Courting combustible cladding reform

One month before the Grenfell Tower fire, the Queensland Minister for Housing and Public Works introduced a bill to increase responsibility and develop accountability for participants across the building products supply chain.

Three months after the Grenfell Tower fire, the Senate Economics References Committee on Non-Conforming Building Products released its Interim Report on aluminium composite panel cladding.

Meanwhile in the private sector, Westpac has commenced an audit of all new and current building projects being funded by the bank to ensure they comply with the building code, a move being replicated by architecture firms and building certifiers, seeking to limit their exposure as insurers begin to impose exclusions in relation to non-compliant cladding.

This month has shown that the appetite for reform is clearly present in both the private sector and the public sector (at least amongst the ALP and cross-benchers). So what will reform look like?

While the Senate Economics References Committee on Non-Conforming Building Products' final report for the entirety of its inquiry is not due to be released until 30 April 2018, the recommendations in its Interim Report could have serious cost and oversight implications if implemented. The Committee's recommendations are:

1. A ban on the importation, sale and use of ACP

Senator Xenophon was quick to act on this recommendation, introducing the Customs Amendment (Safer Cladding) Bill 2017 five days after the report's release. The bill at this stage is limited to banning the importation of polythene core aluminium composite panels (ACP) and does not regulate the sale and use of ACP; however any form of ban could have serious implications for compliant industry users, such as the signage industry. The recommendation has received support from a number of industry stakeholders, including the Property Council of Australia.

2. The establishment of a national licensing scheme

Under this recommendation, the national licencing scheme would extend to all trades and professionals involved in the building industry and would include continuing professional development obligations. Many industries already have continuing professional development obligations which play a valuable role in ensuring practitioners are up to date and understand their legal obligations and best practice in their industries. However, for smaller practitioners, the cost of meeting mandatory continuing professional licensing obligations, and the time away from their practice, can present a challenge.

3. Further consideration by the Building Ministers' Forum to the introduction of "nationally consistent measures to increase accountability for participants across the supply chain"

To get a sense of what greater accountability across the supply chain might look like, we can look to Queensland's Building and Construction Legislation (non-conforming Building Products - Chain of Responsibility and Other Matters) Amendment Act of 2017 (not yet in force), which the Senate Committee indicated goes "some way" to ensuring greater accountability. Under this Act, accountability for non-compliant products will be shared by designers, manufacturers, importers, suppliers and installers.

4. Making all Australian Standards freely available

The licensing costs of the Australian Standards have deterred many users from accessing and using these documents. Making the Australian Standards freely available would reduce costs incurred by users and increase the likelihood of compliance. However, if the commercial incentive for SAI Global to continuously update and maintain the standards is removed, the Government may need to consider a new solution to ensure the integrity of the standards is maintained.

5. Consideration by the Commonwealth government to the imposition of a "penalties regime for non-compliance with the National Construction Code"

Presently, builders who have not complied with the National Construction Code (NCC) can lose their accreditation to conduct Commonwealth funded work. The Committee's interim report recommends a stronger penalties regime, including strong financial penalties, bans from tendering for Commonwealth funded construction work and revoking of accreditations. However, as noted in the Coalition Senators' dissenting report, the Commonwealth's power to impose penalties is limited.

6. Adequate resourcing of the Federal Safety Commissioner to ensure NCC audit functions can be carried out

The Senate Committee noted the important role of the Federal Safety Commissioner's role in "ensuring compliance with the NCC of Commonwealth funded work" but expressed concern regarding the ability of the Commissioner to carry out its newer function of "audit[ing] compliance with NCC performance requirements in relation to building materials". Whether current funding levels are sufficient to carry out this task was one of the points of disagreement between government members.

7. Implementation of Director Identification Numbers to avoid illegal phoenix activity

The introduction of Director Identification Numbers (DIN) continues to be discussed at a Commonwealth level. Implementation of a DIN regime would see directors of companies provided with an identification number, allowing the government greater visibility over the relationship between companies and directors, and allowing the government to more easily identify individuals engaged in phoenix activity. Preventing phoenixing is essential to ensuring any accountability measures are effective, as it will reduce the ability of non-compliant entities to engage in phoenix activity to avoid costs and responsibility arising out of non-compliance.

8. Development of a nationally consistent statutory duty of care by the State and Territory Governments to protect end users in the residential strata sector against non-compliant/non-conforming building products

While the implications of combustible cladding in residential housing is obviously of high concern, the recommendation does not suggest that this same statutory duty of care should be extended to commercial or public buildings. Recent audits have indicated that many public buildings may have non-compliant cladding, such as the Princess Alexandra Hospital at Buranda in Queensland.

Other reforms

Even if none of these changes are implemented, reform seems inevitable. Victoria, Queensland, the ACT and New South Wales have announced taskforces aimed at tackling non-compliant cladding and earlier this month news came out that Westpac was conducting an audit of all new and current Westpac funded construction projects, asking developers to confirm building code compliance. Financiers will want to limit their risk exposure against buildings which may not be covered by insurance.

Next week will see the commencement of the Environmental Planning and Assessment Amendment (Fire Safety and Building Certification) Regulation 2017 (NSW), which will introduce new fire safety requirements for buildings.

The above reforms, if implemented, could go a long way to protecting end users against the use of non-compliant building materials but Government and industry will need to come to terms with the increased cost, oversight and liability implications. 

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