Between NBN Co and a hard place

Risk is an interesting conundrum. Risk plus unions an even more interesting one.

Independent Contractors Australia today posted an analysis of a draft agreement, which the Communications, Electrical and Plumbing Union (CEPU) has written. The union says it's hoping to get contractors to sign the agreement which provide workers for the National Broadband Network (NBN).

NBN Co signed a deal with Silcar last week for construction of the network after a delay due to its cancellation of its former tender process because all of the bids were too high.

Kevin Brown, NBN Co's head of services, said that the company had taken parts out of the deal that would be done by Telstra under its pending deal with the construction company, and had also taken out parts of the deal that it will get power companies to do.

However, the risk for the rest of the build now lies with Silcar, according to an interview with Inside Business.

"So they work on doing the detailed design, we stamp that off and [at] that stage it's got a price, and the risk moves to them to both deliver it, and deliver it on time and deliver it at the price. And we don't carry that risk. That's their risk to carry," he said.

Sounds great for NBN Co, but perhaps not so great for the contractors, depending on conditions.

CEPU divisional president Len Cooper told me this morning that the union wants to negotiate with contractors on an agreement that will ensure dependent subcontractors aren't exploited in the NBN roll-out. He said the agreement was there to be talked about and in no way final. He also said it was premature to talk about cost blowouts when there was no real idea what the make-up of the workforce would be like.

Independent Contractors Australia (ICA) said in its post, however, that it thought that people who didn't adhere to the said contract wouldn't have a chance at winning NBN work. I'm not sure of how valid this is. NBN Co pointed me to the direction of the CEPU and Silcar.

ICA also said that certain clauses in the contract "effectively neuter any construction company's capacity to manage its workforce so as to maximise productivity and efficiency".

"A company must have union approval on any matter to do with the way it manages its workforce. If the union disapproves, it can declare an industrial dispute and force the company (ultimately) into compulsory arbitration. That is, any operational function is potentially subject to imposed decisions by the union or Fair Work Australia," the post said.

The consequence was that any company would have to only do what the union authorised, according to ICA, and that any company working on the roll-out would have to write a cost escalation cause into the commercial agreement, so that the costs could be passed onto NBN Co.

But, of course, if NBN Co isn't wearing the risks...

At least it's only for two years, which Brown said at the press conference was to give greater certainty to Silcar, but it's still a risky business.