Video transcript

Caroline Speed:

Megan, could you tell us more about the building reform underway and specifically how the reforms to the domestic building contracts act will assist in the greater adoption of MMC?

Megan Peacock:

Specifically, the domestic building contracts act has also been reformed and there's been quite a number of changes and that legislation and the regulations that will follow next year are looking to MMC and how we can remove regulatory barriers to MMC, which is fantastic, particularly for our panellists up here today. So, what we're really looking for within that domestic building contract, is improving that flexibility to establish deposit limits and payment stages that support the usage of MMC which often involves much higher upfront costs. The new contract types introduced will differentiate what that percentage will be that will be incurred for the builder for one or more prescribed MMC types, so specifically from the pre-fabricated elements to the full volumetric builds, so that will look very different in the contract, so it will look like 3 different contracts, and how those contract types are defined will occur through the regulation specifically, and will be really informed by the work federally that is happening through the ABCB and also the work that's happening in New South Wales. They're doing quite a bit of work around MMC so we're really looking to see what those will be doing. There will also be a regulatory power that can prescribe exemptions from the proportionality requirement for certain types of contracts, and the reforms will ensure that all consumers will be protected by insurance for whichever build they kind of take, which is fantastic.

So specifically, I'll just mention quickly what the ABCB are doing, they're looking at sort of 2 different priorities, and I wish I didn't have my notes, and I could remember this off by heart for you all, but the first one is legislating a nationally consistent definition through the NCC of prefabricated and modular construction. And then the second project they're looking at is developing and implementing a national voluntary manufacturer certification scheme, and I hope somebody gives an acronym to that very quickly, to verify compliance within the NCC and ensure that sort of chain of responsibility off that. So, we know that the federal government is pouring quite a bit of money into this as part of their national housing target. Victoria is very keen on this, and we know that MMC is not the answer to the housing crisis, but certainly provides us with some really different and innovative ways to build houses much more quickly.

Caroline Speed:

Absolutely we agree, it's part of the solution, but it's not the solution. Steve, following on from this, and in the context of these reforms, what are the regulatory barriers to the greater adoption of all the different products within the broad definition of MMC?

Steven Baxas:

Look, I think the best way to sort of clarify that is to split it into 2 sort of parts and one's the documentation part of it and second is the inspection part. So, documentation approval for a building surveyor it's really important to understand what constitutes MMC and there's different types. So, you know your flat pack examples where trusses and wall, you know, wall frames and trusses are constructed in the factory and delivered on site, doesn't really pose any real barriers from my perspective from for a building surveyor, but once again to volumetric design, it does get a little bit more complex. So, you know, I guess it all begins with design and documentation. So, we have to educate the, I guess, the architects and designers. So, we're really clear about what minimum level documentation looks like and what needs to be represented. I think that's really, really important. You know, section 24 places an obligation on the building surveyor to ensure that sufficient information is contained within the documents before they're approved and they have to demonstrate compliance. So, I think that poses particular issues when it comes to volumetric construction, not so much for the for flat pack and then again there's the inspection component. So, inspections are going to be complex because is it a product that's built in a factory? Or is it something that's, you know, sort of somewhat semiconstructed in a factory and erected on site? So, to what degree does the building survey or the building inspector have to inspect a product that's already lying that's already got electrical wiring that already has plumbing in place. So, I think they're the real issues that we need to sort of understand and regulate so that there's this take up.

Caroline Speed:

Yes, and clarity about who's responsible for which part. Lester, I'll move on to you. I know that you use major domestic building contracts when you're working with clients. Could you tell us about the houses that you construct with Anchor Homes and how the proposed new contracts in the DBCA bill will help your work or benefit your work with clients?

Lester Raikes:

Yeah, thanks Caroline. So, I guess it really speaks to something that we've heard a lot today and that is really consumer confidence, at the moment, the domestic building contracts act needs to be kind of massaged at the moment to work with volumetric module which is the space that we play in, so removing that will be great for our consumers and having some consistency across the board, we think is very important because we're doing a lot of work  to try and build the small segment of the industry that we're currently in. But all these little add-ons, you might say like, what the, that this reform works great, the banks have come forward recently with a product that works for our industry as well, so all these little things are all helping, so we welcome it and we think it's a very good thing for industry and a very good thing for the consumer.

Caroline Speed:

And in the context of housing supply targets, how can volumetric modular construction contribute to industry meeting these targets?

