Dispute Resolution: Lessons to be Learned from the Experience of Disputes in the Construction Industry

8/4/2019 Dispute Resolution: Lessons to be Learned from the Experience of Disputes in the Construction Industry

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CONSTRUCTION INDUSTRY DISPUTE RESOLUTION ASSIGNMENT: Dianne Allen ... p.1LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION

INDUSTRY

LESSONS TO BE LEARNED FROM THE

EXPERIENCE OF DISPUTES IN THECONSTRUCTION INDUSTRY

Dianne Allen, March 1997

Contents

ABSTRACT ............................................................................................................................... 31. INTRODUCTORY REMARKS ............................................................................................ 32. THE CONSTRUCTION INDUSTRY: .................................................................................. 6

2.1 GENERAL OVERVIEW OF THE CONSTRUCTION INDUSTRY ...................... 6

2.2 A BRIEF OVERVIEW OF HISTORICAL MILESTONES/ CHANGE

INDICATORS OVER THE PERIOD 1945-1997 FOR THE CONSTRUCTIONINDUSTRY IN NSW ......................................................................................... 8

2.3 THE OPERATIONAL CONTEXT OF THE CONSTRUCTION INDUSTRY: .... 102.3.1 cyclical nature of economy - boom -> bust ............................................. 102.3.2 tendering process: competition ................................................................ 102.3.3 technological change, some of which can be represented by: ................. 102.3.4 management development ....................................................................... 112.3.5 loss of skills: ............................................................................................ 122.3.6 undercapitalisation of significant proportion of the sector ...................... 122.3.7 dispersal of activity .................................................................................. 122.3.8 diversity of participants ........................................................................... 122.3.9 the intervention of government as a major player: .................................. 132.3.10 regulation and standard setting .............................................................. 13

2.4 THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY: .. 132.4.1 The Nature of Construction Industry Disputes ........................................ 132.4.2 The Sources of Construction Industry Disputes ...................................... 142.4.3 Alternatives and strategies for dispute resolution.................................... 16

3. GENERAL PRINCIPLES OPERATING ............................................................................. 203.1 COMPETITION ..................................................................................................... 21

3.1.1 Basic psychological element of competitiveness: ................................... 21

3.1.2 Classic free market: delivery of goods/ services -> profit ....................... 213.1.3 Competition in other fields ...................................................................... 21

3.2 COOPERATION .................................................................................................... 223.3 NATURAL GROWTH CYCLE ............................................................................. 233.4 ORGANISATIONAL MANAGEMENT DEVELOPMENTS ............................... 233.5 GOVERNMENT AND THE CONCEPT OF PUBLIC SERVICE: EQUITY

PRINCIPLES .................................................................................................... 254. APPLYING THE LESSONS TO LOCAL GOVERNMENT ............................................... 27

4.1 GENERAL OVERVIEW OF THE LOCAL GOVERNMENT INDUSTRY ......... 274.2 CURRENT PRESSURES FOR CHANGE IN THE LOCAL GOVERNMENT

INDUSTRY IN NSW ....................................................................................... 294.3 INDICATORS OF THE LOCAL GOVERNMENT RESPONSE TO DATE: ....... 31


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4.3.1 NSW Dept Local Government Competition Policy Document ............... 324.3.2 Experience of "sea-changes" to some local government entities ............ 334.3.3 ALGA Seminar, July 1996 ....................................................................... 33

5. CONCLUSION:.................................................................................................................... 34BIBLIOGRAPHY ..................................................................................................................... 36

Section 2.1 .................................................................................................................... 36Section 2.2 .................................................................................................................... 36Section 2.3 .................................................................................................................... 36Section 2.4 .................................................................................................................... 37Section 3 ....................................................................................................................... 37Section 3.4 .................................................................................................................... 37Section 3.5 .................................................................................................................... 38Section 4.1 .................................................................................................................... 38Section 4.2 .................................................................................................................... 39Section 4.3 .................................................................................................................... 39

ATTACHMENTS .................................................................................................................... 40ATTACHMENT 1: ABSTRACTS OF PREVIOUS ASSIGNMENTS ........................ 40ATTACHMENT 2: THE CONTEXT OF LOCAL GOVERNMENT .......................... 44 ATTACHMENT 3: INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL

GOVERNMENT WORKPLACE ..................................................................... 50ATTACHMENT 4: EXTRACT FROM "ISSUES IN TRAINING IN NEGOTIATION

SKILLS FOR AN ORGANISATIONAL SETTING" ....................................... 55PRESENTATION HANDOUT: LESSONS TO BE LEARNED FROM THE EXPERIENCE

OF DISPUTES IN THE CONSTRUCTION INDUSTRY ........................................... 56

PRESENTATION: ................................................................................................................... 59


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ABSTRACT:

The main theme of this submission can be described in the adage:

"Those that do not learn from history are condemned to repeat it."

The analysis involves looking at the experience of the construction industry and disputes:

the nature of the disputes

the source of the disputesthe endeavours to deal more effectively with disputes

to see if there are lessons to be learned, warnings to be taken.

The particular application of any such lessons is to local government, where:

the present context of local government involves significant pressures for change,

one such pressure is the challenge of competition.

This challenge, which appears to promise transformation of the present mode of local

government operations (in order to deliver on the industry obligations to the NationalCompetition Policy), is but one manifestation of the current debate on the role of the

government in a market economy.

The lessons learned from the experience of the construction industry may serve to instruct thisdebate.

1. INTRODUCTORY REMARKS

1.1 Our current Western culture tends to be characterised by the now, the new, theshort-term, the quick-fix. This tends to destine us to overlook lessons of the past, to

forget to hold onto key, basic/ fundamental principles which have been hard-won from

the tutoring of experience.

1.2 The experience of the construction industry over the past 50 or so years has been ofchange, and the consequences arising from that change.

1.3 The prevailing context for the construction industry is of an economic cycle that tendsto boom and bust. This cycle produces pressures for efficiency, for survival,

(especially in "straitened" times) which have resulted in the development of somecharacteristic features within the construction industry. The notable features include

high levels of competition, and in many cases the pressure of competition has been

attended by a high level of disputation.

1.4 It is then worth reflecting that the "freely competitive" commercial world, generally,


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demonstrates the elements of a natural cycling of growth:

one independent operator

-> small team/ partnership-> small business: with employer employee dependencies

-> large public company enterprise (almost a bureaucracy)-> diversified enterprise

-> inefficiencies and/or loss of competitiveness and/or conflict break-up / down

-> divesting to smaller, more specifically and clearly focused operations

1.5 This growth cycle is similar to the process of development of the individual:from birth (dependence),

to maturation (independence),

to mutual cooperative interdependence (partnership of adults generating

children),to death of one generation, and

the replacement of the first generation by the second generation cycle.Some of the prime components of this cycle involve the movement from cooperation

to competition to cooperation again.

1.6 The specific experience, recently, of the construction industry, in dealing with

disputes generated in this context, holds out lessons for local government, which iscurrently being increasingly pressed for more and more efficiency.

1.7 This present pressure for change in local government, to deliver greater efficiency, istending towards a much more pervasive use of competitive tendering as a dominant

procedural context for local (and other levels of ) government operations.

1.8 The National Competition Policy, an initiative of the Labor Federal Government, and

now supported by the Liberal/ National Federal Government, the Council of AustralianGovernments and the Business Council of Australia, is one such pressure for reform.

