Labouring under an NBN cost curve

Although no one in government will ever admit it, the construction problems encountered by the national broadband network illustrate just how difficult and costly it is to build Australia infrastructure, mines and major commercial projects.

In a small way the government is being skewered by its own industrial relations mistakes.

That’s why it’s so important for Australia to see Victoria, Queensland and New South Wales ending the cartel style agreements between the building unions and large commercial builders which are major contributors to the problem (States align to bust building unions, March 25).

I want to emphasise that even with the best industrial agreements, the NBN was always going to be a difficult and high-risk undertaking. Delays were likely, particularly in the initial stages.

Nevertheless, on top of this difficult project were overriding labour agreements that were very dangerous for the contractors.

The agreements included some of the key provisions which have caused havoc in resources industry and many infrastructure and commercial building projects.

As Ken Phillips pointed out in 2011, under the NBN agreement an NBN contractor must have union approval on any matter to do with the way it manages its workforce. If the union disapproves it can declare an industrial dispute and force the company (ultimately) into compulsory arbitration.

Given the high labour content in the roll out the unions have potential power to effectively manage the operations (The new NBN nightmare, June 6, 2011).

In fairness to the NBN organisation, its chief Mike Quigley worked hard to try and reduce the impact of Australia’s industrial relations mess. When tenders were first called the unions were pushing very hard to get a full flow through of the disastrous Leighton union agreements in the Victorian desalination plant.

And so the first tenders were very high as tenderers assumed the unions would be successful in exporting desalination agreements to the NBN .

The NBN then split the contract into small lots. The NBN agreement did not contain the very large desalination pay rates but still gave unions a strong element of potential control. How that power would be used would depend on the union bosses on site and the ability of contractors to deal with those union bosses.

NBN now expects to pass between 190,000 and 220,000 premises with fibre by June 30 compared with the 341,000 it had forecast.

One if the major contractors was Syntheo, a joint venture between Lend Lease and listed utilities manager Service Stream. It looks like Syntheo has had a hard time and so fell behind. But others like Silcar, Transfield and Leighton’s Visionstream also found the going tough.

Whether the NBN is constructed under the Conroy or Turnbull models it needs an industrial relations environment where management powers are not delegated to unions. So does the rest of Australia. Thanks to Ted Baillieu, Campbell Newman and Barry O’Farrell we will in time have such an environment on the east coast of Australia.