The construction industry has made progress in reforming outdated practices, but tough conditions threaten to eat away at these achievements.

To ensure a sustainable future, we must abandon the ‘winner takes all’ mentality and embrace genuine collaboration.

For too long, construction contracts have mirrored market trends: when demand is high, risk allocation is dialled down and collaboration increased. When demand slows, lump sum hard dollar controls come back to the fore. This market led zero-sum approach seeks to benefit one party at the expense of the other rather than addressing the unique needs of each project. Straightforward projects might suit fixed-price agreements, while complex, high-risk ventures require collaborative models that balance risks and rewards, regardless of market conditions.

Unfortunately, we are seeing this play out once again as budget pressures increase and project pipelines are cut or delayed. Restrictive terms and unfair risk allocations are making a comeback threatening industry progress in areas like culture, innovation and decarbonisation.

The Australian Constructors Association (ACA) strongly welcomed the publication of NSW Government’s new Principles for Partnership with the Construction Industry, which aim to address emerging challenges and priorities. These principles focus on boosting local manufacturing, improving safety and well-being, enhancing productivity, fostering skills and jobs, promoting diversity and inclusion, improving financial sustainability, and supporting decarbonisation goals. These are commendable commitments that the ACA fully supports.

However, addressing long-standing issues remain a work in progress. Key commitments from 2018—such as collaborative contracting and reimbursement of bid costs have been diluted or dropped completely from the principles. The government has suggested these changes reflect improved agency performance in these areas, but our member surveys tell a different story. Non-compliance by government delivery agencies in respect of the original commitments is growing as pressure on government budgets increases and this has the potential to undermine efforts to build a more innovative and financially sustainable industry.

Reform is possible. Initiatives like the Culture Standard, spearheaded by the Construction Industry Culture Taskforce, the development of a National Construction Strategy and the creation of a blueprint for a sustainable construction industry show the potential for change when stakeholders unite but there is a risk that all this good work will be undone. Construction leads all industries in the number and proportion of companies that become insolvent. Without a financially sustainable industry broader culture and operational improvements are difficult if not impossible to realise.

The stakes couldn’t be higher. Without reform, Australia risks falling short of delivering the critical infrastructure that it needs. We have to stop the contract terms pendulum from swinging! By sticking to our principles, doubling down on transformative change and choosing procurement models based on project particulars rather than market conditions we can create a thriving construction sector where everyone gets what they are looking for. Clients will get value for money and certainty of outcome, workers will have safe secure well-paid work, businesses will make a reasonable return on their investment and the industry overall will be much healthier as a result.

By John Davies, CEO of Australian Constructors Association

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