Under this policy, effected by change in the law, and other incentives [eg conditionsfor the States' revenue sharing grant monies, etc], all government enterprises are

expected to comply with the Trades Practices Act, and/or demonstrate "competitive

neutrality" in the delivery of government services.

1.9 The great risk, unless local government is aware of the pitfalls experienced by, say, theconstruction industry, is that local government, which has a primary mandate to

undertake "community development", will be to become unwittingly and increasinglyembroiled in even more disputation.

The new area of disputation will be that associated with contracts. This disputationwill be now at a commercial level. This has the potential to risk even greater levels

of resources than those perceived to be "currently frittered away" by present

"inefficiencies".


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1.10 I would argue that this diversion of effort - to minimise commercial risk - may well so

turn round local government culture, that the task of community development may

become impossible for the kind of local government that will be formed by this shiftof culture.

1.11 This risk, of loss of "raison d'etre" and "differential" of "government" operations, as

opposed to "commercial" operations, is likely to lead to even more social

disintegration - and set a scene for substantial and debilitating civil conflict.

This assignment seeks to explore these issues, and seeks to discern cautionary lessons from

the experience of disputes in the construction industry, from which local government may be

able to learn, so that the same mistakes, with the same miserable outcomes, does not become

part of the mythology of a failing local government industry.

It does this by first looking at the construction industry under the headings of:

1. general characteristics of the construction industry2. brief overview of historical significant milestones/ change indicators

over the period 1945-1997

3. commercial pressures experienced by the construction industry4. experience of disputes in the construction industry

Then it seeks to look at the general principles driving some of these outcomes:

1. the general nature of competition

2. the general nature of cooperation

3. the development cycle for individuals/ families/ communities withsocial cohesion

4. the development cycle for organisations

5. the role of government/ government agencies

Then it seeks to apply the lessons to the current experience of local government:

1. current position of local government

2. pressures for change3. indicators of local government response at present

The approach is somewhat broadly based, so that given the constraints of the assignment,

much of the material will be dealt with in a summary/ indicative way, without any real

endeavour to substantiate the material in detail.

Also, the emphasis does not deal intensively with dispute resolution, as such, since the

application of this element of the issue has been dealt with in previous assignments, notably:


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- there has been a general concern with its operation, demonstrated by a series of

enquiries, task-forces, etc which have identified a need for further attention to

be given to:

- better definition of the project prior to commencement- joint owner/ designer/ contractor/ supplier discussions at an early stage

- improving industrial relations by reducing the current adversarial

relationship- developing uniform and equitable conditions of contracts for each

industry sector

- undercapitalisation is a characteristic of a significant proportion of the

industry

- 65% of all enterprises in the industry employ fewer than two people

- 88% of enterprises have a turnover of less than $500,000 [per annum]

- less than 1% of enterprises employ more than 50 people- only 1.3% of enterprises have a turnover of $20million a year or more

[Royal Commission into Productivity in the Building Industry, review

of ABS data, 1992]

[This undercapitalisation leads to a low "entry" cost in the

industry, which allows for higher competition, especially at this"lower" end, and combined with the "subcontractor" structure,keeps labour costs low for the industry as a whole.]

- the impact of competing in a "tendering context" leads to low margins

- the industry generally has a short-term focus, applied to both relationships inthe industry and planning of and for the industry - both at the individual project

level, then within the industry at large

- The nature of projects, the out-working of the short-term relationships, together

with a large number of small operators delivering specialised services of a"professional"/ "trade" nature (with some speciality jealousies developed over

time - eg the craft associations -> freemasonry, an attempt to regulate access to

skills and to protect employment) tends to produce a fragmentation of

operations and a fragmented approach


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2.2 A BRIEF OVERVIEW OF HISTORICAL MILESTONES/ CHANGE

INDICATORS OVER THE PERIOD 1945-1997 FOR THE CONSTRUCTIONINDUSTRY IN NSW

The construction industry in NSW, during the period 1945 to the present has been undergoing

a significant change, which can be illustrated by the following list of its characteristics, andthe changes in them:

2.2.1 The private construction industry in the 1950s was predominantly involved in the

domestic home market, and was characterised by small family-based companies -

tradesmen/ builders.

There were also a small number of specialist construction/ engineering firms able to

deliver the specific services necessary for major infrastructure specialist projects.Some of these had developed a wider range of capabilities from their involvement in

infrastructure activities focused for the war effort.

2.2.2 The public sector construction industry, which was engaged in construction of major

infrastructure, was conducted primarily by large and growing Public WorksDepartments with contract and/or subcontracting arrangements for specialist projects

or peak development periods.

2.2.3 A major departure of practice for infrastructure development post-war, involved thedevelopment of the Snowy Mountain Scheme and the Snowy Mountain Authority.

This project, commencing 1949 and finishing 1974, demonstrates some of the issues

in the construction industry/ process:

1. one-off2. site specific

3. geographically located in an otherwise isolated area, with difficult

weather conditions

4. preliminary survey work required - topography; geology5. a complex of different structures - dams, tunnels, piping water,

pumping stations, hydro-electric generating stations, roads, supportinfrastructure homes for workers

6. significant term (1949-1974), and now ongoing operation andmaintenance

The scheme had a two fold objective: collecting water from the easterly flowing

Snowy River catchment and delivering additional water to the Murray &

Murrumbidgee irrigation schemes; and generating hydro-electricity on the way. The

task involved the construction of sixteen large dams, 12 tunnels shortest 1 km, longest23 km, through hard rock, seven power stations. It involved one hundred thousand


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workers of whom two thirds were newly arrived immigrants from more than 40

countries of war torn Europe, who, under Commissioner Bill Hudson's leadership

became a skilled and united team that set world records in hardrock drilling,earthmoving and industrial harmony.

2.2.4 The expansion of the private commercial construction industry and its development

- multi-storey developments: Sydney commercial scene -> home unitsresidential thrust

2.2.5 Public Works & Sydney Opera House 1958-1973

2.2.6 1950/70 development of "subcontracting" relationship/s

1951 subcontractors = 11% of workforce1962 subcontractors = 16% of workforce

1968 subcontractors = 20% of workforce (1951-1968 Hutton, 1970)1971 subcontractors = 21% of workforce

1974 subcontractors = 23% of workforce1977 subcontractors = 27% of workforce (1971-1977 Greig, 1992)

2.2.7 Domestic housing market: expansion of project homes/ building sector

[AV Jennings in Victoria started 1932; resumed private housing operations

1955 and "has been building houses steadily at the rate of between 3,000 and4,000 a year ever since" Gimesy, 1992]

Lend Lease at Carlingford Demonstration Village, Kingsdene, 1961

In 1984/5 71.4% of the house building establishments were responsible for18% of dwelling commencements; while 2.4% of the house building

establishments [the "project" builders] were responsible for 45% of dwelling

commencements (Greig, 1992, p.39)2.2.8 [Joint venture of Concrete Construction & John Holland for Parliament House,

Canberra, 1978-1988]

