14.1
The Chief Executive Officer of NBN Co, Mr Stephen Rue, described the National Broadband Network (NBN) as being 'created to provide a fast, reliable broadband access network to benefit all Australians'.
14.2
A number of Commonwealth Parliamentary committees have inquired into the NBN since its establishment in 2009. These inquiries have primarily focused on the rollout of the project, regulatory governance, rural and regional importance, and customer satisfaction. It is extraordinary then that, despite its huge cost and importance to the Australian people, little light has been shed on the employment conditions of the technicians—the people responsible for installing, repairing and maintaining the NBN.
14.3
This chapter examines the industry labour model of the NBN workforce and how employment arrangements impact the working lives of technicians and others involved in the project.
The National Broadband Network
14.4
The NBN was announced in April 2009 by then Prime Minister the Hon Kevin Rudd MP who said that the creation of the new 'super-fast National Broadband Network' would create on average '25 000 jobs every year'.
14.5
The expectation was that this nation-building infrastructure project would create secure, well-paid jobs for technical trades and construction workers throughout Australia. The Communications, Electrical, and Plumbing Union (CEPU) argued that, more than a decade later, 'the reality for the workers installing and maintaining the NBN falls far short of these expectations'.
14.6
In evidence to the committee, the CEPU National President, Mr Shane Murphy, described the projects impact on workers:
A project that was to be a source of pride has developed the highly sinister underbelly of mistreatment and malfeasance that should be a source [of] shame.
Current phase
14.7
In December 2020, the Minister for Communications, the Hon Paul Fletcher MP, announced that the first major construction undertaking of the NBN was completed and that the network was 'fully built and operational'.
14.8
In the same announcement the government also recognised that 'there is continuing work to enhance the capabilities of the network'. In a $6 billion policy reversal announced in September 2020, the NBN Co stated it would offer last mile fibre access to nearly half of the existing installations on the copper network. The plan was also slated to include other enhancements aimed at supporting gigabit internet speeds for consumers. This increased the cost of the Coalition's NBN rollout from $51 billion to $57 billion.
14.9
Under each rollout phase, technicians have been engaged under different employment contracts. This chapter focuses primarily on the conditions experienced during the current upgrade phase.
The role of NBN bodies
The NBN Co
14.10
The NBN is operated by NBN Co. It is wholly owned by the Commonwealth of Australia as a Government Business Enterprise (GBE) and is accountable to two Shareholder Ministers: the Minister for Communications and the Minister for Finance.
14.11
Mr Murphy described NBN Co as 'a wholesale monopoly broadband infrastructure provider', and shared concerns that its market dominance has a large bearing on what ultimately prevails as the rate of pay and employment conditions for technicians.
14.12
The Australian Competition and Consumer Commission (ACCC) contended that NBN Co comprises a 'significant proportion' of the telecommunications market.
14.13
Mr Rue refuted the concept of NBN Co being a monopoly, arguing that, as the telecommunications market is competitive, 'there's no easy way to assess the percentage of work activity that we hold in the current market'. He argued that it was only at 'peak times' when the NBN held up to 80 per cent of the labour market, and that this was mainly contingent on the stage of the NBN rollout:
I think what we are observing—and I'll give you another data point—is that, if you think about two years ago, NBN was connecting 40,000 customers a week. We were building the network to over 100,000 customers a week. That is what I'd call mass-volume rollout. If you compare that to now, we're connecting 8,000 to 10,000 customers per week. The reason for that is that the network build has finished, as has the bulk migration process for customers. More than 8.2 million people have now connected to the NBN, and it's now the residual number of people that connect as they go along. So by definition, with what you've said, the peak of the build has been completed. The peak of the activations is completed. So is there less work in the market? There absolutely is. That would be felt by the industry.
Delivery partners
14.14
The companies contracted to deliver construction and maintenance services on the NBN on behalf of NBN Co are called 'delivery partners'. The delivery partners include BSA, Service Stream, Lendlease, Fulton Hogan, Downer and Ventia, all of whom provided evidence to the committee. Each delivery partner is contracted to deliver different outcomes for the NBN.
14.15
Ventia, Downer, Lendlease, BSA and Service Stream have all been engaged by NBN Co under the 'unify' project, which was announced in 2020. This project comprises of two main agreements, the unify services agreement and, the unify networks contract.
14.16
Fulton Hogan is not contracted under a unify agreement. Its NBN contract concerns design and construction programs only and identified itself as the 'only [delivery partner] that does not perform maintenance for NBN Co'.
