Construction Productivity in Australian States and Territories Compared

 New estimates for output per hour worked 2011-12 to 2022-23

 

 

 

 

 

In September the Australian Bureau of Statistics released their estimates of hours worked by industry for state and territories. Combining those estimates with state and territory chain volume measures of industry Gross Value Added (GVA is output value adjusted for inflation) for the Construction industry gives GVA per hour worked, which is a measure of construction labour productivity. The ABS produces industry productivity estimates at the national level, but not for states and territories, so the construction productivity estimates here for the states and territories have not previously been available. 

 

The hours worked data starts in 2011-12, and the state industry GVA data is up to 2022-23, so this post covers the period 2011-12 to 2022-23. As Figure 1 shows, over that period there has been great variation between the states and territories in both their level and their trends in GVA per hour worked, which makes comparisons difficult. Therefore the post is in two sections. 

 

Figure 1. State and territory construction productivity 2012-2023

Sources: ABS 6150, ABS 5220 [1].

 

 

The first section of the post compares GVA per hour worked over the five years 2018-19 to 2022-23, looking at similarities and differences between the states and territories. The average of the quarterly shares of building and engineering work in total construction work done in each state and territory between 2018-19 and 2022-23 is also shown. All annual data is for the year ended in June.

 

The second section is on long-run trends in each state and territory between 2011-12 and 2022-23. This has the GVA per hour worked and average shares of work done data, plus the volume of work done to show the relationship between changes in work done and GVA per hour worked. Because of the great variation between the states and territories in GVA per hour worked, section two is organised as four sets of pairs: New South Wales (NSW) and Victoria; Queensland and Western Australia (WA); South Australia (SA) and Tasmania; and the Northern Territory (NT) and Australian Capital Territory (ACT). 

 

This analysis of trends and performance of GVA per hour worked looks at three factors: the effect of the mining boom and the average of the quarterly shares of building and engineering work in total construction work done; the effect of changes in the volume of work done; and the effect of the small size of the industry in Tasmania and the two territories.

 

States and Territories Construction Productivity 2019-2023

 

In 2023 four states had a similar level of around $70 GVA per hour worked: NSW, Victoria, Queensland and SA. Tasmania was closer to $65, and WA $85. However, the NT and ACT were highest with $94 and $118 respectively, and both the territories also had higher levels of GVA per hour worked than the states in 2022. 

 

As Figure 2 shows, GVA per hour worked in NSW and Victoria in 2023 is lower than 2019, and was the same in Queensland and Tasmania. In NT, ACT, WA and SA the level in 2023 is higher than the pre-pandemic level in 2019. Since 2019 WA had a higher level in all years than the other states except for NSW in 2022, although in 2020 the difference was only $2. 

 

Figure 2. State and territory construction productivity 2019-2023

Sources: ABS 6150, ABS 5220.

 

Clearly there is no common level of construction GVA per hour worked across the states and territories. Construction productivity varies from year to year both within and between them. Since 2019 productivity in the two territories has been higher and in SA and Tasmania, the two smallest states, lower than the largest states of NSW and Victoria. Queensland is close to SA and WA is close to the NT. 

 

One potential explanation for differences between the states and territories is the composition of output, the difference in the shares of building and engineering work in total construction work done, because there is evidence engineering work has higher productivity than building work due to larger projects with more heavy machinery and equipment used [3].  As Figure 3 shows this could apply to WA and the NT, which both have had a larger share of engineering since 2019 and higher productivity than other states. 

 

Figure 3. Shares of building and engineering work

Source: ABS 8755. Quarterly chain volume measures [3].

 

For other states the picture is mixed. The share of engineering in Queensland, SA and Tasmania was higher than in NSW and Victoria, but their productivity was lower. The ACT had the lowest share of engineering but the highest productivity. Unfortunately, differences between the states and territories in the share of engineering in construction work done cannot satisfactorily account for differences in GVA per hour worked since 2019, with the possible exceptions of WA and NT.

 

 

States and Territories Construction Productivity 2012-2023

 

The figures below show each state with their GVA per hour worked and value of construction work done (in inflation adjusted chain volume measures, so referred to here as volume). This also allows comparison of the size of the industry between states. 

 

NSW and Victoria

 

The level of GVA per hour worked in NSW and Victoria is very similar and for both has fluctuated around $70 since 2012. Until 2021 it was usually pro-cyclical, increasing as the volume of work done increased, but there were exceptions like NSW in 2018 when work done fell but GVA per hour increased and Victoria in 2016 when the volume of work done increased but GVA per hour fell. Then in 2022 in both states work done increased but GVA per hour worked fell.

 

Figure 4. Gross value added per hour worked and construction work done

Sources: ABS 5220, ABS 6150, ABS 8755. 

