Queensland's Best Practice Principles Cost Taxpayers Millions


Thank you for that kind introduction.

I would like to thank Theresa Moltoni – the Chair of the Brisbane’s Club Workplace Relations Interest Group – for inviting me to speak, as well as everyone who has taken time out of their day to come here today.

Industrial relations is an important policy area that is too often viewed through an outdated class-war lens.

There may have been a time when it made sense to think of Australian workplaces as the battlefield for a perpetual war between employees and employers, but this framing has long since passed its use-by date.

You need only look at the current levels of union membership to see how times have changed. 30 years ago, 41% of Australian workers were union members. Today, that number is just 14%.

And, like most policy areas, this is one where the best policy arises when we focus on economic impacts, rather than tribal allegiances. Unions have their place, and a positive contribution to make provided they don’t kill the goose that lays their golden egg.

As with most things in life, what works in terms of fairness and sustainability is an approach that balances the reasonable aspirations of employees with the need for employers to remain viable and indeed profitable enough to justify the risk they bear in taking on a workforce.

Despite the obvious advantages for such a balanced approach, Australian unions still hold considerable influence, especially over Labor governments. In some cases, including here in Queensland, Labor governments have made decisions that benefit their union allies at the expense of hard-working taxpayers they’re elected to represent. There is some irony in this, of course, as taxpayers are overwhelmingly employees.

Today, I’d like to explore with you an example of what happens when this imbalance gains policy authority through long-established unions’ ownership of Queensland Labor. It is the application of what is known, in a somewhat ironic use of doublespeak, as the Best Practice Principles – a Queensland Government policy that drives up costs for taxpayers and undermines our enterprise bargaining system.

 

Queensland Best Practice Principles

The Queensland Government introduced the Best Practice Principles (BPP) in June 2018.

Forming part of the Queensland Procurement policy, the BPP applies to government projects over $100 million – as well as any other project the state government chooses.

In their simplest form, the BPP are just a broad set of criteria that companies must address when responding to government tenders. These are:

- Best Practice workplace health and safety standards and systems;
- Best Practice commitment to apprentices and trainees; and
- Best practice industrial relations.

These may sound relatively mundane – that was probably the intention. But their implementation undermines confidence in our industrial relations laws, helps funnel money to union slush funds, and wastes hard-earned taxpayer funds.

Alongside the BPP sit a series of interrelated policies and documents.

These include the ‘Ethical Supplier Mandate (ESM)’, which outlines a demerit point system used to punish contractors who fail to apply the BPP. Penalties including a 12 month ban from tendering for government projects.
There is also the ‘Best Practice Industry Conditions (BPIC)’ – documents that take the form of draft enterprise agreements containing specific pay and employment conditions.

These BPIC documents – or draft EBA’s – are used as the standard by which to assess applications for work on major government projects to which the BPP applies. They are a mandatory evaluation criteria with a weighting of up to 20 per cent – more than enough to determine a contractor’s chance of winning a tender.

 

Legal issues

The Queensland Government knows it can’t force the BPIC terms and conditions on contractors.

They know it’s illegal to coerce or unduly pressure someone to make, vary or terminate an existing workplace agreement. That law is well established.

And they know it would be illegal to discriminate against tender respondents who don’t have an EBA in the same or equivalent terms as the BPIC.

We know they know this because of the many statements they’ve included in the BPP and associated documents, which carefully ensure they aren’t crossing these legal thresholds.

The BPP even recommends that officers involved in applying the BPP seek legal advice to ensure compliance with federal workplace relations laws.

Despite this, tenderers face enormous pressure to either adopt the terms and conditions in BPIC, or propose alternate ways in which they’ll meet or exceed them.

They’re even required to outline how they’ll use their “best endeavours” to engage subcontractors who will provide terms and conditions at least equivalent to the relevant BPIC. This is despite the prohibition on ‘jump-up’ clauses in the Building code.

Let’s be clear about what this means: Contractors or subcontractors who fail to apply or match the BPIC terms and conditions of employment almost certainly won’t get the work.

