Lend Lease's about-turn leaves the unions seething

The board of Lend Lease, including its chairman David Crawford and CEO Steve McCann, have taken a bold step: they are backing the federal government’s code of conduct in commercial building and turning their backs on the old cartel-style agreements with unions.

As a result, the building unions are launching vigorous personal attacks on Steve McCann but not on the CEOs of other big builders like Leighton and Multiplex.

When the royal commission into union abuses turns to the building unions next week it will soon find itself investigating the cartel-style agreements between unions and large builders that have boosted the cost of Australian commercial construction by lowering productivity. 

My guess is that we will have a royal commission into the past conduct of Leighton, Multiplex, Lend Lease and other major builders as well as the long overdue inquiry into building union activities.

The old Lend Lease was an active participant in those cartel-style agreements, so much so that the Victorian government -- which was the first government to pass legislation to block cartel-style behaviour between big builders and unions -- stopped Lend Lease tendering for government work. The building unions went to the courts on behalf of their then partner, Lend Lease, to have the Victorian government ban on Lend Lease overturned. (The unions won the first round but lost on appeal.)

How things have changed. The building unions have now sent a circular to their members blasting Lend Lease CEO Steve McCann and Boral chief Mike Kane. McCann and Kane are described as “anti-worker bosses” and, along with Tony Abbott’s, their salaries are highlighted. Clearly the unions are furious that both Boral and Lend Lease are backing the code.

Significantly, the unions are not attacking the chiefs of companies like Leighton and Multiplex. These companies are being much more cautious than Lend Lease in ending their cartel-style agreements with unions.

In WA the building unions offered to cut the mining boom-boosted payment levels but to leave in place all the cartel-style powers to decide who can be subcontractors. It is tempting to many major builders but if any builder signs agreements based on the union offer they will be banned from future federal government work because the agreements are blatantly outside the rules of the government code. Complicating matters is the fact that big groups like Leighton do not have sufficient on-the-ground management skills to manage outside a cartel-style agreement.

As the major builders skirmish for a position, subcontractors are also examining their strategy. Under the cartel-style agreements with big builders, unions controlled who was allowed to subcontract and also the rules of the subcontract. Now the federal government is proposing that any company involved in contracts that are fully or partly funded by the federal government must have labour agreements that limit the power of unions over subcontractors. In NSW and Queensland there have been extensive briefings from government officials and industry bodies to subcontractors as to how the new code will work.

However part of the problem is that the required legislation has not yet passed through parliament and will require support from the new Senators. The federal government believes it can end the cartel-style agreements without legislation but it is a lot simpler with legislation.

The result will be many more hospitals and buildings for the same money.