Dispute Resolution: Lessons To Be Learned From The Experience of Disputes in The Construction Industry

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

Dianne Allen, March 1997
Contents
ABSTRACT ............................................................................................................................... 3 1. INTRODUCTORY REMARKS ............................................................................................ 3 2. 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 CONSTRUCTION INDUSTRY IN NSW ......................................................................................... 8 2.3 THE OPERATIONAL CONTEXT OF THE CONSTRUCTION INDUSTRY: .... 10 2.3.1 cyclical nature of economy - boom -> bust ............................................. 10 2.3.2 tendering process: competition ................................................................ 10 2.3.3 technological change, some of which can be represented by: ................. 10 2.3.4 management development ....................................................................... 11 2.3.5 loss of skills: ............................................................................................ 12 2.3.6 undercapitalisation of significant proportion of the sector ...................... 12 2.3.7 dispersal of activity .................................................................................. 12 2.3.8 diversity of participants ........................................................................... 12 2.3.9 the intervention of government as a major player: .................................. 13 2.3.10 regulation and standard setting .............................................................. 13 2.4 THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY: .. 13 2.4.1 The Nature of Construction Industry Disputes ........................................ 13 2.4.2 The Sources of Construction Industry Disputes ...................................... 14 2.4.3 Alternatives and strategies for dispute resolution.................................... 16 3. GENERAL PRINCIPLES OPERATING ............................................................................. 20 3.1 COMPETITION ..................................................................................................... 21 3.1.1 Basic psychological element of competitiveness: ................................... 21 3.1.2 Classic free market: delivery of goods/ services -> profit ....................... 21 3.1.3 Competition in other fields ...................................................................... 21 3.2 COOPERATION .................................................................................................... 22 3.3 NATURAL GROWTH CYCLE ............................................................................. 23 3.4 ORGANISATIONAL MANAGEMENT DEVELOPMENTS ............................... 23 3.5 GOVERNMENT AND THE CONCEPT OF PUBLIC SERVICE: EQUITY PRINCIPLES .................................................................................................... 25 4. APPLYING THE LESSONS TO LOCAL GOVERNMENT ............................................... 27 4.1 GENERAL OVERVIEW OF THE LOCAL GOVERNMENT INDUSTRY ......... 27 4.2 CURRENT PRESSURES FOR CHANGE IN THE LOCAL GOVERNMENT INDUSTRY IN NSW ....................................................................................... 29 4.3 INDICATORS OF THE LOCAL GOVERNMENT RESPONSE TO DATE: ....... 31
CONSTRUCTION INDUSTRY DISPUTE RESOLUTION ASSIGNMENT: Dianne Allen ... p.2 LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY
4.3.1 NSW Dept Local Government Competition Policy Document ............... 32 4.3.2 Experience of "sea-changes" to some local government entities ............ 33 4.3.3 ALGA Seminar, July 1996 ....................................................................... 33 5. CONCLUSION:.................................................................................................................... 34 BIBLIOGRAPHY ..................................................................................................................... 36 Section 2.1 .................................................................................................................... 36 Section 2.2 .................................................................................................................... 36 Section 2.3 .................................................................................................................... 36 Section 2.4 .................................................................................................................... 37 Section 3 ....................................................................................................................... 37 Section 3.4 .................................................................................................................... 37 Section 3.5 .................................................................................................................... 38 Section 4.1 .................................................................................................................... 38 Section 4.2 .................................................................................................................... 39 Section 4.3 .................................................................................................................... 39 ATTACHMENTS .................................................................................................................... 40 ATTACHMENT 1: ABSTRACTS OF PREVIOUS ASSIGNMENTS ........................ 40 ATTACHMENT 2: THE CONTEXT OF LOCAL GOVERNMENT .......................... 44 ATTACHMENT 3: INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL GOVERNMENT WORKPLACE ..................................................................... 50 ATTACHMENT 4: EXTRACT FROM "ISSUES IN TRAINING IN NEGOTIATION SKILLS FOR AN ORGANISATIONAL SETTING" ....................................... 55 PRESENTATION HANDOUT: LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY ........................................... 56 PRESENTATION: ................................................................................................................... 59
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 disputes the 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 National Competition 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 this debate.
1. INTRODUCTORY REMARKS
1.1 Our current Western culture tends to be characterised by the now, the new, the short-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. The experience of the construction industry over the past 50 or so years has been of change, and the consequences arising from that change. The prevailing context for the construction industry is of an economic cycle that tends to boom and bust. This cycle produces pressures for efficiency, for survival, (especially in "straitened" times) which have resulted in the development of some characteristic 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. It is then worth reflecting that the "freely competitive" commercial world, generally,
1.2
1.3
1.4
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. The specific experience, recently, of the construction industry, in dealing with disputes generated in this context, holds out lessons for local government, which is currently being increasingly pressed for more and more efficiency. This present pressure for change in local government, to deliver greater efficiency, is tending towards a much more pervasive use of competitive tendering as a dominant procedural context for local (and other levels of ) government operations. The National Competition Policy, an initiative of the Labor Federal Government, and now supported by the Liberal/ National Federal Government, the Council of Australian Governments 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 conditions for 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, the construction industry, is that local government, which has a primary mandate to undertake "community development", will be to become unwittingly and increasingly embroiled in even more disputation. The new area of disputation will be that associated with contracts. This disputation will 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".
1.6
1.7
1.8
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 shift of culture. 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.
1.11
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. 2. 3. 4. general characteristics of the construction industry brief overview of historical significant milestones/ change indicators over the period 1945-1997 commercial pressures experienced by the construction industry experience of disputes in the construction industry
Then it seeks to look at the general principles driving some of these outcomes: 1. 2. 3. 4. 5. the general nature of competition the general nature of cooperation the development cycle for individuals/ families/ communities with social cohesion the development cycle for organisations the role of government/ government agencies
Then it seeks to apply the lessons to the current experience of local government: 1. 2. 3. current position of local government pressures for change 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:
1. Resources for Strategic Interventions used by Mediators, Facilitators and Conciliators. 2. Equipping Staff to Handle Disputes Effectively in Local Government. 3. Issues in Training in Negotiation Skills for an Organisational Setting. 4. Facilitation: The Use of Mediation techniques & Processes in Resolving Differences in Group Decision-Making. 5. Learning from the experience of disputes at Shellharbour City Council. SEE ATTACHMENT 1
2. THE CONSTRUCTION INDUSTRY:

2.1 GENERAL OVERVIEW OF THE CONSTRUCTION INDUSTRY
The construction industry (in NSW) can be generally characterised as follows: it is a significant sector representing something of the order of 10% of the economy almost every project is a one-off prototype there is a low standard of contract formation and contract administration a significant factor affecting its current level of efficiency is the level of disputes [the present level of efficiency of the industry represents something like 95% of the level of efficiency found in the US] [Housing productivity indicated from research in 1977 (Blakey in Greig): US 9.2 labour hrs/sqmt (conventional) 6.5 labour hrs/sqmt (system) Aust 9.5 labour hrs/sqmt (conventional) 5.5-6.0 labour hrs/sqmt (system)] the level of disputation has increased significantly over the last decade or so
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 in the 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
2.2 A BRIEF OVERVIEW OF HISTORICAL MILESTONES/ CHANGE INDICATORS OVER THE PERIOD 1945-1997 FOR THE CONSTRUCTION INDUSTRY 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, and the 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 Works Departments 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 the development 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. 2. 3. 4. 5. one-off site specific geographically located in an otherwise isolated area, with difficult weather conditions preliminary survey work required - topography; geology a complex of different structures - dams, tunnels, piping water, pumping stations, hydro-electric generating stations, roads, support infrastructure homes for workers significant term (1949-1974), and now ongoing operation and maintenance
6.
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, longest 23 km, through hard rock, seven power stations. It involved one hundred thousand
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 units residential 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 workforce 1962 subcontractors = 16% of workforce 1968 subcontractors = 20% of workforce (1951-1968 Hutton, 1970) 1971 subcontractors = 21% of workforce 1974 subcontractors = 23% of workforce 1977 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 and 4,000 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 for 18% 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
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; this volatility gives rise to a failure of security of work, and therefore of the employer/employee labour relationship there is a distinct 4 year cycle in the residential sector (evident over 30 years of data collection) the fluctuation of investment/ and workload is a typical characteristic of any "capital goods" industry
2. 3. 4.
2.3.2 tendering process: competition

1. 2. 3. least cost: low margins least time: contingency underestimated/ risk factors minimal recognition 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, etc construction processes change
2.
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 trusses spanning 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, fire protection, 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 with productivity 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 quality assurance systems where overlapping of briefing, design and construction functions allowed work to proceed ahead of finished drawings
2.3.5 loss of skills:

1. 2. the earlier (1945-1960) stable work group included a regular flow of apprentices in training the fracturing (1960-1970) of these groups led to the proliferation of single 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 high interest 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" may be, 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 material productivity, 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 the loss of key skills.]
2.3.8 diversity of participants

general consumers/ Lessees subcontractors head contractor clients - private sector
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 incidence of 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 the question 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
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 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 by numbers and amalgamations) A general culture of physicality which can include physical violence at an individual level
3.
4.
2.4.2 The Sources of Construction Industry Disputes

Construction industry disputes have been analysed and found to come from a variety of key sources: 1. the innate uncertainty in the industry one-off projects unrecognised site difficulties level of flexibility retained for changes during construction the design/ documentation phase poor context analysis poor project enunciation miscommunication between specialists; low standard of contract formation the construction phase low standard of contract administration delays valuation of variations defective work breach of contract by non-payment to contractor
2.
3.
4.
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 the price to be paid for its provision. Good contracts specify standards of provision, explicitly.
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 to initiate 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 attempt to 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 the life 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 to deal with community concerns is in the residential housing sector. Here the owner is (by comparison with the "bigger" end of the industry/ market) most often poorly 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 more aware 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 the negotiation process involved in the construction and contract, etc, demonstrate the importance
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 resolution and 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 properly documented, 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 an important 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 for the other party. There has been a trend to shift from the use of industry experts to
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 commercial matters 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 independent referee who seeks to help the parties reach settlement acceptable to both. In the absence of a mutually agreed settlement, the referee can determine 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 while keeping open access to a judicial decision. These are: Expedited Arbitration Conciliation Within 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 Wales Supreme 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
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 use whatever dispute resolution process suits them. The "standard contract" usually contains an "arbitration" clause. Recent work (1992) reviewed the Standards Australia's General Conditions of Contract 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 escalating routes in the course of seeking to resolve disputes. 9. "Partnering" developments One of the outcomes of the expansion of disputes and the need for organisations, especially those involved in the larger construction projects, to deal more effectively with the innate uncertainty of the process, has been the recognition 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
* * * * * *
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 level possible 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 - adequate and 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 the project 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 identified the 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 of the 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.
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 are physical 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 entropic effect 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 the very conditions of existence required by those organisms. The living world includes more complex developments than the single celled organism. The multi-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] also have 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. The numbers 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 the other - the human and the gut bacteria. This symbiotic relationship is found in many situations.
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. 2. 3. 4. sibling rivalry generational rivalry resource inheritance structures: clan rivalry 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 competition Oversupply of market Bust: shake-out of inefficient operators Development of survival strategies refining of operating efficiencies; formation of strategic alliances takeovers of competitors and/or strategic support operations Development of complex organisations/ conglomerates horizontal integration incorporation of strategic alliances to yield diversified organisation monopoly bureaucratisation inefficiency Competitive 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
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 of specialised physical skills which, once upon a time, were part of day-to-day living, the work environment - hand and eye coordination useful 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 of competition. Its commercialisation, and its nationalisation (Olympics) is but a channelling the "competitive" spirit in a way less destructive than war. 3. 4. Territorial competition/ wars Economic/ wars
It is instructive that the "games" and "sports" of the occidental orientation are not as evident in 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 illustrate the effectiveness of this alternative mode of relationship: 1. 2. 3. 4. the colony insects - the ant, the bee any complex multi-celled organism human being as a multi-celled organism the human social structure
Cooperation is reflected in the recognition that a mutual relationship will bring mutual benefits. Within an organisation the cooperation that leads to horizontal integration allows for the sharing of "overheads".
One such "overhead" is the sharing of the cost of "time" and effort involved in education and/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 matured adult 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 the following phases: 1 2 3 Dependence: child to adolescent: 0-18 Conflict of Adolescence Independence: adult 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 to maintain 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 from competing 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 can deliver by-product benefit to the core profit making activity eg by increasing efficiency and lowering cost of supplies required for the core activity.
This activity results in the development of the following variants of support to full control and ownership: 1. partial control without ownership: long-term contracting selective portfolio development licencing franchising partial ownership and control: minority share holding majority shareholding partnership including joint venture; turnkey (temporary control) full ownership and control acquisition internal development
2.
3.
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 the loss of existence/ identity of one or more organisations along the way.) Mintzberg remarks that for the diversified commercial organisation the mechanisms required to obtain the "return on capital" goals, controls, by primarily quantitative performance criteria, drive out goals that cannot be measured - product quality, pride in work, customers well 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; every strategic 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 and diversity 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.
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 stable times: 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. 2. 3. the position where one joined with a leader for protection from a common enemy: clan leader -> king and standing army. The need for internal cohesiveness among the king's subject -> king as judge -> devolution to courts/ development of common law. The growing size of "community" -> parliamentary democracy.
The development of western democratic states has seen an interplay between basic alternatives: 1. 2. 3. the conservative - maintenance of rule of law; the privileged and class structure, developed from the feudal/ kingly relationship the laissez-faire - letting the market run its course 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. 2. more "government efficiency" - new managerialism; National Competition Policy for reconsidering emphasis - downsizing; corporatising; privatising
The role of government is still one of balancing the forces that would lead to social
disintegration: 1. 2. 3. deploying common resources to equitable ends regulating "private"/ "commercial" activity to ensure equitable ends 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 of goods 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 redistribute wealth (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 railway system 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 managing non-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 from hydro-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 ensure ongoing 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
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 where service cost/ service demand is line-ball or
loss-making/; ... (Thatcher/ Kennett/ NZ/ Mosman/ Liverpool/ ... model) participatory democracy consultation/; transparency/; ... (North Sydney/ .. model)
well-managed organisation
delivering cost-effective services and responding to community aspirations the middle mix (Shellharbour post RJH but still suffering from 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 government industry 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".]
The present pressures for change which are currently imposing "external" management mechanisms on the relatively small, (until now?) geographically constrained local government, demonstrate this lack of understanding. Mechanisms like standardised job evaluation, 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 of large 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 Handle Disputes Effectively in Local Government and 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
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 to review 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 policy priorities and direction promised.) regulation generalisation (Australian codes and standards and process for local policy formulation)
4.
bring into play the obligations of:
5. 6.
Freedom of Information legislation (transparency and accountability elements) Equal Employment Opportunity legislation (social equity objectives)
enhance probity (Code of Conduct for Councillors and staff) 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 and accountability 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 Government overrode some of the initial provisions)
It has now (1996/7) been caught up into the National Competition Policy approach. This has an increased emphasis on reducing "costs" of regulation, and/or non-competitive "monopolies" associated with the public provision of infrastructure service for the community in general. These "older concerns" (for transparency and accountability, representing the reaction to past
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" are gained, 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. 2. 3. previous amalgamations (1975 in country areas particularly), and the internal striving for efficiency derived from the rate-pegging constraints in place since 1977, and the "preparations" for the deregulation of structural constraints of the 1919 legislation - touted in early preparations (1987) for the 1993 changes, and supported 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 "unintended consequences" 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.
4.3.1 NSW Dept Local Government Competition Policy Document