And while smaller subcontractors might have remained competitive in the past by being agile, that ability to do things differently to the major contractors is removed entirely by this policy. It’s as good as putting them out of business.

However, when the ABCC have examined the issue they’ve been unable to find any clear breaches of the law.

This is because the Queensland Government has very carefully designed these policies to pressure companies to adopt or match the pay and conditions contained in union agreements, without breaching federal workplace relations laws.

Companies are not being forced or “coerced” – at least to the high standard the law requires. They’re just left with the choice between tendering for government work and continuing with their existing enterprise agreements.

Hardly much of a choice.

Similarly, tenderers aren’t being told which subcontractors they can or cannot engage, they’re just being asked what they’ll do to engage subcontractors who will apply the BPP. If they don’t provide a satisfactory answer, they won’t get the work.

This might not meet the legal threshold of coercion or undue influence, but the effect is the same.

When presented with this Sophie’s choice, companies are finding themselves in a legal minefield. And some of them – particularly those who would have been subcontractors - lack the legal resources necessary to navigate it.

In doing this, the Queensland government is undermining faith in the law, and damaging the enterprise bargaining system that has been at the core of Australia’s industrial relations framework since Keating’s IR reforms in the early 90s.

 

Benefits for unions

Why are they doing this?

The most obvious reason is that it benefits their allies in the union movement.

Stakeholders report being told – in public and private forums – that the pay and conditions contained in BPICs will reflect the latest major CFMEU agreement.

So it’s no surprise that the BPIC used for the Centenary Bridge Upgrade project contains provisions for companies to pay into the CFMEU’s Building Employee Redundancy Trust, and Building Employees Welfare Trust (the so-called BERT and BEWT funds), as well as a similar fund for the ETU.

The BERT and BEWT funds were examined at length during the Trade Union Royal Commission. As the commission explained, “the CFMEU receives many millions of dollars as a result of arrangements with these entities.”

The Royal Commission outlined how under some CFMEU agreements employers are required to pay a fixed sum per employee into these funds. The money in trust for workers under the BERT fund are used to generate tens of millions of dollars for the CFMEU, which it uses to cover its administrative costs and run training courses that drive membership growth.

The funds paid into the BEWT Welfare Fund are simply used to cover the tax liability of the BERT fund. Hardly a contribution to employee welfare and wellbeing.

There is also a more fundamental way the BPP helps unions. By using BPIC as the standard tenderers must meet, the Queensland Government is almost ensuring union demands are met. It is no coincidence that the BPIC has been said to mirror the CFMEU demands of the moment.

What does that mean?

In practical terms, they’re imposing a de-facto system of pattern bargaining for government projects. It’s a move towards a more centralised industrial relations system, which limits the ability of employers and employees to reach agreements that suit their circumstances.

Queensland Labor pretend that it is simply about getting workers on these jobs the best possible conditions. That is short sighted, and in the long term, false. By forcing extreme terms inorganically, a small number of people get very high paying jobs for a short period of time, but all of those who would have worked with subcontractors and in flow on parts of the economy lose their work. The economic harm it drives causes a contraction that – long term – denies the very working people it pretends to serve in the short term the stability of work and organic jobs growth that means the long term, sustainable wage rises that are the product of rising, sustainable demand.

 

Cost to Taxpayers

It’s not just the companies going through the tender process that are affected by the BPP. All taxpayers are impacted.

According to an analysis by Master Builders Queensland, the BPP will see a carpenter working on a major government project receiving annual remuneration of $196,000 – 60 per cent higher than a standard industry wage.

Higher wages are a good, but when they don’t reflect market conditions they make it impossible for smaller contractors to compete. The flow on effects will see taxpayers get less for their money, while many privately funded projects become unviable.
This is not good for taxpayers, and it’s not good for Queensland.

Excessive and inflexible pay requirements like these are why the BPP is driving up the costs on major government projects.

Some stakeholders have estimated the cost of major projects could increase by as much as 30 per cent.

