The Third Way: Welcome to the Third World

Union Power in Context: Industrial Relations in the Building Industry

Ross Dalgleish

Appendix E

[Extracts from Productivity Commission 1999,Work Arrangements on Large Capital City Building Projects, pages 52-55]

3.4 Project level negotiations

Negotiations at the project level are built on the premise that multi-employer building projects are a single workplace and that certain work arrangements should be negotiated for the whole building site rather than for individual enterprises. The structural model being followed here is a single employer, single site enterprise like that found in most industries (and assumed in the WRA 1996).

The emphasis in project level negotiations is on uniformity of work arrangements across the building site, irrespective of which enterprise actually employs the labour. In practice, this gives the head contractor a central role in setting work arrangements for all employees on site. Project agreements are negotiated directly between the head contractor and unions, often prior to the commencement of building. Subcontractors, who employ most workers, do not have a role in the negotiation process for project agreements. Instead, compliance with the outcome is made a condition of their contract with the head contractor.


Project agreements appear to be used on most large capital city building projects in Sydney and Brisbane. In Melbourne, the VBIA usually assumes this role. However, in recent years there has been an emerging trend to use project agreements on large high profile projects in Melbourne. Project agreements typically contain provisions on site allowances, RDOs, work hours and WHS requirements. However, they are not usually detailed documents, as they cover many work arrangements that are specified in detail in awards and pattern agreements.

Most project agreements are unregistered, reflecting the difficulty in registering federal multiple-employer agreements. Unregistered agreements between employers and employees are allowed under the WRA 1996 but may not replace or override any award or formal agreement and operate in addition to formal awards or agreements already in place (DWRSB 1998a).

Performance effects

Most of the financial benefits of project agreements appear to be captured by head contractors, unions and their members. In contrast, the associated financial costs are largely borne by subcontractors (and, in the longer run, are probably passed on to clients).

For head contractors, the single most important function of project level negotiations appears to be to minimise the risk of time lost and, in particular, industrial disputes. As noted in chapter 2, head contractors face large financial penalties for delays caused by site-specific industrial action. These penalties can account for a large proportion of a head contractor's profit on a project. In contrast, changes in the cost of employing construction workers have little impact on head contractor profits because subcontractors employ most workers on large capital city building sites. This puts unions in a strong bargaining position relative to the head contractor, such that increased allowances and other employment benefits can be negotiated in return for guarantees of industrial peace.

An additional incentive for head contractors to control work arrangements on their projects is that, in some circumstances, they are expected to pay the entitlements of subcontractor employees. In New South Wales, head contractors can be held legally responsible if payments to subcontractor employees do not meet relevant award and agreement provisions (DEWRSB, Response 39, p. 6). For this reason, head contractors do not remit a subcontractor's account until its remuneration payments have been audited to ensure that the subcontractor's employees have received all their entitlements. A similar arrangement applies in Victoria and Queensland, largely as a result of custom and practice. In Victoria, the responsibility of head contractors with respect to the entitlements of subcontractor employees is specified in the VBIA.

Head contractors argue that project agreements are also a useful management tool. They document site specific work arrangements, such as work hours, RDOs, and procedures for inclement weather and other aspects of workplace safety. This can be vital because the head contractor is legally responsible for safety standards. Documenting site specific work arrangements for all subcontractors in a project agreement ensures that everyone on site is informed of their rights and responsibilities. Head contractors may also find project agreements useful in meeting their legal responsibilities to ensure that legislated employment conditions are met for all workers.

An alternative view is that the head contractor's role is to engage and coordinate subcontracted firms on site, not to negotiate work arrangements for each subcontractor's employees. Through contracts with its subcontractors, the head contractor already controls the site's timetables, design, planning and coordination. Work arrangements associated with remuneration should therefore be delegated to subcontractors. Their contracts detail all work specifications and timetables and are reinforced with penalties for any breaches.

For subcontractors, unregistered project agreements can take precedence over registered enterprise agreements, which contravenes the WRA 1996. Project agreements typically increase a subcontractor's costs by requiring increased payments to its employees. They also reduce the flexibility of other work arrangements by requiring the use of a union endorsed enterprise agreement. An additional problem arises for larger subcontractors that have employees working on a number of sites simultaneously with different pay and conditions applying at each site. That is, a project agreement may produce uniformity across a site but at the same time result in pay differences within subcontracting firms.

3.5 Enterprise level negotiations

As noted in section 3.2, enterprise agreements that are substantially negotiated within a single firm are less common in building and construction than in other industries. This is particularly the case for remuneration (see chapter 6). There appears to be greater scope for enterprise level negotiation on non-wage issues.

Where enterprise level negotiations have occurred, they have been more common among head contractors than among subcontractors. Their experiences of enterprise bargaining have been mixed. Some subcontractors said that the expected flexibility and productivity gains had not materialised, largely due to unequal bargaining power or inexperience in negotiating. For example:

    A genuine Enterprise Bargaining Agreement (EBA) trade-off of pay and conditions for productivity has not been something we have achieved. EBA negotiations for us have been almost solely a case of trying to minimise the union's industry-wide standard of pay increase. (Ralph M. Lee Pty Ltd, Response 5, p. 4).

For small firms, a related consideration is the perceived time and effort required for genuine enterprise bargaining, although this must be balanced against any potential productivity gains and can be expected to diminish over time as both sides gain experience of the process:

    Enterprise agreements might be a good idea but the concept of entering into the immense amount of work required to create one with our workers is beyond our business' capacity. (Green Eden Watering Systems Pty Ltd, Response 2, p. 2)

Among larger subcontractors and head contractors in non-residential construction, some of those consulted had achieved benefits from enterprise-level negotiations. However, others were still dissatisfied with the results to date. It was generally recognised that achieving workplace change through this route is an incremental process.

Performance effects

As noted in section 3.2, it is difficult to have genuine enterprise negotiations on a particular work arrangement in the presence of project and industry/trade agreements. Broadly, the alternatives are either uniformity within a firm (enterprise agreements) or uniform work arrangements across building sites (project and industry/trade agreements). The latter has tended to prevail on large capital city building projects.

Where genuine enterprise agreements exist, subcontractor employees tend to have the same work arrangements across different building sites. Hence, employees of different subcontractors working on the same site would have different work arrangements. This would be more appropriate for issues such as ordinary hours, overtime, actual pay rates, performance assessments, bonuses and internal dispute resolution procedures.

If all work arrangements were negotiated through genuine enterprise bargaining then head contractors would lose a degree of control over building sites. If the work arrangements negotiated individually by subcontractors differ significantly, this could cause problems for the coordination and planning of work. For example, if different RDO arrangements or inclement weather arrangements were in force across a site, then this could make planning work tasks for these days more complex. On the other hand, industry/trade level agreements lead to reduced flexibility at an enterprise level and therefore possibly lower productivity.