to the courts and weeks of talks. Eventually, the company made an embarrassing backdown and agreed to contract out the work with no loss of job numbers.
The judge in charge of the case was no soft touch. Richard Tracey, now in the Federal Court, was counsel assisting in the 2002 Cole royal commission that led to tough new laws covering building workers.
''Tracey knows the issues more than most,'' a senior industry executive says. ''But his judgment was, 'If you are stupid enough to give away your managerial prerogative, don't come to my court looking to get it back again.' ''
While wages on the desal project are about 20 to 30 per cent higher than on typical big Victorian construction jobs, they are similar to those on other significant metal construction projects such as the Mortlake power station.
THE senior industry executive says the real problem is not wages, although they are high. ''From a contractor's perspective, as long as you've got covered the wage costs in the bid we don't really care what it is,'' he says. ''It's the inability to run the job that is killing Wonthaggi.''
Thiess, however, was prepared to take the risk, knowing that if it made the tight deadline, the pay-off was there. It also decided to build the plant in a way that was ambitious - some say arrogant.
On large projects, head contractors often sub-contract the work to specialists to off-load responsibility and to tap into specialist skills. In an unusual move, Thiess decided to employ the thousands of staff itself and assemble a complex management structure in a remote location in quick time: an ambitious, some say impossible, task. Barraclough says it was a way for Thiess to differentiate itself when bidding for the contract against John Holland, which had an anti-union reputation.
''It was a genuine commitment to maximise the use of Victorian labour, and we did that. It's much easier to do that in a direct labour environment than in sub-contracting,'' he says. ''It was something we wanted to do, but it also enhanced our bid, it made our bid more attractive than the other bid.''
This may have helped win the bid but it was a costly and risky route to take.
Workers have expressed frustration to The Age at regular problems with getting equipment and that poor management has meant they can spend days with little or nothing to do.
The senior executive agrees. ''Thiess didn't have enough skilled supervisors and managers to do it.''
Cesar Melhem is an industry veteran from the Australian Workers Union. He says directly hiring staff can work, as it did on the AWU-dominated EastLink project, but it needs management skill. ''On a project like this, if you haven't got the right supervision … you're buggered.''
The AWU offered another path for Thiess in Victoria's brutal building IR landscape. The AWU is unpopular among building unions, which accuse it of cutting cosy deals with employers, something Melhem rejects. During the West Gate dispute in 2009, the CFMEU and metal workers' union went to war with the AWU, accusing it of striking a low-ball deal with John Holland.
Curiously, when the Brisbane-based Thiess won the right to build the project, it favoured giving coverage of the work to the more feisty CFMEU and metal workers, and left Melhem and his union sidelined. Powerful figures in the ALP group associated with the AWU believe the decision was in part driven by complex factional manoeuvrings within Labor. They will never forgive John Brumby for his handling of the desal project and how it hurt Labor's 2010 election prospects.
If rival bidder John Holland had won, Melhem says, the AWU would have had up to 500 extra members on desal. The Age has confirmed John Holland would have made much greater use of contractors and pushed for flexible AWU conditions.
During the bid process John Holland also attracted high levels of scrutiny from the Department of Sustainability and Environment, with detailed questions on the deal it planned with the AWU.
Barraclough would not be drawn on whether political pressure was exerted. Former treasurer John Lenders - a me