Miners must fess up on IR dirt

Disastrous industrial relations agreements approved by mining chiefs made it inevitable productivity would slump and costs blow out. Until they admit their mistakes there'll be no change.

It's time for the chief executives of Chevron, BHP Billiton, Rio Tinto and all the major players in the Western Australian mineral resources construction boom to confess that their mistakes have been as responsible as the unions and the federal government for the productivity debacle which will mothball most future mine projects.

Until the CEOs admit their mistakes there can be no start on improving mine construction productivity. When that happens perhaps we can get the federal government and the unions to accept their share of the responsibility for the bad productivity – the consensus that Resources Minister Martin Ferguson is trying to bring about.

The most outspoken critic of Australian mining construction worker productivity is Chevron boss in Australia, Roy Krzywosinski, who says that Australian workers are 60 per cent less productive than their US counterparts – which has contributed to big cost blowouts in a string of mining projects lead by Chevron’s giant Gorgon project, including its Wheatstone LNG plant near Onslow.

But Krzywosinski did not take personal responsibly for his share of the cost blowout although, in fairness, his mistakes have been no worse than most of the other mining CEOs.

This week across my desk came a disastrous 30-page document – the April 2010 WA Chamber of Commerce and Industry agreement titled ‘Employee Relations Information for Contractors Working on Wheatstone Project LNG Plant’.

The document was issued to all Chevron’s construction contractors, and it states that its purpose is to "assist contractors in preparing their tenders in respect to employee relations issues and conditions of employment”.

In fairness to Chevron and Krzywosinski, most miners have used either WA Chamber of Commerce agreements or other agreements designed by consultants in the Western Australia industrial relations club. Similar things have happened in Queensland. The agreements made it inevitable that productivity would slump and that costs would blow out.

As I understand it some miners used similar agreements during the Howard years when they would have been illegal.

The idea was that the agreements would prevent industrial disputes at times when the miners were exposed. Given the high level of construction activity and the government’s industrial relations legislation, which gave enormous powers to the unions, this was a real risk.

I can therefore understand the motivation but the CEOs were signing a one-way ticket to a productivity disaster that would destroy the mineral construction boom.

Chevron’s Wheatstone document was issued to all construction contractors, and it states that its purpose is to "assist contractors in preparing their tenders in respect to employee relations issues and conditions of employment”. The document contains wage rates; allowances; hours of work arrangements, including rest and meal breaks; penalty rates and shift loadings; mobilisation and demobilisation arrangements; redundancy and severance benefits; leave benefits; superannuation; income protection cover details; protective clothing issue and the rest and recreation leave cycle.

In effect, the WA Chamber, acting on behalf of Chevron and Krzywosinski, was instructing Chevron’s prospective contractors on every detail of the terms and conditions of employment which would apply on the Wheatstone Project.

Every contractor who is tendered for the project used identical labour cost and work place assumptions, as dictated by the client.

No contractors were involved in the development and negotiation of those base terms and conditions. The end result was inevitable – a constant stream of concessions to the unions rarely balanced by productivity concessions.

If you want labour productivity anywhere in the world the CEOs have to roll up their sleeves and get involved. They can’t delegate such a vital task to chambers of commerce or industrial relations consultants.

This is the polar opposite to the enterprise bargaining principles and practices that have characterised Australian industrial relations since the Structural Efficiency Principle was handed down by the AIRC in the 1989 National Wage Case.

The Western Australia model ensures that the contractors do not have to compete or be innovative when it comes to industrial and employee relations because there is no ability to do anything differently – which is how productivity is generated.

Wheatstone and other projects became a simple cost plus agreement.

It is not going to be easy to wind all this back as Ferguson is trying to do. We may have to wait until there is virtually no mining construction work in Western Australia.

In the meantime there can be no improvement until CEOs like Roy Krzywosinski admit that signing agreements like Wheatstone was a mistake, which they would not have made had they been operating in the US. And of course these mistakes along with the actions of the federal government and the unions mean the nation will suffer.