Hyper-escalation of construction costs for contractors locked into fixed price contracts is emerging as the biggest current challenge for Australia’s third largest industry, construction. If not addressed, it could significantly impact on the ongoing sustainability of the industry and in the process fracture Australia’s economy.
The report, Construction cost inflation – Ways to address an escalating issue, calls on government to take action both in respect of current and future contracts to ensure that the contractor is not left out of pocket for what is an issue that is well beyond their reasonable control.
The industry is seeing examples of price rises over a 12-month period of up to 70 per cent and it cannot continue to bear the cost of these steep price increases—some costs will need to be passed on to halt the growing trend of insolvencies.
This is a shared problem—government, contractors and the supply chain are in the immediate firing line, but company failures impact the wider economy. Construction underpins the economy—contributing to 8 per cent of GDP–and yet it accounts for more insolvencies than any other sector.
It is in the client’s best interests to work with the contractor as the cost of doing so will be far less than the cost and or delay to a project if the contractor fails.