2.2.9 Concern with the nature of the development of the industry: demonstrated by the

various investigations and reports into construction industry 1988-1992

2.2.10 Royal Commission into Productivity in the Building Industry REPORT 1992

2.2.11 The Sydney Harbour Tunnel - private consortium to fund as well as construct; toll to

raise return on investment- Brereton

- Greiner

2.2.12 Formation of Darling Harbour Construction Authority to overcome difficulties in


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approval and regulation

- Brereton

2.2.13 Baulderstone & Hornibrook - partnering - Glebe Island Bridge 199- 1995

2.2.14 NSW Government Green Paper (1996): The Construction Industry in NSW, proposing

future standards for contract cash flows, and relationships in preparation for handling

higher than usual construction program for 2000 Olympics

2.3 THE OPERATIONAL CONTEXT OF THE CONSTRUCTION INDUSTRY:

The pressures which impinge on the operation of the construction industry can be summarised

as follows:

2.3.1 cyclical nature of economy - boom -> bust

1. the domestic housing sector is one of the most volatile sectors of the

economy, so much so that its activity indicators are used to measure the

current "health" (or otherwise) of the domestic economy;2. this volatility gives rise to a failure of security of work, and therefore of

the employer/employee labour relationship

3. there is a distinct 4 year cycle in the residential sector (evident over 30years of data collection)

4. the fluctuation of investment/ and workload is a typical characteristic ofany "capital goods" industry

2.3.2 tendering process: competition

1. least cost: low margins

2. least time: contingency underestimated/ risk factors minimal

recognition3. cost and time minimisation: -> compromise quality

2.3.3 technological change, some of which can be represented by:

1. construction materials change- improved materials properties/ performance knowledge ->

reduction in quantity required- new materials with different properties eg aluminium;

developments from the petrochemical industry - liquid nails,

new sealants, etc2. construction processes change


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- steel

- reinforced concrete (1850's - John Monier)

- concrete lift slab- pre-stressed concrete

- pre-fabrication- fast-track design (Westmead Hospital, 197x)

- slip formed building with structural facade (Sydney Hilton,

1970)- design for internal flexibility for a 100 year life - Qantas

Building - precast floors suspended from massive trussesspanning between shear walls with no suspended ceilings

- two-way post-tensioned precast facade and floor system

(Institute of Technology, 197x)

- progressive-strength techniques (MLC Centre, 1971)

- the Supershafter (MLC Centre - Civil & Civic)- concrete pumped into slipform core, Grosvenor Place, and new

standards of minimising energy use with an ice storage system- computer-aided design (Sydney Opera House)

3. ancillary facilities developments- airconditioning

- fast elevators (Elisha Otis, New York, 1853)

- computer controlled monitoring of air conditioning, fireprotection, electrical installations and elevators (late 1960's)

2.3.4 management development

- design and construct/ project management (Civil & Civic)- building finance innovation with the formation of Lend Lease

Corporation Limited (Civil & Civic) 1951

- industrial relations (Civil & Civic) - 1958 labour agreement withproductivity bonus; 1972 Lend Lease/ ACTU agreement; the ACTU/

Lend Lease Foundation; wage employees superannuation plan;employee share acquisition plan; 1990 enterprise agreement with

integrated process of workplace reform through consultative

committees- critical path analysis technique applied to the management of complex

operations and complex interfaces like maintaining working operations

during renovations, etc eg Prudential Building 1965-1970- construction management contract (Concrete Construction - Holland,

Parliament House, Canberra, 1978) and "fast track" and qualityassurance systems where overlapping of briefing, design and

construction functions allowed work to proceed ahead of finisheddrawings


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2.3.5 loss of skills:

1. the earlier (1945-1960) stable work group included a regular flow of

apprentices in training

2. the fracturing (1960-1970) of these groups led to the proliferation ofsingle trade sub-contractors, mostly single operators with no

apprentices

2.3.6 undercapitalisation of significant proportion of the sector

1. with undercapitalisation there is no resource to buffer any bottlenecks,temporary short-falls in cash flow

2. for "market" forces this is a positive giving low entry cost to allow real

competition; a negative is that in the "bust" part of the cycle the"innocent" "bystanders" can suffer - the builder going bankrupt, the

owner left with a half built house, the loan and its repayments and no

home. (And/or the "Homefund" fiasco - financing housing with highinterest loans, small deposits at the height of a boom, and then being

cuaght in a lower inflationary wages cycle)

2.3.7 dispersal of activity

- the construction, of necessity, occurs "on site", wherever the "site" maybe, and compared to other "manufacturing" concerns, the sites are

geographically dispersed.- In times of great demand, pre-fabrication overseas, and importing, was

used.

- Recent developments, of computer design and improved materialproductivity, have joined with economic forces to increase efficiency,

and now some components are pre-fabricated (eg frames & roof trusses

for houses) and only assembled on site. [This also contributes to theloss of key skills.]

2.3.8 diversity of participants

- general consumers/ Lessees

- subcontractors

- head contractor- clients - private sector


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- clients - public sector

- unions

- employer associations- governments

- employees- professional supports: designers, architectural, engineering

- financial sector

2.3.9 the intervention of government as a major player:

- source of funds for housing and major capital works infrastructure;- capacity for macroeconomic controls through interest-rate setting -

credit squeeze, etc

2.3.10 regulation and standard setting

- Commonwealth Experimental Building Station, 1944

- Construction Forecasting Committee, 1983

- Building Code of Australia;- Height of Building Act, 1912

- Builders Licensing Act, 1971- Building Services Corporation Act, 1989

2.4 THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY:

As noted earlier, the construction industry is renown for its level of disputes. The incidenceof disputes is a component of the industry, worldwide.

In Australia, concern has been expressed with the recent increase in the level of disputes.

Similarly, in the US and Canada there has been a recent concerted effort to address thequestion of quantity of disputes by exploring their source/s and endeavouring to explore

alternative methods of dealing with such disputes.

2.4.1 The Nature of Construction Industry Disputes

The kinds of disputes which afflict the construction industry are, in general terms:

1. The Breach of Contract

- between Owner and Head Contractor

- between Head Contractor and Sub-contractor- between Head Contractor and Supplier


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2. The professional liability suit

- between Owner and professional consultant- between Head Contractor and professional consultant

- between one professional consultant and another from a different discipline

3. The industrial dispute

- between employer (constructing firm) and employees- between representative unions: employees and employees - the demarcation

dispute (to a lesser extent recently as unions have sought to increase power bynumbers and amalgamations)

4. A general culture of physicality which can include physical violence at an

individual level

2.4.2 The Sources of Construction Industry Disputes

Construction industry disputes have been analysed and found to come from a variety of keysources:

1. the innate uncertainty in the industry

- one-off projects- unrecognised site difficulties- level of flexibility retained for changes during construction

2. the design/ documentation phase- poor context analysis

- poor project enunciation- miscommunication between specialists;

- low standard of contract formation

3. the construction phase

- low standard of contract administration- delays

- valuation of variations

- defective work

4. breach of contract by non-payment to contractor

One of the devices used to deal with the innate uncertainty in the industry is the contract.

At a fundamental level, the contract seeks to enunciate what is expected - the job - and theprice to be paid for its provision. Good contracts specify standards of provision, explicitly.


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Conditions of payment include provisions for "start-up" and "progress" payments. The

"rise-and-fall" clause seeks to deal with the vagaries involved in the impact of time in periods

of high inflation.

The contract also seeks to provide for adjustments to time and cost and to enable clients toinitiate changes during construction.

A device used to minimise uncertainty for the "owner" is the "lump-sum fixed-price" contract.This kind of contract is particularly prevalent for "government" facility construction

contracts.

