Markets 
Premier Jacinta Allan authorised an $837 million taxpayer payment to a Big Build consortium after it threatened to sue the government, a move that would have publicly aired claims Labor had forced it to cave in to CFMEU demands and what that added to the cost of every new train station on the signature Metro Tunnel project.
The legal threat to the Allan government, along with the detailed breakdown of the additional cost forced upon the delivery of every Metro Tunnel station as a result of the CFMEU acting uninhibited by the government, is contained in an 89-page memo titled the “Consolidated Issues Document”.
The document details how “attendant labour” costs on the project soared from an estimate of $299 million in 2019 to $901 million by time of the claim in May 2024.
That 200 per cent increase was racked up largely on the two biggest CBD stations, State Library (up $266 million) and Town Hall (up $208 million). But it was also seen at Arden (up $19 million), Parkville (up $22 million) and Anzac (up $29 million) stations.
About one-third ($196.4 million) of the $600 million increase in the labour bill was “directly attributable” to industrial influences.
The document was sent to the government by an executive general manager who worked as Lendlease’s representative on the consortium delivering the project. It went to Rail Projects Victoria, the government entity Allan previously oversaw as transport infrastructure minister.
The document warned that the consortium would “have no option” but to sue the Victorian government, a move that would have publicly exposed the cost blowouts caused by Labor’s backing of the CFMEU activity, unless it was paid more than $1.5 billion.
Two insiders at large “tier one” building firms, speaking anonymously about a confidential process, said they believed the government eventually settled partly out of concern that this information would be made public through the courts.
The total claim included almost $200 million for “industrial action … which directly affects the project and which is a direct result of an act or omission of the state”.
The file contradicts Allan’s claims that cost blowouts on Big Build projects, such as the Metro Tunnel, were solely driven by inflation and not the CFMEU’s activity or the government, with Allan as minister, allowing the union to dominate projects.
It also raises significant questions about why Allan has persisted in blaming inflation even though she eventually approved, with the backing of key cabinet colleagues, an $837 million no-admission payout to the Metro consortium in response to its claim.
Five sources familiar with the document, and who worked on the Metro project, said they expected it to be one of the first files called for if a royal commission were ordered.
The document stated that since 2020, four factors had meant “Victoria has experienced an extraordinary and unforeseeable change in the landscape in which major infrastructure projects are being delivered”.
One of these four factors is characterised as unreasonable and unanticipated CFMEU demands backed by the Labor government. This is described as “a significant shift in the industrial environment driven by political factors and deregulation by the Victorian government”.
The other issues listed are “unprecedented subcontractor insolvencies; hyper-escalation of material and labour costs; and flow-on effects of the COVID-19 pandemic,” with the CFMEU’s conduct also blamed for fuelling these last two factors.
The document says the “hyper-escalation” in material prices – particularly steel, glass and electrical supplies – cost an unanticipated $193 million, slightly less than the specific industrial problems and substantially less than the overall spike in labour costs.
It also calls out the government’s jammed infrastructure agenda for creating an uncompetitive marketplace that added a further $80 million to the delivery of the Metro.
While The Age earlier this month reported extracts of files detailing the negotiations to reach the government settlement, a hard copy of the Consolidated Issues Document was obtained only last week.
It warned the Allan government that without “a commercial resolution” involving a substantial payout, the consortium would “have no option but to pursue its rights for time and cost both under contract and at law”.
“Although this is not its desired outcome, viewed objectively there would be no other suitable course of action,” it said.
The document contains multiple tables and graphs to differentiate between the cost of blowouts on the Metro Tunnel caused by non-union activity— such as an overhaul of the way the project was managed – and the cost of blowouts caused by CFMEU “industrial issues”, which the document explicitly and repeatedly states the Labor government was aware of and endorsed.
Of the estimated total $1.7 billion blowout, slightly more than half is blamed on rising costs and about half on delays.
Almost $200 million is attributed in the document directly to CFMEU demands endorsed by the state government and involving the use of labour hire workers, known as “attendant labour”.
“The primary driver for the increase in attendant labour requirements is industrial issues which could not reasonably have been anticipated and which have been unprecedented when compared to other Victorian infrastructure projects,” the document says.
It calls out as an example the “excessive attendance during lifting operations and other matters characterised as ‘safety’ matters by the Health & Safety Representatives on the project which have the effect of increasing workforce on the site.
“This is significantly beyond the D&C subcontractors’ and their respective parent entities’ previous experiences on other projects including in Victoria.”
As previously reported in The Age, the practice was “vigorously challenged” but “in the interests of continuing to prioritise progress of the project instead of carrying out protracted commercial negotiations while work is suspended, [the project] has had to proceed with adopting the excessive requirements. This approach was supported by the state.
“Little assistance/influence has ever been provided … when the project has been faced with industrial issues (even at a micro level) despite all major infrastructure projects in Victoria being challenged and disrupted.
“The state has previously requested and been provided with details on the costs for the attendant labour on the project to understand the scale of the issue being experienced and has indicated its understanding on this matter.”
The document detailed additional crane crews, spotters, vacuum operators and traffic controllers as examples of unnecessary attendant labour required to buy industrial peace with the CFMEU.
The Metro consortium is known as the Cross Yarra Partnership and comprises John Holland, Lendlease and Bouygues Construction.
When The Age first reported on the consortium’s leaked document, Allan said she had not read it and blamed inflation for rising costs.
In a statement Allan’s spokeswoman said she did not agree that the CFMEU’s misconduct has materially added to the cost of the Metro project or elsewhere and denied the case with the consortium was settled to avoid adverse publicity.
“Cost increases were due to inflation not corruption, The Age should stop trying to put words in the Premier’s mouth,” she said.
Earlier on Thursday, she used an ABC radio interview on Monday to again argue that inflation was to blame for rising costs in construction.
“Whether you’re building a home or building a project, part of that cost is supplies and materials. Part of that cost is wages,” she said.
“Union wages … do come with fairer wages because they also come with better conditions. Now that’s not corruption; that is an outcome from an enterprise bargaining agreement process.
“We have seen inflation have an impact on the cost of construction around the country, and here in Victoria, ABS data says that it’s actually less than what is being experienced around [Australia].”
More Building Bad stories
The original investigation: Explore the multi-part investigation that plunged the construction industry into crisis.
Administrator fights back: CFMEU’s new administrator has declared the culture in the union’s Victorian arm remains broken.
‘Grind it out’: Allan defends her royal commission refusal to cabinet.
Should have called Saul: Economist has say on inflation versus corruption.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
Nick McKenzie is an Age investigative journalist who has three times been named the Graham Perkin Australian Journalist of the Year. A winner of 20 Walkley Awards, including the Gold Walkley, he investigates politics, business, foreign affairs and criminal justice.Connect via email.From our partners
Read the full article here
