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Are Queensland's BPIC rules counterproductive to the industry?
64 Plays1 year ago
In this week's episode Jason and guest host Mike dive into the recent controversy surrounding the state of Queensland's BPIC (Best Practice Industry Conditions) regulations.
The pair discuss the intention behind the regulations, what the construction industry feels the regulations are actually doing as well as the potential knock on effects on other aspects of construction.
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Transcript
Podcast Beginnings and Jokes
00:00:00
Speaker
So recording unsupervised is what we're going to try and do. You can fix it up in post, Matt, all of the messes that get created. Yeah. You know, it's a bit of bad episode if in the recording, all those starts having to impersonate our voices to fill in the gaps of what we should have said. So that'll be the, the marker of whether or not we're allowed to record unsupervised ever again.
00:00:27
Speaker
You're
Introduction of Hosts and Podcast Focus
00:00:28
Speaker
listening to the Offsite podcast with Jason and Carlos, where we talk all things construction and technology. Join us for discussions with industry leaders and insights into latest trends in construction.
00:00:40
Speaker
Welcome
Carlos' Absence and Sleep Struggles
00:00:41
Speaker
back to another episode of the Offsite Podcast, another one where we are joined by Mike York as I guess a temporary co-host filling in for Carlos while he's now in I guess the third week of
00:00:58
Speaker
I've no sleep. For those wondering, I did get a message from him yesterday morning saying, rough night, I slept from 11 PM to 1.30 AM to which my very empathetic response was, you got that much, did you? Mike, welcome back, mate. Thanks for joining again. Good to be back, man. If I had my choice of another episode with you or casting my mind back to the early days of no sleep with baby, I'm happy with where we're sitting.
00:01:27
Speaker
Yeah, good trade.
BPIC and New Regulations Overview
00:01:29
Speaker
We're going to talk about I guess a controversial topic. So for those people that are that have not been in the Queensland Australia news bubble, which will be I guess most people there's a bunch of conversation than use and within the industry of some new industry regulations that are relatively new called BPIC, which is essentially best practice in construction regulations, which kind of are
00:01:56
Speaker
industry regulations that cover things like the working conditions of construction workers on projects. It's super controversial, but before I dive into the controversy, maybe to step back and say, what is it? Different countries around the world have had different market regulation when it comes to construction. So countries like Japan, the US, Canada has a fair wage policy. Germany has a minimum wage for the construction sector policy.
00:02:25
Speaker
And the
Mandates and Fair Labor Practices
00:02:26
Speaker
goals of these are usually around promoting or sometimes even like enforcing things like competitive or even fair labor practices, things like safety regulations, quality, and specific to the construction industry. Critics generally of these would probably say something like it's
00:02:46
Speaker
you know, a government intervention into something that like a market should resolve. The BPIC itself mandates, so the Queensland Australia specific one that that's been in the news mandates that contractors and unions negotiate agreements.
00:03:02
Speaker
on state civil construction projects over a hundred million in value. And so the intent of the policy is to ensure that like the workers on the projects are compensated and they've got safe work conditions and promote like I guess best practice across the industry. It impacts some of the largest projects across the state of Queensland and I guess the reason why we're talking about this is not only that similar things exist in other regions but
00:03:32
Speaker
The Brisbane, which is the capital of Queensland, is the host of the 2032 Olympics. And so there is a massive pipeline of work that will be impacted by this legislation or regulation.
Impact on Costs and Salaries
00:03:46
Speaker
So what's the controversy? The issue is that the, I guess, construction industry
00:03:51
Speaker
saying that the policy essentially is designed to benefit the unions. It's driven up the cost of projects. They've publicly said something like 30%, which is a lot. 30% is almost one third. They claim that there are like some salacious claims that
00:04:11
Speaker
traffic controllers and some like relatively lower skilled roles are paid salaries of up to like 200 grand a year on some of those big projects. The reason we're talking about it is that context. I've had conversations with contractors several times a month over the last few months and Mike, you and I have kind of had some conversations in the background around this.
