STA.001.028.0001 Andrew Arblaster—Statement [PDF 3.67MB]

STA.001.028.0001
Witness statement
Royal Commission into the Home Insulation Program
Royal Commissions Act 1902 (Cth)
Statement of: Andrew Arblaster
Address:
Occupation:
company manager and shareholder
Date:
14 March 2014
I, Andrew Arblaster, state as follows:
1
I have been the manager and shareholder of the company Enviroflex Pty Ltd since
2005.
2
Prior to Enviroflex I was manager of several businesses; the first one was involved in
agricultural machinery manufacturing, for five years. The second was McDonald
Johnson Engineering, from 1989 to 2005.
3
4
My experience in the insulation industry includes the following:
(a)
Member of the AS3999 Standard Committee since 2008;
(b)
Qualified energy assessor (Victorian Department of Sustainability);
(c)
Qualified insulation installer (Victorian Department of Sustainability).
I have been the president of the Australian Cellulose Insulation Manufacturers'
Association (ACIMA) from August 2009, when I took over from Laurie Moylan.
5
I was a member of ACIMA from 2006. ACIMA was an organisation that represented
manufacturers of Cellulose insulation. All of the members of the association both
manufacture and install insulation. The majority of the members install other types of
insulation as well. During the HIP we created an installer category of membership.
This was restricted to installers who were customers of members and had been
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trained by members. This ensured that we represented only installers who were using
certified product and had good experience and training .
6
In this statement I refer to various documents. Those documents are provided as
Annexure 'A' which is [KWM to insert document number when consolidated] . When I
refer to a document number it is contained within Annexure 'A'.
Background
7
Enviroflex is a manufacturer of cellulose fibre insulation products, and an installer of
insulation to businesses and homeowners. Prior to the HIP, the annual turnover of
Enviroflex was about $3.5 million. At that time, Enviroflex probably employed about
30 employees.
8
Enviroflex had two machines manufacturing cellulose insulation in Knoxfield ,
Victoria . 3180 The business had been formed from an amalgamation of 3 businesses
in the cellulose insulation industry in 2000. One business had been operating since
1965 and the others had been formed in the 1970s The business was profitable and
we had moved into new (leased) premises consolidating the manufacturing and
administration. This further improved the profitability. The machines were worked on
two shifts We had contracts for the sale of untreated cellulose, that is cellulose
without fire retardants, with Bostik, FIP brakes, Exfoliators and seeding companies.
We also sold treated insulation to several other installers our largest customer being
Command Star in Ballarat.
9
For our insulation business, prior to the implementation of the HIP we installed about
80% of our insulation for builders; the other 20% was installed mostly for existing
home owners. The Victorian government had implemented a subsidised retrofit
program for households without insulation and the retrofit part of our business was
growing rapidly. We also had contracts with brotherhood of St Lawrence for low
income homes.
Consultation prior to the HIP
10
Prior to the implementation of the HIP, I did not attend any meetings or consultations
with the Prime Minister or Minister Garrett, or any other minister.
11
I met with Greg Lemmon in April 2009, at Enviroflex's factory . At that time, I
understood that Mr Lemmon was running the HIP. I now understand that, at that
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time, Mr Lemmon was the Director of Stakeholder Management at the Department of
Environment, Water, Heritage and the Arts (DEWHA) .
12
At that time, Mr Lemmon was learning about insulation businesses, so he came out
to visit the Enviroflex business in Knoxfield.
13
Our business was selected because we had been a supplier under the Victorian
VEET scheme since its inception. That scheme was implemented by the Victorian
government. Mr Lemmon was looking at how we had interacted with the Victorian
government through that scheme and seeing what lessons he could learn for the HIP
scheme.
14
Mr Lemmon spent approximately four hours at our business going through the
different types of insulation, learning about cellulose insulation in particular, and
discussing the implementation of the scheme with me. I gave him the advice that the
Victorian scheme was very good, that we'd all had to go through the specified training
for the Victorian scheme to apply and that the Victorian scheme had a high level of
audit and that he should implement an audit of installing as soon as possibly.
15
I also advised Mr Lemmon that one of the successors of the Victorian scheme was
that each business had to be visited and get approved by the Victorian government.
He noted that that may not be possible under the HIP scheme because of the
requirement to get the employment increased significantly in a short time .
