Ken Phillips
Japanese lesson
Last month I commented on the breakout in violence on Victorian building sites (Back to the bad old days, April 6). I likened the violence to a bikie-gang war and predicted more was to come.
We didn't have to wait long, it seems, with rumours circulating that Geelong bikie gang members are being paid to man picket lines at the West Gate Bridge upgrade site. The violence at the site has stopped work at the bridge for more than six weeks. Suicide prevention fences are to be installed and the bridge is to be widened to manage higher traffic volumes.
The contractor, John Holland Group, alleges that workers' lives have been threatened and has initiated multi-million dollar legal actions for damages against the two unions involved.
Last week 200 police were on site to ensure that about 30 construction workers could be bused to work through the picket lines. Workers have had their vehicles followed and have been harassed by balaclava-hooded thugs, vehicles transporting workers have had their windows smashed driving through pickets and several arrests have occurred.
The West Gate Bridge violence is the peak of a recent wave of construction site violence affecting Victoria. However the recent violence is the most important because it a litmus test for the future of construction in Victoria and nationally. There’s a lot at stake on many levels. It’s a political test for the Rudd and Brumby governments. It tests the credibility of the Australian Council of Trade Unions. Most importantly, the outcome will signal whether the planned, national, multi-billion dollar infrastructure projects can be delivered on time and within budgets.
Cost blow-outs
Some brief history sets the scene for understanding the economic and political issues at stake.
I’ve studied this area for a long time. In December 2008 I collated contractual evidence that the Melbourne Commonwealth Games Village cost an extra $50 million on a $144 million project due to industrial relations problems. Further, that the Victorian government was aware of the extra cost.
Two years earlier (November 2006) I predicted that the $2.4 billion EastLink project in Melbourne would save $295 million and open some six months early because it had secured significantly improved industrial arrangements. The prediction was based on comparisons to the $1.8 billion CityLink project which was plagued with industrial turmoil. I was out by one month on the early opening. EastLink opened five months early in June 2008.
In the same 2006 report I summarised the documented cost over-runs on the Holden engine plant upgrade ($4 million), Melbourne’s Federation Square redevelopment ($40 million), Melbourne Cricket Ground redevelopment ($100 million) and Melbourne’s Southern Cross railway station development ($90 million). This sample of project cost over-runs all resulted from industrial relations disputes, violence and intimidation that plagued Victoria up until about 2005.
Victoria was the worst example of nation-wide industrial relations lawlessness afflicting the commercial construction sector. It was fully detailed in the 2003 Cole Royal Commission report into the sector. Since 2005 there has been an amazing level of comparative calm in Australian construction and hard evidence of significant productivity boosts, higher employment levels and wages and projects being completed on time and within budgets. Construction sector industrial disputes dropped to near zero. The difference was the Howard government reforms to construction laws, policed by the specialist construction ‘cop’, the Australian Building and Construction Commission which started operations in 2005.
The Rudd government has legislated to shut the ABCC down in January 2010 and the IR climate is now changing. The West Gate Bridge and other recent Victorian construction violence show that.
Spooked investors
There are simple reasons for the return to violence. It’s easiest understood by another history lesson from the ‘Saizeriya’ story. The West Gate Bridge events are following the same patterns and involve the same players.
Saizeriya is a giant Japanese restaurant chain serving Italian food. In 2000 they committed to constructing a major $400 million factory complex in Melton in the western suburbs of Melbourne to prepare and export food to their 400 Japanese restaurants. Hundreds of people were to be permanently employed. Saizeriya fitted the food bowl ambitions of Victoria being a perfect valued adding export project.
A newly elected, enthusiastic ALP Bracks government gave lots of assistance. This included recommending to Saizeriya that they sign an industrial relations agreement with the National Union of Workers (NUW) for coverage of the operations of the factories. Unbeknown to Saizeriya, this upset the Australian Manufacturing Workers Union (AMWU) who wanted coverage. The AMWU already had coverage of metal fabrication on the first factory construction along with the CFMEU who had civil construction coverage.
The CFMEU and AMWU pressured Saizeriya to dump the NUW and use the AMWU. The CFMEU/AMWU agitation on-site required Saizeriya to bring in security guards amongst many measures. The factory was scheduled to open in February 2002 but was delayed until about June 2003.
The Japanese were stunned by the extent of the industrial violence and trouble. They froze plans to build the other seven factories and investigated setting up in New Zealand. In late 2003 Saizeriya instigated a $42 million damages suit against one of the construction companies involved and the IR consultancy brought in to help resolve the dispute (but not against the government). The company's writ named the government and chief of staff for Premier Bracks, Tim Pallas, as recommending courses of action to Saizeriya during the dispute. The dispute massively damaged Victoria’s and Australia’s global investment reputation amongst major food companies.
Tim Pallas has been promoted. He is now the minister in charge of the West Gate Bridge upgrade and involved in advice on how to resolve this industrial dispute.
The West Gate dispute also involves the AMWU and CFMEU. John Holland has an industrial agreement with the AWU who built the West Gate Bridge. The AMWU/CFMEU managed to get some members onto site through a labour hire company then started demanding coverage. John Holland’s said "no!"
The entire scenario looks a lot like Saizeriya repeated. John Holland is the meat in the sandwich in a demarcation dispute between the AMWU/CFMEU and a rival union. Again Tim Pallas is responsible for representing the Victorian government’s position. This time the government is the client but John Holland suffers the financial cost of the dispute. The project is seriously delayed with no resolution imminent. Work stopped again last week after Tim Pallas brokered discussions with the CFMEU/AMWU.
Why is this happening again and now? There are several reasons, all of which give insight into the true nature of industrial relations in Australia. It’s to do with internal Labor politics.
The union movement is not a united force. It’s more like a series of labour businesses involved in cut-throat competition in a limited market.
In construction, the AWU is by far the most commercially sensible and pragmatic. They look after their members but are prepared to cut commercially viable deals with businesses to enable jobs to be finished on time and on budget. They have a history of sticking to the deals they make.
The AMWU does not behave reasonably in the construction sector. They are comparatively more reasonable in manufacturing, but not always. The construction section of the CFMEU has a reputation for militancy. This compares to their forestry division who normally work closely with businesses. These unions are heavily factionalised. They are stricken with internal warfare over who controls the many millions of dollars of member funds.
The CFMEU/AMWU in Victoria has a hard-core band up to 200 militant supporters. With the economic downturn this small group wants to secure well-paid work for themselves. The West Gate Bridge project will run for two years paying over $140,000 a year to some workers. The group wants to force AWU workers off site and grab the jobs for themselves. The problem is that once they gain control of the site there is a strong incentive to deliberately work slowly to drag out the work and earn more money.
This is what happened at Saizeriya, CityLink, the Commonwealth Games sites and so on. When allowed to operate, this small group has and will again control of an entire industry.
Ken Phillips is executive director of Independent Contractors of Australia. He is the author of Independence and the Death of Employment (Connor Court).