 

These states have the largest amount of construction work. The volume measures of work done in 2023 were around $80 billion for NSW and $70 billion for Victoria. The size of their markets means they are diversified across all types of work, and less affected by individual major projects. The states’ average shares of building and engineering were almost the same in the two periods 2012-18 and 2019-23, with higher GVA per hour worked and a higher share of engineering in NSW since 2012, an effect that became more noticeable after 2019. In 2023 the volume of work had risen to record highs in both states. 

 

After recent increases in regulatory requirements introduced to address building quality and safety issues, the high share of building work in these states may have required more people working on compliance. Although many might be working offsite, an increase in the number of people employed will have affected the industry’s productivity level. The high share of building work might also have given the CFMEU a significant role in these states, which may have affected their onsite productivity. Both these factors will apply to some extent to other states and territories as well. 

 

Figure 5. Shares of building and engineering work

Source: ABS 8755. 

 

Queensland and Western Australia

 

In 2014 the Australian mining boom peaked with the value of work done in these states reaching $80 billion in Queensland, mainly due to construction of LNG plants, and $70 billion in WA, mainly due to construction of new mines. The pro-cyclical nature of construction productivity is clearly seen in these states, GVA per hour worked followed the fall in the volume of work, which fell to around half the peak level, with GVA per hour worked declining by around 30 percent in Queensland and 20 percent in WA [4].

 

Figure 6. Gross value added per hour worked and construction work done

Sources: ABS 5220, ABS 6150, ABS 8755. 

 

Although all states were affected by the mining boom, these two are the most resource intensive and were impacted the most. The Queensland economy is larger and more diversified compared to WA, which is why the volume of construction since 2016 has been greater there. The high share of engineering construction at 60-70 percent in WA accounts for the very high level of GVA per hour worked there.

 

Figure 7. Shares of building and engineering work

Source: ABS 8755. 

 

 

South Australia and Tasmania

 

The volume of work done in these states is much lower than elsewhere. In 2023 it was nearly $16 billion in SA, where GVA per hour worked was similar to Victoria, and about $4 billion in Tasmania, where GVA per hour worked is lower and shows the big rises and falls associated with large projects commencing and completing in small markets.  

 

Although their GVA per hour worked is lower than NSW and Victoria, these states have had higher shares of engineering in their averages of work done. The small market effects probably outweigh the higher share of engineering in their level of GVA per hour worked. 

 

Figure 8. Gross value added per hour worked and construction work done

Sources: ABS 5220, ABS 6150, ABS 8755. 

 

Figure 9. Shares of building and engineering work

Source: ABS 8755. 

 

 

Northern Territory and ACT

 

The territories have distinctive characteristics. Both are very small markets, in 2023 the NT had about $3.2 billion work done and the ACT $3.9 billion work done. During the mining boom work done in the NT rose to over $11 billion in 2015, although some of the work will have been on defence projects, but GVA per hour worked did not peak until 2018. In the ACT GVA per hour worked took off in 2020 and increased by 50 percent, while the value of work done has been the same.

 

Figure 10. Gross value added per hour worked and construction work done

Sources: ABS 5220, ABS 6150, ABS 8755. 

 

The NT and ACT are at opposite extremes for shares in construction work done. The NT has the highest share of engineering work at around 70 percent of the total, similar to WA in 2012-18 but slightly higher in 2029-23, and the lowest share of building work. The level of GVA per hour worked is also similar to WA, and their similar levels of GVA per hour worked and share of engineering gives some support to the idea that engineering has higher productivity than building. 

 

However, the ACT complicates the picture, because the level of GVA per hour worked is higher but the ACT has the highest percent share of building work at nearly 80 percent of the total, and the lowest share of engineering work. 

 

 

Figure 11. Shares of building and engineering work

Source: ABS 8755. 

 

 

Conclusion

 

The ratio of hours worked to industry gross value added (GVA) is a measure of labour productivity. Using ABS data the level of construction GVA per hour worked for Australian state and territories can be found and compared from 2011-12, when the hours worked data starts, to 2022-23, when the state industry GVA data ends. In 2023 NSW, Victoria, Queensland and SA had a similar level of around $70 GVA per hour worked, Tasmania was closer to $65, and WA $85. The NT and ACT were higher with $94 and $118.

 

This comparison of state and territory trends and levels of GVA per hour worked looked at three factors: the effect of the mining boom and the average share of engineering in construction work done; the effect of changes in the amount of work done; and the effect of the small size of the industry in Tasmania and the two territories. 

 

The share of engineering work is very high in WA and the NT, and in Queensland up to 2018. During the mining boom the volume of construction work done there reached record levels between 2011 and 2014, before falling in Queensland and WA by around half to more typical levels from 2018. In WA work done fell by two thirds between 2015 and 2023. GVA per hour worked went up and down as it followed the rise and fall in the volume of work done, showing a strong pro-cyclical relationship between changes in their level of productivity and changes in the amount of work done. In Australia, the level of both GVA per hour worked and share of engineering is highest in WA and NT.