The recently released NSW Department of Local Government guidelines for Competitive Tendering identify the following concerns: 1. "council[s] ha[ve] a responsibility to fully assess both the anticipated benefits and the economic and social costs before making [a] decision .. to use competitive tendering" "evidence is beginning to emerge from Australia and other countries concerning the effects [of competitive tendering] on local communities and council employees" "competitive tendering comes at a cost, and will only be successful when preceded by adequate planning"
2.
3.
The guidelines go on to note: 4. "Councils already undertake competitive tendering and contracting out in an increasingly 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." "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" "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" "[The statutory obligations that need to be addressed in considering] competitive tendering issues [include]: making statutory and other plans
5.
6.
7.
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-term tender 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 alternative suppliers) 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 still be 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
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. 2. 3. 4. 5. 6. 7. 8. 9. the nature of the change needs to be recognised as a national management issue unless there is increased participation of all members of our society and our society is made more inclusive, we risk becoming a disintegrating society Australia is at risk of becoming obsessed about developing a culture of competition By comparison, many Asian growth economies have been built on internal cooperation and external competition Australia needs to encourage a culture of collaboration at home To do this will require an ability to keep competition in perspective There is a perception in the community of a loss of power and individual control of people's own lives There is a loss of accountability in the public arena as services were privatised 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 this paper.
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 current pushes to "commercialise" its operations. Local government needs to seriously and clearly look at just what its objectives are, what its community does really want from it. Local government then needs to be flexible in how it chooses to deliver those goals.
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 for government enterprise will be required. When there is competiton for resources (within a limited revenue base, raised by taxation, and between "economic" services and "community development" processes of equity and democratic participation) local government will need to be involved in giving clear leadership to 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, and especially 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.
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, O Built 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, O Built 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 Economics Instability in the Australian residential construction industry. Canberra: AGPS, 1990 [Discussion Paper 10 Department of Industry, Science & Technology Non-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:
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, D Issues 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 the natural 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 ed 1996 (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
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, Spencer New 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, D Equipping Staff to Handle Disputes Effectively in Local Government. [Unpublished]
Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996.
Section 4.2
Local Government Act, 1993 Stuckey, EB Bluett Local Government Handbook (New South Wales). Sydney: Law Book Company 1987, 11th ed. Stuckey, EB Bluett Local Government Handbook (New South Wales). Sydney: Law Book Company 1994, 13th ed.
Allen, D Equipping Staff to Handle Disputes Effectively in Local Government. [Unpublished] Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996. Allen, D Issues in Training in Negotiation Skills for an Organisational Setting. [Unpublished] Assignment for course work on Negotiation for the UTS MDR, June, 1996 Allen, D Learning 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
Section 4.3
Allen, D Equipping Staff to Handle Disputes Effectively in Local Government. [Unpublished] Research Assignment for course work on Dispute Resolution for the UTS MDR, May, 1996. Allen, D Learning 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 Revolution Local Government News, 1996, vol 3 no 3 p.9-10
ATTACHMENTS
ATTACHMENT 1: ABSTRACTS OF PREVIOUS ASSIGNMENTS
INTRODUCTORY REMARKS: As noted in the introductory remarks, this assignment takes "as read" previous material on disputes and dispute resolution dealt with in previous assignments. To give some indication of the scope of that material, the following abstracts are tendered: The first major assignment looked at: EQUIPPING STAFF TO HANDLE DISPUTES EFFECTIVELY IN LOCAL GOVERNMENT ABSTRACT: This paper seeks to address the task of equipping local government staff to effectively handle disputes that arise in the workplace. The paper seeks to do this by: 1. 2. 3. 4. 5. 6. 7. 8. reviewing the context of local government reviewing the nature of disputes that present in the local government workplace identifying the skills required in dealing with those disputes looking at the training required to develop those skills reviewing the current training that is readily available to local government considering the development of dispute handling systems appropriate for a local government body considering a training plan to develop dispute resolution skills, for a local government body reviewing some of the literature of dispute resolution to see what insights may be provided from this alternative source
The second assignment, looked at ISSUES IN TRAINING IN NEGOTIATION SKILLS FOR AN ORGANISATIONAL SETTING ABSTRACT: This report seeks to explore the issues arising from the consideration to provide training in negotiation skills in the workplace. The report does this by: 1. reviewing impressions and implications from personal experience of negotiation skill training 2. reviewing recent literature on the subject 3. seeking to apply these reflections to the task of determining curriculum and presentation - training techniques. The report notes the nature of effective negotiation skill training: with its inherent "interpersonal" aspect and the reliance on experiential learning, often in the context of a simulation, or role play. Since interpersonal (and hence negotiation) skills are reflected in behaviour, and behaviour is instructed by the formation of self-concept (the intrapersonal), the individual needing such training most is the one who has a dysfunctional behaviour formed as part of their self-concept. To change this behaviour requires framebreaking and new frame formation. This is a task which is complex; takes time; and will require significant effort by participant and trainer, with the trainer especially on notice to sustain a model of consistent pattern of behaviour congruent with the new frame, and to provide instruction on the new frame of perception and approach and reinforce congruent behaviour in the participant when it is attempted. The risk of effective framebreaking is that it may include psychological breakdown. In that event, if the training has been sponsored by the organisation, then the organisation has some responsibility for having contributed to the breakdown. Without adequate management of the training, the events, and the consequences, and adequate support to maintain the individual while the new frame is constructed, the organisation could be held responsible for negligence through current occupational health and safety legislation. Planning and delivering such training, if required of the organisation, is then a very sensitive issue, requiring support mechanisms not always associated with
a typical training program. The third assignment looked at FACILITATION: THE USE OF MEDIATION TECHNIQUES & PROCESSES IN RESOLVING DIFFERENCES IN GROUP DECISION-MAKING ABSTRACT: The task of facilitating group endeavour is particularly relevant to current social conditions. It is important in the development (or maintenance) of organisational effectiveness. For those involved in, or associated with, local government, community consultation and participative decision-making is becoming an increasingly important part of responsiveness to community expectations. The new legislative context delivered by the Local Government Act, 1993, makes such things part and parcel of the local public policy process. Facilitation is beginning to be seen as a significant tool in such consultative and participative contexts. Its capacity includes an ability to assist in conflict management, or dispute resolution if necessary, having a role to play in helping communities deal with differences which might otherwise develop into debilitating disputes. This report seeks to 1. 2. explore the nature of facilitation of group activity and give some consideration to the task of developing facilitation skills for use in the workplace (especially as applied to local government).
It does this by: 1. 2. looking at the activities and processes used in the alternative dispute resolution process of mediation, and identifying how much common ground there is between mediation and the activities and processes used in facilitating group processes and group decision making.
It then looks, in some detail, at the present level of understanding of group processes.
The report then seeks to gather this, and other study*, together and to conclude with a consideration of the basic requirements in the development of knowledge and skills for facilitators. (The knowledge and skills identified are obviously useful, and applicable, to the mediation of multi-party disputes.) (*Other study: "Equipping staff to handle disputes effectively in local government" - Assignment for Dispute Resolution Unit, May 1996)
The fourth assignment looked at LEARNING FROM THE EXPERIENCE OF DISPUTES AT SHELLHARBOUR CITY COUNCIL. ABSTRACT: This paper looks at a number of experiences that Shellharbour Council has had with disputes over the period 1974-1996. These experiences are generally illustrative of the context of disputes in local government. From a review of this experience it is apparent that Shellharbour Council, since 1974/5, is an organisation which has generally been open to different ways of dealing with disputes. The organisational learning process, derived from these experiences, over this period, has tended to set a relatively progressive culture for handling disputes. Nevertheless, given the context of change in local government, and continued growth and complexity of issues that Shellharbour Council can anticipate facing in the future, there is room for a more strategic effort to improve its present performance. The "case studies"/ experience then form a resource from which the organisation can continue to learn for such improved performance.
ATTACHMENT 2: THE CONTEXT OF LOCAL GOVERNMENT