However, one of the tendencies, while seeking to minimise risk by a contract, is to in fact

shift the risk unfairly to one or other of the parties.

When this unfairness becomes apparent - the issue at risk is exposed and the cost of dealing

with that risk, which was not provided for in the cost/ time estimates, and there is no attemptto recognise mutuality in the relationship and a fair sharing of changes resulting - then there is

a break-down of the contractual partnership.

An endeavour, from a canny operator, say, to use the letter of the contract to not meet a

reasonable share of the cost of the unforeseen risk and/or other changes developing over thelife of the contract will precipitate a retaliation from the exposed partner in the contract.

It has been a relatively recent development to recognise the principle that the locus of risk lies

with the party which has the greatest control over the risk factor.

A particular area of disputation which has led to the development of a range of processes todeal with community concerns is in the residential housing sector.

Here the owner is (by comparison with the "bigger" end of the industry/ market) most oftenpoorly informed, relative to the builder. In this disparity of informational power, the owner

can be "put upon".

The development of the consumer protection lobby between 1959/60 [formation of the

Australian Consumers' Association] and the present, has made the ordinary home-owner moreaware of a right to redress from poor performance.

The NSW Government has responded to community awareness and the consumer lobby with

legislation and the provision of tribunals to deal with disputes arising. (Builders' Licensing

Act, 1971, Builders' Licensing Tribunal, 1971, Building Services Corporation Act, 1989 &Building Disputes Tribunal, 1991.)

For the typical home construction, the relationship between owner and builder, and thenegotiation process involved in the construction and contract, etc, demonstrate the importance


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of negotiating skills, not generally well developed.

SEE ATTACHMENT 4

2.4.3 Alternatives and strategies for dispute resolution

There has been a growing awareness of the need to develop alternatives for dispute resolutionand strategies for minimising the development of disputes in the construction industry. The

range of such alternatives is as follows:

1. Negotiation

Most construction disputes are dealt with, by the parties, by negotiation,throughout the life of the contract, and providing such negotiations

involve a measure of fair dealing on both sides, and is properlydocumented, the dispute does not escalate to the next stage.

2. Litigation

Litigation was the [historically] first recourse for any escalated dispute.It is still a major recourse for some disputes. Litigation may be

needed to adjudicate in an area where there has been a costly oversight

of risk by one or both parties. The recourse of litigation is still animportant aspect of the development of issues of equity which have not

arisen before and for which there is no case law, etc.

3. Commercial Arbitration with Industry specialists arbitrators

When the cost of litigation and the delay in the courts became

untenable in commercial considerations, the legislature provided for

commercial arbitration with industry specialists as arbitrators.

[eg: Arbitration Act, 1902 (NSW); Supreme Court Act 1970 (NSW)

arbitrators appointed to assist the court; Commercial Arbitration Act,1984 (NSW)].

This is still a major process for resolving disputes and an effective

process. It runs the risk of being exploited by a reluctant party because

its "process" can be used to obtain commercially untenable delays forthe other party.

There has been a trend to shift from the use of industry experts to


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arbitrate on technical issues, apportionment of risk, etc, to an

overreliance on "legal" argument and a focus on "legal" aspects of

process. This has brought this option into some disrepute.

4. Mediation

The next development, allowing disputants to deal with their conflicts,

quickly, cheaply, and to retain security of confidential commercialmatters came with the development of the Australian Commercial

Disputes Centre (1986, under the auspices of the NSW Government)and its offer of an intermediate process: mediation by a neutral party.

5. NSW Building Disputes Tribunal 1991 (part of Consumer Claims

Tribunals)

This deals with claims up to $24,000. It provides an independentreferee who seeks to help the parties reach settlement acceptable to

both. In the absence of a mutually agreed settlement, the referee candetermine the matter by making an order.

6. Developments in court-annexed processes

There have been a number of developments in seeking to deal with the

time, cost and technical aspects of construction industry disputes whilekeeping open access to a judicial decision. These are:

Expedited Arbitration

ConciliationWithin the arbitration process there is provision for a

conciliation to be attempted, usually after the

Preliminary Conference.

Section 27 conference [Commercial Arbitration (Amendment)

Act 1990 (NSW)]

Referencing Out [Chief Justice in the New South WalesSupreme Court - Practice Note No.58]

In the District Court, which deals with claims up to $250,000, there is

now the potential to reference out technical matters.

The Local Court can deal with matters up to $40,000.

7. Other [US] models/ options


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There are a number of other alternative dispute resolution strategies

available, which have been developed in the US and elsewhere. These

include:

Independent Expert Appraisal

Binding Independent Expert Determination

ICC Pre-Arbitral Referee Procedure

Senior Executive Appraisal

Mini-trials

Disputes Board of Review

Binding Interim Decisions

8. Preferred approach

It is within the competence of any of the parties to a contract to agree to usewhatever dispute resolution process suits them.

The "standard contract" usually contains an "arbitration" clause.

Recent work (1992) reviewed the Standards Australia's General Conditions ofContract and now AS2124-1992 provides for negotiation and the potential of

ADR, as well as arbitration, indicating an increasing recognition for the need

for a variety of means from which the most appropriate can be selected.

Current thinking on the development of dispute resolution systems

recommends the establishment of de-escalating routes as well as escalatingroutes in the course of seeking to resolve disputes.

9. "Partnering" developments

One of the outcomes of the expansion of disputes and the need fororganisations, especially those involved in the larger construction projects, to

deal more effectively with the innate uncertainty of the process, has been therecognition of the parties to the construction being essentially in a partnership -

a common objective, with the parties having different functions.

This has led to the development of the concept of "partnering" where the

necessity to maintain an effective longer-term working relationship is

recognised, and then consciously worked on.* Conferences are called of the stakeholders, where information


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and concerns are shared.

* Wherever possible, risks are foreshadowed.

* When "variations" arise, the stakeholders confer.* The key "operators" to the various aspects of a complex

construction are identified.* Working relationships enhancing personal and timely

communications are developed.

* There are clearer allocations of levels of "responsibility"amongst the key "operators".

* Matters are encouraged to be negotiated at the lowest levelpossible and the escalation of differences to disputes is averted

as far as possible.

This is but a variation on the process of "horizontal integration" that occurs in

an effectively operating large organisation.

But the need for this element of project management infrastructure - adequateand effective lines of communication between stakeholders, on issues of

concern, to gain partnership in decision-making - is a significant recognition of

the nature of the task facing any multi-party enterprise, especially when theproject involved is itself complex, and to some extent unpredictable.

10. Infrastructure industry service development - project management

Many of the larger operations in the construction industry have long identifiedthe need for "project management". There is a growing recognition in the

industry that this element of "organisational" "infrastructure" is critical to

obtaining project success. Hence there has been a development of this area ofthe industry, and the formation of specialised training to deliver personnel with

these skills.

This is another aspect of the more fundamental issue of seeking to deal with

disputes by prevention, rather than cure. It involves the development of

dispute minimisation/ management tools.


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3. GENERAL PRINCIPLES OPERATING

One of the guiding principles in the physical and biological world in which our current

activities are placed is the second law of thermodynamics. This reminds us that there arephysical limits to "efficiency". That "energy in" does not convert, 100%, to "power

effectiveness out". That to generate "order" requires energy in the face of a natural entropiceffect to minimise "order" - or the generation of "disorder". [The Carnot cycle, for the steam

engine -> maximum of 60% efficiency.]