 

The relationship between GVA per hour worked, the share of engineering, and the volume of work done is not as clear in the other states and the ACT. In NSW and Victoria the volume of work done has increased over the last few years but GVA per hour worked has fallen. In SA and Tasmania, the volume of work done has increased over the last few years but GVA per hour worked has not, while in the ACT GVA per hour worked has increased but the volume of work done has not. 

 

The volume of work done varies greatly, with big states having larger and more diversified construction markets. In 2023 the volume of work done in NSW was almost $80 billion, nearly $70 billion in Victoria, and in Queensland almost $50 billion It was close to $40 billion in WA and $9 billion in SA. However, in the territories and Tasmania, the volume of work done is small, typically only $3 to $4 billion a year, and GVA per hour worked in these small markets increased and decreased by large amounts. This is probably due to the effect of large projects commencing and completing, and is particularly noticeable in the NT. 

 

These differences between the States and territories shows that productivity is affected by local factors such as the size of the market and diversification of work, particularly in the small states of SA and Tasmania, and the NT and the ACT. This might have two effects. The first is in the territories, where the commencement of large projects appears to lead to big changes in work done and a more volatile pattern in productivity. Compared to NSW and Victoria the territories have much more variation over time with big changes in the level of GVA per hour worked. The second effect might be seen in SA and Tasmania, where a factor in their lower level of GVA per hour worked compared to NSW and Victoria could be a less diversified market and more small firms.

 

Finally, is there a more misused and misunderstood concept than construction productivity? Misused because it is often linked to growth, but as a ratio of inputs to output, it does not measure growth in industry output. Misunderstood because it is assumed that no increase in labour productivity is ‘bad’ or ‘poor’ and means the industry is not developing capability or advancing in technology. 

 

In fact, the lack of growth in construction productivity probably indicates a high level of efficiency in an industry that has been refining it’s system of production using industrialised materials like steel, concrete and glass since the nineteenth century, and traditional materials like brick and timber for millennia. Once an industry is at or close to the efficiency frontier there is not much room for productivity growth [5].

 

Also, although the ratio of labour input to output has not decreased, which leads to higher productivity, there has been recent shift in employment from onsite to offsite with an increase in the number of people employed in designing, planning and managing construction projects. Some unknown proportion of these people will be working on BIM and other digital systems, as these technologies become more widely used and more firms become digitised. There will also be more people working on compliance due to recent increases in regulatory requirements introduced to address building quality and safety issues. 

 

Labour productivity is typically pro-cyclical and moves up and down with the building cycle and activity levels. Unlike other targets such as business investment, R&D or skills and training, the long-term nature of productivity means it is not suitable as a policy target. 

 

*

 

[1] ABS 6150 Modelled state and territory jobs and hours worked estimates by industry. Quarterly data annualised to June.

ABS 5220 State Accounts – Industry Gross Value Added for Construction, chain volume measures (the value of output minus the value of intermediate consumption adjusted for price changes). 

 

GVA per hour worked is industry GVA divided by the annual total of hours worked:

                                    Hours  million                                     Industry GVA                     GVA per hour

2023                       Annual total                                         $ billion                                  worked $

NSW                       694.4                                                          49,399                                     71

 

[2] Their different levels of labour productivity were analysed in a 2022 post on Construction Productivity Trends for Building, Engineering and Construction Services using GVA per person employed.

 

[3] ABS 8755 Construction Work Done, States and Territories, chain volume measures. The quarterly shares of building and engineering in total work done are averaged over the time period used.                    

 

[4] The effect of the mining boom was discussed in a 2023 post on The Long Cycle in Australian Construction Productivity using GVA per person employed. 

 

[5] This argument was made in a 2023 post Is Productivity Growth in Construction Possible?

 

 

 

Grenfell, Cladding, Compliance and Building Safety

 Recommendations from the UK Inquiry and Combustible Cladding in Australia

 

 

 

 

 

The second report from the Inquiry on the Grenfell Towers fire in London in 2017 has been released. It is an enormous report of 1,700 pages that covers many topics in 7 volumes and 112 chapters, and makes 82 recommendations [1]. Some are specific to the UK, but many are relevant to Australia, in particular, the recommendations on regulation and combustible cladding.

 

Cladding is a product used on the exterior walls of buildings, made of two thin sheets of aluminium with an internal layer of insulation, known as Aluminium Composite Material (ACM). It comes in sheets that can be cut to size and fixed to the building with rivets or a frame, and has been widely used on high-rise buildings. The insulation layer is a foam, often made from polyethylene, with different performance specifications, the most important being the effect of fire and whether it is fire resistant or not. Flammable cladding is combustible and not fire resistant, and its use is restricted by building codes, typically to buildings under a height limit (in the UK it is 18 meters or seven stories) at the maximum reach of fire brigade ladders and hoses.

 

This post is on combustible cladding and product compliance in the UK and Australia. Parts of the second Grenfell report and recommendations are extracted, then the Australian response to cladding fires through revisions to the building code, recommendations on regulation, and state audits of buildings with combustible cladding is covered.  