Employment arrangements
14.17
NBN technicians are not direct employees of NBN Co. To deliver their contracted work, the delivery partners engage labour in two primary ways:
(a)
Through direct 'sub-contractors'—'A Communications technician traditionally contracted directly to Delivery Partners to perform sub-contracted construction and maintenance work on the National Broadband Network, on behalf of NBN Co', or;
(b)
Through a 'prime' contractor—'An industry term for an additional third-party contractor who secures contracted work offering from an NBN Co delivery partner and sub-contracts that work again – retaining a self-determined commission on the earnings for works completed, from the sub-contractor'.
14.18
Though the committee did not receive evidence directly from any prime contractors, it did receive information from the NBN Co's delivery partners as to how they engaged their NBN workforce.
14.19
In its submission to the inquiry, BSA specified that they engage workers directly and through a prime in a 50 per cent split. They argued that this arrangement affords better technician pay and flexibility.
14.20
Ventia are contracted under the unified services contract and identified that its contracted NBN workforce comprised of 60 per cent direct employees and 40 per cent prime contractors. Ventia's Group Executive, Telecommunications, Mr Tim Harwood, expanded upon the benefits of using prime contractors:
There's a number of reasons for that. Quite often the primes already have their own internal personnel, so they're not all just subcontracting all of their work out. They have, in some cases, plant and equipment that is used for the projects. In some cases they have plant and equipment that is used for the projects. They also bring another layer, if you like: the ability to supervise resource management of the smaller companies and, perhaps more, the way their businesses are set up they are able to administer and manage work with us. A much smaller company might be very good out on the tools and performing the work, but when it comes to running the business, they might find that a little bit more challenging.
14.21
Service Stream outlined their 'field operations' composition:
We have about 1,700 specialist contractors that are engaged by the business. Approximately 30 per cent of those contracting organisations are the owner of the business, the director, undertaking the field services—electricians, telecommunications technicians et cetera. Approximately 70 per cent of the contractors that we engage across the business have between one to five employees operating within their organisation as well.
14.22
The Managing Director of Service Stream, Mr Leigh Mackender, said that Service Stream chose to sustain such a model for the benefit of the technicians themselves:
Our model really supports flexibility for our contractors. They can choose if they'd like to work for Service Stream, the hours they'd like to work, the days they'd like to work et cetera. We provide that flexibility. And many of our contractors work not just for us but, obviously, for other delivery partners—other third parties both within telecommunications and across the broader infrastructure market.
14.23
Downer explained that, whilst they do contract work out to other organisations, those organisations use an employee‑based business model as opposed to primes who further subcontract the work:
From our business model we contract with construction service partners who are independent businesses. We do not directly engage sole traders. We do not engage primes in order to deliver services.
14.24
Downer later stated that it does use independent contractors from 'time to time' but only on an 'ad hoc' basis to complete jobs outside of the remit and skills of their core workforce.
14.25
Mr Damien North, Group Manager, Industrial Relations at Downer, explained that this is due to the nature of Downer's contractual obligations:
The work that we do doesn't lend itself to being performed by independent contractors. It's more the construction type work that would be done by crews. There may be some fault response to be done by employees of subcontractors. That's why we've applied that model: the type of work that we do, it suits having those companies that are set up to do that work.
14.26
Fulton Hogan, not being engaged under the unify contract, does not engage with any prime contractors and does not allow subcontractors to further subcontract work without its prior approval, meaning that its 'workforce structure is very different to that in the Unify Services contract', Mr Lee Revell, outlined their workforce arrangements:
Our workforce—those actually doing the work, not supervising the work—is made up of our own employees and a manageable number of key subcontractors, who directly employ their workforce too. Generally speaking, we deliver 50 per cent of the work with our own workforce, our own employees. The other 50 per cent, we deliver through a handful of partner subcontractor organisations in each state, who directly employ their employees.
Remuneration
14.27
Technicians are paid per job on a schedule of rates which provides 'fixed component pricing for the delivery of specified activities within a project'. There are thousands of rates, and each is dependent on a set of variables that may affect the completion of a job, such geographic location and age of technology.
14.28
The schedule of rates is struck during the initial tender process between NBN Co and its delivery partners. Delivery partners then remunerate their labour force on the same basis. Chief Executive Officer and Managing Director of BSA Ltd, Mr Tim Harris explained how the schedule of rates agreement struck between BSA and the NBN Co is used to inform technician rates:
For every job type, technology, region et cetera, you have an agreed rate with NBN which they would pay to BSA, as they would pay it to the other delivery partners. We then use that, obviously, as you'd expect, to set our rates with the subcontractors.