16
We spent a lot of time on the factory floor going through various products and
discussing the installation process.
17
At that meeting, Mr Lemmon gave me a PowerPoint presentation. A copy of this is
ARA.002.001 .0001 . This PowerPoint confirmed that the government expected the
industry to expand its capacity, and that part of the employment stimulation was
going to come out of Australian manufacturing.
18
Mr Lemmon was talking to me about the ability to increase production in polyester
and cellulose. He a fair handle on what could be done with glass fibre because he'd
also been talking to Fletcher and CSR. I was able to tell him that cellulose and
polyester product production could ramp up very quickly. He went away with the
impression that we could meet the increase demand as required . He also told me that
it was the intention of government to increase employment and that he would be
promoting Australian manufacture.
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19
As it turned out, most of the employment came from shipping companies and out of
the wharfs , when Australian manufacturers could not keep up with the demands of
the HIP. A huge amount of insulation product was imported.
20
Mr Lemmon and I also discussed training and the dangers of being in roof cavities.
spent a large amount of time discussing how down lights should be treated, in terms
of clearances and the different types of covers, focussing on how to minimise the
significant risk for fire that downlights present. I also explained how Enviroflex's
installers dealt with downlights and various other issues during an installation.
21
Mr Lemmon and I also had detailed discussions about the Victorian Energy Efficiency
Target (VEET) scheme, which was the program that the Victorian government was
running at the time. Enviroflex was one of the installers under that program. A lot of
the discussion at the meeting was about the success of the VEET scheme.
22
I told Mr Lemmon that the HIP should have a similar training regime to that under
VEET. Under the VEET scheme everybody who was installing insulation had to go
through a training programme at TAFE, run by an insulation expert. I went through
that programme; it took about three nights of four hour sessions. This training taught
installers how to identify risks, including electrical risks . People attending this training
had usually had little or no experience prior to it. I have not heard of any deaths
under the VEET scheme. I believe the inspection system organised by the Victorian
government was a reason for that.
23
I would not send out an installer alone until he or she had done the VEET training
programme and spent at least six months with one of our senior installers, receiving
training on the job. I believe that this ensures that an installer can manage the risks
properly.
24
I told Mr Lemmon that as far as possible, he should keep and maintain the same
requirements with the HIP that were already in place with the Victorian scheme.
25
I remain of the view that the HIP should have been based on the model established
by the Victorian Government in its VEET scheme.
26
Mr Lemmon expressed the position, however, that the main concern of the
government seemed to be to implement the program quickly. As a result,
government did not appear keen to hear suggestions that would either delay the
implementation or slow the speed of the implementation once it had commenced .
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27
The Commonwealth government appeared to be reluctant to follow the structure of
the VEET scheme as a model for the HIP as that structure wou ld not allow the
government to roll out the HIP to all areas of Australia as quickly as it wanted . The
government seemed to believe that if existing businesses were relied upon then rural
communities would not have access to the HIP. However, that coverage had not
been a problem in Victoria. There existed installers in Gippsland and in Western
Victoria who were accredited under the VEET scheme.
28
I had a concern that Mr Lemmon hadn't really appreciated two things. One was that
an audit program should be in place to start auditing business as soon as they started
installing. I was also concerned that he didn't necessarily understand the
requirements for installer training . When Mr Lemmon came to our business he had no
understanding of cellulose or polyester and I guess that was one of the reasons for
him having taken the time to come down and see us.
29
I also made known my views regarding the need for training as part of the ACIMA
formal written submissions made throughout the HIP and also through the regular
email contact between Mr Herbert and DEWHA, as produced to the Commission.
30
Our procedure with ACIMA was to focus all the communication to the government
through our Secretary Mr Herbert. I would be discuss things with Mr Herbert on a
daily basis but the final submission or correspondence would be sent under Mr
Herbert's name. That way we as the ACIMA membership and executive could unite
our focus . We also shared the ACIMA representation at the various government
meetings, depending on location of the meeting or if an executive member had
particular installing and/or manufacturing experience and could add better value to
the meeting, depending on the focus of the meeting as advised in advance by the
Agenda.