 

The relevant section of the Grenfell report is The testing and marketing of key products. This is Volume 2, with a detailed history of the testing and performance of the cladding products used on Grenfell, their certification and publication of test data. All the quotes below are from the 48 page summary of the report here.

 

Since Grenfell, the UK has committed £5.1 billion ($10 billion AUD) to remove and replace cladding through five different funding schemes. In the 81^st monthly Building Safety Remediation data release in July 2024,there were 4,630 residential buildings 11 metres and over with unsafe cladding, 949 buildings had started remediation works and 1,350 buildings had completed remediation under the schemes. There are thousands of smaller buildings whose owners or more often leaseholders will have to pay for remediation, where residents are paying for fire alarms and fire watches, with higher insurance premiums and lower valuations.

 

The UK Government Ignored Warnings

 

Between 2012 and 2017 the Department for Communities and Local Government received numerous warnings about the risks involved in using ACM and knew about cladding fires in London 2009 and abroad (Melbourne 2014, Dubai 2012, 2013, 2015). “However, despite what it knew, and the warnings it received from some quarters, the department failed to amend or clarify the guidance … on the construction of external walls.”

 

The report also found that over this period “the government determinedly resisted calls from across the fire sector to regulate fire risk assessors and to amend the Fire Safety Order” and the government’s deregulatory agenda “dominated the department’s thinking to such an extent that even matters affecting the safety of life were ignored, delayed or disregarded.”

 

Industry was Deceptive and Dishonest

 

There were three building products responsible for the 72 deaths in the Grenfell fire. The Arconic Reynobond 55 PE rainscreen panels, used on the external wall of Grenfell Tower, were made of two thin sheets of aluminium with a polyethylene core to provide stiffening. From 2005 Arconic “deliberately concealed from the market the true extent of the danger of using Reynobond 55 PE” but “was determined to exploit what it saw as weak regulatory regimes in certain countries.” After the cladding fires in Dubai in 2012 and 2013 “Arconic did not consider withdrawing Reynobond 55 PE in favour of the fire-resistant version then available. Instead, it allowed customers in the UK to continue buying the unmodified product, giving them to understand that it would tell them if it was unsuitable.”

 

Celotex manufactured RS5000, a combustible polyisocyanurate foam insulation, marketed as “the first PIR board to successfully test to BS 8414” and “acceptable for use in buildings above 18 metres in height.” However, the test on which Celotex relied in support of that claim had been manipulated with the complicity of the Building Research Establishment (BRE), with fire-resistant magnesium oxide boards placed to ensure it passed. Celotex then “embarked on a dishonest scheme to mislead its customers and the wider market.”

 

Most of the insulation used on Grenfell Tower was Celotex RS5000, but about 5% was K15 Kooltherm manufactured by Kingspan Insulation. From 2005 Kingspan falsely claimed that K15 had been successfully tested under BS 8414 and could be used in the external wall of a building over 18 metres, and “Tests performed in 2007 and 2008 on … K15 were disastrous, but Kingspan did not withdraw the product from the market.” Kingspan “dishonestly relied on the results of those tests to support the sale of K15 for use on buildings over 18 metres” and “cynically exploited the industry’s lack of detailed knowledge …  and relied on the fact that an unsuspecting market was very likely to rely on its own claims about the product.” The inquiry found “levels of competence in the construction industry are generally low” for contractors, designers and building control officers. 

 

Testing and Certification

 

On the Building Research Establishment the report said “BRE held a trusted position within the construction industry and was recognised both nationally and internationally as a leader in fire safety. However, from 1991 much of the work it carried out in relation to testing the fire safety of external walls was marred by unprofessional conduct, inadequate practices, a lack of effective oversight, poor reporting and a lack of scientific rigour.” Senior staff gave advice to Kingspan and Celotex on the best way to satisfy the criteria for a system to be considered safe, and “we saw evidence of a desire to accommodate existing customers and to retain its status within the industry at the expense of maintaining the rigour of its processes and considerations of public safety.”

 

The report found a “significant reason why Grenfell Tower came to be clad in combustible materials was systematic dishonesty on the part of those who made and sold the rainscreen cladding panels and insulation products. They engaged in deliberate and sustained strategies to manipulate the testing processes, misrepresent test data and mislead the market. In the case of the principal insulation product used on Grenfell Tower, Celotex RS5000, the BRE was complicit in that strategy.”

 

The inquiry also found the British Board of Agrément (BBA) and Local Authority Building Control (LABC) failed to ensure that product certificates were accurate and based on test evidence. The UK Accreditation 0ervice, responsible for oversight of those certification bodies, failed to apply proper standards of monitoring and supervision. The BBA was technically incompetent and failed to manage the conflict of interest between its customers (the manufacturers) and its responsibility to certify products as compliant. The LABC failed to scrutinise the claims made by the manufacturers and “was willing to accommodate the customer at the expense of those who relied on the certificates.” Both the BBA and the LABC were victims of “dishonest behaviour on the part of unscrupulous manufacturers.”