14.29
In its submission to the inquiry, Downer argued that the 'fairest way' to remunerate workers was on the basis of a schedule of rates. Group Manager, Industrial Relations, Mr Damien North, told the committee that the schedule of rates are not 'dictated' by the NBN Co and that a stringent bidding takes place before they are agreed upon:
All of these projects are won on a competitive tender basis, so we and our competitors need to put together a bid, and in putting together that bid we need to understand the various components of the work that we're about to perform. So we say, 'This is how much it's going to cost to do this task.' There could be hundreds, if not thousands of these particular schedules across our business. So we look at what it's going to cost to do the job safely, and then we put together a price based on that rate card that we would do so we have an indicative price.
14.30
Mr Mackender explained that the rate setting process includes extensive consultation with experts and field workers to ensure the agreed upon rates are viable:
When we are tendering on work through a commercial process with our clients, we will first of all build that rate card from the ground up. We will take advice from our subject matter experts in the business. We will engage with some of our contractors in the field and some of our employees and other industry experts, including undertaking time and motion studies et cetera to formulate what we believe is an applicable rate that is commensurate with the works that need to be undertaken. Then we build that up, ultimately, in what we provide back as a rate to our client to cover the services.
14.31
Mr Murphy told the committee that the delivery partners have 'no talks with any of the subcontractors' when updating contracts and rate setting. However, in its submission, BSA asserted that:
We meet with the CEPU on a semi-regular basis. We also continue to seek feedback from technicians directly, through our regular Toolbox Talks, to ensure we maintain positive and mutually beneficial relations.
14.32
The ability to negotiate the payment rates rests solely with NBN Co or the delivery partner. Under this payment mechanism, NBN technicians are prevented from setting their own rates, unlike other typical industrial trade contractors:
[T]he big issue with our members is that they are not like normal contractors you would get out as a plumber or an electrician. They don't have the ability to choose their [rates]. They don't have the ability to control profit and loss. There is a set rate for the job and that's it.
14.33
In response to a question regarding whether technicians get paid for any uncompleted jobs, Mr Richard Bartley, the Executive General Manager of BSA Ltd, said that a number of 'business rules' dictated this outcome:
… it's not true to say they never get paid for an incomplete job; it depends on the reason and the type of rationale for why the job was incomplete. So they get paid an incomplete rate on a number of jobs but not 100 per cent of jobs.
14.34
The committee sought evidence on what the likely average rate of pay or annual salary of a NBN technician was. One witness agreed with a $100 000 a year revenue figure, not including working costs, indicating that the actual amount he took home per annum would be much lower. Lendlease's Managing Director, Services Division Mr Toby Matthews, was unable to provide the committee with an estimation on the annual salary of a worker engaged on a unify contract:
It's a very difficult thing to calculate. The rates are really based on scopes of work, on output, rather than hourly rates. So it doesn't convert to hourly rates. I suppose it also varies due to the amount of work that an individual technician might choose to do on a given day, or week. That can also have an impact, perhaps, on what their hourly rate ends up being.
Issues affecting field workers
14.35
As part of its evidence gathering, the committee heard testimony from a number of NBN technicians who shared 'significant concerns about the nature of their engagement with NBN Co and its delivery partners'. These concerns are discussed below with particular reference to:
unequal job distribution;
inappropriate and unethical contracting practices; and
the oversupply of labour.
14.36
Mr Murphy contended that the employment arrangements between NBN Co, its delivery partners, and subcontractors are 'causing real problems', and are depriving technicians of employment entitlements. Specifically, he said:
Under NBN Co's current business model, these essential skilled workers are forced to operate as contractors with no sick pay, annual leave, superannuation or other workplace rights … They have no say, as employees would, in negotiating their rates of pay, no power to negotiate the term of their contracts to ensure basic workplace safety or reasonable hours.
Unequal job distribution
14.37
The committee received evidence from witnesses that job distribution needs addressing within the NBN labour force. Many workers experience perpetual insecurity about whether or not they would receive jobs:
They roll up every morning not knowing how many jobs they have, whether they're going to get any work at all, where their work location will be and how far from home it might be, how many jobs they will receive and whether they will make a living or not.