00:04:35
Speaker
Obviously, controversy, I think that word will probably get high frequency in this discussion. As we block the line. Yeah, exactly. I guess, as you kind of mentioned, it definitely makes me reflect on
00:04:49
Speaker
There's obviously these minimum standards in most places and no doubt Oz has had them before as well. So I guess the first question for you is parking aside the issue of are minimum standards right or wrong? I think everyone's in agreement
BPIC's Influence on Productivity and Technology
00:05:05
Speaker
that some minimum standards are right in some way. I guess the big question is and how industry is kind of reacting is
00:05:13
Speaker
Is this an overstep with this kind of policy that actually starts to drive down productivity and works against some of the things that it's actually trying to achieve? Yeah, I think it's hard to pry the truth and the core goal from kind of like a little bit of the stocking stuffing that happens in any of this stuff.
00:05:36
Speaker
I think like you said, everyone would agree, like you would also have to pry apart. It's kind of like, you know, like an omnibus thing where it's jammed together, safety, working conditions. And so you got to kind of take them piece by piece. But yeah, like when you read things that there's like,
00:05:54
Speaker
massive pay for relatively unskilled jobs or you know some of the things that folks would read online would be that some of the conditions that are being asked for around like stopping the introduction of technology or innovation with things like off-site or modular construction.
00:06:11
Speaker
Or even there's another thing that is in a number of the articles on the topic which talk about the special arrangements for union delegates that ensure that their pay is above the trade rate. If you put aside the stuff that looks like
00:06:26
Speaker
stocking stuffing because that kind of then looks like there's a little bit, I don't know if you remember the writer strike in the US like last year or so and one of the sticking points from the union there in the negotiation was that I think they wanted agreement from the studios not to use artificial intelligence in writing or there was another one where they wanted the minimum number of like writers in the room when something's being written.
00:06:52
Speaker
And so those things obviously feel like there's a very tenuous connection to driving the industry forward. They do feel like protecting maybe a status quo or doing favors for specific people.
00:07:12
Speaker
They're
Financial Burden of Increased Costs
00:07:13
Speaker
trying to set minimum standards for safety and try to keep upping the, you know, if you're on the side of the union, the goal is to keep moving the bar up with regards to safety, with regards to working conditions and with regards to pay. You know, if they're like a player in the game, they're probably doing the right thing and trying to keep moving the bar upwards. So I don't know if that answers your question, but I think you've got to pull apart the three pieces.
00:07:40
Speaker
Yeah. And I guess all the stocking stuffing. Well, yeah, let's double click on because I agree. There's a lot of diversion and stuff. Even when I read, I think one of the headlines was like popularly called or like named the CMF EU tax. And so when you're going to cross the line there, that's going to get you. You're going to get I'm repeating what's on the podcast.
00:08:08
Speaker
Um, what's, what's been stated in a magic publication. I don't think that one had any attribution either. And so when you read, yes, similar to what you were talking about, there's obviously a lot of.
00:08:21
Speaker
people have certain motives at play when they're trying to line up the public perception of what this actually is and potentially labeling it certain things that are there to evoke a response. And so, yeah, I guess if we park some of that, because I agree, it's sometimes hard to cut through all that noise and try and figure out, well, what problem are we actually trying to solve here? What's the actual intent? And so,
00:08:48
Speaker
even just to double click on that bit of your understanding like what what is the core problem that if you look government side union side and then contractor and employee side as well what's the the crux of the problem or some of the components of the problem that are actually trying to be addressed at the moment.
00:09:06
Speaker
Yeah, I think the safety side of it, there's like a lot of other legislation in the country and in other countries where this topic comes up that covers like the safety side. So it does feel a lot like that gets bundled in and really it's about pay and maybe a little bit about conditions.
00:09:25
Speaker
Really what this specific, so different countries have taken different approaches. Some have set minimum, like minimum wages within certain trades or within certain regions. This approach is basically forcing contractors to negotiate with unions when the project qualifies over a certain size, which does kind of feel like the government has just said, sit too, like lock two people in a room.
