Surely this is a matter of balance. The grammar that the students have been learning hasn't been a waste of time, but if they haven't got the vocabulary to plug into that grammar, we shouldn't be surprised that they can't string sentences together. The only worry would be that they haven't even been able to learn the grammar due to not being able to plug vocabulary in. This could conceivably leave grammar to be viewed as if it was just meaningless mathematical formula. Not helpful to non-mathematically inclined students.Tara B does have an important point. If the students actively resist the methodology applied by the teacher, it will fail! Students here in Taiwan often believe that they need to learn more grammar. The fact that a mere six years of grammar during their state school education, perhaps a few more at university, and possibly even more at bushibans (Taiwanese Language Schools) have failed to achieve the desired results does not make the penny drop, and indeed, psychological reasearch indicates that this would be so. Psychologists have found that when a person has invested a lot of time, energy or money in something, it is very psychologically difficult to admit that it has been negative. Therefore, students with years of studying grammar and shocking productive ability (the intermediate come pre-elemntary brigade who have memorised every rule and can barely string a sentence together in less than 5 minutes) will have a psychological need to view those years of studying grammar as valuable. This belief makes it very easy for them to accept that they need to master grammar better rather than change the way they study. Thus, arguably the most important challenge for the teacher is to convert the students to a more productive method of study.
That's very pessimistic, though. If we assume that the grammar has been learnt, if the focus is now switched to vocabulary building progress should be fairly rapid. If they've got a thing about grammar, I'm sure that collocation exercises can be made to look as if they are more grammar, which to an extent they are anyway.
I'd look at the vocabulary builders at the back of English File, or Test your professional English series if they are doing ESP as these are very good for vocabulary building. Crosswords and wordsearches are also good for vocabulary building.
Once their vocabulary has been built up you can address things like pragmatics which may be very different to English, organisation, cohesion, etc.