In living things this general principle expresses itself in the ongoing need of energy (daily

eating, breathing, drinking and metabolising) to maintain life.

Furthermore, we live in an enclosed system - there is a finite limit to materials and energy.

In this natural world, with these two basic constraints, there is an ongoing to-ing and fro-ing

between competition and cooperation.

The untrammelled competition for the energy and resources available, when exercised by

single celled living organisms, leads to mortal viral and/or bacteria diseases. And when

completely untrammelled, such competition would lead inevitably to the destruction of thevery conditions of existence required by those organisms.

The living world includes more complex developments than the single celled organism. Themulti-celled organism is able to form because untrammelled competition is set aside for

cooperative effort and differentiation of role.

In the multicelled organism, untrammelled internal competition can occur, and when it does,

it is also mortal - the killing cancer.

But living organisms [which continue to go on living, as least generation by generation] alsohave the capacity to adapt to threats coming from a changing environment. The concepts of

"survival of the fittest", and the "natural selection" of "fitness" are used to explain the

existence of the current level of diversity of species - under the evolutionary theory.

Within populations of prey and predator a natural balance forms. Too many predators reduce

the number of prey, which then means not enough prey to feed the too many predators. Thenumbers of predators decreases, the number of prey then returns to a higher level. The

balance forms when numbers of predators and prey gives a "stable" population of both.

At a more intimate level, two different species can co-exist, maintaining their own individual

identity still [compared with the multi-celled organism], each unable to live without theother - the human and the gut bacteria. This symbiotic relationship is found in many

situations.


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Throughout the living world, adaptations equip species to inhabit, in a balanced way, a variety

of niches, and the result is an ecological balance of immense diversity.

3.1 COMPETITION

The expression of competitiveness, the competition for scarce resources, is exemplified in the

following areas:

3.1.1 Basic psychological element of competitiveness:

1. sibling rivalry2. generational rivalry

3. resource inheritance structures: clan rivalry4. tribal/ ethnic rivalry

3.1.2 Classic free market: delivery of goods/ services -> profit

Formation of a market [identification of an unmet need/ fabrication of a new

need]Supply of goods and services to meet that market need by a leading operator

Growth of competitionOversupply of marketBust: shake-out of inefficient operators

Development of survival strategies -

refining of operating efficiencies;formation of strategic alliances

takeovers of competitors and/or strategic support operationsDevelopment of complex organisations/ conglomerates

horizontal integration

incorporation of strategic alliances to yield diversified organisation

monopolybureaucratisation

inefficiencyCompetitive challenge from new/ different directions: small leading edge

operator, new innovative process, etc

3.1.3 Competition in other fields

Other parts of our western culture that enshrine/ develop competitiveness are:

1. Games


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Games are past-times developed to build the skills required for

socialisation into a competitive world; one such socialisation is the"emotional"/ "psychological" pay-off from competing to be a "winner"

2. Sport

Sport is another of the past-times, associated with the development ofspecialised physical skills which, once upon a time, were part of

day-to-day living, the work environment - hand and eye coordinationuseful for hunting and catching elusive prey.

The development of competitive sport, with its socialisation of

"supporter" identification [a potentially bigger group than the"participants"], especially with the winning team, is another aspect of

providing the social and psychological pay-offs from the process ofcompetition.

Its commercialisation, and its nationalisation (Olympics) is but a

channelling the "competitive" spirit in a way less destructive than war.

3. Territorial competition/ wars

4. Economic/ wars

It is instructive that the "games" and "sports" of the occidental orientation are not as evidentin most oriental cultures where the emphasis on "cooperation", and the importance/ survival

value of the group is greater.

3.2 COOPERATION

There are a number of significant examples of the survival value of cooperation that illustratethe effectiveness of this alternative mode of relationship:

1. the colony insects - the ant, the bee2. any complex multi-celled organism

3. human being as a multi-celled organism

4. the human social structure

Cooperation is reflected in the recognition that a mutual relationship will bring mutualbenefits.

Within an organisation the cooperation that leads to horizontal integration allows for thesharing of "overheads".


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One such "overhead" is the sharing of the cost of "time" and effort involved in educationand/or socialisation. The more complex the multi-celled organism the greater the period of

time required to develop from the single cell of conception to the fully grown and maturedadult multi-celled organism. During that time of dependent development, there needs to be

the service of time, effort, care, training of at least one other adult to assist in this process.

For human beings there is also the education, psychological and social development required

to equip the individual to function in the social setting developed for survival.

For 20 century humanity there is also the time and education required to equip the individual

to survive in an social context which includes an increasing level of technological know-how.

3.3 NATURAL GROWTH CYCLE

At the individual level we see the interplay of competition and cooperation expressed in thefollowing phases:

1 Dependence: child to adolescent: 0-18Conflict of Adolescence

2 Independence: adult3 Interdependence marriage/ family

Conflict in family

3.4 ORGANISATIONAL MANAGEMENT DEVELOPMENTS

With the increasing complexity of society associated with technological change arising from

the industrial revolution, has come the development of increasingly complex organisational

activity.

For the commercial operation and the government operation alike, the question of how tomaintain effectiveness while increasing size and complexity, has led to much study of

structure and processes, showing significant levels of common ground.

In the successful commercial operation, high effectiveness leads to increasing profit and

market share which yields capital to spare. Since the organisation does not benefit fromcompeting with itself, that spare capital is then applied to other operations to seek to gain yet

more capital. The "sensible" way to invest such capital, is where that capital support candeliver by-product benefit to the core profit making activity eg by increasing efficiency and

lowering cost of supplies required for the core activity.


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This activity results in the development of the following variants of support to full control and

ownership:

1. partial control without ownership:

long-term contractingselective portfolio development

licencing

franchising2. partial ownership and control:

minority share holdingmajority shareholding

partnership including joint venture; turnkey (temporary control)

3. full ownership and control

acquisitioninternal development

As noted earlier, the experience of recent times, in the capitalist world, is that an active and

efficient market place continually places competitive pressures on commercial organisations,pressures which seek to gain optimal efficiency. In an endeavour to maintain such efficiency

organisations often cycle through a process of increasing complexity to the point where

efficiency ceases and then increasing simplification. (Though such cycling may include theloss of existence/ identity of one or more organisations along the way.)

Mintzberg remarks that for the diversified commercial organisation the mechanisms requiredto obtain the "return on capital" goals, controls, by primarily quantitative performance

criteria, drive out goals that cannot be measured - product quality, pride in work, customerswell served. He then goes on to remark: "That would pose no problem if the social and

economic consequences of decisions could easily be separated. Governments would look

after the former, corporations the latter. But the fact is that the two are intertwined; everystrategic decision of every large corporation involves both, largely inseparable. As a result,

its control systems, by focusing on economic measures, drive the diversified organisation to

act in ways that are, at best, socially unresponsive, at worst, socially irresponsible."

For operations to remain effective, there needs to be an ongoing striving for the balance

between competition and cooperation, and within cooperation between the single focus anddiversity which includes complexity and integration.

Complexity = degree of vertical, horizontal and spatial differentiation in an

organisation

Integration = degree to which members of various departments achieve unity of effort

Such efforts include the use of tools such as benchmarking and re-engineering, including the

use of outsourcing, even for what up till now have been considered to be basic "corporate"

infrastructure services like payroll, computer services, etc.