Lester Raikes:

Yeah, sure, so I think the key thing is with modern methods of construction really across the board, and others will speak to it as well, but with what we do, it's the speed of construction really where we come into play. So, we can get a lot done in a very short space of time and you know, we got high quality control by building these modules in the factory. So, we're building typically depending on the house and the design, we build anywhere from 80 to 90% of the building in a factory, put them on a truck, take them to site, finish them off. Typically speaking with our builds, we build a lot of one-off projects,  our construction time in the factory ranges from about 8 to 12 weeks, on site 4 to 6, sometimes the scopes get a little bit extended out on site as well, but there is others in the space that are doing a lot of repetitive designs that would be able to build a house in 4 weeks.

Caroline Speed:

Yeah, and the on-site work, some of it's concurrent with the work you're doing in the factory so it's not necessarily 12 weeks plus 4 weeks, is it?

Lester Raikes:

Yes, it would be. Oh yeah. So we would start the work, we would prep a site while the building's still in the factory, but we have some of the challenges that we have on site, for example, is getting an electrical connection, that takes mostly up to 4 weeks, but we sometimes have a house sitting there waiting to be handed over, but we're waiting for some of the authorities to connect the services.

Caroline Speed:

It's a common story that we hear, it's not your part of the process that delays sort of your delivery. It's other parts of the process that delay the delivery. And we know that part of the barrier to greater uptake to MMC is and volumetric in particular is consumer perception of the product. So, how can we work together to shift this?

Lester Raikes:

Yeah, it's a good question. It's not just consumer perception, I think it's general perception and just that example I gave you before about, you know, service authority taking longer to be able to connect to service because we are so fast, like that's just an obvious disconnection you might say with MMC and then just a conventional way of doing things. But I think to answer the question about consumer, it really comes down to education. I mean a lot of people just are not aware of the kind of housing that we can deliver in this space. Our whole design philosophy at our company is that we try and design something that you would not be able to recognise that this building came on the back of a truck, and I think that we do that quite well, I'm sure we can do better, there's others in our industry that do an amazing job of it, but we have a lot of clients choose us as a company to build their house, not because it's modular, because they like the design that's being put in front of them and they've seen. So, I think we've got a lot of work to do as an industry to educate people, I think, generally what actually can be achieved and help be able to deliver housing at a much faster pace.

Caroline Speed:

Thanks Lester. And so Phil, you're sort of working in a different part of the MMC space so could you tell us what Drouin West Timber and Truss manufacturer and how it sits within that broad definition?

Phil Miller:

Thanks Caroline, we manufacture your lightweight cladding wall systems, so we're purely designed, if you can bring up that photo? So, our system we either use your James Hardy products, CSR products or your Masterwall foam systems. We also use pro board for your fire rated systems as well. In our factory we also install all the external windows, external sliding doors and external doors. So it's actually in a controlled environment. So in Gippsland, as Lester knows, we can go from 0 degrees up to 40 degrees whether it's raining outside or snowing, we actually can still build it inside the factory. That's purely what we do, it's all built around a green field site and our system is purely designed for 8 units and above, so your multi-res sector. Technically, it's a copy and paste of one another so it's a speed of construction much like Lester does, saves time on site and that's a big thing for us.

Caroline Speed:

And you mentioned there's some really clear time savings with the way you produce your home, so could you tell us about your sort of end to end day 1 to day 5 of construction as delivery and construction on site and then following on from that, how can that type of construction contribute to meeting our housing supply?

Phil Miller:

Yeah, so that photo up there, so once all the detailing has been done for a certain unit, that left hand photo you see where those front photos we can actually build, manufacture a double story unit in our factory with a double lockup garage within a day and a half, cladding, walls, windows all ready to go. We can actually then supply and install, so those 2 first units we supplied and installed them within 3 working days. The major builder we're actually working with in Victoria, that's a bank of 10, so they've actually done pretty well, so we do quite a few hundred with them now. That bank of 10 by the time we finished, they handed over to their clients turnkey, garden, landscaping their done was actually completed within 51 working days, so they've got it down pat. And what I mean by saving time and money on site, they're using that extra capital to move on to the next bank of 10. So the finishes are very good, I have actually seen the end finishes, people go 51 working days, what's that all about? I have actually seen the finishes inside and out and they are very, very good. They don't cut corners.  They’ve got the trades perfectly aligned which is fantastic, that's what you need, they good quality trades on site, much like Lester does in our warehouse, in our factory, we actually have tradesmen and so they're actually qualified either carpenters or retired builders and that's what you need, the guys that actually care for your product before it actually goes out on the site. Now in terms of the, our space, in terms of how it's going to help with the housing shortages, it's not, you know, the golden child so to speak, it does assist in everything.

