Senate crossbench must ignore construction giant Lendlease

In recent days senator Derryn Hinch dropped a juicy hint; the Prime Minister could receive an early Christmas present. Most of the Senate crossbench is looking favourably at the Australian Building and Construction Commission and may pass the bill to form it early next week.

In the meantime, construction giant Lendlease is trying to sway key crossbenchers to negotiate for them an exemption from the anti-corruption building code, the code the ABCC will enforce.

The code is designed to thwart anti-competitive conduct by big building companies such as Lendlease, protect subcontractors from unconscionable treatment and ensure taxpayers receive value for money in infrastructure projects. Lendlease and other big builders are financially driven to make every effort to escape it.

Lendlease wants the code amended, saying “no legislation should be retrospective or, if it is, appropriate transition measures are put in place”. This is being too clever by half. Everyone in the industry has seen the code coming, it has been out there for more than 2½ years now. Plenty of warnings have been given, but Lendlease has chosen to ignore them. The company thumbed its nose at the government, weeks before the code was due to start, by signing a four-year enterprise bargaining agreement that sits in full breach of it.

This EBA has caused much consternation because it contains wage increases of 20 per cent, but in my opinion that is not the issue; Lendlease has barely any construction employees anyway. It can pay them $1 million a year each for all I care.

The problem with the EBA is that Lendlease will force every subcontractor who wants to work on a Lendlease site for the next four years to sign up to it and pay their staff the rates it contains. It is this price-rigging activity the code is designed to stamp out, and Lendlease is hoping the crossbenchers will give it special dispensation to allow it unethical and anti-competitive behaviour.

Last week, this column detailed Lendlease’s significant, fraudulent conduct when performing building work for the US taxpayer in New York. For more than a decade leading up to about 2012, the company overcharged government for works, and charged for work never completed. It avoided prosecution in a settlement deal by paying a fine to authorities.

Lendlease also has tried to buy its way out of sordid conduct right here in Australia not that long ago. In 2012, an enterprise agreement called JDA 8 signed by Lendlease put the company in breach of the Victorian Liberal government’s anti-corruption building code. JDA 8 covered only 140 construction workers directly employed by Lendlease but the deal meant the company would force every small business that worked for Lendlease into union EBA arrangements.

JDA 8 said subcontractors’ employees had to be engaged on terms and conditions of employment “which are no less favourable overall than commercial building industry rates”. Commercial building industry rates mean the terms and conditions of standard regional Construction Forestry Mining and Energy Union enterprise agreements.

This clause meant Lendlease would force every small business that wanted to work on its jobs to pay wages that had been predetermined by the CFMEU. When this happens, a free market is not in existence. This is an abuse by a big business over smaller ones and anti-competitive conduct that should never be allowed. It is this behaviour that has caused Australia to become the most expensive place on Earth to build major projects.

When the Victorian government found out about JDA 8, it notified Lendlease that it was no longer eligible to tender for government work. At the time, Lendlease claimed to have more than $9 billion worth of projects under way. The company pleaded for exemption from the code and even offered to pay a “bond” of $500,000 to the government. Every time Lendlease was caught breaching the code by, say, forcing its subcontractors into union arrangements, the government could keep $10,000 of it, until there was no money left.

The Victorian Liberals quite rightly rejected the offer, which was basically just a bribe, nicely corporatised. It responded by saying the suggestion was “not an appropriate solution” and “could not be contemplated”. Just absorb this fact and consider the implications; Lendlease management thought money could change hands between them and a government, for the government to bend its own rules, and allow it exemption from an anti-corruption code of conduct, which would mean that building work would keep flowing their way.

So here is a plea to the crossbenchers: please don’t listen to bleating from Lendlease. Our biggest builders and our construction unions are equal partners in crime when it comes to ripping off the Australian taxpayer. Lendlease and other “tier one” builders have the most to lose if a competitive industry comes about. Requests for special treatment must be shunned.

Finally, once the ABCC is in and the dust settles, the government must do its bit too. It must alter its tendering guidelines and processes to make it possible for smaller building companies to bid for government jobs. It is impossible to have a competitive market without lots of competing participants.