Allan warned CFMEU takeover of traffic control could add more than $400m to Big Build costs, royal commission hears

The royal commission into Victoria's building industry on Monday heard evidence including phone calls, emails, internal memorandums and ministerial briefs showing how the Construction, Forestry and Manufacturing Employees Union (CFMEU) wrested industrial control of the Gap Road project by unlawfully shutting it down. The commission was established following the masthead's Building Bad investigative series, which revealed criminal infiltration of the CFMEU and widespread misconduct on government projects.

Chris Young, KC, counsel assisting the royal commission, told Commissioner Chris Kourakis that after a meeting on June 7, 2022, at CFMEU headquarters between four rail alliance representatives and two union officials, work resumed that evening. No record of what was said or agreed at that meeting has been found. "There are no minutes. There's no file notes. There's no letter recording what was agreed," Young said.

Notes from a rail alliance meeting at the time said union officials "pushed through" security guards and that workers were threatened with being "smashed" if they did not down tools. The notes stated: "They said you guys better not turn up tonight, otherwise we will smash you during the day."

Appeals to Victoria Police did not help. According to notes from a Microsoft Teams meeting held by rail alliance members: "We've called the police twice in the last two weeks without luck. They asked for our security to intervene and escort them off-site. We feel that without intervention from WorkSafe, police believe it's a health and safety matter and don't want to intervene."

The commission heard that workers' health and safety rights were used as "industrial leverage" on the Big Build, with rights of entry exploited to stop critical works and secure demands. Contractors were left to manage industrial disruption by themselves and "often did so by buying peace".

According to briefings prepared by the former major transport infrastructure authority for Allan in 2022 and 2023, when she was minister responsible for transport infrastructure, rates for traffic controllers under the CFMEU's alternative agreement were "70-90 per cent higher than the current rates". The briefing said: "The cumulative high-level impact for projects converting current traffic management industry rates to CFMEU terms and conditions is estimated to be well in excess of $400 million."

Four days after the CFMEU's takeover of Gap Road, the rail alliance building the project awarded a traffic management package to a company named CCL, without a competitive tender, for just over $2 million. CCL's hourly rates were roughly double those of the company it replaced, the royal commission heard.

The hearing also examined memorandums from building company John Holland, a contractor at Gap Road. One memo from between 2017 and 2021 stated: “The premier [Daniel Andrews] is factionally aligned with the socialist left, and the CFMEU is the key industrial organisation involved in that faction. We also understand the CFMEU has unprecedented access to ministers and other key Victorian government stakeholders.” Another John Holland memo said a CFMEU regional agreement “impacts everything from current and future tenders to our day-to-day operations. It would forgo management prerogative on matters such as, but not limited to, employment and subcontractor selection.”

Young said the commission would examine the state's response to complaints, noting that contractors reported conduct through formal notices and "can identify no response from the state to many of them".

The commission has received information and evidence suggesting organised crime involvement in the construction industry, including that apparently legitimate businesses made large payments to people associated with organised crime for services that “appear to have involved little more than intimidation and menace”.

Lawyers for former premiers Andrews and Allan, the CFMEU, contractors and government agencies were present at the hearing. Andrews and Allan are not expected to be called as witnesses during this block of hearings. Hearings will continue through the state election campaign and into the next term of government. The commission is due to deliver its final report by August 20, 2027.

The first witnesses are expected to appear on Tuesday.