Caroline Speed:

And so how many would you produce in a year at the moment? And then with a view to what kind of government investment or other investments required for you to expand that production?

Phil Miller:

We can produce up to 300 a year, government assistance, whether it's grants, whether it's from federal or state, we can actually double our capacity. So we've got room, you've been in our factory, we got room for an extra couple of panelised lines, we've got the space to actually double our size of our factory as well next door and we can easily double our capacity per year by either putting on an extra shift, which then means we're employing locals and local trades and getting new jobs like this on board definitely helps the system as well.

Caroline Speed:

And do you feel like there's enough funding coming through? I know there's quite a lot going on in Victoria, but federally as well?

Phil Miller:

Yeah, there is, there’s a bit coming on. So, we have had a few enquiries from other states regarding our product and a company from Canberra approached us a few months ago, but it's just a bit too far to travel from Drouin to Canberra to take that sort of system, unfortunately.

Caroline Speed:

And you mentioned quality and some of the feedback we received from the builder that we know you work with who manages. Obviously, he works with the building surveyor and then the inspectors. The feedback from the building surveyor and the inspectors is the quality of your product is superior to what they see from traditional on-site builds. So, Steve with this in mind, sort of from your perspective, what's the role in building surveyors in increasing the adoption of MMC?

Steven Baxas:

From my perspective, is there are very few barriers in that product. I've actually been to the Drouin factory with you, we did a tour that day and I see no barriers whatsoever because it's erected on site and it can be inspected on site as normal, the plumber comes in afterwards, electrician comes in afterwards, so all these things can be certified on site. So, from a quality perspective, it's constructed in a controlled environment and erected on site. So, it makes sense that the quality is going to be quite superior, if you imagine trying to battle the elements between summer and winter in Melbourne and having to build in the rain and build in the you know, scorching heat, this is a far, you know, far superior product when you watch the way it's actually constructed on a table.

Caroline Speed:

And Brenton, moving on to your space, tell us about the range of products that MULTIPANEL manufactures.

Brenton Russo:

There's some common themes that I see between you all, which is the accuracy of your work, the minimal waste. Same at Drouin West Timber and Trust and I'm sure it's the same for you Lester and the quality of the product that you can deliver, because it's manufactured offsite. From your perspective Brenton, what are the responsibilities of manufacturers operating in MMC and what should they be providing to their customers?

Brenton Russo:

We've got to provide a quality product same time every time and on time and that has to happen. It's got to be backed up with certification and testing, and that needs to be current. We've actually got our CodeMark audit today and tomorrow so that's an annual audit we do and that's that serves for traceability as well. So, any product of ours manufactured, it's the same with these guys, every noggin they manufacture spit out has got a barcode and you can trace that back to the timber mill. It's the same with our product, we can trace it back to our raw materials. So, anything that happens in the future, we can say where it come from. Traceability is important, I think we need to help the industry understand that what they're using works, it stacks up and it's been done for a while as well. So, I think they're the important parts.

Caroline Speed:

And what are the opportunities and risks that you see in your work and how do overseas products fit into that?

Brenton Russo:

I think the opportunity is huge for us. We we've already spoken about this the pace of what we can, the way we can do things, and like I said, we do module and traditional but we've got a heap of stuff going in Queensland at the moment for the MMC program and they're spitting out homes to people that need them, social housing to those most vulnerable, in 27 days and I was speaking to someone last week and they want to get it to 14, and these are getting roofs over the head of people that need it. I think that's very important, it's not the answer for everything which we've all spoken about. It's not everything, but it's certainly a certain section of the market and producing homes quick for people that need them. There's a huge opportunity there. Another thing I want to touch on is women in the workforce. They've come up before and if you work in a factory environment, it's got male, female toilets, it's clean, I think it's an opportunity there to promote women in the industry. I got a couple of young girls and they said, "Dad, could we become builders?" It's like, "Well, there's an avenue there to do it." and I think that's a lot better than potentially traditional on-site construction. I think there's a massive skilled labour shortage, so we've got to do more with what we've got and like I said, you can you can install 8 to 10 shower bases in a day with us. So, it's one person can do more, so I think if they're modules in a row in Lesters factory, you can do even more than that. So, I think the ability to look at productivity, look at quality, there's huge opportunity for the industry. In terms of risk, I feel like the elephant in the room is bathroom pods from overseas. So, it's easy to speak to and what lies beneath. Once you got a finished product, who knows? And it's the first versus the 1000th pod that comes in and the differences in that, and I think we've also got an industry here to protect, we've got some really quality people doing really cool stuff here. Sink do bathroom pods out north of the city and it's a fantastic product and it's not expensive, and I think that's what we got our head around. Australian-made doesn't mean expensive, it means high quality, and I think the overseas risk, they're huge in compliance. I was actually speaking to someone in Sydney a couple of weeks ago who's manufacturing bathroom pods in China and he said, "I want to buy your product, send it over there, get someone to put it in, bring it back." I'm like, "Well, at least he's trying.” It makes sense and at least he's meeting CodeMark certification with his waterproofing, which is one of the most important things in bathroom. So, I think there is huge risk, we don't want to be anti-competitive but yeah, there's certainly some risk to consider.