00:09:53
Speaker
And like, you're not coming out. It's like a definitely like a parenting technique, right? It's like stick for the people in the room and you're not getting out until you're all friends and you sorted it out. No dessert until you finish your dinner. And so if you practically what's happening is it's just like increasing the leverage for the union in the negotiation, which forces the contractor to get to some agreement because their whole business, their whole business is doing these projects. So they can't get to agreement. They can't do the project. And so.
00:10:22
Speaker
Yeah, practically what's trying to happen is to increase the pay for workers without maybe having to do the hard work of the government working out what it should be at a minimum level per trade and just say you guys go there and sort it out in this room.
00:10:38
Speaker
And I guess at a conceptual level, obviously I sort of mentioned kind of like attractiveness of jobs. So salaries go up, working conditions go up, safety goes up. All great things for the worker in terms of, I definitely prefer to work in a job that's better paying and safer than an alternative.
00:10:58
Speaker
I guess as you tease out that kind of spectrum though, there's obviously a trade-off cost. And so where does that opportunity cost start to trade off? On one hand, you're talking about, great, we've created really attractive jobs and employment conditions on the cost side, which is, I guess, the other side of the spectrum.
00:11:21
Speaker
someone's got to pay for that with the, what, 60 plus billion of construction pipeline coming up over the next few years. What are the trade off costs that actually come on the other side of the spectrum with those? Yeah, there's like two parts that come to mind. So first of all, yes, you're right. Someone has to pay for it. The cost eventually just gets priced into the bid. I know that some of the articles and maybe some industry bodies have thrown around numbers of like somewhere between 10 and 30%.
00:11:50
Speaker
for cost increase. I've had many conversations with contractors at work that are active in this region and they have done their own analysis for when they're bidding on jobs and the number for them is like 35 to 45 percent cost impact of those jobs not just on labor on all costs
00:12:10
Speaker
And so that's like massive. That's massive given that like productivity is a major issue in construction, adding, you know, that's like taking a 50% back step. So that's a problem. It ends up coming through the taxpayer. You can build less for the same money or you have to spend more money to build the same thing.
00:12:30
Speaker
The flip side of it, which is the weirdest bit of this specific regulation compared to other countries that have had similar things, is that this is specific to
00:12:45
Speaker
Not only one state within the country, but one category of project, which are these big projects over a hundred million. And so you're right, increasing pay and conditions for workers, really good outcome. But it does feel a little bit like we just go after the people that might have the money.
00:13:05
Speaker
to go and extract those conditions. And the result is, yeah, maybe those jobs are more attractive for people, but where are the people going to come from? Well, they're going to come from the jobs that are, that are like the neighboring job that is not a B pick job. Yeah. And so it does
Narrow Application and Market Effects
00:13:21
Speaker
feel a lot like, uh, robbing people to pay Paul.
00:13:24
Speaker
even within the same state, robbing people, people to pay Paul. And again, an, an argument could be that, you know, is the government just avoiding doing the thing that might be unpopular of setting that minimum standard by saying, we'll take the jobs that can afford it or make them negotiate in order for anyone to compete that are not those jobs. They also have to lift their standard. So it's like trying to like do a de facto wage and conditions increase. Yeah.
00:13:54
Speaker
by putting all the burden to maybe contractors and unions to battle it out on big jobs. Yeah. It makes me think back. It's a few years now. But if you remember in the States when there was the big push for employee perks at all the technology companies. And so suddenly that wasn't just great salaries. There was the ping pong table was everywhere. The private chef started to come in. And so
00:14:22
Speaker
Obviously, we're not talking about those kind of things here, but what it effectively did was raise the expectations of all employees, not just in that little category of high-technology, venture-funded businesses. But then the flow-in effect was that magnet kind of drew them in from all the adjacent industries around, and then pushed that exact same price pressure up into all of the surrounding ones.
00:14:48
Speaker
Yeah, and so it's not even just like, so yeah, the legislation affects a state, a type of job within a state. So people are going to go from those projects that are not that type and go over to that type of project, which causes local pressure within the state. But then some of the advocacy that I've seen for it is that we'll be able to attract as a state skilled workers from other states.
00:15:16
Speaker
Those other states are still in the same country and those other states have tons of work themselves. And so it does feel like super narrow and possibly short-sighted about like just shuffling the decks in a game of like musical chairs.