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The present scene in organisational development is seeing signs of a new kind of organisation

arising: one which seeks to enunciate the task of management in increasingly less stabletimes: the task of managing diverse resources and diverse disciplines in a coalition of variable

relationships. (eg writings of Charles Handy & Peter Saul, to name but two.)

SEE BIBLIOGRAPHY

3.5 GOVERNMENT AND THE CONCEPT OF PUBLIC SERVICE: EQUITY

PRINCIPLES

With the maturing of Western capitalism and social development, there are indications that

government has, to some extent, come to a cross-roads in determining what its role is, as"public service" vis-a-vis private enterprise.

Government structure/s have come a long way from:

1. the position where one joined with a leader for protection from a commonenemy: clan leader -> king and standing army.

2. The need for internal cohesiveness among the king's subject -> king as judge ->

devolution to courts/ development of common law.3. The growing size of "community" -> parliamentary democracy.

The development of western democratic states has seen an interplay between basic

alternatives:

1. the conservative - maintenance of rule of law; the privileged and class

structure, developed from the feudal/ kingly relationship

2. the laissez-faire - letting the market run its course3. the socialist - where common wealth develops the commonwealth - taxing of

all to provide for social ends: physical infrastructure, education, health etc

In Australia, in 1996, the accretions of these developments finds governments apparently

overloaded, and unlikely to be able to continue to deliver the expectations of the community(for government sponsored services).

This is resulting in pressures for

1. more "government efficiency" - new managerialism; National CompetitionPolicy

2. for reconsidering emphasis - downsizing; corporatising; privatising

The role of government is still one of balancing the forces that would lead to social


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disintegration:

1. deploying common resources to equitable ends2. regulating "private"/ "commercial" activity to ensure equitable ends

3. encouraging competition for efficiency (?"economic rationalism")

The "temptation", in government, is the choice between alternatives of how to do "it".Especially when the non-government "market" fails. When small numbers (eg rural

dwellers) cannot command a measurable "market share" to warrant the market supply ofgoods and services, equity, and policy (if rural products are still to be a significant component

of the country's economic base and international independence) requires the government to

intervene. The socialist intervention (not really different from the approach of the "king") to

become the goods and services supplier, taxing others to subsidise the process and redistributewealth (equity), has, in the past, built a large "public sector". The non-socialist

governments have not necessary sought to disband that.

For instance, compare railways in Australia and the US. In the US the railwaysystem was developed by private enterprise. In Australia the railway system

was developed as a public enterprise. In Australia, under government

controlled operation, funds are raised for the capital works of tracks, bridges,tunnels, etc; rolling stock; and operation and maintenance. The restructuring

of railway operations, now sees Gollinan involved in rolling stock construction

and maintenance; Freightcorp handling bulk freight; Countrylink managingnon-urban services; CityRail the urban operations.

Similarly, the electricity industry has been through major restructuring over a

long period: the "Commission" constructed power stations, ran coal mines,

constructed and maintained the state-wide grid; the distribution, marketing,retailing and accounting was handled, first by local government (unit by unit),

then cooperatively in the more "regional" county councils. Now we are on the

brink of a deregulated market for supply where generation fromhydro-electricity and/or brown coal fired power plants from Victoria, or gas

fired plant in South Australia, can be bought and sold interstate and distributors

can compete on a non-geographical basis for market-share.

The current "debate"/ "conflict" is with the process of reviewing this and restructuring,including the dismantling of government enterprises. The dislocation is substantial. The

outcomes are not necessarily guaranteed to deliver the necessary minimum of equity to ensureongoing social cohesion.

This is the dilemma experienced by the construction industry between 1945 and the present,as government intervention, by investment in public sector construction activity, has

fluctuated, and stimulated and precipitated the "boom and bust" cycle/s.

The construction industry is continuing to devise better ways of doing business to develop the


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stability necessary for ongoing survival.

The local government industry, under pressure from the Federal Government, and State

Government, to be able to justify its existence/ entitlement to support with "community"resources (taxes, etc), is now facing the same dilemma.

4. APPLYING THE LESSONS TO LOCAL GOVERNMENT

4.1 GENERAL OVERVIEW OF THE LOCAL GOVERNMENT INDUSTRY

The local government industry (in NSW) is generally characterised by:

* prone to local political (and other) pressure- party politics

- self-interest

- coalitions of self-interest

* not necessarily driven by business efficiency

(Perceived inefficiencies [Central government perception of local government]-

Wayne Collins IMM Bulletin March 1996, p.8:- operational and management inefficiencies

- excessive overheads- poor work practices

- professionally based and inward focused organisations

- too many elected members- too many staff

- too much involvement in detail and regulations

- too much parochialism- a lack of regional urban planning

- a lack of inter-Council cooperation)

- with other competing, substantial objectives

- efficient business- participatory democracy

- well-managed organisation

[The current "model" options being discussed at Shellharbour City

Council, as it begins to undertake a strategic planning process include:

efficient business lean/; mean/; userpays all/; private enterprise

where profit making/; public enterprise whereservice cost/ service demand is line-ball or


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loss-making/; ...

(Thatcher/ Kennett/ NZ/ Mosman/

Liverpool/ ... model)

participatory democracy consultation/; transparency/; ...

(North Sydney/ .. model)

well-managed organisation delivering cost-effective services

and responding tocommunity

aspirations the

middle mix

(Shellharbour post RJH but still sufferingfrom schizophrenia)

something else: if so what??(other models ?? eg Floyd & Palmer;

Michael Jones; the kibbutz; ...)]

- the dilemma involves:- balancing competing interests

- equity- responsiveness

* diversity of responsibility/ activity- construction of infrastructure

- maintenance of infrastructure- regulation

- provision of a diversity of community services

* limitations of local/ locality community and resources base

- boundaries/ amalgamation- size and the enchantment of "economies of scale"

One of the least recognised aspects of local government, is its diversity of operations.

[Observers outside the industry do not recognise the extent of the diversity and

its implications for management. The internal players in the local governmentindustry do not recognise how difficult other organisations have found it to

manage diversity effectively and strategically. This lack of "other enterprise"operation knowledge means that local government management is not well

placed to critically assess the usefulness, or otherwise, of the so-called"business" management "solutions".]


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The present pressures for change which are currently imposing "external" managementmechanisms on the relatively small, (until now?) geographically constrained local

government, demonstrate this lack of understanding. Mechanisms like standardised jobevaluation, and other normal approaches to business efficiency, can be applied reasonably

effectively to a "single" focus operation. The usual context of operations of commercial

organisations is in the "single" focus enterprise. And when diversity is the experience oflarge commercial operations, there is no real evidence that they really know how to deal with

it. (Porter in Mintzberg)

The analysis of the diversity of structure, and operations etc, in Equipping Staff to HandleDisputes Effectively in Local Governmentand its impact of creating "opportunity" for

disputes deals with this in detail.