These costs will ultimately be borne by taxpayers – either in the form of higher taxes, or fewer and poorer quality services.

Let’s be clear about what this means.

It means the state government is prepared to allow taxpayers to pay way more than they should for infrastructure – meaning we all get less of it.

It means they are prepared to siphon more taxes to their mates at the expense of teachers, classrooms, hospital beds, and medical research.

Blowouts for the Brisbane Olympic Games alone could easily total in the hundreds of millions.

 

Townsville stadium

But we don’t need to wait for the Olympics the financial impact of the BPP. Cost blowouts are already happening.

Take the Townsville stadium upgrade.

This was one of the first projects subject to the BPP.

Despite only coming into effect mid-way through the project, the BPP caused a cost blowout of $43.5 million, pushing the stadium upgrade 17.4 per cent over budget.

How do we know this cost blowout was due to the BPP?

Well, because Queensland Minister for Sport, Housing and Public Works basically admitted it.

Responding to questions about the cost blowout, Mick de Brenni said he made “no apology” for implementing the BPP, arguing that it showed the Queensland Government were “making sure the workforce is as well paid as any construction workforce in Queensland.”

Thankfully, the BPP only applied to workers who signed on after May 2018. If the policy was retrospective the blowout would have been much larger.

 

Gold Coast Light Rail project

The Gold Coast Light Rail project also appears to have suffered a cost blowout due to the BPP

In August 2019, Infrastructure Australia’s business case costed stage 3A of the Gold Coast Light Rail at $709 million.

Less than two years later the 2021 Queensland budget revealed the cost had increased by almost $334 million to over $1 billion – an increase of almost 50%.

This is before construction on the project has even begun.

This $334 million would be enough cover the annual cost of over 270 ICU beds, and the salary of the entire Queensland cabinet for the next 4 years. Combined!

What are Queenslanders getting instead? The same Gold Coast light rail project they were already getting, but at a higher price.

Warning for federal election

The Queensland Government’s BPP policy isn’t unique.

There is a similar issue brewing in the ACT with their ‘Secure Local Jobs Code’. And the last time we had a federal Labor government they brought in the ‘Fair Work Principles’, which also created requirements for companies tendering for Government work.

So we can reasonably assume that under a Federal Labor Government we’ll see renewed attempts to imbed union benefits in federal tender documents.

Labor is, after all, still a party of the union movement. Unions have considerable power throughout the ALP, and more than half of the current shadow cabinet are former union officials.

And it’s much easier to implement policies like the BPP than take on reform of the Fair Work Act.

This should serve as a warning of what will be at stake at the next federal election – and Queensland is sure to be key to the outcome.

It also highlights the stakes of the next Queensland state election. At its core this is a state government issue, and only a Queensland government can abolish the BPP.

But this does not mean the federal government is without influence.

 

Solutions

Almost half of the Queensland Government’s revenue comes from Canberra, and 24% comes in the form of tied grants.

The federal Government regularly contributes over 50 per cent of funding to Queensland’s major projects.

This gives the Commonwealth considerable leverage over how federal funds are used.

The Morrison Government has a duty to ensure the Australian public get value for money. Queenslanders shouldn’t be ripped off to benefit the union allies of the Queensland Labor Party.

Thankfully, the Morrison Government’s agreement to provide 50% of funding for the Brisbane Olympic Games was made on the condition that there be a jointly owned, funded and run Olympic Infrastructure Agency.

This provides the Morrison Government with the opportunity to ensure the Brisbane Olympics doesn’t cost hundreds of millions more than it should.

But the Olympics shouldn’t be an exception. The government should be ensuring taxpayers get value for money whenever federal funds are provided.

Using established tied grant funding processes, we can also ensure the BPP isn’t applied to other projects funded by the Federal Government.

Ensuring taxpayers’ don’t get ripped off is the very least a government should do. Instead, Queensland Labor have chosen to drive up costs for taxpayers to benefit their union mates. It is an own goal of epic proportions – in the long term denying construction workers the sustainable wage growth and job security that comes from a healthy economy.

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