14.38
When workers were receiving jobs, they were not always distributed equally between subcontractors. Mr Murphy told the committee that workloads were not being distributed fairly, with 'some contractors favoured and too many exploited'. He said that those working through a prime are reportedly receiving 'the most lucrative category of installation and provisioning work':
When it was in the ebb, not the flow, some subbies as reported that in the morning they get five or six jobs a day, similar to others, but during the day or earlier in the morning they would see a number of jobs disappear from their queue and end up with two or three, while guys working through primes or others would be getting five to eight jobs a day. That's where the disparity was and where people started to become suspicious about why this was happening: 'Why are people getting more work than us working for a prime as opposed to working direct?'
14.39
Furthermore, there is no transparency or follow up as to why different workers have been given preference. Mr Nedelkovski said:
All these guys working under these primes were getting all the fibre to the curb jobs. Every time I asked the delivery partner, 'Why aren't these guys getting trained?' or 'Why is this work not being shared evenly?' they would say, 'We're working on it,' but it never eventuated.
14.40
Mr Mohammed Yehia, an experienced NBN field technician subcontractor, supported the assertion that prime contractors seemingly receive more work, and provided the committee with anecdotal evidence of his experience working for a delivery partner:
I have never seen 10 jobs in my life with NBN, never. On maybe one day through the last three years I have taken eight jobs; it was overflow from another technician or whatever. The usual, as I mentioned earlier, is three, four, jobs a day, or five to six if it was good.
14.41
Other witnesses said that not only do technicians engaged by prime contractors get more jobs; the types of jobs are easier and safer. Mr Nedelkovski told the committee that in order to get 'eight or nine jobs in a day' a technician would have to be doing one specific type of job.
I can assure you: to get to eight or nine jobs in a day, it would either have to be a specific type of work, which would probably be fibre to the basement work, or it would be fibre to the curb work, which is a lot simpler.
14.42
CEPU argued that this is in part due to the 'increased complexity of jobs on the mixed technology network'. In the original NBN rollout technicians were completing repetitive work, such as connecting fibre to portals inside premises. This is no longer the case:
Now technicians may be required to repair degraded copper wires or remediate HFC cabling. Often they will arrive at a job to find it is impossible to complete the repairs in the time assigned due to unforeseen faults or degradation of obsolete technologies.
14.43
The old networks present unique difficulties for technicians and can significantly blow out the time a job takes to complete. Referring to how long a typical job may take to complete, Mr Nedelkovski explained:
That can vary. To do three or four jobs, on average, to be honest, it's anywhere from four to six hours, but those four to six hours can become 12 hours because the network that we're working on out there, in particular technologies, is quite old and fragile, and there's not just the one fault; there are faults in multiple locations that require every particular location to be attended to physically so that you can resolve and rectify the issues.
14.44
Furthermore, the mixed technology jobs require technicians to have more qualifications. Experienced technicians, who have invested more time and funding into training, are being allocated more difficult jobs, or being engaged to fix the errors of other technicians:
… if you have a look at a lot of those people's work, some of them are probably the unskilled ones. They are the people that most of us skilled technicians are following around and cleaning up their mess.
14.45
Mr Mackender said that Service Stream 'take into account a number of factors' when allocating work but predominantly it will 'allocate that work based on the competency of the technician, based on their availability and based on what works they'd like to undertake':
As I talked to earlier, the preference of the contractor or specialist contractor that we are engaging and the nature of the work and the activity that we believe will be required are certainly taken into account, and we can take into account other factors such as performance et cetera. So we do look at a range of measures when we are allocating work. We generally try to assure that we can allocate work across our business. It is in our interests to support those small business specialist subcontractors and provide continuity of work wherever possible. But we do take into account some of those other factors.
14.46
This ongoing inequality in work distribution has created a wage disparity amongst technicians, with only a 'select few earning a good salary'. The remainder, despite working up to 60 hours a week, are 'often left unable to earn a living wage'.
14.47
Mr Harwood agreed that the average amount of jobs per day was four. However, that the variance between job numbers that exists is not due to preferential treatment, but due to a number of individual factors:
It really does vary with the individuals. They provide availability into the NBN system—some contractors might provide us a 40-hour week, others may choose to provide certain days and others may choose to provide part of a day as well. We have people today that are doing two jobs a day, equally, we have people today doing eight jobs a day. So there's a wide variation in the numbers of jobs per day. The typical number that you would see and typically expect is around four jobs per day.