Implementation of the HIP
31
After the HIP commenced, Enviroflex had product demand issues almost
immediately. I outlined these issues with Kevin Herbert (then secretary of ACIMA) in
an email on 28 August 2009. A copy of this email is HER.002.003.0458. I was
concerned with procuring paper of an adequate quality wh ich did not cause problems
for the Enviroflex machines. At that time, I thought that sourcing raw product from
reliable sources would be difficult as the HIP was only scheduled to run for two years
and paper exporters would not want to change their contracts in the short term .
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32
The Construction & Property Services Industry Skills Council (CPSISC) was
contracted by the Department of Climate Change, Energy and Environment (DCCEE)
to produce some training materials on installing insulation. This was because of an
email Mr Herbert received on 22 July 2009 from DEWHA. A copy of that email is at
ARA.002 .002.001 0. The book CPSISC produced included ACIMA as a party to the
book. I am not sure why that was the case . I do not believe that ACIMA was
consulted on the book, nor given a chance to review it before it was published.
33
There were about 20 errors in the book, and some of them were quite significant. For
example, the CPSISC expressed clearances between insulation and downlights lights
that were different from those contained in the Australian Standard. There were also
errors in relation to the uses of cellulose . I made known my views by marking up a
printed copy and sending it by mail to CPSISC. I refer to sending the marked copy to
CPSISC in an email to Kevin Herbert on 22 July 2009. A copy of this email is
ARA.002.002.0026.
34
A second version of the book was released after the completion of the program in
2010. This was used as the basis for the training course for insulation inspectors in
the HISP. The second version contained the same errors.
Changes to the HIP
35
I received information about changes to the HIP through Mr Herbert. Mr Herbert
would look at the agenda of a proposed meeting and would send along one or two of
our members who had experience in relation to the topics covered by the agenda.
ACIMA was in a unique position because each of our member businesses was both a
manufacturer and an installer. Therefore, the people representing ACIMA had more
hands-on experience in installing than the other people at those meetings, who were
generally manufacturers only.
36
I provided comments on the information which Mr Herbert sent about changes to the
program . For example:
(a)
I sent an email to Mr Herbert on 1 November 2009 explaining my position in
relation to the change to the funding model, the need for further safety
clarifications on down lights, and metal clips and the like. A copy of that email
is ACI.002.001 .0274; and
(b)
I responded to comments on the DEWHA Risk Assessment Template in an
email on 28 January 2010. A copy of that email is ACI.002 .001 .0316.
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37
Close to Christmas in December 2009, the government released an Approved
Products List. ACIMA and the Polyester Insulation Manufacturers Association of
Australia (PIMAA) had been pushing for an approved list of products for some time,
because of the serious level of non-compliant imported products that had flooded the
market in response to the HIP. When the approved list was released, it bore no
relationship to the consultations the industry had had with the government. I did not
understand where it came from . The government came back later and said that they
had got it from the Australian Standards. This caused huge problems for the whole
industry because we then spent a lot of time trying to get our products back onto the
list. I had communication in early January 2010 with Mr Herbert regarding the
mistakes in the Approved Product List. He confirmed that he had spoken to DEWHA
about my concerns . A copy of emai l correspondence between Mr Herbert and me is
ACI.002 .001 .0304.
38
I do not believe that foil sheeting products shou ld ever have been a part of the HIP or
on the Approved Products List, even in Queensland. Certain ly there were installers
in Victoria using it, but it would never get to 3.5 R-rating, which was the required
rating in Victoria at the time. I think that to a large extent, even through the industry
consultation meetings, I never understood what foil was being used for. It was not
until the first deaths occurred and came to public attention that I understood that foil
was being used as a form of insulation.
39
In about January 2010, not long before the end of the program, the government
attempted to 'patch up' the system in response to the deaths that had occurred and
media reports about the lack of safety management of installers during the HIP.
40
The government released a draft "DEWHA Risk Assessment Template". I
understood that this was intended to improve safety because it was going to be
compulsory and insulation companies would be audited against it.
41
On 28 January 2010 Kevin Herbert forwarded a request for comments that he
received from the department. I responded by emai l to Mr Herbert on 28 January
2010, a copy of that email is found at ACI.002 .001 .0316. In that ema il I expressed
concerns that the DEWHA RISK Assessment Template was confusing and not
written in a manner that would allow an average installer, who would likely have
limited reading skills, to understand it and apply it. The template needed to be
pictorial for it to be useful; pictorial presentation of information is consistent with union
documents, so that it can be read and understood by those with limited reading skills.
