New federal laws that would allow businesses with union-backed enterprise agreements to be favoured for taxpayer-funded work have sparked warnings they could create a fresh corruption risk in Commonwealth contracts, drawing comparisons with practices exposed in the CFMEU scandal.
Anti-corruption barrister Geoffrey Watson, SC, warned against the Albanese government creating more systems that concentrated power over access to lucrative government-funded work, saying such arrangements had historically proven vulnerable to corruption and market manipulation.
Business groups, independent MPs and the Coalition have also voiced concern over changes they say could advantage businesses with union-covered agreements, creating commercial pressure for firms seeking government work and extending those requirements through Commonwealth-linked supply chains. It is set to pass the Senate without debate next week after Labor reached a deal with the Greens.
The controversy has revived debate over Watson’s landmark CFMEU inquiry, which found enterprise bargaining arrangements in parts of Victoria’s construction sector had become compromised by criminality, favouritism and splurged billions of taxpayer dollars in cash-for-access schemes.
Watson, who is also a director of the Centre for Public Integrity, said the central risk was any system that gave a small group of people significant influence over access to valuable commercial opportunities.
“What I saw when I was doing the work of the CFMEU was that the power to give an EBA was concentrated in the hands of a few people, and that meant that it was very, very easily corrupted,” he said. “It meant that the people who held that power could control the market.”
The federal government says the changes are intended to encourage greater participation in enterprise bargaining as part of a wider workplace relations package and did not impose any obligations on the Commonwealth to require an enterprise agreement.
The Business Council of Australia also attacked the planned laws, arguing they risked elevating industrial arrangements into a gatekeeper for government procurement decisions.
Chief executive Bran Black said the proposal was an integrity problem that should alarm every Australian business and taxpayer and ran counter to lessons from recent CFMEU investigations.
“This is a corruption risk written into law, and every Australian will pay for it,” Black told this masthead.
“This reaches into every corner of the economy – the essential services Australians rely on every day, infrastructure, energy, health and defence. Any sector with government funding is at risk.”
Watson’s report, Rotting from the Top, found enterprise agreements were in some cases treated as commodities, with access allegedly bought and sold and used to determine which contractors could participate in major projects. The report concluded that control over agreements distorted competition, excluded legitimate businesses and created openings for organised crime in the construction sector.
“In particular markets, an EBA can be extremely valuable. It means that you can contract for work, or if you don’t have an EBA, you may be shut out from contracting,” Watson said, while also criticising the government’s lack of public scrutiny over the proposal.
He said the system had been shown to generate corrupt behaviour on both sides of the transaction.
“It also means that people will pay bribes to get EBAs. People will solicit bribes to give EBAs.”
Black said the government’s position that it would not use the power to favour union-backed businesses begged the question of why it needed to be enshrined in law.
Around 2.6 million workers are covered by around 8800 union-backed workplace agreements, according to the Department of Employment and Workplace Relations.
Independent MP Allegra Spender said she supported genuine enterprise bargaining, but the CFMEU scandal had exposed the risks of corruption when enterprise agreements become commercial assets “to be bought and sold”.
“The ability to preference union-backed enterprise agreements creates the risks that government procurement practices will actually drive corruption, as well as disadvantage small businesses who are much less likely to have enterprise agreements,” she said.
Independent MP Kate Chaney moved to strip the procurement provisions from the bill, arguing public contracts should be awarded on merit, capability and value for money rather than industrial arrangements.
“Government contracts should go to businesses that can deliver – on merit, on value, on capability – not to the businesses that hold the right union agreement,” she said.
The Coalition has also opposed the measure while supporting other elements of the bill aimed at improving the efficiency of the Fair Work Commission, accusing Labor of using procedural reforms to advance a broader industrial agenda.
Workplace Relations Minister Amanda Rishworth rejected claims the laws would create preferential treatment for union-aligned businesses, arguing they were designed to strengthen collective bargaining and improve workplace co-operation.
But she told parliament the laws would not cover construction contracts, in an acknowledgement of the large-scale corruption that has taken place.
“We have recognised a different approach is required in construction,” Rishworth said. “[But] we are not shutting out employers, we’re not shutting out unions, we are bringing people together.”
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Rob Harrisis the national correspondent for The Sydney Morning Herald and The Age based in Canberra. He is a former Europe correspondent.Connect viaemail.