SEE ATTACHMENT 2 & 3

4.2 CURRENT PRESSURES FOR CHANGE IN THE LOCAL GOVERNMENT

INDUSTRY IN NSW

The revision of the Local Government Act in NSW, which resulted in new legislation

operational from 1 July 1993, has sought to:

1. increase transparency, by:

- additional requirements for publication of proposals;- opportunity for community participation in policy formation/

decision-making

These two factors have/ will continue to contribute to

-> added cost in overheads: publication; public announcement;-> added time in consideration process

2. increase accountability, by:

- new accounting standards AAS27

- transparency requirements

- management plan and budget process- forward financial planning documentation

- community land management plan process- Section 94 Management Plan process


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3. increase flexibility, by:

- opening the structure to review

(The structure no longer predicated by mandatory positions and

associated "departmentalising". There is a mandatory requirement toreview structure after each general local government election. This

procedurally allows for a new and recently endorsed political agenda to

be implemented by being able to transform internal relationships/resource allocation and performance expectations, etc and thereby give

the newly elected body the capacity to deliver on changes in policypriorities and direction promised.)

- regulation generalisation

(Australian codes and standards and process for local policy

formulation)

4. bring into play the obligations of:

- Freedom of Information legislation (transparency and accountability

elements)

- Equal Employment Opportunity legislation (social equity objectives)

5. enhance probity (Code of Conduct for Councillors and staff)

6. and earlier discussions raised the spectre of compulsory competitive tendering.

This change, which resulted from community pressure (and State Government response?),

followed a formal review over the period 1987-1993, was a response to the pressures and

objectives of the period 1960's-1980's. The focus: of increased transparency andaccountability referred those concerns.

(* process start: 1987 [p.x Stuckey / Bluett Local Government Handbook, 13th ed 1994]

* process finish: May 1993 - after the Department of Local Government had received

and processed 11,500 submissions and the Upper House of the State Governmentoverrode some of the initial provisions)

It has now (1996/7) been caught up into the National Competition Policy approach. This hasan increased emphasis on reducing "costs" of regulation, and/or non-competitive

"monopolies" associated with the public provision of infrastructure service for the communityin general.

These "older concerns" (for transparency and accountability, representing the reaction to past


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difficulties) has now been "run over" by the more current and/or future oriented concerns

(international survival?).

In consequence there is a real potential for a significant "clash" of objectives: public policy

involving participative processes; and efficiency of operations where such "efficiencies" aregained, not from improved management processes, but by cutting corners.

4.3 INDICATORS OF THE LOCAL GOVERNMENT RESPONSE TO DATE:

Whereas in other states, notably Victoria, change by amalgamation and by the institution of

compulsory competitive tendering, has been legislated, the position in NSW is not yet so

circumscribed.

Within the "space" generated by

1. previous amalgamations (1975 in country areas particularly), and

2. the internal striving for efficiency derived from the rate-pegging constraints inplace since 1977, and

3. the "preparations" for the deregulation of structural constraints of the 1919

legislation - touted in early preparations (1987) for the 1993 changes, andsupported by the Institute of Municipal Management,

NSW local government agencies have been making changes which have improved their

general operating efficiency. This is particularly so for those local government areas which

are operating in an urban context and experiencing substantial growth.

SEE ATTACHMENT 2 - Section 1.2

The interposing of the National Competition Policy, into the NSW scene, while generating

concern, has not yet resulted in any legislative compulsion to privatise certain operations

and/or contract out core activities.

And, in the current debate, there is beginning to be signs that some of the "unintendedconsequences" of untrammelled competition may be starting to be recognised.

Three such indicators are found in the NSW Dept of Local Government Competition Policy

Document; the experience and critical analysis of the outcomes of "sea-changes" in some

local government entities; the ALGA Seminar, July 1996.


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4.3.1 NSW Dept Local Government Competition Policy Document

The recently released NSW Department of Local Government guidelines for CompetitiveTendering identify the following concerns:

1. "council[s] ha[ve] a responsibility to fully assess both the anticipated benefitsand the economic and social costs before making [a] decision .. to use

competitive tendering"

2. "evidence is beginning to emerge from Australia and other countries

concerning the effects [of competitive tendering] on local communities andcouncil employees"

3. "competitive tendering comes at a cost, and will only be successful whenpreceded by adequate planning"

The guidelines go on to note:

4. "Councils already undertake competitive tendering and contracting out in anincreasingly wide range of areas. The Industry Commission estimates that

Australian local government contracts the greatest proportion of their current

expenditure compared with Commonwealth and State governments."

5. "The advantages of competitive tendering [include]:- the benefits of competition

- improving in-house performance

- focussing attention on strategic goals- achieving best value for money

- taking advantage of innovation"

6. "The disadvantages of competitive tendering [include]:

- cost savings may be illusory or have at least been exaggerated- employment effects - job losses in the public sector

- related adverse social effects

- lack of job security- reduced wages

- reduced employment conditions

- other social impacts- access and equity

- consumer issues- capacity of council to provide a service

- other costs"

7. "[The statutory obligations that need to be addressed in considering]

competitive tendering issues [include]:- making statutory and other plans


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- the management plan

- involving the community

- involving staff and local government unions- training needs

- workplace reform- structural issues

- accountability

- open decision-making

- probity- quality of service

The tenor of these (and the other supporting) remarks reflects some of the experience of the

construction industry:

Without adequate preparation, contracting out of services, by the short-termtender process can produce more trouble than it is worth.

While reduction in quality of service is recognised, the other potential, for "commercial"

disputes between the Council, as the principal, and the contractor, is not so readily

recognised.

When the Council acts for the public, and the services, etc, provided are so constrained by

geographic location, other commercial factors (eg consumer power to choose alternativesuppliers) may not come into play.

Indeed, indications, from other governmental agency privatisations and belt-tightening, is that

access and equity, particularly for small numbers away from major conurbations, are likely to

be lost.

4.3.2 Experience of "sea-changes" to some local government entities

While it is still early days in NSW, and there are any number of improvements which can stillbe extracted from current NSW local government operations, some of the touted "sea change"

experiences have not only been extremely cold and uncomfortable, but in some cases have

resulted in organisational dysfunction at a significant level.

Examples are beginning to come in which counsel caution, especially with dramatic change.

eg Liverpool City Council; the demoralisation of small communities in Victoria.

4.3.3 ALGA Seminar, July 1996

The Australian Local Government Association and the Australian Council of Social Service


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jointly sponsored a round table debate in Parliament House Canberra in July 1996, between

twenty leading Australians with expertise in a wide range of disciplines, exploring the nature

and implications of the current changes coursing through the Australian community.

The implications of the debate were reported as follows:

1. the nature of the change needs to be recognised as a national management

issue2. unless there is increased participation of all members of our society and our

society is made more inclusive, we risk becoming a disintegrating society3. Australia is at risk of becoming obsessed about developing a culture of

competition

4. By comparison, many Asian growth economies have been built on internal

cooperation and external competition5. Australia needs to encourage a culture of collaboration at home

6. To do this will require an ability to keep competition in perspective7. There is a perception in the community of a loss of power and individual

control of people's own lives8. There is a loss of accountability in the public arena as services were privatised

9. The "social capital" - the trust, the good-will, the cooperation within an

organisation, a community, a company and a country - is an important reality

The findings of that group would appear to express the same concerns I have raised in thispaper.

5. CONCLUSION:

As raised in the beginning:

"Those that do not learn from history are condemned to repeat it."

There are enough lessons from the construction industry (and other case studies from the

commercial/ corporate world) to indicate that competition, while increasing efficiency, has its

downside/s. One such downside is the heavy cost of increased disputation.

Local government in NSW will be well advised to hasten slowly with dealing with the currentpushes to "commercialise" its operations.