14.48
One reason for the disparity in work distribution, offered by Mr Matthews, was that 'the system itself and the distribution of the work doesn't favour independent technicians or small businesses as primes as such':
My understanding is that, again, that varies quite significantly across the individual technicians, with some choosing to do maybe a couple of jobs per day. Maybe they're not working on this contract full time and they've got other opportunities for work elsewhere. I think you can probably achieve, on some days, up to eight jobs, or tickets that they might pick up. So I think, on average, it probably works out at around four tickets per day.
14.49
Mr Rue told the committee that the company was trying to improve its field service management system and provide delivery partners with work forecasts earlier in an effort to better allocate jobs based on skills and travel time. But, he said, it was 'a complex environment'.
Inappropriate and unethical contracting practices
14.50
Concerning evidence was provided to the committee regarding allegations of corruption and bribery amongst prime contractors. For example, Mr Murphy told the committee of serious allegations reported to CEPU of wilful malfeasance involving the manner in which prime contractors were engaging labour for work on the NBN.
14.51
The committee queried Service Stream as to whether it was aware of allegations of 'kickbacks or preferential work being allocated to particular contractors' amongst its NBN workforce. Mr Mackender indicated that Service Stream was 'aware', but in these instances there had not been 'evidence to substantiate' such claims.
14.52
NBN Co assured the committee that 'if an illegal matter was raised with NBN we would investigate that fully'.
Box 14.1: In-Camera evidence on unethical contracting practices
The committee heard evidence directly from a number of technicians as part of the inquiry. One of those workers gave their evidence in a private session.
The following sections from in the camera session have been reproduced with the agreement of the participant, have been de-identified to protect the identity of the worker, and are not referenced.
The committee heard evidence from an individual engaged as a manager with a delivery partner. The witness claimed that one prime subcontractor had direct influence over specific people in management and identified instances of malpractice between the delivery partner and the prime including:
not issuing invoices or paying GST to workers;
bribery in the form of illegal drugs such as cocaine and cigarettes for extra work; and
monetary bribes to terminate workers unlawfully.
The witness said when these instances were brought to their attention, they were reported directly to the delivery partner but they were 'ignored'. The witness said they encouraged the affected technicians to pursue legal action:
I did encourage the technicians to go directly to the police, but there's a level of resistance because they're afraid of things happening to them.
Furthermore, the workers affected by these circumstances were allegedly threatened:
A threat … would be, basically, 'We know where you live and, if you don't shut up, we're going to shut you up'. It was something to that effect.
Low wages
14.53
In 2020 NBN Co's Chief Executive Officer, Mr Stephen Rue, received a salary package of $3.1 million and a further $1.2 million in bonuses. Executives were paid a share of $11.4 million with six of the head executives receiving a seven‑figure total pay check.
14.54
In total, NBN Co paid out $78 million in taxpayer-funded bonuses in the 2020 financial year, with executives on a salary of $200 000 or higher, receiving average personal bonuses that year of $50 000 each. While the Minister for Communications has claimed that 'a substantial proportion of those bonuses were paid to front-line staff', data supplied by NBN Co shows only 179 of 1761 NBN employees earning less than $100 000 received any bonus at all. Despite this cohort accounting for 30 per cent of NBN Co employees, they received just 2 per cent of the bonuses awarded.
14.55
In comparison, the committee heard that the remuneration rate of many technicians was 'barely a living wage'. Asked if he believed that CEPU members are paid fairly and able to meet business and statutory obligations Mr Murphy responded 'absolutely not'.
14.56
Committee Chair, Senator Tony Sheldon, probed this point and tabled a question on notice from Budget Estimates 2021-2022. Senator Sheldon stated that in the answer 'I asked whether the NBN ensures that subcontractors are paid enough to at least cover their own expenses. You said that you don't know'.
14.57
NBN technician and CEPU member, Mr Steve Nedelkovski, told the committee that sometimes, workers were not remunerated for jobs at all:
There are certain circumstances where we can go out to a job and spend two to three hours on the job and then come to the realisation that something out of our control is causing us not to be able to finalise the job. We then get zero dollars for that job. We don't get paid anything for jobs that can't be completed.
14.58
This assertion was supported by evidence presented to the committee from a number of NBN technicians who said that current remuneration rates were unsustainable. For example, NBN technician and CEPU member, Mr Burak Sagol, told the committee:
When I started in 2016 the rates were higher, if not on par, with what we're getting now five years later. As you know, the cost of living, inflation and everything has gone up but our rates have not changed over the last five years.