00:15:33
Speaker
Yeah,
Economic and Political Implications
00:15:34
Speaker
and I guess like from a government standpoint at a macro level still trying to balance inflation and cost pressures, obviously construction is a big part of industry in Oz. Yeah, I can definitely see that the riskier side of as you start to kick those things off, they can start to snowball a little bit.
00:15:57
Speaker
Yeah, one of the articles, sorry to cut you off, one of the articles was talking about how there was like a $64 billion pipeline of work within the state. And then the estimate of 10% cost increase was causing it to go up by 6 million. But if you take the contractors, you know, analysis behind the scenes, what they're actually saying is like 35 to 45. That's an unbelievable number and an impact.
00:16:21
Speaker
And so do you think, back to that question of like who ends up paying for it? So in these large projects that we're talking about, $100 million plus, and let's say the ones that haven't been awarded yet, is it practically gonna look like tier one contractors will need to increase their bids by whatever that additional cost burden is, and they're starting to forecast what it looks like, and the government foots the bill, and therefore kind of taxpayers,
00:16:50
Speaker
I guess I'm trying to understand and tease out the burden on contractors versus the burden on government and say taxpayers in that particular example. Because on one side, if it was the contractors not paying for that, you could make the argument that they're going to do great from a margin and top line revenue standpoint. There's obviously more to it though. Otherwise, I feel like everyone would just be shaking hands and saying, this is a great deal. A lot of it comes down to like the politics of politics.
00:17:19
Speaker
Very meta. There's a famous book in construction called How Big Things Get Done. And it talks about the idea that the incentive for the politician that's announcing the project is to just start digging the biggest hole possible in the ground so that someone has to finish the project.
00:17:39
Speaker
And so there is like a little bit of incentive from a politics perspective to just get all the projects going, lock them all in, minimize the potential awareness of the cost. And then at a certain point, you know, you have to go back and say we needed to spend more money sometimes, you know, on the projects over time.
00:18:00
Speaker
There's some, there is like a benefit to like the head in the sand technique. If the ultimate goal is to get a project built at whatever cost, it's not the best outcome for taxpayers, but it's not really taxpayers that are controlling it. It's politics.
00:18:17
Speaker
Yeah, ultimately, in the end, the taxpayer will pay for it. It just might be that it looks like the projects all start. And then in a year and a half time, the cost goes up. And then in a year time, the cost goes up. And then the cost goes up. You know, that person that announced has probably changed portfolio three times by the time that happens. And, you know, someone else gets to deliver the bad news.
00:18:39
Speaker
It's the story of a lot of megaprojects.
Mega-Projects and Cost Escalation
00:18:43
Speaker
We just start. We all pretend we agree that the number's going to be X of how much it's going to cost to build. And then, yeah, we slowly keep allocating more and more budget to it until someone does an audit. Yeah. It reminds me of the saying there's been much more fiction written in Excel than in Word.
00:19:05
Speaker
Yeah, exactly. That's what's going on. The other thing that was interesting that came up as like an argument for the legislation is like this idea that construction jobs are sometimes higher risk or could commonly higher risk, you know, there's night shift, there's out of hours, there's, you know, we're trying to get people specific skills.
00:19:30
Speaker
But the counter to that, that I was thinking about is like, it's hard to throw a blanket rule across all projects over a hundred million and say, well, therefore these all fairly need to be this higher cost base, uh, or conditions for labor. Like, you know, you could have a hundred million or $150 million road job. That's just a slightly longer bit of road than the $80 million road next to it.
00:19:56
Speaker
Then there you get other ones that like super complicated rail projects that need specific trades that are in high demand.
00:20:05
Speaker
there's gotta be an argument to say that there are probably market forces that should resolve that. And it's a weird incentive to piece up all the projects so that they're all, it's like there's like that banking rule in the US where transfers over like 9,890 something dollars get validated through like a government body. And so everyone just does like 10 of those transfers of like 9,000,
00:20:31
Speaker
Yeah. So do people start letting contracts at like 95 million dollars?