EXTRACT FROM "EQUIPPING STAFF TO HANDLE DISPUTES EFFECTIVELY IN LOCAL GOVERNMENT" 1. 1.1 THE CONTEXT OF LOCAL GOVERNMENT: SUMMARY REMARKS: 1. 2. There are a diversity of disputes needing to be dealt with in the "ordinary course of events" in the local government workplace context. There are a range of levels within the organisation where, if effective dispute resolution occurs, at the first presentation ("at source"), operations will be more efficient. A significant number of disputes present in the context of no previous relationship (contact?), with little likelihood of an ongoing contact (relationship) - eg single, first and last time, customer contact. Other disputes present in the context of an ongoing relationship. These are vital to the well being/ development of community cohesion, either within the organisation itself as a "community"; or within the community at large. There are a range of current pressures from change: social, technological, constitutional, which are impacting significantly on local government. This overall pressure of change has the potential to expose previously "wearable abrasions" into something more significant. The most significant of these are: 5.1 Award restructuring - shift of industrial context from (outside of the organisation) the Commission to (inside the organisation) the Consultative Committee; awards; personnel processes; enterprise bargaining; etc 5.2 Local Government Act changes - transparency, accountability, community consultation 5.3 EEO management plan - grievance process (Local Government Act requirement) 5.4 Competitive tendering. (There are certain minimum requirements already which call for exposure to public tendering. There is the quest for efficiency and accountability. There is the flow-on of change process from UK -> NZ -> Victoria -> who knows where next - it is certainly "kicked around" as an option for NSW ??) 5.5 Best practice - performance measures, comparisons, benchmarking, etc There are the particular pressures that occur within the development of bureaucracy; bureaucracy/ elected representative interface; and proximity of electorate 6.1 Legitimate lobbying 6.2 Ombudsman process development
3.
4.
5.
6.
6.3 1.2
ICAC process development
AN OVERVIEW OF LOCAL GOVERNMENT IN NSW:
1.2.1 A Demographic Thumbnail Sketch:

Local Government in NSW is, on the one hand, "homogenous" - its practices dictated by the same state legislation. On the other hand, there are significant levels of essential diversity: 1. There 173 local government areas from Sydney City to Windouran. At this stage they are categorised by the Local Government Grants Commission into four major categories, with a total of 11 subcategories: 1 2 3 4 2. 3. 4. 5. Councils in the Sydney Statistical Division [45 councils] Non-Metropolitan councils which are predominantly Urban (Shellharbour City Council's category) [21 councils] Coastal Councils [18 councils] Rural - Councils with Significant Rural Areas [93 councils]
6.
7.
8.
Sydney City is a complex urban area with a significant mesh with the seat of State Government. Windouran, in the central Murray area, has a population of about 500. The area with the largest population is Blacktown with an estimated 199700 in 1986. There are 124 areas with populations less than 31,000 (the average population per area in 1986). (The Shellharbour Local Government area has a population of 50,000 and this is growing at the rate of 2% per annum.) Staff sizes range from 20 staff to in excess of 1000 staff. (Shellharbour Council has a staff complement of the order of 220, in 1993 the staff to 1000 population ratio was 4.45, the eighteenth lowest. Baulkham Hills had the lowest staff to population ratio at 3.39.) Annual resources, at the disposal of elected representatives, range from $1.5 million to $150 million. (Shellharbour Council's annual expenditure from revenue resources is of the order of $27 million.) In terms of personnel development: 8.1 the average staff to 1000 population ratio in local government in NSW is 6.00*, 8.2 the number of local government bodies with a population of 24,000+, and so likely to have a workforce in excess of 145, is of the order of 60, ie a little over one third of the industry is at this level (A workforce of 145 is the level at which there might be justification for designating a position for a human resource professional from the Howes 1995 HR benchmark figures [Howes P "Benchmarking '95", HRMonthly, July 1995,
10-14]) [*6.00 is only a rough and indicative estimate extrapolated from category averages ranging from 4.75 to 12.37] 8.3 therefore the personnel function is likely to be poorly developed in the majority of councils.
1.2.2 The Nature of Autonomy in Local Government:

Within the constraints of legislation determined by the State Government, each local government body is autonomous. Each Council is able to determine, with little or no reference to what other local government bodies are doing, what its priorities might be. From 1919-1993, when the previous legislation operated, that autonomy was constrained by a significant body of regulatory legislation. One of the purposes in this was to ensure predictability between local government areas, in rules to govern development, building, etc. One of the consequences however, was something that amounted to a "restriction of trade". Certain senior staff positions were mandatory, with industry-derived accreditation. This tended to "protect" the industry from competition. There was little or no transfer of personnel, skills and (maybe improved) processes from the other two tiers of public administration. There was hardly any challenge from private sector management expertise. There was no encouragement to take any initiative to change and adapt to current pressures of the industry's operating environment. From 1977 to the present, the autonomy of local government has also been constrained by regulation of rate increases, by the NSW State Government, of both political complexions.
1.2.4 The Impact of Urban Growth in the Sydney Metropolitan area and its immediate hinterland:
The post World War 2 growth of some local government areas and infrastructures on what was the fringe of Sydney (Blacktown, Fairfield, Sutherland, Penrith, Gosford, Wyong, etc.) yielded: 1. 2. 3. substantially sized organisations, under significant economic pressure from growth, within the constrained economic climate of rate pegging, (since 1977).
These changes were beginning to be reflected in: 1. 2. 3. 4. demands additional performance from staff resources, and the need to put in place more leading edge personnel systems, and provide for delivery of incentives for performance, internal structural change from standard hierarchies to flatter organisations with interdependent work teams.
The independently determined, "professional" or "occupationally" derived awards in place were not keeping pace with these changes. The diversity of "professional"/ "occupational" awards reflected "patch" jealousies. The rates of pay reflected industrial muscle and/or market. In these circumstances there were significant problems with equity. The general awards, except at the "Senior" staff level, did not give any cognizance for a need to be able to flexibly respond to specific locational circumstances. Local Government, in line with most other industries, now needed a mechanism to allow it to explore workplace reform. This would allow individual councils to respond more positively and effectively to significant differences in context. What was needed for a city based area was not necessarily applicable to either a regional town or a south-western rural district. The award developed in 1991 fulfilled most of these needs. Those councils which had been actively struggling with the task of developing contemporary personnel systems (consistent with organisational restructure) were able to act quickly, or formalise actions taken to that date, within the new award structure. These changes also delivered independent support for their progress with strategic personnel developments. This change was then reinforced by the long awaited and much debated changes in the Local Government Act, 1993. This legislation now required open competition for work in local government and selection on merit, and the establishment of an Equal Employment Opportunity Management Plan for each local government body. 1.3 STRUCTURE & SOURCES OF PRESSURE FOR PERFORMANCE IN LOCAL GOVERNMENT:
Structurally, for local government, there are at least 9 major components: 1. The Electorate: ordinary people, lobbyists, in their ward structures, political party branch members, the candidates before pre-selection and after nomination, representatives The Elected Council: Labour pre-selected & elected; non-aligned independents; representatives of emerging political movements - eg Greens, Democrats; government (majority) and opposition (minority); ward groupings The Senior Staff: Town Clerk/General Manager; Senior professionals: Engineer, Town Planner, Health & Building Surveyor, Treasurer, Others (Chief Librarian) The professional/ technical staff The operational staff
2.
3.
4. 5.
And externally:
6. 7.
8. 9.
State Government & Department of Local Government; Local Government & Shires Association; (and to a lesser extent the "industry" interests/concerns - solidarity in a hostile world - hostility from other political spheres - State; Federal; - the private competitive market seeking access to new areas of operation; - the international "best practice" context - NSW vs other States; NZ; USA; UK Local Government practice, etc) Staff Associations: Municipal Employees Union, HABSA, Engineers Association, Clerks Association/Institute of Municipal Management Clients/ Business Interactions: Landowner/Developer; Development/Construction firms; Contractors & Suppliers; Community organisations; Federal Government
1.4
ANALYSIS OF INTERESTS GENERATING PRESSURE FOR PERFORMANCE ON LOCAL GOVERNMENT:
The following list identifies the major types/ sources of differing interests which generate pressure for performance on Local Government: 1. Federal Government - using local government as an agency in delivering federal policy outcomes: eg labour market programs; social development programs (child care); regulating to achieve national objectives - micro-economic reform State Government - using local government as an agency in delivering state policy outcomes: eg community service (youth programs); devolving responsibility for regulation etc to the local level - houses of ill fame from "police" to town planning area Ordinary people - ratepayer - value for money (rate dollar); community services - facilities (sporting, community, cultural, etc); infrastructure - roads, etc; specific services - building applications etc; Lobbyists: environmental; business; Elected representatives - re-election; policy implementation; community development Political parties - establishing a more formal involvement and expression at the local government level to build community profile and acceptance Staff - professional satisfaction Staff - employment security and pay for performance Local Government & Shires Association higher profile/value to local government industry performance; comparative performance/ leadership reputation in the wider
2.
3.
4. 5.
6. 7. 8. 9.
10. 11.
local government industry Staff associations - industrially advantageous conditions for employees Businesses - permission to develop within (minimum) economically viable constraints
1.5
A BRIEF HISTORY OF AN EXAMPLE DEMONSTRATING THE IMPACT OF THESE VARIOUS PRESSURES, AND THEIR SOURCES, ON DISPUTES AND THE DEVELOPMENT OF DISPUTE RESOLUTION MECHANISMS:
These competing interests have meant that the incidence of disputes has increased and the processes to resolve such disputes have been refined over time. In the area of regulatory responsibilities, the recent history in NSW provides a useful indication of the outworking of the task of balancing these diverse and competing interests. It also demonstrates the interactive impact of State Government, Local Government and the community represented by individuals and lobby groups. For instance, with the Local Government Act, 1919, the post-war growth of urbanisation brought the need for legislation to regulate competing interests in the use of land (Town Planning). This led to amendment of the original legislation. Eventually it required the formation of a separate act of parliament, the Environmental Planning & Assessment Act, 1979, (EP&A Act) to deal with this issue. A significant component of that legislation has been to: 1. 2. 3. define the matters that need to be addressed in assessing any proposed development; broaden the rights of parties to participate in the process to decide a matter; and establish a Court to hear disputes in the area, with the option, in that process, of mediating a solution for the contesting parties
The refinement of dispute recognition, and the processes to resolve such disputes, has taken the following course:
1.
2. 3. 4.
1919-1979: Council the only decision-making authority - with right of appeal to the Minister of Local Government concerning impropriety; independent investigation by the Department of Local Government concerning the alleged impropriety; or appeal to the Court in Equity for compensation of losses associated with such decision-making 1979: Interposition of the Land and Environment Court to review such decisions on appeal Right of interested party to object formalised Right of interested party with objection to be heard at formal hearings
5. 6. 7. 8.
Right of third party (public interest) to object formalised Right of third party (public interest) to be heard at formal hearings Establishment of mediation as option/ preliminary to full enquiry Categorisation of some kinds of developments ("designated developments" as indicated in EP&A Act ss 78-83) as having a wider than developer/council impact, (ie having a general public interest - or a significant, regional, environmental or economic impact) and therefore needing a separate EIS, a Commission of Enquiry, a Ministerial decision
These refinements have endeavoured to: 1. 2. Review the initial decision of refusal or conditional approval (where conditions have been held to be onerous) Provide a mechanism/ forum for all parties affected by the decision to be consulted, their interests to be heard, and therefore taken into account in the approval process Ensure that (wider) public interest concerns can be heard
3.
In 1993, the revised Local Government Act sought to establish common principles of administrative procedure, and to draw back from centralised regulation. Within this philosophy, the new legislation seeks to encourage processes which achieve consultation, formal submission, and relevant review, at the local level, prior to making a decision, and this may assist with the dealing with disputes by providing for effective participation of affected parties at an earlier stage.
ATTACHMENT 3: INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL GOVERNMENT WORKPLACE

