Senate Environment and Communications Legislation Committee, , 9:03:30 to 9:16:04
Examination of labor costs and the impact of the renegotiated Enterprise Bargaining Agreement (EBA), which added nearly $1 billion to the project budget.
Topics: Workplace relations, Government spending
Speakers: Dennis Barnes, Hon Sarah Henderson, Hon Murray Watt, Unknown Speaker
>> I appreciate that. Let me let me move on. Um Mr. funds in 2022. Can I ask what was the average annual wage of a FTE
>> on on Snowy too or in
>> on Snowy too?
>> Yeah, I'd have to take that on notice.
the reason I asked this is I'm looking for the acceleration of the of the wage because according to GHB project benefits analysis on page 22, the annual wage of a worker in 2024 was $120,000. So I'm seeking the figure for 2022. uh if you can take that on notice. Do you know what is the current average annual wage of a worker now?
>> Again, I would have to take that on notice.
>> I mean, my concern is Mr. Barnes that the EBA which governs this project has completely blown out. 80% of the costs relate to labor costs. That's correct, isn't it?
>> That's correct.
>> Well, the blowout is extraordinary. and you don't know the average annual wage of workers on your own project.
>> I was expecting to be asked the question of what the EBA had contributed to the uh cost differential between 12 and 22.
>> Okay, but this is Senate estimates and so 80% of the people costs are attributed 80% of the of the costs of this project are attributed to labor. So can you give me a breakdown? You can't give me any sort of breakdown on the average annual wage per worker now?
>> No, I don't have that data with me.
>> So it's the case that of the say the 10 billion additional dollars in blowout that 80% of that blowout is attributable to wages.
>> Well, it's attribute I mean there is obviously two things in the cost. One is the rate you pay someone and the number of people and for how long. uh the of the 10 billion dollars uh a little over five billion dollars is associated with more people for longer. So it's not necessarily a rate question
>> but isn't it the case also that the average annual rate has in has increased.
>> Yes. So in 2025, the EBA was renegotiated and that was renegotiated to a market rate which was independently verified at that time.
>> Uh can I just take you to the ANAO's latest report at page 73? Uh it says in the corporate planning process, Snowy Hydro included the impact of the renewed EBA as one of the pressures on the project achieving the target cost. Can you confirm that is the case? can you expand on on on that pressure
please? Well, in the as I described earlier, the the escalations that have contributed to the $10 billion uh uh of $2.5 billion. We we obviously have a range on this because we don't know how many people for how long precisely. Uh, and we have not yet agreed a variation with our contractor, but the impact of the EBA renegotiation was a little under a billion dollars.
>> A little under a billion dollars. So, is that you're saying that the as a result of the EBA renegotiation that added just under a billion dollars to the total cost of the project? >> Can you give me the precise figure? Uh
well, you can't we haven't got a precise figure because we haven't agreed the variation with the contractor yet. I wouldn't want to prejudice that discussion. Uh and the precise figure obviously relies on the number of people for how long? Uh but the figure within the 22.2 billion is just under $1 billion.
>> And can you break that down? what what is the the the cost drivers in the EBA that you've renegotiated?
>> Well, combination of rates, allowances, uh various matters which are published on the Fair Work Commission website
>> and as Mr. Barnes has said that the EBA rates were found to be in line with market rates
>> and what happens so that's still under that's still under negotiation, is it? Or still hasn't yet been agreed? Well,
the EBA is finalized with the workers and that's on the Fair Work Commission website. Obviously, with our contractor, we don't just say, "Yes, here's just under a billion dollars." We make sure that there is very robust documentation to support a variation in the target cost. Now, it's an allowable cost. So, we will be paying for those costs. It's whether those costs uh contribute to the contractor's performance or penalty regime. >> And that's the bit that's still under
negotiation. >> So given it's not agreed, could it go beyond $1 billion? >> To the EBA?
>> It's really around it. The cost will be just under a billion dollars. The negotiation is about how whether the contractor uh has it included in its target cost or whether it is part of a penalty that the contractor will face and the precise detail of that. We don't disagree with the contractor on the need for a variation. We're just making sure that the detail is correct.
>> And so what is the what are the barriers to finalizing the EBA?
