The ACCC’s recent national recall of installed electrical cable provided a timely reminder of the impacts non-conforming products can have on safety, industry sustainability, productivity and long-term asset values.
With an estimated 40,000 homes and businesses affected, conservative estimates place the rectification work into the tens of millions of dollars. The administration costs alone will be large when considering the supply chain has involved electrical and hardware wholesalers, builders, electrical contractors and building owners. The original cable supplier has been placed into administration and will not wear the cost of its foray into supplying building products in Australia.
As announced by the electrical safety regulators, affected cables[i] pose the safety risks of fire and electric shock that will increase over time, with risks increasing significantly from 2016 onwards and particularly where cable is exposed to heat.
The recall requires accessible cable and cable exposed to heat sources to be removed and replaced. Practically this will see the removal of cables in roof cavities, underfloor spaces and installed near heat sources (for example heaters, ovens, ranges and down lights).
Installation inspections should be conducted by a qualified electrical contractor. If affected cables are not found during an inspection, costs will need to be paid by home and building owners. This situation may lead to some building owners attempting inspections themselves and risking electric shock.
Practically, the recovery rate for this cable recall will depend on whether building owners, builders and installing electrical contractors are aware of this recall notice, check their purchasing records and undertake action to check all potentially affected installations.
Cable that is inaccessible and left installed now will continue to degrade at a much faster rate than quality cable and will require replacement if disturbed in future. At that point, what may appear to be a simple job of replacing an electrical fixture may require significant additional rectification work to replace brittle and cracking electrical cable insulation. In this way, long-term asset values will be affected.
Where cable is judged to be inaccessible and not replaced under this recall notice, there is a requirement to identify such properties via a warning sticker in the meterbox. This will be seen by future property purchasers as increasing the risk and costs of such properties. Additionally, stickers may be removed by unscrupulous building owners, exposing new owners to increased safety risks and unforseen cable replacement costs.
Non-conforming products skew the market against legitimate product manufacturers, suppliers and installers who are forced to compete against cheaper business models. Such non-conforming products are cheap for a reason – they sometimes leave out critical safety components and are of lower quality.
In the recent case, key plasticiser ingredients, important in retaining suppleness of cable insulation over time, were left out of the finished product. As such, the insulation will ultimately become brittle. While this allowed the cable to be manufactured cheaply, the overall costs associated with the sub-standard and unsafe nature of the product will easily outweigh the initial saving.
Additionally, the “consumer guarantee” as defined by the Australian Competition and Consumer Act may be applied by homeowners. This law allows consumers to ask their electrician to replace all affected cables in their installation as these defective products would likely fit the definition of “major defect” under the Act, regardless of whether they are accessible or not.
The cost to re-wire an entire home after it is already built can be many times the original cost to install cabling, as internal and external cladding may need to be removed and replaced to allow access. This situation could lead to the possibility of legal disputes between the liable parties (contractors, builders and cable suppliers) and may place contractor and building companies in financial stress as they will wear the initial costs of such replacement.
To reduce the risk of another cable recall in future, electrical safety regulators should consider the re-classification of electrical cable into a higher risk category and the harmonisation of state electrical safety regulations to improve the visibility and traceability of suppliers and electrical products on the Australian market.
Also, to reduce the incidence of fly-by-night operators, regulators should consider applying a risk management approach to building products and suppliers – including the possibility of recall insurance. Without this, the costs of recalls will continue to be borne by the supply chain in Australia and the Australian economy more broadly when weak suppliers fail.
For further detail, read about Ai Group’s non-conforming products research project.
Do you have any relevant experiences with non-conforming products? Please share them below.
[i] All sizes and configurations of white TPS* and Orange Round Infinity mains power cables are affected as well as Olsent power cables sourced from Infinity Cable Co Pty Ltd
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