14.59
With 32 years of experience in the industry, Mr Nedelkovski was well placed to comment on this, and contended that the job rates being paid 15 years ago were 'on par with the rates we are being paid today'.
14.60
BSA explained that whilst it may be true that some people may not have seen the rates move a lot, the rates do get 'reset' in an annual review process that takes into account CPI and the movement in rates is largely 'dependent on where they are in terms of the technology mix and where their specialist skills are.'
14.61
Mr Nedelkovski argued that many technicians were 'consistently [reporting] declining real incomes' due to workers having to pay out of pocket for many 'necessary' tools and materials:
So, if we're getting two jobs a day, that's about $148 for the day, and then you can take out your fuel and your other expenses—your training and your tools. Since I joined the NBN, the tools that I've had to acquire have cost me in excess of $10,000 to be able to perform the job in accordance with the customer's requirements and obviously in accordance with NBN's requirements.
14.62
The committee heard that NBN technicians can be required to purchase new costly tools and equipment without compensation, and that while some operations costs such as fuel are highly variable, the rates of pay for technicians remain statically low.
14.63
Further compounding issues of low wages amongst technicians was evidence from an NBN technician who claimed that a prime he engaged with taking as much as 40 to 50 per cent commission from his wages.
14.64
NBN technicians are currently receiving a $75 top-up fee due to ongoing service app issues. Mr Nedelskovaki said that under the current rates, the $75 enablement fee was the only thing keeping him financially afloat:
At the moment we're being paid an enablement fee by NBN and it is only because of this am I able to keep working. If the enablement fee is removed by NBN at the end of October, then I will probably have to look for another job; it's that simple.
Workforce planning—oversupply
14.65
CEPU argued that NBN Co's lack of a 'business plan' has had significant shortcomings in the way of workforce planning. According to Mr Murphy, there is a discrepancy between the supply in labour and the demand for work, which is driving an oversupply of workers:
What's occurring here through Gumtree and other platforms, is that we're getting unskilled and many other people applying, coming from many industries who've never worked in this sector, sliding underneath the primes and then creating a mass flood of contractors, referring to the position of Mohammed and others where you only get two or three jobs a day. They are very skilled and multi skilled, have been on the job for many years and have invested in their business and training, and they are now finding themselves unable to make a reasonable living because people have flooded the market and there isn't a business plan saying how many are actually required.
14.66
Mr Yehia commented that the effects of an oversupply of labour in the market were twofold, in that not only did the influx of unskilled workers detract from work available to experienced, industry established technicians, but that it also affected the 'quality of the network'.
14.67
Mr Murphy explained that this NBN labour market feature was untenable and could be addressed through a 'proper business plan' and cost assessment on the 'required number of people' to carry out the NBN work:
You can't keep operating a system year in, year out, adding more and more workers to the system, many unskilled. That not only creates a quality issue but places pressure on the skilled operatives who have invested in their business over a long period of time. You can't have a situation where you have a bucket of work but the bucket of supply is far greater than the bucket of work.
14.68
Mr Rue said that NBN Co 'do[es] communicate all of [its] build and activations targets—and directly with the delivery partners'. The NBN Co's Chief Operating Officer, Ms Katherine Dyer, supplemented this point by explaining that the NBN Co undertakes forecasting processes and communicates with delivery partners to aid them in generating workforce allocations numbers:
The principle is that we provide the delivery partner with a 12-month forecast and then what we call a near-term forecast—three months, one month, one week, the day before and on the day … They utilise our forecast and they translate that into how many contractors or how much workforce they need. The delivery partner puts those contractors in the system that we operate within, based on their skill set and the regions that they're allocated to. The delivery partner knows where we are, in areas, with our activations analytics—what we expect to see from a network performance. Utilising that information broadly, they've got to make sure that they have enough of a workforce to be able to perform in that environment.
14.69
Ms Dyer further communicated her confidence in NBN Co's established business practices saying that 'I've got to believe that the commercial environment is working and that the supply and demand of work is working for us'.
14.70
However the committee received evidence that NBN technicians are being engaged for work by unscrupulous contractors through unregulated online marketplaces like Gumtree. It is doubtful this practice is conducive to an effectively managed and planned supply chain.
Pyramid contracting concerns
14.71
Evidence provided by field technicians suggested that the exploitation and undesirable working arrangements experienced by them may be an overarching function of the pyramid contracting model. By 'deliberately precluding adequate reporting and complaints mechanisms' the multiple layers of subcontracting serves to dilute the chain of responsibility and creates an environment that allows noncompliance to flourish.
