The Federal Government's new construction industry, industrial relations legislation tends to reinforce a view that for workplace reform to occur legislative change is required first. Although important, this "legislation first" focus can divert attention away from what is in fact the main industrial relations dynamic of commercial deal making.
Particularly in the construction sector Australia's industrial relations processes have always been about the doing of business deals and the orchestrated allocation of who gets what jobs in town. The process involves "insiders" using industrial relations to make sure outsiders don't become commercial threats to their established businesses. Sometimes violence is used to enforce the system. But it's important to realise that nothing is what it seems in industrial relations, because in construction complex pay offs occur between parties who outwardly appear as adversaries.
This game of public subterfuge is further masked through the use of industrial relations commissions who by way of custom and practice give legal sanction to deals without considering whether the deals are good or bad or breach commercial or other law. And many industry associations actively massage the deals even while complaining about the deals.
However running parallel to the Federal Government's legislative agenda is their move to tie funding of government construction projects to the government's industrial relations building code. This poses the real threat to the way Australian business, in conjunction with unions, organize the construction industry.
A major outcome of the Cole Commission seems to be the education of the Federal Government on the detail of the anti-free market processes at play and how industrial relations acts as a mask to anti-competitiveness. Further, the Cole Commission flushed out the extent to which consumers are the ultimate losers in this market manipulation game.
The Federal Government appears to have realized that with its $5 billion a year of projects it's the dominate consumer in town. Government projects are the real profit spinners. For example when things go bad in construction, big dollars can be lost quickly. Construction companies rarely lose money on government funded projects because government is routinely prepared to accept the burden of cost overruns. Companies need the government profit purse to offset any losses on private sector projects. This is critical to the current deal making environment.
But now the Federal Government appears to have decided to be a demanding consumer and use its commercial leverage to force financial performance through tight industrial relations arrangements on its construction jobs. This is extraordinary because normally the competing interests of government departments and the political imperatives to complete grand projects, cause government to acquiesce to the "build at any cost" approach. Some powerful arguments must have been accepted by Cabinet to cause a new government resolve.
As a result workplace relations reform in construction could be looking serious. But there are questions. Even with construction specific legislation can key government projects be built without using establishment players? For the government's reform agenda to succeed, "doing what I do", will have more impact than "doing what I say". And here is the difficulty.
The bureaucracy and industrial relations and human resource practitioners are steeped in the culture of conforming to established deal making. If the government is to see its projects completed on its industrial relations terms there may be problems finding the managerial talent and the contractual dynamic capable of creating and implementing successful strategies. For example construction site security problems on targeted projects are conceptually nightmarish and beyond the expertise of most builders.
Further, established major contractors are too exposed on other jobs to run the risk of doing work without their union partners. Grocon demonstrated this.
But there are many small and medium construction businesses who aspire to be large and would love to do the work. Their fear is the risk of financial disaster if the government strategy collapses. Retribution from existing industrial relations deal makers would be savage against those firms who worked with a failed government strategy. The potential profit needs to be significant if the probable downside of involvement in a failed government agenda is financial martyrdom
If however the government's strategy succeeds, the established commercial dynamic in construction could alter and be institutionalised, around a properly regulated free market.
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