Firms pushed to cheat to win work as budgets blow out

Construction firms are in a "race to the bottom" amid a culture of under-quoting causing cost blowouts on large infrastructure projects, with unions calling for local businesses to get preferential treatment when bidding for government contracts.

Taxpayer-funded builds need more rigorous procurement policies because the system encourages cheating, Construction, Forestry, Mining and Energy Union construction president Rita Mallia told a NSW parliamentary inquiry on Wednesday.

"Jobs are poorly regulated, they blow out of budget, contracts are under-tendered and all sorts of problems occur which end up being the problem of the state government," she said.

Unions say thousands of jobs have been sent offshore, leading to higher costs and lower quality. (Dean Lewins/AAP PHOTOS)

"You just end up with a race to the bottom .... those who actually want to do the right thing can't win the work, so everybody is sort of pushed to cheat."

The inquiry is probing government procurement practices and what impact they have on social development.

Unions NSW has told the inquiry thousands of jobs have been offshored, resulting in higher costs and lower quality, with governments prioritising short-term financial gain over the long-term benefits keeping contracts local can bring.

The volume of contracts awarded by the government gives it significant influence and a responsibility to ensure taxpayer funds are supporting best practice labour rights and standards, according to Unions NSW secretary Mark Morey.

Mark Morey wants the government obliged to spend at least half its contracting budget on local firms (Bianca De Marchi/AAP PHOTOS)

"We believe the taxpayers of NSW do not support their funding being used to undercut their own wages and conditions, nor to fund companies with a proven track record of wage theft or exploitation," Mr Morey said.

The government should be forced to spend at least half its contracting budget on local firms, with increased weighting for those demonstrating strong labour standards and supply chains, Unions NSW submitted to the inquiry.

The union peak body pointed to an ACT policy, requiring businesses bidding on government contracts to show how they are going to create local jobs.

The NSW proposal includes a requirement for businesses to show they are meeting labour standards and an independent body auditing procurement.

Unions want an independent body monitoring government construction contracts. (Flavio Brancaleone/AAP PHOTOS)

Other union requests include publishing the analysis of decision-making for contracts worth more than $1 billion and mandatory consideration of local economic benefits.

Procurement decisions are not limited to goods and also need to ensure an adequate and sustainable workforce, NSW Nurses and Midwives Association health and safety officer Veronica Black told the inquiry.

"NSW is currently facing a significant nursing and midwifery staffing crisis, leading to an over-reliance on the use of overtime, excessive use of agency staff and dependence on the goodwill of nurses to work short-staffed, and that goodwill is running pretty low," she said.

The union wants a 15 per cent pay rise for nurses and midwives to attract and retain staff.