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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Victoria's building union crackdown reaches the next level

Tuesday, September 23, 2014

In a significant development the Victorian government this week imposed the first sanction against a construction firm for breach of the Victorian Construction Code.

McConnell Dowell Contractors is no minnow in the construction game. It reports around $3.5 billion in construction works on its books at any one time, operating in Australia, New Zealand and Asia. It is a major builder of infrastructure, currently building, for example, large-scale water supply tunneling in Brisbane and the Gold Coast Light Rail.

But for the next three months McConnell Dowell can forget about tendering for any new government construction work in Victoria.

According to the government statement, the ban was imposed after McConnell Dowell engaged a labour hire company with a CFMEU construction union agreement after pressure from the union. This put McConnell Dowell in breach of its own workplace relations management plan and the government’s construction guidelines.

Not a lot more detail is available but I bet there’s some line about executives having to attend ‘please explain’ meetings at the very highest of levels in McConnell Dowell. The code specifically bans contractors from seeking approval from or consulting with unions over which subcontractors they engage. It would be this provision that has been breached.

The three-month ban might seem like a slap on the wrist. After all McConnell Dowell targets major projects. Tender processes of major projects happen over much longer time frames than three month. The ban doesn’t apply to tender processes in which McConnell Dowell is currently involved. So at best the sanction might delay a process for them.

But there’s more to this short ban than first appears. In construction tendering it’s necessary to be on top of all new tenders when they happen. The ban stops McConnell Dowell from being invited to tender or submitting an expression of interest. They are locked out of the process for three months. This puts them critically behind their competitors and at a significant disadvantage.

There’s big damage to their corporate reputation as a reliable, tender compliant business. The Victorian, New South Wales and Queensland codes are identical. NSW and Queensland will now be looking at McConnell Dowell closely, suspicious that they could be in breach somewhere on current jobs.

The Federal government has its (identical) code currently before the Senate. The Federal Fair Work Building and Construction authority is highly active investigating and prosecuting breaches of the Fair Work Act. Breaches inevitably involve levels of collusion between construction unions and large firms. Again McConnell Dowell will likely be receiving special attention.

But for the McConnell Dowel it’s not a total disaster, yet! When the code first started in Victoria, Lend Lease stuck with its CFMEU collusive deal-making and defied the government. Some months ago it ‘converted’ and announced its commitment to the code. A week ago the Lend Lease lead consortium won the tender for the $8 billion East-West Link road tunnel project. There is a construction life without union collusion!   

The McConnell Dowell ban sends big signals.

Lend Lease will now be all too aware that the Victorian government will be monitoring for code compliance on the East-West Link project. Sanctions are still possible when projects have begun. All construction firms may now be realising the commercial message underpinning the construction code.

The chief executive of Boral, Mike Kane, should also be pleased. In the Royal Commission into union corruption he exposed how his competitors happily moved into the concrete supply market after Boral had been black banned by the CFMEU. In a recent speech he discussed Boral’s refusal to engage in ‘criminal cartel conduct’ in the construction sector. When firms collude with unions, that’s effectively what’s occurring.

Kane further exposed that all the litigation against construction unions, makes no difference. The real issue in construction is commercial; who gets the jobs wins! If union collusion results in winning work, collusion will occur. The ban against McConnell Dowell changes that situation. Collusion with unions now results in loss of work. That’s where the change will and is happening.

In my last article on this subject, I stated that if at the November 29 Victorian state election, the Victorian ALP wins, then Victorians will have effectively elected a CFMEU-run government. I might appear party political, but it’s a statement of fact.

This current ban on McConnell Dowell demonstrates how the construction code is changing the commercial reality of construction. A CFMEU-run ALP Victorian government will immediately return construction to one dominated by ‘criminal cartel conduct’ between unions and construction firms.

[First published in Business Spectator, September 2014]

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