The Canberra Metro consortium plans to employ 500 people on the tram build, half in a union-negotiated agreement and half as sub-contractors.
The Canberra Times also understands the consortium has rejected the controversial memorandum of understanding between the ACT government and unions as in conflict with federal workplace laws.
But that hasn't stopped it negotiating an enterprise agreement with the construction union to directly employ as many as 250 construction workers, a deal that has enraged Canberra's civil engineering industry and sparked a brawl with the Master Builders Association.
Association ACT executive director Kirk Coningham is calling on the government to delay signing the contract with the Pacific Partnerships-led consortium to build the tram, a contract it believes will be signed this week.
"Canberra has managed without light rail thus far. Surely we can take a few more weeks to address these deeply concerning governance issues which bring the integrity of the entire process into question," he said.
The Civil Contractors Federation says the deal will inflate wages, lock out Canberra contractors and distort the local industry, given the scale of the tram build.
Canberra Metro says employing construction workers directly gives it better control over safety.
But business leaders put the blame with the union MOU. Mr Coningham said the entire ACT civil engineering industry had refused to sign the union enterprise agreement this year, leaving the tram consortium with no compliant contractors. Given the government's clear signal through the MOU that a deal must be done with the unions, Canberra Metro was left having to employ directly.
"Any contractor that ignored such an explicit instruction from a client would never win a tender. So what to do? Revert to a form of contracting last seen 30 years ago where the union still delivers the labour deal, but this time the head contractor directly employs workers instead of sub-contractors," he said.
Canberra Metro is understood to have written to the ACT government saying that its legal advice showed the MOU conflicted with federal workplace law. Given the MOU itself makes it clear that legislation takes precedence, the consortium effectively set the MOU aside.
But Mr Coningham said the message of the MOU was "plain and simple - do a deal".
"A deal has been done – and it locks out Canberra contractors from the biggest construction project our city has ever seen," he said.
"As much as government and the head contractor must pretend this is business as usual the CFMEU has already confirmed it is not. It is a rather clever solution of which they are justifiably proud."
Any sub-contractors would have to meet union rates to get work, he said.
It is unclear why the two shortlisted consortiums were given copies of the MOU during their bids last year.
Capital Metro Minister Simon Corbell said it was an agreement between unions and the government and there was no expectation that consortiums would sign it.
The MOU gives unions a say on companies seeking pre-qualification for government contracts. It also says firms winning government contracts will allow enterprise agreements and awards. The business community says this is at odds with federal laws which only force companies to make enterprise agreements when a majority of workers vote for one.
But Mr Corbell rejected the suggestion, saying the MOU is clearly subject to law, even including a clause saying, "nothing in the MOU is intended to oblige the ACT Government to act in any way in breach of any law or trade agreement".
A spokesman for the chief minister Andrew Barr hit back at the MBA, saying the project would create thousands of new jobs and it was "concerning that any Canberra organisation would want to put Canberrans' jobs at risk".
"It is hard understand why a construction peak body would try to put this project and every future infrastructure project in Canberra at risk in this way," he said.
"Surely the MBA cannot be arguing that a government should go back on its word and break agreements made in good faith."
Neither Canberra Metro nor the Construction, Forestry, Mining and Energy Union have released the enterprise agreement. But it is understood to be based on a John Holland agreement – John Holland, a subsidiary of Chinese company CCCC International, is the construction partner in Canberra Metro.
The John Holland rail-plant agreement (2009-2014) has 6am to 6pm ordinary hours for 38 hours a week, with time-and-a-half for the first two hours of overtime, then double time. Double time is also paid after noon on Saturday and on Sunday, or if someone is required back at work within 10 hours, and double-and-a-half is paid on holidays. Night shift attracts a 30 per cent loading. Ordinary hourly rates in 2013 under that deal ranged from $38 to $44.
Mr Coningham said the standard approach of "tier 1" firms was to do a deal with the union before final bids, buying them protection from industrial unrest on the job. Labour costs, usually about 30 per cent of the contract, were then passed straight to the government in the bid price.