New industrial relations requirements can cost contractors in lost PPP work

By Dr Graham Smith.

Key Points:
The new industrial relations requirements can prove an obstacle for contractors wishing to secure Australian Commonwealth PPP contracts.

The new industrial relations requirements can be one of the trickiest areas for overseas construction companies operating in the Australian environment. They must ensure that they can comply with Commonwealth Government industrial relations requirements particularly on Commonwealth funded or Commonwealth sponsored projects.

On any project funded by the Common-wealth (even if the Commonwealth only provides a small part of the funding through grants) the Commonwealth requirement is that all builders and subcontractors comply with both:

• the National Code of Practice for the construction industry; and
• Industry Guidelines for the industrial relations and occupational health and safety components of the National Code of Practice for the construction industry.

Both the Code and the Industry Guidelines contain quite specific requirements in relation to industrial relations regulation and practices.

For example, industrial relations agreements designed to cover the whole of the project (Project Agreements) can only be used in quite specific and authorised circumstances. Also, industrial relations practices that permit compulsory unionism or which require contractors to have specific types of industrial instruments (and not others) are prohibited.

A problem for a major construction company is that even though it may be able to ensure it has compliant industrial relations arrangements, many of the subcontractors it will need to engage may not be able to comply. Major builders are increasingly using what are called jump up clauses in their enterprise agreements to ensure that non-compliant subcontractor industrial agreements "jump up" automatically to the builder's compliant agreement.

Increasingly, Commonwealth Departments will send out questionnaires at pre-tender stage which will require careful and considered responses. In most cases legal advice about these responses should be obtained as otherwise a tenderer may be ruled as non compliant at an early stage.

Even if a builder is a successful tenderer on a project, it needs to be aware of its ongoing obligations to ensure compliance with the Code and the Industry Guidelines. The Commonwealth Government has established the Interim Building Industry Taskforce to monitor compliance with the Code, the Industry Guidelines, enterprise agreements and the Workplace Relations Act.

For further information, please contact Dr Graham Smith.