LEND Lease is at risk of being overlooked for work on the Bendigo Hospital because of a union-friendly agreement with the CFMEU.
But in a move to be announced by the State Government today, the builder has six months to rip up its contract with the union to avoid sanctions, the Herald Sun reports.
The building company's deal with the union is in breach of the State Government's tough new building code, which is designed to crack down on the rogue activity in the construction industry.
But CFMEU national secretary Dave Noonan said this morning the union would be backing its deal with Lend Lease, which he argued was made legally under the Fair Work Act.
The State Government rules give the government power to ban companies in breach of the code from bidding for public work.
The Lend Lease ban could also spread to its sibling companies Baulderstone and Abigroup.
The Herald Sun understands that the new amendment to Premier Ted Baillieu's building industry crackdown would encourage companies to change existing labour agreement deals.
From July, any company that fails to end union agreements that allow the flying of union flags and include clauses to allow union officials wide-ranging site access would be ruled out of State Government tenders.
The building industry has been on a knife's edge since the bitter CFMEU dispute with Grocon earlier this year.
The CFMEU blockaded the Myer-Emporium building site for at least 16 days, in a dispute that saw ugly clashes with police.
Mr Noonan said he would fight to keep the deal with Lend Lease in place.
He said the State Government had given its powers over industrial relations to the Federal Government during the Kennett era.
"The State Government is attempting to introduce its ideological anti-union agenda by stealth," he said on ABC Radio.
Mr Noonan said the Baillieu Goverment's action was "unconscionable."James Copsey, a Victorian Government spokesman, said: "The guidelines are about ensuring a productive and law abiding construction industry in Victoria and that all companies who tender for Government work are expected to comply with the guidelines."
Read more at the Herald Sun.