Caroline Speed:

Thank you. And following on from that, Steven, Megan, how does product accreditation sort of fit into the MMC space and how might that help improve consumer confidence?

Steven Baxas:

Yeah, a product accreditation scheme is the elephant in the room. That's really what's missing and a fit-for-purpose sort of product accreditation scheme. I mean, we currently do have a couple of options. There's the local BRAC accreditation and there is the CodeMark that's already been adopted. I think they provide certainty in design and quality and they can be relied upon by building surveyors. So, it makes perfect sense that if you move to something that's manufactured more so than just flat pack in a factory, which is a whole bathroom pod, which is lined, which can't really be inspected in a traditional sense, then accreditation really is the answer.

Caroline Speed:

Megan anything from your space? Steve’s covered it, I love it. I think the other common theme here is the time savings across all the different products. It seems to be a really one of the greatest assets along with the consistency of the product delivery and the quality of the product delivery. So, look, given these clear benefits that we've heard about today of incorporating MMC into building and construction projects, do you have any sort of further thoughts about how we can all contribute to the greater adoption of MMC?

Megan Peacock:

I can just start from government perspective. Yeah. So, as we move through the domestic building contract, we'll be coming out to industry. You know, we know the plumbers have a particular interest in the bathroom pods in particular and inspections. We know that there's lots of people with lots of opinions about MMC and we want to get it right, and so we're really inviting people when we come out with the domestic building contracts acts regulations to provide us with feedback and then through the work with  DJSIR the other department. They're doing great things with industry around MMC. So, we're very connected in with them to try and make sure that the industry is growing and we're doing the things that we can to help that happen.

Steven Baxas:

I can add to that. Ideally, we want a national accreditation scheme, not a Victorian scheme or we can go at it alone and I guess that is an option for us. Should nationally it become you know a bit long in the tooth, the risks are we need products to actually work across boundaries and borders. It'd be, you know, what if you do grow your business and you want to take something to Canberra or to New South Wales and vice versa? We don't want barriers in place if that happens. So, there's a real, there's a real benefit to a national accreditation scheme. That's really what we should be striving for.

Brenton Russo:

We said a lot today, but we need to be promoting innovation and I think innovation is a big thing and the opposite to that is to not try and tear down innovation. I think as Australians, we have tall poppy syndrome a little bit and I think it's, with MMC, it's very difficult to have a conversation unless you're having it in probably one of 3 different ways, and that's whole houses coming out kit of parts or pre-fabricated products like ours which suit both traditional and modular, so I think to understand MMC, is very important, and then as an MMC industry, we need to sell ourselves better and promote our products and promote the cool stuff that we're doing, and go back to Lesters slide, like, that house is really cool. It's really beautiful, like you said, people are buying it for the design, not the fact they get it quicker. So, I think there's a lot of promotion to be had there and collaboration too. I think the MMC industry is very collaborative because it's a lot smaller, but they do work in well with each other and they don't hold back. They share secrets, which is good.

Caroline Speed:

Can I just jump in there? You mentioned innovation and we've had a conversation previously about some of the barriers to innovation and for the work you're doing. Do you want to talk a little bit about some of those barriers that you've encountered?

Brenton Russo:

Yeah, getting a new product to market is hard and you got to get acceptance, but also there's barriers you got to go through and when we first started, CodeMark wasn't necessarily as strong as it is now, but to get those accreditations, get the systems in place, it's got to be done. And there's often, I spoke to Megan before about it, but there's often tests that want to be had that we don't have the ability to test for. So, embracing innovation is one thing, but actually making sure that everyone's comfortable using it is another thing, and I think they got to fit together. But that's even understanding from a regulatory perspective, what we're looking for, but yeah, we have to embrace innovation. I mean, we've been around 20 years, so we're not some overseas product. We're manufacturing Carrum Downs, so we we're not going anywhere and yeah, innovation is key, but you have to have a surety around it because we've just heard from the cladding combustible cladding stuff, like you don't want to adopt innovation that hasn't doesn't stack up. So got to be critical at the same time.