 

Recommendations

 

The five relevant recommendations, numbers 19 to 23, quoted in their entirety below, are: 

 

19. It is essential that those responsible for designing buildings have access to reliable information about the materials and products they wish to use. In their product literature manufacturers make many claims for their products, some of which are not of an overtly technical nature but are calculated to give the impression that a particular product has passed a particular test or has been shown to be suitable for a particular use. That was one of the marketing devices employed by those who manufactured and sold the rainscreen cladding panels and the insulation used in the refurbishment of Grenfell Tower.

 

20. Manufacturers were able to use misleading marketing material in part because the certification bodies that provided assurance to the market of the quality and characteristics of the products failed to ensure that the statements in the certificates they issued were accurate and based on appropriate and relevant test evidence. The United Kingdom Assessment Service (UKAS), the organisation charged with accrediting them, failed to apply proper standards of monitoring and supervision. The fact that three separate manufacturers were able to obtain misleading certificates relating to their products is evidence of a serious failure of the system and points to a need for a different approach to the certification of construction products.

 

21. We do not think that the appointment of a National Regulator of Construction Products will solve the problem because the system will still depend on the effectiveness of the conformity assessment bodies and the limited oversight of UKAS. Conformity assessment bodies provide a commercial service combined with an element of regulation, but the two functions do not sit easily together. Pressure to acquire and retain customers can all too easily lead such bodies to be less rigorous in their examination of products and materials and enforcing their terms of contracts than could reasonably be expected of bodies acting in the public interest.

 

22. We therefore recommend that the construction regulator should be responsible for assessing the conformity of construction products with the requirements of legislation, statutory guidance and industry standards and issuing certificates as appropriate. We should expect such certificates to become pre-eminent in the market.

 

23. In our view clarity is required to avoid those who rely on certificates of conformity being misled. We therefore recommend:

a. that copies of all test results supporting any certificate issued by the construction regulator be included in the certificate;

b. that manufacturers be required to provide the construction regulator with the full testing history of the product or material to which the certificate relates and inform the

regulator of any material circumstances that may affect its performance; and

c. manufacturers be required by law to provide on request copies of all test results that support claims about fire performance made for their products.

 

Ineffective Regulation 

 

Recommendations 22 and 23 refer to a construction regulator. This relates to the inquiry’s first recommendation, which was for the establishment of a single construction regulator as the “focal point in driving a much-needed change in the culture of the construction industry.” The regulator would be responsible for the testing and certification of construction products and issue certificates of compliance with legislation, statutory guidance and industry standards. This addresses the problem of the inefficient and complex regulation of the industry which, as the section quoted in full below shows, was hopelessly fragmented:

 

“At the time of the fire the Department for Communities and Local Government was responsible for Building Regulations and statutory guidance, the Department for Business, Energy and Industrial Strategy was responsible for regulating products and the Home Office was responsible for the fire and rescue services. Building control was partly in the hands of local authorities and partly in the hands of approved inspectors operating as commercial organisations, enforcement of the law relating to the sale of construction products was carried out by Trading Standards and commercial organisations provided testing and certification services to manufacturers of products. UKAS accredited organisations operated as conformity assessment bodies. In our view, this degree of fragmentation was a recipe for inefficiency and an obstacle to effective regulation.”

 

The Australian Response to Grenfell 

 

In Australia, combustible cladding first became an issue with the Melbourne Lacrosse building fire in 2014, and after the Grenfell Tower Fire in 2017 state governments set up taskforces to audit buildings for use of combustible cladding, and to assess the level of associated risk. The results of those audits and state policies for rectification are detailed in the next section. In this section the two key actions at the national level are reviewed: the revision of the Building Code of Australia (BCA); and the commissioning of a review of regulation and building defects that became the Building Confidence report. 

 

BCA and JAS-ANZ

 

A revision of the 2016 BCA was not scheduled until 2019, however the Australian Building Codes Board developed an out-of-cycle amendment for cladding products, known as the 2016 Amendment 1 that was legislated in all states in March 2018. This updated the performance requirements on spread of fire and evidence of suitability of combustible cladding.  

 

Cladding manufacturers had used the product certification scheme known as CodeMark, accredited by the Joint Accreditation System of Australia and New Zealand (JAS-ANZ). A certificate of conformity contains information about the purpose and use of the product, how the product complies with the BCA, and conditions and limitations on use. In February 2019 JAS-ANZ withdrew certificates of conformity for nine cladding products. In July 2019 JAS-ANZ suspended all accreditations of CertMark International which had issued those certificates of conformity but, after a review, in October 2019 lifted the suspension subject to conditions. 

