By Jon Davies, CEO, Australian Constructors Association
The Construction Forestry and Maritime Employees union’s (CFMEU) ’Building Bad’ investigation continues to expose the underbelly of the construction sector, revealing long-unchecked criminal behaviour.
For many, the details of the investigation will be new, but the issues it uncovers are depressingly familiar to those working in the industry – issues they’ve felt powerless to change.
An abundance of Ford Rangers on our roads gives the impression that the industry is in good health, when this couldn’t be further from the truth. Many companies are teetering on the edge, one bad job away from collapse. Why?
Construction companies are required to lock in prices for projects that could take many years to build and take on the risk of everything from the weather impacting progress to global pandemics impacting supply chains and all for a profit margin less than what they could earn if they just left their money in the bank.
The numbers don’t lie; construction industry accounts for 26 per cent of all insolvencies in Australia and its workers are six times more likely to die from suicide than a workplace incident. Under the circumstances, it is hardly surprising that industry has learnt to take the path of least resistance and that women only make up 14 per cent of the workforce.
Why is it important?
The construction industry is Australia’s fourth largest employer, employing over 1.3 million workers and contributing nearly 8 per cent of GDP. It’s critical for fixing the housing crisis, building the infrastructure needed for our growing population, installing the new poles and wires to meet our decarbonisation commitments and ensuring national defence. Yet, it is now 30 per cent less productive than thirty years ago, costing the economy over $60 billion annually.
So, how do we go from building bad to building good?
First, if properly resourced and supported, the appointment of an administrator to manage the affairs of the industry’s largest construction union should see an end to the culture of coercive control driven by personal rather than project gain. But to prevent history from repeating, the government must ensure long-term industrial relations stability. Further legislative reform is required to achieve this. Separately, a modern version of the Hawke-Keating Prices and Incomes Accord – uniting government, industry and unions – could drive a shared commitment to productivity.
Cultural change will take time but adopting the tried and tested industry Culture Standard and an industry-wide culture charter with enforcement would be a good start.
We also need procurement rules focused on delivering true value for taxpayers, not just cheap tender prices. This shift would encourage better project outcomes instead of undercutting and taking on unmanageable risk.
Fair payment terms will improve liquidity in the supply chain and reduce insolvencies. The construction industry is not a bank and should not be treated as one.
Allocating project risk properly at the head contract level will provide increased transparency, certainty and prevent risk shedding down the supply chain to those least able to manage it. It is neither ethical nor in the public’s interest for government agencies to push risks onto contractors that cannot be estimated and then hide behind a contract when it materialises.
Finally, improved certainty of project pipelines will encourage more companies to expand their workforce, reduce reliance on labour hire and improve industry training and skill levels.
The key to ‘building good’ is aligning the interests of all industry stakeholders.
Clients, especially government, want value for money and certainty of project outcomes. Workers want safe, secure well-paid jobs. Industry needs a reasonable return on their investment. There is no reason why everyone can’t get what they want.
The construction industry is used to solving complex problems every day. There is no more complex a problem than turning the industry around but there has also never been a better opportunity or more pressing need to do this. The Industry Blueprint currently being developed by the National Construction Industry Forum, has the potential to lay the foundations for a more sustainable industry. But to build on this foundation, we need all sides of politics to make ‘building good’ a top priority.