14.72
The CEPU submitted that NBN Co's operational structure for the engagement of technicians is 'creating widespread job insecurity, underemployment and declining income for workers'. The CEPU therefore argued that for technicians to thrive and remain financially sustainable usage of outsourcing or subcontracting needed to be limited 'to instances of genuine need or efficiency, and cease using such methods to undermine job security and limit wage growth for Australian workers'.
14.73
The Executive General Manager, Consumer and Fair Trading of the ACCC, Mr Rami Gregson, said that issues within a subcontracting model were not 'completely uncommon' and not necessarily a product of the subcontracting itself . However, Mr Gregson did further acknowledge that:
The more parties you get in a supply chain, the more controls and checks and balances the primary contract provider might need to have in place to ensure there's probity throughout that chain.
14.74
NBN Co contended that 'vigilance' within the industry is important but that having multiple business partners encouraged 'healthy' competition for the 'contracting ecosystem'.
14.75
As a technician, Mr Nedelkovski questioned the necessity of the 'middle-men' in the subcontracting arrangements, stating that his daily interactions are with the NBN and that most subcontractors 'don't even talk to [their] delivery partners':
So I've never been able to understand why the delivery partners have existed, because, as I said, for everything that we do, when we come across a problem out there and are not able to do the work, or we do the work or whatever the case is, our interaction is 100 per cent with NBN.
14.76
Evidence from another technician, Mr Aghamohammadkhan, indicated that multiple levels of contracting had implications on dialogue and information dissemination between NBN Co and its contractors. He contended that a prime contractor he had previously been employed under was terminated by a delivery partner but subsequently went on to receive work with another.
14.77
Ventia's General Manager, Mr Neil Barnes, remarked that, in an instance where a subcontractor was terminated by Ventia, the NBN was notified. It was not expressly stated whether this was a voluntary or mandated process within Ventia's NBN contract. However, NBN Co later clarified in an answer to a question taken on notice that its contracts with delivery partners 'do not expressly require Delivery Partners to proactively notify NBN Co of instances of termination of a sub-contractor, nor for the reason(s) the Delivery Partner took such action'.
14.78
Mr Revell explained that in engaging workers directly, Fulton Hogan had a 'great platform' to create 'sustainable employment' for their workers:
When you have your own employees and/or you're working with fewer partners, you have the opportunity to really invest in that. It's much harder to manage that through hundreds of independent contractors or hundreds of businesses. It's a very hard thing to manage.
Assurance measures
14.79
The committee sought evidence on where along the subcontracting chain the responsibility for worker conditions existed.
14.80
Repeatedly, NBN Co said that responsibility fell to the delivery partners, and that their approaches weren't for NBN Co to comment on. However, Ms Dyer contended that the NBN Co were 'very active, at all layers of NBN's management'.
14.81
However, when questioned by the committee, many of the delivery partners made it clear that whilst they engage subcontractors, they are not party to how much the prime contractors are paying their workers, and further, that they have limited, if any, oversight of it. Mr Matthews explained:
It's not something that we have visibility of. What we have visibility of is the rates that those primes or individual technicians, the small businesses, receive for the work that they complete.
14.82
The evidence, in this regard, was lacking. However, both the NBN Co and its delivery partners emphasized that, despite the lack direct oversight afforded to them, they do carry out a range of assurance measures addressing contracting activities in their control environments.
On payments
14.83
NBN Co maintained that their governance framework was 'comprehensive and strong'. As part of this 'governance process' the NBN Co 'audit and investigate the arrangements of the contracts that have with delivery partners'.
14.84
The NBN Co clarified that this assurance step emerged during the invoicing process, where delivery partners are required to 'make a declaration that they have paid their subcontractors or their workforce'. When pressed by the committee whether a statutory declaration was a sufficient assurance mechanism, Ms Dyer further communicated the NBN Co's confidence with this arrangement:
So we're confident that, with the arrangement, particularly with the additional governance we have in place with those delivery partners, the system is working well. Like you, from time to time we do hear from people, contacting NBN, who claim that they haven't been paid. We will always work to resolve those issues if the claims are substantiated.