 

Building Confidence Report

 

In 2018 the Building Confidence: Improving the Effectiveness of Compliance and Enforcement Systems for the Building and Construction Industry Across Australia report by Peter Shergold and Bronwyn Weir was published by the Commonwealth Department of Industry, Science and resources [2]. Their report found problems with product compliance and fragmented regulation in Australia, and made 24 recommendations that “if adopted by all jurisdictions, will lead to a degree of harmonisation which does not presently exist.” Construction is regulated under both state and federal legislation implementing the BCA, and through the National Construction Code (NCC).

 

After investigating building failures that highlighted problems with defects and lack of compliance with the NCC,Building Confidence found: 

·      Compliance failures included non-compliant cladding, water ingress, structurally unsound roof construction and poorly constructed fire resisting elements;

·      Practitioners may lack competence and do not understand the NCC;

·      Design documentation is generally poor and results in inadequate information;

·      Licensing bodies, regulators and local governments can be inadequately funded or lack skills and resources; and

·      Supervision has generally been by private building surveyors who are not independent from builders and/or designers. 

 

The report concluded “The compliance and enforcement systems have not been adequate to prevent these problems from emerging and they need to change as a matter of priority. There is no panacea or ‘silver bullet’ to resolve these problems.” The key recommendations 6 and 7 were for effective regulatory powers and recommendations 18 and 19 for proactive regulation with mandatory inspections.

 

Recommendation 1 was for registration of building practitioners involved in the design, construction and maintenance of buildings, and recommendation 10 was for building surveyors. Recommendation 3 was for practitioners to undertake compulsory Continuing Professional Development on the NCC. Recommendation 17 was for an independent third-party review of the designs before work commences. 

 

Other important recommendations were 12, for a building information database that provides a centralised source of building design and construction documentation, and recommendation 20 for a building manual for commercial buildings to be available on completion. Recommendation 21 was for a compulsory product certification system for high-risk building products. These recommendations addressed the serious problems of building defects and use of non-compliant materials that had become widespread in Australia. 

 

Although it preceded the Grenfell Inquiry’s second report by six years, the Building Confidence report is in some respects the Australian equivalent. Commissioned in 2017 after Grenfell, the Introduction noted “Our Terms of Reference do not specifically refer to the concerns regarding combustible cladding. However, this issue has been a dominant underlying theme of the consultations we have held.” There were two recommendations specifically on fire safety.

 

Recommendation 8: That, consistent with the International Fire Engineering Guidelines, each jurisdiction requires developers, architects, builders, engineers and building surveyors to engage with fire authorities as part of the design process. The report found “the role of the fire authorities in building approvals differs across jurisdictions. In some cases, the involvement of fire authorities is a source of frustration because of their lack of resourcing for this role. There are complaints that some fire authorities oppose designs on issues which are beyond their expertise. Furthermore, there is a lack consistency in interpretation of the NCC.”

 

Recommendation 19: That each jurisdiction requires registered fire safety practitioners to design, install and certify the fire safety systems necessary in Commercial buildings.

This requires “mandatory certification of the testing and commissioning of fire safety systems” and “testing and commissioning should not be performed by the system installer.”

 

Recommendation 19 is closely related to the two preceding recommendations: 17 for independent third party review for specified components of designs and certain types of buildings; and 18 for on-site inspections of building work at identified notification stages.

 

 

Combustible Cladding Audits by Australian State Governments

 

In a recent report for the Australian Building Codes Board, the Centre for International Economics included the table below on apartment buildings that may have combustible cladding. Note that these estimates do not include commercial and public buildings, that the audits below do include. As the audit results show, these estimates are reasonably accurate for the number of high risk buildings. The three large states of NSW, Victoria and Queensland have over three quarters of the estimated number of apartment buildings with combustible cladding. 

 

Table 1. Share of apartment buildings that may have non-compliant cladding

                                                                        NSW     Vic          Qld         SA           WA         Tas         NT           Act

Apartment bldgs that may have          

non-compliant cladding          163         385         144         22            42            0               7               29

Estimated no. of apartment bldgs

built between 1997-2017        4701     2937     2147     196         538         6               124         402

Possible non-compliant

bldgs. share of total                     3%          13%       7%          11%       8%          7%          6%          7%

 

Source: Centre for International Economics, 2024: 8. Proposed Changes to Building Product Regulation: Cost-benefit analysis. Canberra. 

 

Victoria

There have been two cladding fires in Victoria, the 2014 fire at Lacrosse Tower and the Neo 200 building fire in 2019, both in Melbourne. After Lacrosse a taskforce was set up in 2017 that found  potentially 1,400 buildings could have combustible cladding, and recommended the government establish a dedicated cladding agency. In 2019 Cladding Safety Victoria (CSV) was established within the Victorian Building Authority (VBA), and legislation in 2020 made CSV the world’s first stand-alone cladding rectification agency, funded by a levy collected by the VBA that is added to building permits. 