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42
It is my understanding that Mr Herbert communicated these concerns to DEWHA.
Fires during the HIP
43
Although there were more 'fires' during the roll out of the HIP, the rate of increase
was not greater than before the HIP was established .. My view is consistent with a
CSIRO report, a copy of which is ABC.002 .001 .1341 . My view is that:
(a)
the number of fires increased (compared to years prior to the HIP) because
there were more installations occurring;
(b)
there is a definitional problem when the 'fires ' during the HIP are considered .
Not all fire call outs were in relation to a fire that caused structural damage,
for example when cellulose is ignited, it smoulders and causes smoke but
does not cause structural damage. Despite this, if the fire department is
called in this case, it is reported as a 'fire '; and
(c)
the high number of fires reported in Victoria might also be because each of
the States and the State fire brigades have different definitions. This meant
that there was different recording coming in from different states. In Victoria
both the CFA and the metropolitan fire brigade paid a great deal of attention
to insulation fires.
44
On March 2010, I sent an emai l to Craig Downsborough. A copy of this email is
ARA.002 .002.0001 . Mr Downsborough was at the Department of the Prime Minister
& Cabinet. In that email , I highlighted that although there were other potential
causes, the risk of down light fires was increased because of lack of training of and
information given to installers during the HIP. My particular concerns were that fires
were caused because :
(a)
electricians often installed the downlight too close to timbers or underneath
timbers. Electricians sometimes illegally install the lights into timber joists and
the like; and
(b)
downlights were not visible under old insulation. During the HIP, installers
often put more insulation on top of the old insulation. This would cause heat
to be trapped and caused fires to start.
45
All of these risks would be items that a trained installer would know to look out for and
avoid.
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Suspension of the HIP
46
During discussions surrounding the termination of the HIP, ACIMA informed the
government that HIP should be wound down slowly. This was because ACIMA had
been encouraged as individual members to drastically increase production. As a
result, those same manufacturers needed to slowly manage a reduction of this
capacity to limit the financial strain that it wou ld place on them .
47
An example of this occurred at the industry consultation meeting on 12 October 2009
which I attended. I refer to an email from ACIMA Secretary Mr Herbert to the ACIMA
members sent on 13 October 2009, providing a summary of what occurred at that
meeting. A copy of that email is at HER.002.00
48
In item 1 of that email, Mr Herbert stated that the issue of the 'run down' of the HIP
was discussed and stated that:
"ACIMA attendees stressed the need for a closely managed run down of the HIP
so as to protect those who had invested heavily in plant etc would not be left
extreme financially disadvantaged" and
"DEWHA were left in no doubt that more information/discussion on the managed
run-down of the HIP was URGENTLY required ."
49
I recall having delivered that message to DEWHA during that meeting and I am of the
view that Mr Herbert's email account of that meeting is accurate.
50
Industry's request that the government closely manage the wind-down of the HIP and
provide advanced notice and consultation with us, however, did not happen. The HIP
was suspended overnight and manufacturers were left to deal with a drastic drop off
in demand for product.
51
I was heavily involved in discussions around the Home Insulation Safety Plan (HISP) .
This is because we had to reduce Mr Herbert's hours of work at ACIMA to one or two
days a week after the suspension of the HIP. This was as a resu lt of many ACIMA
members leaving the organisation, because they were unable to pay their bills and
their businesses were folding .
52
In my view, the major flaw of the HISP was that inspectors were not adequately
trained. I expressed these concerns in emails that I sent to Matthew Mad in and Mr
Herbert on 10 January 2011 and 9 January 2011 . Copies of these em ails are
included in ARA.002.002.0028.
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53
The DCCEE requested that I provide comments about a pocketbook which was to be
used as a training guide for the HISP inspectors. Accordingly, on 30 January 2011 , I
sent an email to DCCEE setting out my concerns regarding the Pocketbook V0 .2. A
copy of that email is ARA.002.002.0031 . These concerns echoed the issues with the
original CPSISC handbook, discussed above.
54
I attended a considerable number of meetings with DCCEE and the training
authorities in the aftermath of the HISP and in reviewing the training documentation
that had been issued to the safety inspectors, they admitted that cellulose insulation
hadn't been included.