Local government needs to seriously and clearly look at just what its objectives are, what itscommunity does really want from it.

Local government then needs to be flexible in how it chooses to deliver those goals.


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One option, when value for money is involved, and measurable services are to be delivered, is

that of using the best practices of the commercial arena, one of which is competition in a

free market.

When equity and democratic values are in view, the process of developing best practices forgovernment enterprise will be required.

When there is competiton for resources (within a limited revenue base, raised by taxation, andbetween "economic" services and "community development" processes of equity and

democratic participation) local government will need to be involved in giving clear leadershipto and in the debate to allow the community to make an "informed choice". There is

currently less and less room available for any local government entity to make a mistake by

overlooking the by-products (or unintended consequences) of certain of the choices now

facing us.

While there are now a range of ways to deal with disputation, (compared with previously, andespecially as applying to break downs in contractual arrangements) the adage of: "prevention

is better than cure" would still seem to have much to commend it.


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BIBLIOGRAPHY

Section 2.1

Tyrril, John Construction Industry Dispute Resolution - An Overview. Sydney: [np] [nd]

Greig, AW Structure, organisation and skill formation in the Australian housing industry.

Canberra: AGPS, 1992 [ Background Paper 13: The National Housing Strategy.]

Partnering: a Strategy for Excellence. Canberra: MB-CHAA, 1992.

NSW Government Green Paper: The Construction Industry in New South Wales. Sydney:NSW Govt, 1996

Eccles, John Project Management and Administration. [Sydney: np, 1997]

Section 2.2

Gimesy, OBuilt from Nothing: a history of the Building Industry in Australia. Carlton, Vic:Building Careers Resource Centre of Australia, 1992.

Greig, AW Structure, organisation and skill formation in the Australian housing industry.Canberra: AGPS, 1992 [ Background Paper 13: The National Housing Strategy.]

Partnering: a Strategy for Excellence. Canberra: MB-CHAA, 1992.

Section 2.3

Gimesy, OBuilt from Nothing: a history of the Building Industry in Australia. Carlton, Vic:

Building Careers Resource Centre of Australia, 1992.

Greig, AW Structure, organisation and skill formation in the Australian housing industry.Canberra: AGPS, 1992 [ Background Paper 13: The National Housing Strategy.]

Bureau of Industry EconomicsInstability in the Australian residential construction industry.

Canberra: AGPS, 1990 [Discussion Paper 10

Department of Industry, Science & TechnologyNon-Residential Construction Forecasts:

Short-term Prospects: August 1995 [June 1994; June 1992]. Canberra: AGPS, 1992-1995

Australian Federation of Construction Contractors. The Building and Construction Industry:


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A Way Forward: A discussion paper to stimulate debate on the most effective way to achieve

industry reform. St Leonards, NSW: AFCC, 1991

Gittins, R, "Beware dream home dangers" Sydney Morning Herald, March 19, 1997, p.17

Section 2.4

Tyrril, John Construction Industry Dispute Resolution - An Overview. Sydney: [np] [nd]

Eccles, John Project Management and Administration. [Sydney: np, 1997]Mallam, WG The NSW Building Disputes Tribunals. [Sydney: np, 1997]

Australian Bureau of Statistics Official New South Wales Yearbook, 1976. Sydney: ABS, 1977

Allen, DIssues in Training in Negotiation Skills for an Organisational Setting. [Unpublished]

Assignment for course work on Negotiation for the UTS MDR, June, 1996

David, J,Designing Dispute Resolution Systems. [Sydney: Paper for Second International

Mediation Conference, 1996]

Section 3

This material, on the essence of competition, cooperation and reflections from the natural

world, etc, come from own science background [1963-1967 studies & 1968-1973 teaching]

and it would be difficult to note bibliographic sources.

A recent discussion which also reflects on these elements of the principles of operation in thenatural world, and which are applied to the "organisation" and the "management" issues

related, and then looks to apply this principles to equip the participants in such organisations

to learn is:

Senge, PM The Fifth Discipline: The Art & Practice of the Learning Organisation. Sydney:

Random House, 1992.

Section 3.4

Mintzberg, Henry Quinn, James Brian The Strategy Process. London: Prentice-Hall, 3rd ed1996 (2nd 1991, 1st 1988).

Handy, C The Age of Unreason. London: Arrow Books, c.1989, 1995

Handy, C The Empty Raincoat. London: Arrow Books, c.1994, 1995


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Saul, P, "Managing the Organization as a Community of Contributors", Asia Pacific Journal

of Human Resources, 1996, 34(3) p.19-36

Section 3.5

Zifcak, SpencerNew Managerialism: Administrative reform in Whitehall and Canberra.Buckingham Open Univ. Pr, 1994.

A current article challenging the concept/s that the process of corporatisation is "marketplace"and "capitalist"/ competition and risk, etc, is

Saul, JR, "Meaning lost in corporate world" Sydney Morning Herald, March

21, 1997 p.21

There is a current debate seeking to critique the expansion of regulation:

Vass, N, "Calls for muzzling of State's watchdogs" Sydney Morning Herald,

January 20, 1997

Editorial, "Watchdog cost" Sydney Morning Herald, January 28, 1997

A much older and another new thrust in the debate of "efficiency" versus other values in

government choice/s is illustrated by:

Letters: Schofield, K, "Efficiency drive loses community spirit" Sydney

Morning Herald,January 20, 1992

Sharpe, F, "Diagnosis needed before treatment" Sydney Morning Herald,

March 18, 1997

Vinson, T, "Threats to legal aid courting disaster" Sydney Morning Herald,March 17, 1997

Section 4.1

Mintzberg, Henry Quinn, James Brian The Strategy Process. London: Prentice-Hall, 3rd ed

1996 (2nd 1991, 1st 1988).

Porter, ME "From Competitve Advantage to Corporate Strategy" in The Strategy

Process

Allen, DEquipping Staff to Handle Disputes Effectively in Local Government. [Unpublished]


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INDUSTRY

Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996.

Section 4.2

Local Government Act, 1993

Stuckey, EBBluett Local Government Handbook (New South Wales). Sydney: Law BookCompany 1987, 11th ed.

Stuckey, EBBluett Local Government Handbook (New South Wales). Sydney: Law BookCompany 1994, 13th ed.

Allen, DEquipping Staff to Handle Disputes Effectively in Local Government. [Unpublished]

Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996.

Allen, DIssues in Training in Negotiation Skills for an Organisational Setting. [Unpublished]

Assignment for course work on Negotiation for the UTS MDR, June, 1996

Allen, DLearning from the experience of disputes at Shellharbour City Council .

[Unpublished] Assignment for course work on Dispute Resolution in Commerce for the UTSMDR, November, 1996

Section 4.3

Allen, DEquipping Staff to Handle Disputes Effectively in Local Government. [Unpublished]Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996.

Allen, DLearning from the experience of disputes at Shellharbour City Council .

[Unpublished] Assignment for course work on Dispute Resolution in Commerce for the UTS

MDR, November, 1996

NSW Department of Local Government Competitive Tendering Guidelines. Sydney: NSW

DLG, 1997.

In the Midst of RevolutionLocal Government News, 1996, vol 3 no 3 p.9-10


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CONSTRUCTION INDUSTRY DISP

Documents

Dispute Resolution: Lessons to be Learned from the Experience of Disputes in the Construction Industry