 

The cladding rectification levy began in 2020 and applies to Class 2 to Class 8 buildings [3] and is expected to raise $433 million. The CSV 2022-23 Annual Report had a final figure of 1,588 affected buildings, including those where remediation is complete or underway. Below is the figure from the Annual Report on the work done and different levels of fire risk from flammable cladding. 

 

Figure 1. Cladding Safety Victoria: Assessed fire risk and remediation

 

Source: CSV Annual Report 2022-23: 16. 

 

A 2023 Cladding Review found between 2019 and October 2023: 828 buildings have been referred to CSV for funding consideration; 365 buildings have been granted funding approval for rectification; and 276 buildings have had cladding rectification works completed. There were also “approximately 800 buildings with combustible cladding, which will not be funded through the Private Residential Cladding Rectification Program.” Only buildings with Unacceptable risk have rectification funded by CSV, although in 2022 $32 million of levy funds were provided to local councils and owners corporations for management of Elevated and Low cladding risk in a Partnership Program.

 

New South Wales

The NSW Government responded to Grenfell and Lacrosse with the Fire Safety and External Wall Cladding Taskforce in June 2017. By February 2023 the Taskforce had inspected 4,182 buildings, cleared 3,803 of them, and had 379 buildings under review, assessment and remediation, of which 192 had remediation underway, ordered or approved. 

 

In 2020 NSW started Project Remediate to remove combustible cladding from high risk apartment buildings. It provides a 10-year, interest-free loan to fund the cost of remediation, using cladding products and systems endorsed by the Cladding Product Safety Panel.  It also provides program management, inspection, design, building, assurance and certification services with Hansen Yuncken as the Managing Contractor, so it is a complete package. Owners Corporations register their building, it is inspected and two designs prepared and costed. The Owners Corporation then decides if they want to proceed with the agreed design and join the program, or exit at no cost. 

 

Queensland 

Queensland has had a chain of responsibility law since 2017, to stop the use of unsafe products on buildings. This makes all parties in the supply chain, including manufacturers, importers, suppliers, and installers, accountable for compliance with standards and regulations. The Building and Construction Legislation (Non-conforming Building Products—Chain of Responsibility and Other Matters) Amendment Act 2017 restricted the use of non-conforming building products and included a requirement to report their use. The legislation also extended the powers of the Queensland Building and Construction Commission (QBCC) to investigate and take enforcement action.

 

In 2018 legislation required all private owners of affected buildings to complete a combustible cladding checklist to determine the type of cladding. Buildings with an identified cladding fire risk were required to display a Form 42 - Affected Private Building Notice – at the entry, and building owners had to implement fire safety risk mitigation measures between identification of cladding fire risk and completion of rectification, which was their responsibility. Between 2019 and 2023 there was a Safer Buildings Taskforce to advise the government on policies and actions, on how to rectify combustible cladding and support building owners through the process. 

 

Owners are not required to rectify their building, however cladding risk and rectification costs must be disclosed when selling. As of 31 May 2024 more than 18,000 private buildings [4] had been cleared. There were 976 requiring a solution to address the risk, and 308 potentially at risk and needing to complete the checklist process. There were 345 buildings that had notified removal or rectification. In August 2024 elevenpublic buildings still needed rectification and some unknown number had been rectified and removed from the online list. 

 

Other States and Territories

 

The building audit in South Australia was completed in 2018. It found 2 public buildings were high risk and 50 were low or moderate risk. There were 96 private buildings with low or moderate risk, 21 with high risk, and were 7 rated as extreme risk. A concessional loan scheme began in 2023, with a fixed rate and term of up to 10 years for a maximum amount of $15 million for each building being remediated.

 

The 2017 audit in Western Australia found 50 public buildings and 52 private buildings needing rectification. By 2024 work on 31 public buildings and 47 private buildings had been completed. 

 

The ACT Government audited public buildings in 2017. In 2021-2022 a Private Buildings Testing and Assessment Scheme provided grants to owners corporations worth up to $20,000 as a rebate on the cost of testing and assessing of cladding.  A Concessional Loan Scheme has provided owners corporations access to a low-interest loan for remediation. 

 

In Tasmania the audit found 42 of the 43 buildings where ACM is in use can be classified

as low risk. One building, a hospital, was classified as high risk and needed urgent rectification.

 

Implementation of the Building Confidence Recommendations

 

A detailed review of progress on implementing the report’s four recommendations mentioned above on building safety, across the states and territories, was done by the Australian Construction Industry Forum in 2023. The results for the four recommendations on fire safety for design consultation, certification, design reviews and onsite inspection are in Table 2.

 

Table 2. State and territory implementation of recommendations

Recommendation        Full implementation                    Partial implementation

8                                 NSW, Qld, SA, Tas, NT                Vic, WA, ACT

17                              NT                                                                 Vic, Tas

18                              ACT, NT, Tas                                         NSW, Qld, SA, WA. Vic

19                              NSW, Qld, Tas                                    Vic, SA

 

Source: A Cross-Jurisdictional Review of the Implementation of the Building Confidence Report, Australian Construction Industry Forum, 2023: 24-25. 