EXTRACT FROM "EQUIPPING STAFF TO HANDLE DISPUTES EFFECTIVELY IN LOCAL GOVERNMENT"
2.
INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL GOVERNMENT WORKPLACE:

OVERVIEW:
2.1
In the exercise of local government, there are a variety of interactions where there is the potential for dispute, and disputes with significant differences in nature. The basic interactions are: 1 Customer Service:
2 3 4 5
Regulatory responsibilities: Staff interactions: peers; superior/ subordinates; industrial Involvement in Community development: New legislation: transparency, accountability, interactive processes FOI Revised Processes: Documentation; exhibition; submission; consideration; decision
2.2
DETAILED BREAKDOWN OF INTERACTIONS:
2.2.1 Customer Service:

There are a variety of (Council) staff / customer interfaces. Typical examples are: 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Cashier and ratepayer Counter Clerk and service/information seeker Accounts Clerk and debtor or creditor Regulatory Officer and applicant Elected representative and elector with enquiry/ complaint/ policy position to lobby Professional Officer and Community Organisation Representative Professional Officer and complainant
2.2.2 Regulatory Responsibilities:

There are a variety of regulatory officer and applicant interfaces: 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Building Inspector and Building Applicant Building Inspector and Building Owner/ Occupant Town Planner and Development Applicant Engineer and construction firm representative Professional Officer and Contractor Health Inspector and Licence Applicant or Holder Ordinance Officer and facility user
2.2.3 Staff Interactions: Peers; Superior/ Subordinates; Industrial

There are a variety of staff interactions, at a variety of levels, for a variety of issues: 3.1 Peers: Personal interactions - personality, style, values differences - if gender or racially based, or determined by other areas where discrimination is now illegal can lead to discrimination/ harassment appeals Superior/ subordinate: allocation or control of work; discipline; performance appraisal;
3.2
3.3 3.4 3.5 3.6
recommendation for allocation of satisfying work; recommendation for promotion Staff and Union representative Staff in Union membership interactions Staff in task-related interdepartmental interactions Staff Representatives in representative forums: interacting with one another interacting with management representatives
2.2.4 Involvement in Community Development:

There are a variety of levels of this kind of interaction: 4.1 4.2 4.3 4.4 4.5 (Social Work) Professional Officer to Client (if case-work is done) (Social Work) Professional Officer to Community Group Professional Officer to Community Representative Councillor to elector (especially when elector is a Community (Group) representative, or voicing a sectorial concern) Councillor with Community Organisation (especially when the Councillor is the Mayor)
2.2.5 New Legislation: Transparency, Accountability, Interactive Processes

