The construction industry has been on high alert since October 1, having to be careful of the Federal Government's new construction industry watchdog. The Australian Building and Construction Commission is equivalent to the Australian Competition and Consumer Commission, but deals exclusively with the construction sector. The ABCC is set to have a far-reaching impact on the very structure of construction sector.
The following story highlights why.
About two years ago in one sector of the construction industry, the union covering that sector began its round of pattern bargaining negotiations. As had always happened in the past, the union went to the employer association expecting a period of hard negotiations, but with the association striking a deal that all its members would adopt.
What this dealing making always delivered was a competition "level playing field", where everyone in the industry operated on the same labour arrangements. The union sold this as a key benefit to the big companies in the sector.
But in the new round of negotiations something changed. The members of the employer association decided they were fed up with the pattern agreements and many wanted to deal directly with their workforces. As a consequence, the union negotiations with the employer association became tense.
It never came to strikes, thanks to good communication strategies by the employer association and the companies with the workers on the ground. What did emerge, however, was a classic piece of Machiavellian subterfuge by one of the largest businesses in the association.
During negotiations, this particular business kept pushing for the union agreement, causing great dissent within the employer group. It later transpired that this business had just secured one of the largest tenders going in the sector, and had done so under a union deal. The company was in fact deeply involved with the union.
The problem the company now had was that it needed every other business in the sector to sign up to the union pattern agreement to ensure no competitor had cost or operational advantages over them. The company put enormous but underhand pressure on the employer association to agree to the union pattern agreement. It leaked information to the union and tried to have the association's negotiators removed. It didn't succeed.
The outcome was that few signed the union agreement, and most businesses struck a deal directly with their workers.
Recently the major business involved with the union went broke. What it feared would happen, occurred. It had a union agreement that kept its cost and operational structures higher and less efficient than the outcomes achieved by other players in the industry. These locked-in costs and inefficiencies contributed to its collapse. Another union-aligned business also recently went under.
This story demonstrates that industrial relations issues in the construction sector are only partly about union muscle. Union strength only exists while it serves the perceived commercial interests of some companies to the disadvantage of others. In effect, industrial relations processes in construction act as a mask covering collusive, anti-competitive activity that would ordinarily breach the Trade Practices Act.
For a long time this anti-competitive mask has dominated every major project in commercial construction. The ACCC has been ineffective in stopping this. This was a finding of the Cole Commission, the Government's long inquiry into the construction sector.
The setting up of the ABCC is to instill competition into commercial construction in the way the ACCC aims at maintaining competition in the general economy.
The ABCC has similar, wide powers of investigation, enforcement and prosecutions to the ACCC. If the ABCC acts like the ACCC, commercial construction is set for a massive shake-up.
Construction companies that have structured their businesses around union deal-making to block competitors will have difficulty. Being union friendly could become a competitive disadvantage. A new and very different Australian construction sector is likely to emerge.
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