 

Conclusion

 

The second report from the Inquiry into the 2017 Grenfell Towers fire in London that killed 72 people has found government, industry, regulators and product certifiers all culpable. Government ignored warning about combustible cladding, whose manufacturers were deceptive and dishonest. Testing did not ensure compliance, and certifiers did not do their job. Regulation was excessively fragmented across multiple agencies, and being ineffective suited the prevailing deregulatory approach that allowed designers, fire safety engineers and contractors who lacked expertise to approve use of combustible cladding. 

 

Governments had been aware of the combustible cladding problem after fires in high rise residential buildings in London 2009, Dubai 2012, 2013 and 2015, and Melbourne 2014. In Australia, after Grenfell there was a revision to the BCA in 2018 and nine cladding products had their certification cancelled in 2019. The Building Confidence report on defects and product compliance was published in 2018, with 24 recommendations, 2 specifically on fire safety.

 

Beginning in 2017, Australian states and territories began audits of public and private buildings to determine the extent of the problem and each building’s level of combustible cladding risk. Most have published the results, and from the available records 3,571 affected buildings have been identified: Victoria has 1,588, NSW 379, Queensland 1,284, South Australia 176, Western Australia 102, and Tasmania 43. Most of these are classified as low risk. It is not clear how complete this data is. 

 

The cost to governments of remediation have been very large, in the UK £5.1 billion has been budgeted across five remediation schemes. Australian states and territories will have spent hundreds of millions on audits and billions on rectifying cladding on public buildings, although the actual amount has not been disclosed. In Victoria 130 public buildings were affected, in South Australia 52, and in Western Australia 40, but numbers in other states are unknown. Perhaps 400 public buildings in all, and assuming average remediation costs of $5 million a building gives a starting guesstimate for the states of $2 billion. It could be much more. 

 

 Most of the expenditure on remediation has been on public buildings. For private buildings it is the owners, or in the UK the leaseholders, who are responsible. In Australia two states and the ACT have concessional loan schemes, and in Victoria a cladding rectification levy began in 2020 that is expected to raise $433 million. The eventual cost to owners of private buildings can also be expected to be in the billions. 

 

To describe the widespread use of combustible cladding on buildings as a regulatory failure understates the scale and scope of the problem. There were multiple points of failure, not just by ineffective and under-resourced regulators responsible for building permits, safety and product compliance, but also by the architects, fire safety engineers, contractors and subcontractors responsible for the work. With clients asking for cheaper combustible cladding, often on the basis of dishonest marketing by manufacturers, they did not have the necessary information or expertise to prevent its use. 

 

Fundamentally, the construction industry needs to improve understanding of compliance requirements by the professionals responsible for building designs and permits, and they all need to be included in a chain of responsibility to ensure products are safe and comply with the building code. Contractors should be able to stop work and seek advice if they believe designs are unsafe, and the conditions for such action should be codified or legislated. Designs and fire safety plans should be lodged with a regulator, product traceability and registration compulsory, and inspections during construction mandatory. 

 

There are no easy or simple solutions to the problem of building safety. The Hackett Review and Grenfell Inquiry in the UK and the Building Confidence report in Australia made similar recommendations on regulation of construction, enforcement of compliance with building codes and standards, revising building design, approvals, permits and procurement, and improving industry expertise. Implemented together, these recommendations would lead to systematic change in construction. Implemented piecemeal the problem cannot be solved, and there will be more building failures, and potentially tragedies like Grenfell, in the future. 

 

*

 

[1] This was the third report on the Grenfell Towers fire. The first was the 2018 Hackitt review’s Building a Safer Future. Independent Review of Building Regulations and Fire Safety that examined regulations, compliance and enforcement, all of which were found to be inadequate, and was critical of procurement practices. The recommended regulatory changes led to the 2022 Building Safety Act and a Building Safety Regulator for the UK. The second was the Inquiry’s first report in 2019 that focused on the night of the fire, its cause, and the actions of the London Fire Brigade. 

 

[2] See also Compliance in Building Design from Cladding Safety Victoria, 2024 here and  Rebuilding Confidence: An Action Plan for Building Regulatory Reform, Building Products Innovation Council, Canberra 2018 here.

 

[3] Classes in the Building Code of Australia are: Class 1 (houses), Class 2 (apartments), Class 3 (residential buildings including hotels), Class 4 (dwellings attached to commercial buildings), Class 5 (offices), Class 6 (shops), Class 7 (car parks and warehouses) and Class 8 (laboratories and factories), Class 9 (health and civic) and Class 10 (non-habitable). 

 

[4] A ‘private building’ is a two or more storey residential building (excluding houses), health care or aged care building, or a three or more storey office, retail carpark, warehouse or factory building; that received development approval to build or to alter the building’s cladding between 1 January 1994 and 1 October 2018; and is at least 50% privately owned.