14.85
NBN Co’s audit of payments appears to extend only to confirming that a payment has been made, not that the quantum of the payment is fair or appropriate for the task that has been completed. It is clear, based on evidence provided by technicians, that NBN Co is also not auditing the margin withheld by Prime Contractors. When asked if it had any further proactive assurances that compliance obligations were being met in accordance with the declaration, Ms Dyer said that the NBN Co 'expect' their delivery partners to act lawfully.
14.86
None of the delivery partners that gave evidence to the committee had a comprehensive payment auditing mechanism of their engaged subcontractors in place.
14.87
Ventia considered the payment arrangements of NBN subcontractors to be something that is 'commercially held between the prime and the individuals underneath' and it does not proactively audit those arrangements. Mr Harwood, acknowledged that it would be 'possible' for a prime to contract with an independent contractor at any rate, even a rate that might be less than minimum wage.
14.88
Similarly to NBN Co, Ventia rely on a statutory declaration for payment assurance from their subcontractors:
We do request that those subcontractors in the payment claim process between us and our contractors declare that they have paid their supply chain the entitlements to which they are due, so that is a check that is put in place.
14.89
Mr Neil Barnes presented evidence of a 'validation' process they undertook regarding a case of underpayment from one of their contractors:
[W]e did receive an escalation from the CEPU recently with one of our primary companies. The suggestion was being made that the payments weren't flowing through to the contractors and hadn't done so for some weeks. We got in touch with that primary contractor and, as a result of that, found that the payment hadn't flowed through as it should have. We checked from our own payment side of things and payment had been made to the primary, so there was no issue in terms of payment. As a result of our investigation into that we parted company with that prime, and the prime moved away. Then, as an outcome of that, we ensured that those secondary subcontractors were paid, which they were, and we picked up a number of those contractors direct—they came on as sole entities—and some of those chose to move as their own preference to work for other primes.
14.90
Fulton Hogan also have a 'stat dec type process' in which it requires subcontractors to 'sign off monthly' that they are paying in accordance with 'appropriate employment laws'.
14.91
BSA said that they can 'request stat decs et cetera where we think behaviours are not happening'. Mr Bartley provided evidence of a such circumstance in which the failure to provide a statutory declaration on lawful payment resulted in the termination of a prime contractor engaged by BSA:
The latest one that we took off the platform we had heard that they weren't paying their subcontractors in full and on time. We asked that prime for a stat dec to declare that they were complying with the law, as per our MSA statement of work. We didn't get that guarantee from that prime and we removed them from the platform. As a result of that, seven of the contractors who worked with that prime came direct to BSA, which was a good outcome for us to retain that expertise on our platform.
14.92
Lendlease was the most explicit that the conditions of its subcontractors engaged through Prime Contractors are not of any interest. Mr Matthews emphasised it is 'just not something that we have visibility of or seek to have visibility of'. When asked why Lendlease chose not to have that visibility, Mr Matthews added: 'A choice would suggest that we've thought about it and decided not to. I don't think that's the case'.
On recourse
14.93
The committee also sought information from NBN Co and a few of the delivery partners as to what, if any, recourse measures were in place for workers. Ms Dyer advised that NBN Co have a comprehensive whistle-blower program operated by an external body. Mr Rue later reiterated the seriousness of this matter:
And that is why I have said on regular occasions at both Senate estimates and in private meetings—and I will say it again here to anyone who is listening—that we have a whistleblower line. When anybody contacts us, we follow those issues up to the extent that is required under whistleblower legislation. We do care. If there are allegations or information you can give us with specifics, we do follow up and we will continue to follow up.
14.94
Service Stream and BSA provided evidence of similar whistle-blower hotlines run by third parties. Workers engaged by Service Stream experiencing distress about their working conditions are able to about to raise them with either management staff or the 'independent whistle-blower process'. Mr Mackender said this dual measure was in place to address workers who may not feel comfortable raising concerns with direct supervisors. Furthermore, a member of the whistle-blower team reports directly to the Service Stream board, enabling matters to be 'promptly investigated and reported and action is taken if required'.
Concluding comments
14.95
This chapter has provided a case study of Commonwealth procurement policy with regard to the National Broadband Network. It has emphasised issues in multi-layered subcontracting and how this can facilitate malpractice along the contracting chain, and substantial inefficiencies and waste of taxpayer money through margin-clipping by excessive layers of subcontracting intermediaries.
14.96
It has also illustrated the disparity between the generous financial treatment provided to senior NBN Co executives, and the abhorrent conditions for their front-line workers. The next chapter, Chapter 15, provides the committee's view and recommendations on these matters.