Royal commission take three: construction sector still lawless

The Abbott government isn’t the first to take aim at corruption in the construction industry. Alan Porritt/AAP

In light of the upcoming Royal Commission into trade union corruption, it’s worth asking if the recommendations of the two previous Commissions into the construction industry, together with other state efforts and codes of practice had been implemented and followed through, would we be in this position today?

They certainly would have been expensive, due to the cost of closely monitoring projects and adding resources for enforcement of existing laws to the relevant agencies.

The new Royal Commission, expected to cost up to A$100 million, follows reports on corrupt and illegal activity in the Construction Forestry Mining and Engineering Union (CFMEU), and while the terms of reference cover a range of issues, the CFMEU has been the catalyst and provided justification for the inquiry.

The two previous Royal Commissions into the building and construction industry included one led by Roger Gyles in 1990-92, and another headed by Terence Cole in 2001-03.

What have we learned?

Both concluded the fundamental problem was a lack of respect for the rule of law, a phrase found repeatedly throughout both final reports, and this was a problem on both the employer and union sides. Cole said:

Culturally, first, there needs to be recognition by all participants that the rule of law applies within the industry.

Gyles also suggested those who break the law should be punished and said:

Observance of the law and law enforcement in general play very little part in the industry. The law of the jungle prevails. The culture is pragmatic and unprincipled. The ethos is to catch and to kill your own…Once it becomes acceptable to break, bend, evade or ignore the law and ethical responsibilities, there is no shortage of ways and means to do so.

Gyles found illegal activities: “…range from physical violence and a threat of physical violence at one end to petty pilfering of building materials at the other. In between there is a great variety of illegal activities, essentially economic in nature or effect, from collusive arrangements involving giant corporations and industry associations to labour-only sub contractors paying small amounts of graft to project managers. Those involved range from managing directors of large corporations to labourers on site. No sector of the industry has been immune.”

Nevertheless, Gyles concluded that industrial relations was overwhelmingly the most important issue and the union’s conduct and philosophy the fundamental cause of the industry’s problems. He recommended the government deregister the BWIU (now the CFMEU) in both the state and federal jurisdictions, and his Commission’s Building Industry Task Force pursue cases and recommend changes to the law. Gyles made 63 recommendations to the NSW Government, of which all but two were adopted.

Following Gyles came the NSW Code of Practice for the Construction Industry (1996), then the Commonwealth, State and Territory governments through the Australian Procurement and Construction Council (APCC) introduced a National Code of Practice for the Construction Industry in 1997. Many codes and guidelines have been issued and revised at both levels of government over the last decade. Policy interest in this area escalated significantly after 2003 when the Cole Royal Commission reported.

Nothing’s changed

Ten years after Gyles the same problems were still prevalent. In his final report Cole envisaged an industry where:

…disputes are resolved in accordance with legislated or agreed dispute resolution mechanisms rather than by the application of industrial and commercial pressure. The rule of the law must replace industrial might.

Cole found a disregard for enterprise bargaining, unlawful strikes and use of inappropriate payments. As a result 31 individuals were referred for possible prosecution, 392 instances of unlawful conduct were found (including 30 by employers), and 25 different types of unlawful conduct and 90 types of inappropriate conduct identified.

At the time Cole said:

These findings demonstrate an industry which departs from the standards of commercial and industrial conduct exhibited in the rest of the Australian economy. They mark the industry as singular. They indicate an urgent need for structural and cultural reform. At the heart of the findings is lawlessness. It is exhibited in many ways.

The final report had 212 recommendations, the great majority about changes to federal workplace relations legislation governing the building and construction industry, and proposed an Australian Building and Construction Commission (ABCC) to monitor illegal behaviour by unions. While the ABCC had a restraining influence on the industry in general and the CFMEU in particular, it obviously did not fundamentally alter “standards of commercial and industrial conduct”.

In late 2013 the Victorian Government asked their Construction Code Compliance Unit to investigate compliance with the law and codes of practice in the Victorian building and construction industry. The interim report was due in October and, given the revelations of the last few weeks, one can only wonder what they found. Both NSW and Queensland have similar codes of conduct and guidelines, and all three states are using their role as major clients to enforce compliance with legal obligations by contractors (not unions it should be noted).

A new approach

While the recommendations from Gyles and Cole did become legislation, perhaps the real underlying issue that should be addressed is why the building and construction industry operates the way it does. Neither of those Royal Commissions produced a vision of a different industry, apart from a law abiding one, and made no recommendations on the direction that strategic development of the industry might take.