The changing state of Victorian construction

Lend Lease is putting Victoria's attempts to cut building costs by 20 per cent to the test with their new industrial agreement. How the Victorian government and the unions respond could mark a new federalist era.

Lend Lease has learned the hard way that if you are a major commercial builder and want to operate in the state of Victoria it requires a different approach to industrial relations than that required by the Commonwealth legislation.

But I believe that what happened to Lend Lease in Victoria is only the beginning of what will be a significant change. Just as Victoria has taken control of commercial building rules for its government contracts (because the Commonwealth actions have boosted costs), so we are going to see more and more states retaking control. This control change will not be confined to commercial building but will cover a wider range of areas.

This is the beginning of a new federalism.

At Business Spectator we have published two commentaries on the Lend Lease issue (Who'll join Ballieu's construction revolution, October 15) and (Lend Lease skirts Victorian building foundations, October 17).

Early this morning Lend Lease Chief Executive Officer for Australia, Mark Menhinnitt phoned me to declare that Lend Lease does want to operate in Victoria and is a major investor in the state. He will have discussions with the Victorian government about the latest enterprise agreement which he believes is in line with the guidelines. However if adjustments are required they can be made. He emphasised that Lend Lease has a policy of retaining control of its work sites and has fought unions in extended recent strikes in Queensland to win on this issue.

The Menhinnitt declaration is in stark contrast with what the building unions are saying. They are jubilant and believe that Lend Lease has breached the Victorian guidelines (which they want to overthrow) because the Lend Lease agreement allows them control over sub contracting and site access. (Menhinnitt says the union power covers only a limited area and Lend Lease will be in control of its sites and sub contracting).

Advisors to Victorian Premier Ted Baillieu agree with the unions and say the Lend Lease agreement is in breach of the guidelines. If the unions and the Government advisers are right then Lend Lease will find it hard to gain Victorian government work and operate in the state without a change of agreement -- unless there is a change of government or Ted Baillieu buckles.

I must emphasise again that Menhinnitt believes that the unions and advisers are wrong and that Lend Lease can comply with the Victorian guidelines and wants to operate in Australia’s second most populous state.

How this situation came about is instructive for all those who undertake enterprise agreements in the commercial building industry. Lend Lease started negotiating in January before Ted Baillieu had introduced his guidelines which are aimed at reducing the cost of Victorian infrastructure building by 20 to 25 per cent.

When the guidelines were introduced, Lend Lease did not contact Ted Baillieu to check that its proposed agreement met with the guidelines before signing it. In my view it was a mistake.

This week Menhinnitt put out a press release saying that Lend Lease complied with the Victorian code but did not mention the guidelines which is where the teeth are. That caused ripples in the industrial relations arena.

When Menhinnitt and Baillieu sit down and discuss the matter, the Lend Lease chief will have to work hard to convince the Victorian Premier that the Government's outside advisers and the unions are wrong and that the Lend Lease agreement complies with the guidelines.

If, as is likely, the agreement has to be amended, then it will not be easy to do.

In fairness to Lend Lease it is one of the first companies to be hit with the fact that some parts of workplace action are moving back to the states as we start the new federalism era.

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