>> Well, the EBA is finalized
>> to finalizing the cost. Uh well, it's
the standard of documentation we require from the contractor to confirm that.
>> And so are we uh could are you concerned that this process could slow the work down? >> And where are the where are the significant I mean you've talked about almost a billion dollars in additional costs. What's driving that? I mean you've talked about rates of pay allowances. Where are where is the big pressures on the additional costs? I
mean perhaps it's worth also just explaining that the EBA covers the workers of SC Hydro who are uh the the employing entity for our contractor. Uh there are then you know when you work on a site like Snowy Hydro you then contract many more subcontractors over time and the subcontractors obviously look to enjoy the same rates as the head contractor. Uh so it it comes from many different subcontractors. So that's the first point and I think the majority of the cost and again this is in the Fair Work Commission ruling would be in the rates
>> It's the rates of pay is it? That's the big drop.
>> That would be the majority.
>> And and how much has has the wages gone up under this new arrangement?
>> Again, I'd have to take that on notice because it's a very complex set of
arrangements. On average though, what's the you must know I mean this is a you must know the average increase in the in the wages.
>> I think the headline rate is in the order of 5% a year.
>> 5%. Okay. Um so in the GHD document it stated that jobs are expected to peak in 2027. So with the equivalent of almost 6,600 full-time jobs supported directly by construction in 2027, the total number of FTE job years supported in any year of the project is expected to peak at approximately 18,700. So that's the GHG document. Uh can you tell me what the cost forecast will be for supporting this 18,700 strong workforce?
>> Well, the the workforce employed by future generation joint venture is the uh in the order of 5 a half thousand. Uh GHD have done pretty typical input output modeling to go what does that have an effect on the economy? all of the various support services and supplies that come from all over Australia. So, we don't pay for those. Uh we pay for the people and the people on the job as a result of the EBA will have an impact accounted for in the 10 billion of just under a billion dollars.
>> Is this the CFMEU? Um is the CFMU driving this EBA? Is that the principal union?
>> Uh we we have a wide range of uh union representation on the site. AWU, AMWU, CFMMEU.
>> And do you know what the breakdown is?
>> Uh, I don't think you're allowed to know what the breakdown is, but the majority uh at the moment would be AWU.
>> Okay. Um, so did the EBA do anything in relation to productivity? >> are you seeing productivity gains as a result of this huge uplift in costs?
Well, well, it's, you know, the project was stalled in 2023, so we have seen productivity improve progressively over the last uh 3 to four years. Uh,
>> no, I'm talking about the EBA. Does the EBA contain any productivity conditions
>> or making sure a project is no longer stalled would represent a
>> productivity. I don't need smart cracks from you. I'm asking >> I'm just reflecting on where the project was at when you left off. productivity particular productivity KPIs in the EBA.
>> I mean the I I I think the workers who work remote from home two weeks on one week off uh often doing 12-hour shifts underground uh have uh enough productivity drive that the EBA didn't require productivity measures of that nature. I don't know
well look, we're obviously very concerned about the cost reassessment. Uh you've we've obviously Senator Smith has asked about the OPD. do you have a copy of the cost reassessment with you? >> Are you able to provide us one that a copy today?
>> I think I answered earlier that I would take that on notice.
>> And what's the barrier in pro in not providing that document?
Well, the there's no single document. There's a a raft of supporting information and we have a single prime contractor on this job and uh we have to ensure that value for money is achieved through that relationship and there's a lot of commercially confidential information in that documentation.
Um, okay. Can we um can we get a copy of the EBA, please?
>> Well, I mean, it's on the Fair Work Commission website.
>> Well, they provide
>> I'm asking for a copy and Mr. Barnes, I just look for nearly a billion dollars in additional costs. I am concerned that there's no specific productivity gains as part of that uplift in wage wages and other allowances. Is there anything that you can point to in that document in relation to productivity gains? I'd
have to take it on notice, but like I say, the majority of the workers travel two weeks on, one week off to an extreme environment and work under harsh conditions underground. Uh I think those workers being well served by good transport, good conditions on site uh contributes to the productivity. uh there isn't I from recollection any specific productivity measures i.e you get paid more or less. I think you know they're often counterproductive particularly when we're working in a high hazard environment and we want people to be take safety first.