00:20:36
Speaker
If we switch gears for a second, I am one of the bits you brought up the start was that concept of obviously long ranging for construction. Our
Innovation and Restrictive Practices
00:20:46
Speaker
job is to become more innovative, more productive, still have great working conditions and employment conditions, but ultimately trying to deliver projects more efficiently. The complexity and scope of projects doesn't seem like it's getting any smaller in the upcoming least few years that we can see. And I imagine post that.
00:21:06
Speaker
Is there any truth, do you think, to some of the stuff around whether it's precast or whether it's modular or those kind of things? Does any of this risk innovation or are there ways that it can support and enhance innovation if we're attracting top talent at better prices? What's your sense in what it could actually mean for innovation?
00:21:30
Speaker
Yeah, ultimately, the industry itself has internally talked constantly about productivity being an issue that needs to be worked on and addressed. And I think for sure, modularization or offsite manufacturing is a very key important part of it. We talked on this podcast a couple of episodes ago about modern methods of construction in the UK really supporting it.
00:21:55
Speaker
And interestingly, some of this legislation tries to lock in the status quo approach. The construction industry is a high risk, low margin business, which structurally makes it quite unappealing and risky for contractors to try crazily innovative things because they're taking on a lot of risks to make a relatively low margin. Things that put more hurdles in their way, they're going to be the ones that have
00:22:22
Speaker
to innovate it in combination with like designers and clients. So things that put more hurdles in their way, I think are just going to slow that down, which is why I was talking to start about piring apart pay conditions and safety, because the conditions bits where they like lump in the, okay, writers won't use AI or the, you know, you won't do modularized construction for this thing. I think that's all I'm a real skeptical about a lot of those.
00:22:50
Speaker
things being more than just a stocking stuffer. Yeah, I think you bang on and it is. Well, even as looking at a few of those industries that are not much further down the path, a few years down the path, let's say with advancements in AI and robotics and technology.
00:23:08
Speaker
It almost seems like there's no argument that the right mix of the future is some kind of hybrid adoption of both. They're definitely not full replacements for people in any way, but helping to arm the labor force to actually utilize what is now available seems to
Proposals for Improvement
00:23:28
Speaker
be the only way to really keep advancing productivity over the midterm at least.
00:23:34
Speaker
Yeah, 100%. And we see similar behaviours in like mining in negotiations with unions as well. Conscious of time, so to maybe bring the discussion to a head, would you have any thoughts on what you would do if you were the government in this scenario?
00:23:52
Speaker
Yeah, I think your advice is the one that really resonated with me. The only way to solve big complex problems like this, I think, is breaking them down into the component pieces and actually having honest
00:24:07
Speaker
and real conversations and say those ones generally aren't done in the in the newspaper or behind a microphone and a pedestal but it is there's genuine right intent behind a lot of this I think as we talked about and there are benefits on both sides of the equation so I think to your point I'd be breaking it down into
00:24:28
Speaker
the safety components and we go and talk really specifically about the safety concerns for these size projects versus others and think about the edge cases because it's very unlikely that that also coincides with every role title that you quickly rattled off and every kind of paying condition. So I think it's a
00:24:48
Speaker
too broad a brush at the moment which seems like maybe the slightly easy way out it's get out some of the the fine finer paint brushes and let's go and work on a couple of the individual pieces specifically.
00:25:03
Speaker
Yeah, for me, I think like totally agree, I'd be separating the pay conditions and the safety piece like Australia on its own already has very high standards around safety. For conditions and I'd pay conditions, I'd prefer to let the market decide as much as possible. I would definitely favor the idea of government protection for like a minimum level for I guess the more
00:25:29
Speaker
the less skilled roles in particular. So maybe by trade or by role and having that be across the country. So we're not just like shuffling people from one spot to another in order to rob Peter to pay for anything else to add. Otherwise I think we've, I think we've, I think we've successfully walked the line of not being too controversial red meaty. We'll figure it out later. I guess in the comments.
00:25:56
Speaker
Yeah, cool. This could be the last episode of the offsite podcast. So thanks for listening, Mike. Thanks for joining me again, mate. Good to see you, mate.