55
The failure to adequately train the HISP inspectors resulted in inspectors wrongly
'failing' certain cellulous installation inspections, which had actually been installed in
accordance with the relevant standard. This is likely because inspectors were
employed by:
(a)
UGL- a company that had little to no experience in insulation and likely
trained its inspectors only in relation fibreglass batts as that product
accounted for about 70-80% of the insulation installs; and
(b)
CSR- which manufactures fibreglass batts - a product which competes in a
(now shrunken) market against cellulose insulation.
56
Where a cellulose installation 'failed' an inspection, I would often go and inspect that
installation personally. I found that many cellulose installations which had been
installed in accordance with the standard had been 'failed' by a HISP inspector. A
common reason for the 'failure' was that the inspectors simply didn't understand the
cellulose product and installation practice. For example, cellulose is 'pumped in' to a
roof cavity so does not require full access to a roof cavity (as opposed to fibreglass
batts). If an inspector could not access a roof cavity which had been filled (in
accordance with the standard) with cellulose, they would often 'fail' the installation.
'Failures' such as this were not isolated cases, they were very numerous.
57
This had a direct impact on cellulose businesses as it meant they were not being
paid. It also caused reputational damage to our sector of the industry.
58
On 22 October 2010 I sent an email to Martin Bowles regarding issues such as these.
Mr Bowles was the Deputy Secretary of the Energy and Safety Programs Group at
DEECD. Mr Bowles responded by email on 10 November 2010. In his response, Mr
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Bowles provided general information but did not really address my concerns or
provide any concrete solutions. A copy of my email and Mr Bowles' response is
ACI.002 .001 .0564.
59
The high rate of 'failures' of cellulose installations as a result of the HISP was picked
up by Price Waterhouse Coopers in its report on the HIP. This amplified the
reputational damage to the cellulose industry, despite the fact that the vast majority of
the 'failures' reflected a failure of the inspector to understand the insulation of
cellulose fibre than any failure on the part of the installer.
Business after HIP
60
Prior to and during the HIP, the insulation industry was actively and directly
encouraged by the government to make investment and increase manufacturing
capacity. While there is always a risk in making investments, the risks of investing in
the HIP was calculated, given that the program was to run for two and a half years .
61
I received no warning of the termination of the HIP. There was no warning from
government that we should be winding down investment or our output. As a result,
we had to make drastic changes to our business when the termination was
announced.
62
Since that time , Enviroflex has lost a lot of money. These losses relate directly to the
massive investment made during the HIP, made in response to the government's
direction to do so, and the sudden termination of the program.
63
Four years after the termination of the HIP, Enviroflex is still paying for:
(a)
a new machine we had installed that has not been used since the HIP was
terminated;
(b)
new trucks and other equipment; and
(c)
two and a half years' (based on current sales) worth of stock which was in our
factory when the HIP was terminated .
64
Since the termination of the HIP, Enviroflex has had to redirect our business and
we're now doing a lot more commercial work and acoustic work in order to survive. It
has been costly to invest in and adapt to this new work.
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65
Turnover during the scheme turnover increased to $6.5 Million. However in 2010 it
dropped to $2.5 million. We have now built it back to $4.0 million.
66
One of the significant issues is that after the failure of the program the value of the
business plummeted and in particular the value of the machines went to zero. We
were not able to obtain business finance and have been working off our existing
overdraft account and also deferred payment of taxes. We estimate the increased
cost of interest has been in excess of $80K.
67
We have not been able to provide any dividend to the owners and the business has
only survived by the owners adding approximately $300K to the business since the
termination of the scheme. This has been invested in new technology so that we can
undertake acoustic and wall retrofit work.
68
Prices for installed insulation plummeted at the termination of the scheme due to
many installers trying to turn surplus stock into cash . This impacted our builder
business. A number of installers that set up under the scheme have remained in the
industry running off low cost base further depressing prices.
69
ACIMA is a sadly diminished association after the termination of the HIP. At its peak,
during the period of the HIP, ACIMA had 14 or 15 members. There is currently only
one member in Western Australia , one in South Australia, one in Victoria and none
anywhere else. Most of the businesses that were members of ACIMA have had to
sell everything up and have folded.
70
Unless otherwise stated, this statement is based on my own knowledge .
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Signature of witness
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