Legislation (Non-conforming Building Products - Chain of Responsibility and Other Matters) Amendment Act 2017. It should, the Committee has suggested, be adopted as "a model for best practice 'chain of responsibility'", noting that "responsibility for building compliance in general is currently weighted too heavily at the end of the supply chain and measures need to be put in place to address this." The Committee has also observed that evidence before it "showed that the level of penalties and the application of penalties are currently inadequate in providing effective deterrence of the importation and supply of non-conforming building products"; and 
  • Recommendation 10: the final report discusses at length the report commissioned by the BMF and released earlier this year, "Building Confidence - Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia" (Professor Peter Shergold and Ms Bronwyn Weir). By recommendation 10, the Committee has given in-principle support to Recommendation 12 of the Shergold and Weir Report "'[t]hat each jurisdiction establishes a building information database that provides a centralised source of building design and construction documentation' so regulators are better placed to identify where non-compliant building products have been installed". This recommendation is "aimed at improving access to documentation to enable information sharing and data analysis to inform regulatory decision-making." The Committee has also expressed in-principle support to the collection of detailed building construction and maintenance documentation for buildings to facilitate audits.

The balance of the Committee's recommendations are that the Government:

  • Recommendation 2: should develop a confidential reporting mechanism through which industry and other stakeholders can report non-conforming building products; 
  • Recommendation 4: should require an importer intending to import goods that have been deemed high-risk to conduct sampling and testing by a NATA accredited authority (or a NATA equivalent testing authority in a another country that is a signatory to a Mutual Recognition Arrangement) prior to importation; 
  • Recommendation 7: work with State and Territory Governments to establish a national licensing scheme, with requirements for continued professional development for all building practitioners; 
  • Recommendation 8: consider making all Australian Standards freely available. This point is forcefully advocated in the final report, the Committee noting that "building practitioners should not be expected to pay unreasonable sums of money to access Australian Standards which are required to ensure they comply with the NCC", further, that "making Australian Standards freely available would have a significant positive impact on building compliance" and would "reduce the overall cost of compliance and insurance and … the cost and impact on future state and territory emergency, fire and medical services"; 
  • Recommendation 9: should consult with industry stakeholders to determine the feasibility of developing a national database of conforming and non-conforming products; 
  • Recommendation 11: consider 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; 
  • Recommendation 12: consider the merits of requiring manufacturers, importers and suppliers to hold mandatory recall insurance for high-risk building products; and 
  • Recommendation 13: review the Customs Act 1901 (and other relevant legislation) to address the challenges of enforcing the existing importation of asbestos offence, with the aim to close loopholes and improve the capacity of prosecutors to obtain convictions against entities and individuals importing asbestos (which review should include consideration of increasing the threshold required to use 'mistake of fact' as a legal defence).

The Committee's final report offers a comprehensive appraisal of the structural and other problems that characterise the current building regulatory system and is unequivocal in its call for urgent action. Industry stakeholders should now be monitoring the Government's reaction; implementation of the Committee's recommendations could have significant cost and other ramifications in the sector.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.