New Union tactic !

The militant Construction, Forestry, Mining and Energy union ( CFMEU ) has adopted a new tactic to try and recover money lost by subcontractors when big building companies go into receivership.  They threaten to use their muscle against the ultimate owner of the place being constructed unless that company makes good and pays out those losses.

Woolworths contracted work for a new supermarket in the Sydney suburb of Balgowlah and this was won by the giant Southern Cross Construction company.   Southern Cross has since ceased work and gone into administration, leaving money owed to numerous subcontractors for the work done.   This is a familiar situation in the building trade.   Theoretically, the successful tenderer receives progress payments as the job proceeds and uses these to pay subcontractors, but firms in financial trouble usually slip behind with payments and once the firm goes into administration - years may elapse before the subcontractor receives just a few cents in the dollars owed.

The CFMEU is suggesting that it may place a boycott on Woolworths and curb their expansion plans unless they come to the negotiating table and meet union demands.   The union claims that Southern Cross won the Balgowlah job with a tender $ 4 million less than the nearest tender.   In some convoluted way they see this as a " profit " that should be used to reimburse subcontractors who are losing money by no fault of their own.   They embellish this thought with the claim that Woolworths have " deep pockets " and make an annual profit in the realm of $ 1.8 billion.

This tactic was previously employed against the state government when a building company went bust, leaving a number of low income housing projects incomplete.  In that case, the jobs were declared " black " and work remained at a standstill for months while negotiations proceeded.   The matter was finally resolved - with  " undisclosed terms ! ".

This tactic seems to be taking the building trade into new directions.  Bankruptcy by the prime contractor has always been a problem in an age when the builder is more of a " manager ", overseeing the contributions by a small army of specialist contractors, who themselves are part of a new trade consortium.

For instance, few builders construct their own frames and roof trusses these days.  That is usually provided by a frame and truss  factory, and the builder engages separate assembly teams to put them in place on the job.  This work is followed by other specialists who clad the walls of the building, and other specialists who batten out the truss roof and fix tiles or sheeting.    It would be interesting to see where the CFMEU expects the dividing line to fall between " subcontractors " and " other suppliers ".    If the CFMEU is looking for all money owed to be paid, then the building trade is likely to suffer a severe reversal.      Many principals will have second thoughts about entering into such an open ended contract !

The obvious answer is to supervise the distribution of progress payments so that work completed is promptly   reimbursed, but this would create another level of bureaucracy and take management out of the hands of the building companies, making them more vulnerable to ceasing operations.   It is a fact of life that contracting contains an element of  " risk "  that goes hand in hand with the skill of making a profit.   It would be difficult to eliminate risk - without an equal and opposite effect on profit.

At this stage, the CFMEU is setting it's sights on the big end of town.  It is threatening to use it's muscle on those with deep pockets and there seems no chance that the average homeowner trying to have a new house built will be threatened with making good the losses of an insolvent building contractor if the work stops at the half completed stage.

Unfortunately, once the unions start to interfere to regulate the contracting arrangements that have served the trade well for centuries,  the chance of other large construction companies closing their doors and seeking administration - increases sharply !