Subbies squeezed from both sides on building sites

The West Australian, January 26, 2017:

We hardly need the retirement of construction union headkicker Joe McDonald to remind us that the building game is a rough and tumble industry, where the participants play for keeps.

Indeed, so urgent was lawlessness in the construction industry that Malcolm Turnbull marched us all off to a double dissolution election last year so that he could reinstitute a tough cop on the building industry beat.

That the Prime Minister has seemingly forgotten all about the Australian Building and Construction Commission should not be read as evidence that problems are magically gone. But equally, a mounting body of evidence suggests it’s hardly just the CFMEU responsible for disputation on our building sites.

David Rowe will testify to that. A Geordie lad by birth, Rowe has run an air-conditioning ducting installation business in Perth for the past 23 years.

But it’s not disputes with the unions that have pushed his business to the edge. Instead, Rowe has worn big losses on enormous government-funded infrastructure projects.

He’s just the latest subcontractor to complain about power imbalances in the building game, where the Government provides the dollars and appoints the head contractors, who then ruthlessly seek to push risk down the chain through an array of layers of subcontractors who actually do the construction work.

Rowe claims his company Vortech lost $1.2 million on the Perth Children’s Hospital project, and he’s staring down a big six-figure loss on the new Perth stadium in Burswood.

On the stadium job, Vortech subcontracted to a company called MPM Group, which in turn was contracted to the stadium’s head contractor Brookfield Multiplex. MPM Group was responsible for providing the detailed technical drawings for installation of the air-conditioning ducting. Vortech was responsible for hiring the installers and doing the work.

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Rowe provided The West Australian with detailed paperwork that shows Vortech made claims for delays on the project totalling 59 weeks as a result of the failure to get drawings done and approved on time.

He also provided a histogram — a document that shows how he planned to ramp up a work force to between 30 and 40 workers from June last year through until October, whereafter the workforce would gradually scale down as the bulk of work was completed.

Instead, manpower on the site was just six to seven in June and July, 11-18 from August through October, before peaking at 31 in November, by which time the job was far behind schedule.

“Fifty per cent of the job has to be completed with only 25 per cent of the allocated time,” Rowe said.

“We were instructed to work off plans which hadn’t gone through the proper approval process. The drawings were revised constantly and there was a huge amount of re-work and alterations.”

With problems on the job mounting, MPM terminated Vortech’s contract on December 28 amid the Christmas shutdown period.

“Vortech has failed to comply with the reasonable direction of MPM to have five men on site on 28 December 2016,” the termination notice said, among a range of other claims about resourcing, payment schedules and non-compliance with the contract terms. There are two sides to every story, of course, and MPM managing director Tom Purdon, who signed the termination letter, responded to The West Australian’s query by email.

“Pursuant to our contract with Brookfield Multiplex, MPM cannot make any public comment on either of the stadium projects,” he said.

“We note that pursuant to the contract between Vortech and MPM, Dave Rowe is also prohibited from making any public comment and your article would represent yet another fundamental breach of contract committed by Mr Rowe.”

It is impossible from this position to independently assess the merit of the competing claims.

But Rowe had to terminate 34 workers as a result of the dispute, and pay out their entitlements after Christmas.

He claims he is owned $790,000 from work on the stadium — a sum that is putting enormous stress on his business and that may require him to either re-mortgage his home or call in administrators.

He also claims a six-figure sum is being withheld for work completed on another MPM-contracted project — the City of Cockburn/Fremantle Dockers recreation centre (which was visited yesterday by Premier Colin Barnett on an election campaign stop).

Last week, Vortech, MPM and their lawyers met, with Vortech tallying up $1,093,713 of labour, materials and equipment supplied but not paid for on both projects. In the end, Vortech submitted a claim for $780,000, plus GST. Rowe says MPM offered to pay $305,000.

Legal letters have been exchanged and the dispute is heading for adjudication under the Construction Contracts Act. If that process fails, it could end up in court, at further expense to the parties.

“I am sick to death of this industry,” Rowe told me in his Wangara office, vowing that if he managed to keep his head above water through this dispute, he would no longer tender for major government contracts.

“Multiplex, MPM, they all just push the risk down on to us, who actually employ the guys, do the work and pay the payroll taxes.”

Rowe says subbies at the bottom of the chain like him face two choices: agree to what he describes as “onerous” contract conditions which see them bearing great risk, or avoid tendering for large jobs, preferring not to employ people and grow his business.

Twice bitten, Rowe is now shy. He’d rather remain a small business than try to grow.

That can’t be good for his industry, or the State.