A Program to Validate Building Product Manufacturer Claims

BMAE Meeting

August 11, 2009

Gettysburg, PA

Need

• Concerns over dealer certification programs led to a meeting to discuss establishing a certification program for dealers

• Out of meeting realization that retail building product dealers faced a liability from selling building products with unvalidated manufacturer’s claims

Need

• People Rely Upon Retail Dealers to Provide Product Characteristics and They Do

• Nearly 63% of the dealers who responded to a ProSales survey this spring said they get asked daily about the quality and performance of specific products. Another

27% said they're asked at least weekly - Craig Webb - ProSales, June 10, 2009

Need

• Examples - Manufacturer Claims– Window

• Green– Low VOC Glue– FSC Wood

– Composite Decking• Meets NFPA Flame Spread Requirements• Color Will Not Fade• Green - 60% Recycled Materials

Need

• Retailer Relies Upon Manufacturer Un-validated Claims and Warranties– What happens if false?

• FTC truth in advertising action filed• CPSC complaint

– Retailer • Defendant in legal action• Loss of customer confidence and reputation

• Exactly the Concerns That Have Led to Our Support of the ISFA

Need

Product Validation

• Our solution• Our partnership with Intertek labs• Tipping points to making it happen• Business and marketing plan• Timeline• Summary

The Solution

• A program to protect retailers by validating manufacturers’ product claims

• An opportunity to help manufacturers by integrating many sets of testing requirements

The Benefits

• Reduce retailers’ liability• Reduce builders’ liability• Self-regulation keeps government (CPSC) at

bay• Manufacturers can utilize test results

conducted for others; aggregates, does not duplicate testing

• Manufacturers can differentiate products from their competition

• Consumers assured that product claims have been checked by a third party

The Program

• A Product Validation Initiative

• An Industry Service to independently verify product claims– Conforming products will be issued a

certificate listing validations and an Internet directory listing indicating which manufacturer claims have been validated

The Program

• Manufacturer applies to the program • Manufacturer submits information on a

product, including stated claims:– Performance, strength, durability, environmental,

etc.

• Information evaluated:1. Is there a basis for the claim? (e.g.., a standard)

2. Is there substantiation for the claim? (e.g.., supporting evidence from a qualified lab)

The Program

– If so, product receives the certificate and listing– If not, additional testing could be required

• Manufacturer pays small application fee and annual fee to keep listing

• Manufacturer pays evaluation fee • Product is re-evaluated periodically• Listed product claims can be challenged by a

retailer, wholesaler, or another manufacturer• Spot factory inspections can be conducted

Formation of Program

• Formed by FBMA Board of Directors– Decided that contracting with Intertek key to

proceeding– Needed an organization to request an RFP from

Intertek

• Being reformed into LLC– Building Product Retailer Alliance

Intertek

• Intertek is the world’s premier testing and inspection organization– Provides services in over 100 countries– 24,000 employees– Testing programs for all types of building materials

• Fire testing• Physical testing• Structural Testing• Chemical testing• Biological testing

– Over 60,000 products bear Intertek’s marks– Relationship with all major manufacturers

Intertek's Expertise

Construction ProductsCladdingCurtain wallsDecking & gratingFloor/Ceiling systems & componentsInsulated concrete formsInsulation productsGrease and ventilation ductsManufactured woodPenetration firestopsPerimeter jointsRoofing productsSealant, caulk, and foamsWall systems & components

Mechanical SystemsDampers & diffusersHearth productsPlumbing

Furnishings & FinishesMattressesFabrics & fillersFlooringFurniturePaints & coatingsWall coverings

Doors & OpeningsFire & Entry DoorsFramesComponentsHardware (Hinges, Latches, etc.)GlazingSkylightsWindows

Building Product Retailers Alliance

• To be acknowledged as legitimate needs to have a sponsoring organization that is a recognizable stake holder– Makes sense that the companies that sell building

products should be the most concerned that the products characteristics and performance are as advertised

Building Product Retailers Alliance

• To be able to accomplish it’s mission must have be or have a relationship with an independent third party validation/verification firm

• Third party validator must be able to validate at point of manufacture - a worldwide presence

Building Product Retailer Alliance

• Florida Limited Liability Corporation - LLC

• Ownership to consist of associations federated with NLBMDA– 200 units (shares) @ $1,000– No association can control more than 10% -

20 units - of the corporation

Building Product Retailer Alliance

• Governance– Each partner (owner of 1 or more units)

entitled to a seat on the board of managers• Representation limited to association’s chief staff

officer

– Board of managers makes big decisions• Approves budget• Officer compensation (if any)• Change in Mission• Etc.

Building Product Retailer Alliance

• Governance– Executive Committee

• Elected by unit holders - partners– Vote based on number of units held (5 units = 5 votes)

– In charge of day to day operations

Building Product Retailer Alliance

• Operations– All administration handled by Intertek

• Intent not to have employees, offices, etc.

– BPRA Responsibilites• Program oversight - audit• Marketing

Building Product Retailer Alliance

• Products– Validation of building product manufacturer

claims• Validation of existing test reports, certifications, etc• Verification if no existing validation

– Testing, manufacturing site verification

– Forensic services– Other servies

Building Product Retailer Alliance

• Liability– Intertek owns validation

• Manufacturer indemnifies Intertek

– D&O/E&O and liability coverage– Corporate shield– Negotiating Intertek indemnification of BPRA

Building Product Retailer Alliance

• Marketing– Strategies

• Develop Website - Intertek• Develop easily recognizable logo and program title• Marketing Targets

– Building Supply Industry– National builders (residential and commercial)– Big Box retailers– Architects and product specifiers– Green community– Building codes– Federal and state governments– Building product manufacturers

Building Product Retailer Alliance

• Marketing– Tipping points

• BSI– National retail chains– National wholesalers and co-ops

• Big Boxes• National builders

Building Product Retailer Alliance

• First year expenses– Insurance coverages $12,000– Board expenses $ 5,000– Marketing $80,000

Building Product Retailer Alliance

• Income Fees• Company application $ 250 - 500• Company renewal $ 250 - 500• Product validation application $ 2,000 - 6,000• Validation renewal (40%) $ 800 - 2,400• Verification Depends• Quality Assurance Depends

Building Product Retailer Alliance

• Income – Example

• Application– 100 companies @ $ 375 = $ 37,500

• Validation– 500 products @ $ 4,000 = $ 2,000,000

» Total $ 2,037,500

» BPRA @ 2% = $ 40,750@ 5% = $

101,875

Building Product Retailer Alliance

• Time is of the essence

• Competing private initiatives: NAHB, SCS

• Government initiatives

• There will be more regulation, not less

• We need to take the initiative, get BPRA running, and launch the program

• It needs to be nation-wide and industry-wide

Building Product Retailer Alliance

• Nathan Bedford Forrest– “I was the furstest with

the mostest”

Timeline

• Initial meeting (conf call) of executive committee in late-September

• Initial marketing materials by Sept 30• Launch at October 7 - 9 NLBMDA/HCN

ProDealer Industry Summit– Intertek prepared to answer mfrs’ questions,

process applications

Summary

• Our exposure is serious

• BPRA program is a low cost, win-win-win

• Partnership with Intertek enables us to hit the ground running

• Will require your help

• Now is the time for us to act!