What's going on at the Royal Commission into the Building Industry? The Commission's brief is to investigate unlawful and inappropriate conduct and in this context spectacular examples of shady payments to unions have emerged but what is the general direction of investigation?
An inclination may exist in a paper released summarising 29 private, "tell all" meetings held in October 2001 between the Commissioner and key players in the building industry. The paper is an outstanding overview of how the building industry operates and perhaps creates a road map for Commission investigations.
The paper describes four levels in the industry; capital city CBD building sites controlled by about fourteen major head contractors; many large sub contractors who often, but not always operate on CBD sites; lots of small subcontractors; and the housing industry structured around independent contractors. Sharp distinction is drawn between civil and engineering construction sites (factories, mines, industrial plants) and CBD building sites where most problems seem to exist. The housing industry is trouble free.
CBD sites are almost 100% unionised and are organised through systems of cascading contracts starting with developers, to head contractors and then sub contractors who employ about 95% of workers. The overview paper talks of a "symbiotic" relationship between unions and the head contractors where industrial relations agreements protect the head contractors from competitors. Margins are tight and head contractors extract profit by squeezing sub contractors.
Unions are not a formal part of the contract chain but have critical links and effectively control sites. For example they are de facto safety regulators although they carry no liability. Unions appoint their "safety officers" while professional safety officers are banned. Workers compensation authorities have so little safety knowledge that they cede authority to the unions. CBD accident rates are high in comparison to civil construction where professional safety officers are appointed.
Bad management is said to be endemic on CBD sites. Poor coordination of supplies to sites is common as is booking of trades persons when sites are not ready.
Cranes are the critical point of control and are locked up by one branch of the CFMEU. Enormous commercial pressure backs the smallest of union demands. A simple blow of a dogman's whistle stops cranes and all work.
Building unions have a commercial problem. They must extract their membership fees in the comparatively short time a site is under construction. By comparison civil construction unions secure long term revenue because they take operational control of factories and plants after construction. The outcome is more militancy on CBD buildings than at civil construction sites, but this collapses at civil sites when unions fight over who has long term coverage. Civil construction completion has been delayed for years in some demarcation disputes.
Generally though civil construction has less problems and better safety than CBD sites because developers are usually the future operators of the site and demand control of construction. The developers directly control or supervise construction contracts and suffer the costs of inefficiencies, losses or safety problems. Typically the developer or head contractor will employ about 65% of a civil construction workforce.
Away from the city CBDs, unions exert some but sporadic influence restricted by an anti-union culture among regional workers, and union officials find the travel difficult. The outcome is that civil and non CBD construction is cheaper than CBD. For example Melbourne high rise apartments have about 30% higher construction costs than do Gold Coast apartments. Melbourne consumers pay more!
Luckily Australia's domestic housing industry doesn't operate like CBD construction.
Of particular interest is the emerging role of the building industry superannuation and redundancy funds which are now successful developers and profitable financiers of CBD construction. The question is, do CBD industrial relations deliver market advantage and possible future monopoly to these partly union controlled funds?
This is the building industry overview given privately to the Commissioner. Most contributors claim it would be commercial suicide for them to state their views publicly in evidence. If a pattern is emerging in the Commissions enquiry, it is perhaps an effort to flush out evidence that gives substance to the industry picture painted in private. And as always any devils to be found will be in the detail!
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