Lend Lease skirts Victorian building foundations

Lend Lease's new industrial agreement hands significant power over to the unions when it comes to managing worksites. It could be a test case for Victoria's new building guidelines.

On Monday Robert Gottliebsen discussed the big battle that’s occurring in construction (Who'll join Baillieu's construction revolution, October 15) where Victorian Premier Ted Baillieu has put in place tendering arrangements designed to bring construction costs under control. Monday’s coverage concerned the national industrial agreement of Lend Lease that arguably puts it in conflict with Baillieu’s tendering requirements.

The stakes are high because if Lend Lease isn’t compliant it’s denying itself access to the $18 billion of big infrastructure projects Baillieu has planned for Victoria. It’s probably understandable then that late Monday Lend Lease released a ‘we love the Code” statement. Presumably Lend Lease will follow up with cuddly discussions with the Victorian government to convince them of their compliance.

What then are the facts? What does Lend Lease’s industrial agreement, signed by project management and construction managing director Murray Coleman, say?

The perspective I bring to bear is the impact on the capacity of Lend Lease to manage its construction worksites. I do this by applying the principles of the Capacity to Manage Index I developed in 2002. Over four years I assessed more than 300 industrial instruments covering five industry sectors including construction. The index is not identical to but parallels the Victorian Construction Code in isolating management issues that have proven over time to reduce efficiency and increase costs.

On this measurement tool the Lend Lease agreement clearly limits the capacity of Lend Lease to manage its construction sites. Take these examples.

Lend Lease has agreed to 26 rostered days off on all its construction sites (clause 10.2) This is a standard applied across the construction sector. But what this means is that for 26 normal workdays a year construction sites stop. No work is allowed to be done. Time and delay is money and structured, and enforced no work means big increases in construction costs.

Clause 4.2 effectively locks in existing commercial construction conditions, particularly inclement weather, manning limitations and rosters into all of Lend Lease’s projects including its civil and mechanical projects. Such existing conditions have been proven to add 30 per cent plus to construction costs.

Clause 4.3 incorporates the terms of the Building and Construction General On-Site Award 2010. This means that there are over 220 pages of documentation external to the agreement regulating the employment relationship creating major managerial complexity.

The use of contracting out and labour hire is massively restricted and controlled under the agreement (clauses 8.2, 27.1, 27.2) hugely limiting Lend Lease’s capacity to respond to changing work circumstances arguably predetermining delays and inefficiencies. Further, Lend Lease may not use any subcontractor unless first they have consulted with the union.

Clause 16 effectively mandates that Lend Lease must employ non-working (union) delegates. That is, Lend Lease must pay union officials to be on site but not to do any construction work. This is precisely the provision that caused the recent ruction at Grocon. The union insisted that Grocon employ union officials. Grocon said no and the union blockaded Grocon sites. Lend Lease have agreed to employ such officials.

To each of these measures that Lend Lease has agreed, an increased construction cost can be calculated. But it’s not Lend Lease that ultimately pays. The cost is always and ultimately borne by the client. Victorian Premier Baillieu has obviously done some calculations and decided that the Victorian taxpayer should not have to carry the cost. He wants better value money for Victoria.

But there’s one more issue and it’s my favourite. In looking at capacity to manage I always study the ‘consultative’ provisions in agreements. ‘Consultation’ sounds wonderful but in the construction sector there’s a different story. At the Victorian desalination plant construction, the builder, Leighton Holdings, wanted to change some rosters but had to consult. The process went on for six months.

Lend Lease have signed up to a consultative clause (clause 7) that most likely predetermines a Leighton’s desal type delay process. Several layers of union committees must be involved on almost any conceivable issue requiring a decision. The effect is that Lend Lease is not capable of doing anything on a managerial level without going through detail, complex negotiations with the union. This adds major costs to all of Lend Lease’s construction projects.

Lend Lease may be expressing love for the Victorian Construction Code. But they’ll have to do some fast footwork to prove that their commitment is reflected in their industrial agreement and actions. Ted Baillieu doesn’t seem to be someone easily fooled.

Ken Phillips is executive director of Independent Contractors Australiaand author of Independence and the Death of Employment.

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