State of the industry and project implications for procurement and contracting

Abstract

The Australian construction industry continues to face a series of extraordinary challenges in the form of high demand, global supply chain disruptions, labour and materials shortages and inflationary pressures. Surprisingly, the current industry climate has had impacts comparable with when the industry was scrambling to deal with the new concept of ‘COVID-19’. The presentation will examine the impacts that these challenges are having on the delivery of new projects, including by looking at recent trends in procurement strategies, contracting models and frequently requested departures to the tradition lump sum contracts during the tendering and negotiation phases. In particular, the presentation will explore some of the risks and issues that need to be considered when looking at tenderer proposed departures as well as important aspects to keep in mind when administering such contracts. For example, rise and fall is perhaps the most commonly requested departure in the current market, however consideration must be given to how these provisions operate, what materials or items they are limited to, how the clause triggered, what the price adjustment is based on and who can request such price reassessment. On the last point, it is surprising how often clauses are drafted which do not allow a Principal to request a rise and fall reassessment when there is a price decrease. How these practical tips and pieces of advice are implemented regarding specific contractual provisions may impact how a project is run and ultimately benefit or hinder a project’s ultimate success, including be avoiding potential disputes.