Caroline Speed:

There was also a cost element to innovation. I remember in our discussion that you sort of, it's exactly the same product, but when it's used in a different way, you had to go through the full process again.

Brenton Russo:

Well, we're a prime example of a national accreditation scheme.We sell all over Australia. So, what, you know and even now when we sell to a modular builder, it might be manufactured by Modscape here that goes to Queensland or well they got a Queensland plant, but it might go to South Australia. So, stuff is crossing across borders a lot, and it's one thing, you know, terms of what you got to think about, but I remember learning that every time a module goes on a truck, it's like going through an earthquake. So, we do need a national system that says if you're going to do this, this is the best way to do it, but yeah, our product goes traditional, non-traditional all over Australia and even some parts of the world.

Caroline Speed:

Yep. And Lester, could I ask you too, we've had a conversation about this, but what you're doing to sort of shift consumer perception from within your business with your potential customer base?

Lester Raikes:

Yeah, it's a good question. It's sort of harder to pull off than it sounds, to be honest. But yeah, we've recently employed a full-time content creator just to create our own content. If I can ask everyone in the room, jump online, have a look at what all these modular builders are doing, give us a follow, share some of our content. We need you guys to show interest and to have a look and see what we're all doing. It's fascinating what can be done in this environment, in this industry, but that's my simple request, just have a look, follow some of the awesome work that us modular builders are doing and by doing that, it'll just amplify what we're doing and yeah, you know, it'll continue to grow.

Caroline Speed:

Could I also add in another discussion we've had part of the barrier to greater adoption is the fact that your products not really able to be constructed in green field areas where Drouin West Timber and Truss product is absolutely well suited to green field areas. Can you tell us about the barriers of why you've ended up in more of a bespoke market rather than the green field market where there could be greater adoption?

Lester Raikes:

Yeah, sure. I guess that's self-inflicted in one way because the, you know, we're doing lightweight clad smaller house types, but a lot of the green field sites with their restrictive covenants won't allow a lightweight clad building to be built in those areas. So that is a bit of a bit of a challenge. Who knows, maybe in the future, as this kind of construction type is adopted more and more, that may become a little bit easier. I mean the reality is you can brick one of these homes up on site, but we lose efficiency as soon as we start doing those things as well.

Caroline Speed:

And the design covenants are things like requiring either brick or stone as part of the construction or particular colours, particular types of cladding, and that doesn't really fit with the way you construct your volumetric houses for transport.

Lester Raikes:

Yeah, that's right. So, typically it's the developers guidelines that we're struggling to stay within.

Caroline Speed:

Yep. Or tiled roofs and those sorts of things as well. Yeah. Phil, final thoughts from you?

Phil Miller:

Yeah. As I was saying before, that with the Drouin West, how we operate is that with our current developer and previous developers have always had upfront issues at the start where inspectors and surveyors look at our product and go “What's this all about?” So, it's all about training the current breed out there, and also training the new guys that coming through as well what the MMC space is all about. So, we’ve sort of got that organised as well, so to speak, and also what Lester touched on before, the bank's now coming to the party as well. So, our current developer with this first lot went through, he put a lock up and frame stage payment within 4 days, the bank goes “Hang a second, what's going on here?” didn’t believe and they came and had a look and they go “What's this MMC space all about?” So I think the CBA was the first one they come on board with different contracts for, you know, conventional side. Now the modern method construction side, that's very good and I believe the other banks are slightly coming on board as well and, same with Anchor Homes, all of our cladding when we put on in our factory, we've actually had the companies come out, teach our guys how to actually physically install it as per their manufacturing standards. So yeah, we are the manufacturer, but also we have to warranty that for 7 years on site. That's a big thing as well people don't know.

Caroline Speed:

In terms of that education piece with banks, with building surveyors, with consumers I suppose, is there anything else that you feel you could be doing, Steve, to help in that space?

Steven Baxas:

Look, I could certainly provide clarity to industry as these things come to market. The other space, it's a little bit tricky, to your point, is insurance and, you know, what's insured and who insures and who warranties it. It was built in the factory, on site. Yeah, chain of custody, all of that. Security of payment as well because there's a lot of money spent before anything makes it to the site. So, all of these things are things that we need to work out in order to facilitate it. But yeah, they’re my thoughts.

Caroline Speed:

Yeah. All right. Well, look, thank you everyone. And I think that's all we have time for today, Michael. But thank you for joining us here today for this conversation.