The Local Government Act, 1993, has established a variety of mechanisms, by way of statutory obligations, which are designed to achieve the goals of transparency, accountability, consultation. The key provisions are: 5.1 5.2 FOI: The application of Freedom Of Information legislation to local government organisations and activities Access to key policy and practice Documentation: Policy & Procedure documents Annual Report Financial Report Management Plans - Organisational Management Plans for Use of Community Land Process of Draft - Exhibition - Submission - Determination in the development of key policy matters: Land Use Local Control Plans Management Plan (including forward financial plan - Budget) Revised Processes for dealing with applications for buildings, development Application; Notification; Exhibition; Submission; Consideration; Decision; Right of Appeal Processes for Appeal - eg prior to the "giving of an order"
5.3
5.4
5.5
2.3
INTERACTION AND POTENTIAL FOR DISPUTE:
When these interactions are handled effectively, accurate information is conveyed, the recipient is adequately informed and able to progress their business interests efficiently to an agreed conclusion. When there is some problem, for either party to the interaction, and a conflict arises, the mechanisms used by (especially) staff to contain the conflict become vital to both parties to the interaction. The recognition of this, by: 1. 2. 3. formulating policy and practice on process & mechanisms for raising grievances and reviewing advice given and/or decisions made ensuring staff awareness, and skill development to handle the level of interaction expected of them, in their respective roles providing training in specific interaction skill development, as applicable to the Local Government context
becomes a vital part of a local government body's effectiveness. 2.4 KINDS OF DISPUTATIONS:
The differences of interest (detailed in Section 1.4) are real, and reflect in a vast variety of disputations/ potential for disputation: from one person versus the Council, to a wrangle involving the issue of legal interpretation with state-wide implications (the "precedent" case) The major categories of differences in disputes are: 1. 2. 3. 4. 5. 6. 7. Disputation on the council in the public forum: political polarisation Disputation between councillors & senior staff Disputation between management & staff Disputation between Council & State Government / bureaucracy - Housing Commission & Landcom etc Disputation between Council & large developers Disputation between Council & residents: development/ winners & losers Disputation between residents where Council can be drawn in (because of regulatory role or policy of pro-active community development)
Within these categories there are a range of potential for dispute: 1. Disputation on the council in the public forum: political polarisation A. B. Between clear political opponents - pre-selection & pre-election Between clear political opponents - post-election through period of
C. D. E. 2.
office - government vs opposition Within a political group - labour group - policy differences; political ideology stands; Impact of external parties - the different policy emphasis lobby; single-issue interest lobbying; intra-party political power plays Between Mayor and Councillor/s
Disputation between councillors & senior staff A. B. C. D. Mayor and Town Clerk/General Manager Mayor and individual Senior Staff Member Councillor and Senior Staff Member Elected representative and staff member
3.
Disputation between management & staff A. B. Individual complaint "Class" complaint
THEN WITH UNION INVOLVEMENT C. 4. Union "political" agenda -
Disputation between Council & State Government / Bureaucracy - Housing Commission & Landcom Etc A. B. Autonomy / Control complaint Differences in political priorities
5.
Disputation between Council & large developers A. B. Development Control - general Development conditions - particular
6.
Disputation between residents: development/ winners & losers A. B. C. Development Control or Conditions - particular Building Control or Conditions - particular, and especially for extensions Miscellaneous other regulatory functions of Council - dog & stock control; off-street parking of heavy vehicles; home occupation usage; etc
THESE DISPUTATIONS CAN BE AN ENDEAVOUR BY ONE OR OTHER OF THE PARTIES TO EMBROIL COUNCIL DECISION MAKERS (AND/OR OFFICERS) WITH REGULATORY POWERS TO CONTROL
AND/OR PUNISH AND SO DEAL WITH INTERPERSONAL RELATIONSHIP DIFFICULTIES BETWEEN ADJACENT OR NEAR NEIGHBOURS
ATTACHMENT 4: EXTRACT FROM "ISSUES IN TRAINING IN NEGOTIATION SKILLS FOR AN ORGANISATIONAL SETTING"
Note 1 in Bibliography HAVING A CULTURAL MILIEU FOR PRACTISING NEGOTIATION SKILLS: Just as negotiation, as a skill, is poorly recognised in the workplace in interpersonal exchanges, so, negotiation is not readily recognised as occurring elsewhere, in the whole range of life activities. Further, in the area of commercial transactions, in the name of "efficiency", our western culture has, by and large, removed the opportunity to practice and develop this skill. The oriental culture, with its emphasis on relationship rather than efficiency, and a different conception of time, persists with the marketplace and the barter. It is here, in day-to-day transactions, on a small scale, that a person practices and refines their negotiating technique. This is gone from our fixed-priced supermarket. Then, when the time for negotiation comes, with the big ticket item, we are not well equipped to deal with it, and often come away disappointed. When the big ticket item is a construction in time, (the first and last home) with the flexibility to make changes as the construction develops, then there is the potential for poor negotiating skills, and inadequate communication and documentation, to create the context for a big fight. Hence our Builders' Services Corporation appeals mechanism.)
PRESENTATION HANDOUT: LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY
The main theme of my 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 disputes in the construction industry to see if there are lessons to be learned, warnings to be taken. I then seek to apply any such lessons to the current situation facing local government. Firstly, I look at the construction industry under the headings of: 1. 2. 3. 4. general characteristics of the construction industry brief overview of historical significant milestones/ change indicators over the period 1945-1997 commercial pressures experienced by the construction industry experience of disputes in the construction industry
Then I look at the general principles driving some of these outcomes: 1. 2. 3. 4. 5. the general nature of competition the general nature of cooperation the development cycle for individuals/ families/ communities with social cohesion the development cycle for organisations the role of government/ government agencies
Finally I seek to apply the lessons to the current experience of local government: 1. 2. 3. current position of local government pressures for change indicators of local government response at present
One of the sources that has helped me clarify some of the issues in the current debate about "corporatisation"/ "privatisation"/ "commercialisation" of government is: Zifcak, Spencer / New Managerialism: Administrative reform in Whitehall and Canberra. Buckingham Open Univ. Pr, 1994. p.185 (speaking of theThatcher & Hawke governments) "Both governments were able to cut public expenditure, to insist that new methods be adopted to control it, to reorganize the machinery of government, to reduce the public
service numbers, to insist that wage demands be moderated and to demand that management in the civil service be made more efficient." p.186 "In Whitehall .. efficiency for the government meant that the public sector should operate more economically and be run more like a business. "For many in the civil service.. the pursuit of efficiency might be defined as enhancing the machine's capacity to respond to shifts in the political and policy environment, or at the other end of the spectrum, ensuring the provision of high-quality service." p.188 ".. there [are] three themes which.. illustrate the much deeper currents .. which exert a powerful influence upon attempts to alter the practice of management in government [:] politics and management; efficiency and effectiveness; and control and delegation. p.190 "The businessman is after "market share" and "bottomline" for his corporation. So are Ministers. But in our parliamentary form of government ... their "market shares" are different. Both consist of votes to be garnered. Throughout most of the critiques of the way in which the Whitehall village is managed runs a strong vein of impatience with the propensity of Ministers to engage in pork barrel politics... But if ICI's shae price were determined by the number of marginal consitituencies in which the great corporation contrived to operate, its boardroom would be similarly motivated. (Bruce-Gardyne 1986:235)" p.190 "However, it is equally possible to understand politics as the process through which society's governing norms, standards and relations are developed and sustained. On this view, the purpose of administrative decision-making is not efficiently to produce tangible outputs in the form of benefits and services. Rather, its aim is to regulate and maintain a dynamic balance between divergent and competing social forces and actors over time." p.191 "Because politics consists of the regulation of social relationships, the criterion of efficiency cannot be the only one against which the effectiveness of government should be judged. Other procedural values such as impartiality, equity and participation, which relate specifically to the quality of relating, need equally to be considered. The dictates of efficiency may lead to the supply of a handsome governmental product. But the efficient provision of governmental services is but one step along the road to achieving a more desirable social compact. If, then, this equilibrium is upset by the neglect of other ethical and procedural values, the broader purposes of governmental intervention may well be defeated."
Zifcak goes on, over p.177- 181, and then later, to identify three models for reform, and to suggest that only when all three are in place/ had their way, will real reform come to government. The Three models are: Purposeful intervention - rational managerialism; Institutional negotiation - between loci of power; Appreciative shift - new stories, the new paradigm; and the combination of the three AS?? -> PI; -> IN; -> AS From my study, and somewhat broadbrush analysis, I conclude: 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 current pushes to "commercialise" its operations. Local government needs to seriously and clearly look at just what its objectives are, what its community does really want from it. Local government then needs to be flexible in how it chooses to deliver those goals. 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 for government enterprise will be required. When there is competiton for resources (within a limited revenue base, raised by taxation, and between "economic" services and "community development" processes of equity and democratic participation) local government will need to be involved in giving clear leadership to 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, and especially 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.
PRESENTATION:
PERCEPTIONS: HOW WOULD YOU DEFINE "EFFICIENCY" FOR A GOVERNMENT ENTERPRISE? .............................................................................. A CONSTRUCTION ENTERPRISE? COMPARE AND CONTRAST -> ASSIGNMENT APPROACH: HOW MUCH COMMON GROUND IS THERE ABOUT EACH INTERNALLY AND THEN BETWEEN GOVT/ CONSTRUCT; HOW MUCH DIFFERENCE PAINT ROLLER - I AM INTO THE BROAD-BRUSH TREATMENT CARTOON: STOP LAUGHIN' THIS IS SERIOUS CARTOON: IT'S ALRIGHT ..
EZEKIEL: WHEELS VISION
PERCEPTION
Different people seeing the same things in different ways because of their different objectives/ frameworks. "Perception" is one of the "People" aspects of the analysis required for successfully undertaking interest based negotiations - Fisher & Ury
MY QUESTION IS: How do you see/ how would you define "efficiency" for a "government" activity? MY SECOND QUESTION IS: How do you see/ how would you define "efficiency" for a "construction" activity?
LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY CONSTRUCTION REVENUE ECONOMY OF SCALE COMPLEXITY
QUALITY DISPUTE SIZE EFFICIENCY COMPETITION COMMUNICATION

