The Miles Government’s Best Practice Industry Conditions (BPIC) sweetheart deal with the CFMEU is inflating costs on Queensland Government mega projects by $1 billion a year and helping to squeeze new home buyers out of the market.

A report by Tulipwood Economics, commissioned by the Australian Institute for Progress finds productivity in the building industry has gone backwards 18.1% since a peak in the mid-2010s and construction costs in Queensland have blown out 30% since the pre-Covid year of 2019.

Download the full report here.

The Queensland taxpayer is getting less and paying more which raises serious questions about the cost of the government’s infrastructure program, projected total debt, and future inflation in the whole construction industry.

The report estimates the cost of the mandatory BPIC procurement requirements together with other structural inefficiencies of the Queensland construction sector to be at least $4.2 billion over the forward estimates (2023-24 to 2027-28) or about $1 billion a year.

It further estimates the gains from an improved productivity performance in the construction sector should BPIC be abandoned to be about $8.9 billion over the forward estimates or $2.2 billion a year. Union members in the construction sector are receiving wages which are 50% higher than non-union members with civil labourers, crane operators and traffic controllers on Queensland Government mega projects receiving between $150,000 and $200,000.

Construction cost inflation in Brisbane is the highest in the region at 6.5%, above Sydney (6%), Melbourne (5.5%) and Auckland (5.6%).

The report finds generous benefits on government financed projects such as 26 rostered days off a year on top of public holidays, compared with 6-10 RDOs on civil sites, a 5% wage rise every year until 2027, premium overtime rates of up to 300% and a raft of other entitlements have sapped worker flexibility and increased project risks.

In addition, workers can down tools when the temperature hits 35C or humidity rises above 75% at 29C and they will be paid 40 hours in any four-week period for delays caused by rain, storms, or extreme wind.

Employers are required to hold toolbox meetings with workers lasting at least two hours once a month at every site to foster “communication and consultation” with a standing invitation to the union representative to attend.

The agreement doesn’t even meet some of its basic aims, such as increasing industrial harmony and safety. Despite the deal with the CFMEU, working days lost in Queensland due to industrial action are the highest in the nation at 38,000 days, almost one third of the national total of 120,000.

Workplace fatalities are higher in Queensland (1.8 per 100,000 workers) than Western Australia (1.7), NSW (1.4) and Victoria (1).

The report says the higher pay and conditions are becoming the default for the construction industry, and not just government projects.

It finds unions are using their power to hold-up and delay projects, threatening disruption at critical phases until their demands for even higher wages and ever more favourable conditions are met.

Tulipwood Economics says the Queensland Government has weak incentives to manage construction costs and cost blow-outs.

As the single dominant buyer in the industry, the government awards contracts for mega-projects that attract few bidders. The lack of competition is exacerbated by organised labour exploiting their own dominant position as a supplier of construction labour.

Taxpayers are ultimately footing the bill for the cost increases as the government is forced to raise more revenue to fund them.

The report calls for an independent review of the construction sector by the Queensland Productivity Commission and the removal of BPIC.

It recommends a raft of competition reforms, such as partitioning projects where feasible to promote competition, encouraging more foreign bidders to enter the Queensland market, and encouraging more skilled overseas and interstate migration to increase the labour pool for the industry.

The report also calls for the reinstatement of Building Queensland in a narrower role than its previous incarnation to advise Cabinet on project prioritisation and to enforce consistency in project assessment across departments and industry sectors.

Building Queensland would promote independent, expert, and transparent consideration of projects, and publish full cost benefit analysis reports for projects with a value above $100 million.

Download the full report here.