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.

1 LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY

LESSONS TO BE LEARNED FROM THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY

2. THE CONSTRUCTION INDUSTRY:

2.3 THE OPERATIONAL CONTEXT OF THE CONSTRUCTION INDUSTRY:

2.3.1 cyclical nature of economy - boom -> bust

2.3.2 tendering process: competition

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

2.3.4 management development

2.3.5 loss of skills:

2.3.6 undercapitalisation of significant proportion of the sector

2.3.7 dispersal of activity

2.3.8 diversity of participants

2.3.9 the intervention of government as a major player:

2.3.10 regulation and standard setting

2.4 THE EXPERIENCE OF DISPUTES IN THE CONSTRUCTION INDUSTRY:

2.4.1 The Nature of Construction Industry Disputes

2.4.2 The Sources of Construction Industry Disputes

of negotiating skills, not generally well developed. SEE ATTACHMENT 4

2.4.3 Alternatives and strategies for dispute resolution

3. GENERAL PRINCIPLES OPERATING

3.1.1 Basic psychological element of competitiveness:

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

3.1.3 Competition in other fields

3.3 NATURAL GROWTH CYCLE

3.4 ORGANISATIONAL MANAGEMENT DEVELOPMENTS

3.5 GOVERNMENT AND THE CONCEPT OF PUBLIC SERVICE: EQUITY PRINCIPLES

stability necessary for ongoing survival.

4. APPLYING THE LESSONS TO LOCAL GOVERNMENT

the dilemma involves: balancing competing interests equity responsiveness

bring into play the obligations of:

4.3 INDICATORS OF THE LOCAL GOVERNMENT RESPONSE TO DATE:

4.3.1 NSW Dept Local Government Competition Policy Document

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

4.3.3 ALGA Seminar, July 1996

ATTACHMENT 2: THE CONTEXT OF LOCAL GOVERNMENT

ICAC process development

AN OVERVIEW OF LOCAL GOVERNMENT IN NSW:

1.2.1 A Demographic Thumbnail Sketch:

1.2.2 The Nature of Autonomy in Local Government:

ANALYSIS OF INTERESTS GENERATING PRESSURE FOR PERFORMANCE ON LOCAL GOVERNMENT:

ATTACHMENT 3: INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL GOVERNMENT WORKPLACE

INTERACTIONS/ POTENTIAL FOR DISPUTE IN THE LOCAL GOVERNMENT WORKPLACE:

DETAILED BREAKDOWN OF INTERACTIONS:

2.2.1 Customer Service:

2.2.2 Regulatory Responsibilities:

2.2.3 Staff Interactions: Peers; Superior/ Subordinates; Industrial

3.3 3.4 3.5 3.6

2.2.4 Involvement in Community Development:

2.2.5 New Legislation: Transparency, Accountability, Interactive Processes

INTERACTION AND POTENTIAL FOR DISPUTE:

Disputation between management & staff A. B. Individual complaint "Class" complaint

THEN WITH UNION INVOLVEMENT C. 4. Union "political" agenda -

EZEKIEL: WHEELS VISION

QUALITY DISPUTE SIZE EFFICIENCY COMPETITION COMMUNICATION

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