SPASA is keenly aware of the rapid changes being experienced by members with the current global price rises for fuel. These pressures are already impacting every part of your business, and it is important to understand when and how you are able to take these cost increases into account.
This information is provided for members engaging with consumers under a building contract but there may be general principles which can assist all members in their business dealings.
When accounting for and responding to price increases you should consider the following:
For new projects - consider the most appropriate contract to use for the type and scale of the project
Understand your contract – Depending on your state, ‘rise and fall’ clauses can allow you to take account of price increases and decreases, or prime cost and provisionals sum may provide scope for flexibility
Keep track of price changes – each time you are quoting or contracting, make sure you have checked the current price for your building materials and factor in any increases into the tender or contract pricing.
Think about the timeframe – where you are able to shorten the timeframe between signing a contract and commencing the work you may be able to limit the impact of ongoing price rises. For extended contracts, make sure you have sufficient provision to account for future changes.
Engage your customer – communication is key, while no one can predict how prices will change, your customer should be kept aware of the state of play and understand that you are working in their best interest to complete a project as agreed.
Be aware that once the contract is signed, you may not be able to pass on the price increases to your client, so take time at the start to set your arrangements up as carefully as possible.
The position on post contract cost recovery (often known as rise and fall clauses) is not uniform across all jurisdictions. While the core contractual disciplines remain the same, members should identify the real cause of the additional cost, use the correct contract clause, and comply strictly with notice and documentation requirements. The extent to which broader price-adjustment mechanisms are available will depend on the contract form and the law applying in the relevant state, territory or country.
The table below provides a high-level guide on whether such clauses can be relied upon. It should be read as a practical starting point only, not as a substitute for checking the specific contract and the applicable local law.
| Jurisdiction group | Position on broad escalation | Practical member approach | Key clause availability |
|---|---|---|---|
| ACT / NSW / QLD / SA / TAS | The SPASA contracts include clause 15.2 which is a wholesale material movement mechanism only, and should not be used as a substitute for labour, freight, fuel or general overhead increases. | Members may still prefer to frame many claims through the more specific pathway that actually caused the additional cost, such as delay, variation, latent conditions, compliance changes, authority changes, PS / PC overrun or late payment. A targeted claim is usually easier to explain and defend. |
Clause 15.2: Available 10% cap per notice Clauses 11.2, 11.4, 12.5, 14.1–14.4, 15.3: All available |
| VIC / WA | In both Victoria and Western Australia, the current legislation prohibits the use of rise-and-fall clauses, so ordinary post-contract increases in labour and material costs are not recoverable as a free-standing price-rise claim. |
Use builder-variation, latent condition, authority fee,
changed-compliance, service-line, site-survey, delay and
customer-default clauses with disciplined notice and documentation.
Do not present ordinary inflation, labour increases or general material
increases as a free-standing post-contract price increase.
VIC: Clause 15.3 outlines the situations where the Contract Price is subject to change. WA: Clause 15.2 outlines the situations where the Contract Price is subject to change. |
|
| New Zealand | Generally, a builder in NZ can increase the price in a Fixed Price Building Contract where there are specific contractual provisions that allow for it, such as rise and fall clauses, prime costs, provisional sums, or special conditions. | Subject to contract used, identify the specific contractual trigger (variation, PS/PC overrun, authority change, customer delay). | Apply variation and delay machinery as primary levers. |
The contract should be treated as a working tool, not just a document signed at the start of the job and revisited only when a problem arises. Even a strong contract will do very little to protect a member who does not follow its procedures, issue the required notices, or maintain proper project records. The common mistakes below are worth close attention, because they are often the very things that undermine an otherwise legitimate entitlement.
Do not issue a bare notice saying that shells, concrete, labour, freight or fuel have become more expensive and therefore the contract price has increased.
Do not characterise ordinary inflation as a latent condition, variation or compliance change unless that is genuinely what occurred.
Do not rely on delay-cost provisions without proper notice, a causal explanation and evidence of actual time and cost consequence.
Do not understate provisional sums or prime cost allowances at contract date in order to create a later uplift opportunity.
Do not perform substantial additional work first and try to sort out the paperwork later unless the contract genuinely permits urgent work to proceed in that way.
In Western Australia, Clause 15.2 is written to outline when the Contract Price is subject to change. In Victoria, this is handled under Clause 15.3. Wholesale price adjustment it is not permitted by either state’s laws and hence is not available under the applicable SPASA contract.
Where the clause applies, do not aggregate multiple small notices under Clause 15.2 to avoid the 10% per-notice cap without taking legal advice on whether the aggregate exposure triggers the customer’s termination right.
Do not issue delay-cost or suspension notices without maintaining a contemporaneous record of the cost consequences as they accrue. Reconstructed records are harder to defend.
Do not rely on verbal directions, approvals or refusals alone. Confirm them in writing immediately and file them against the project record.
To assist members manage your contracts, both new and existing, SPASA has prepared a detailed guidance note that steps through the SPASA standard contract clauses that relate to changes in pricing. There are many reasons for a price to change and it is important not to assume that a general increase in labour, materials, freight or supplier pricing can simply be passed through to the customer because it occurred after the contract was signed. That is rarely the correct contractual analysis and may prejudice an otherwise available entitlement.
Members should instead identify the true cause of the additional cost, match it to the clause that governs that event, and comply strictly with the applicable notice, timing and documentation requirements.
Only SPASA members can access SPASA contracts. If you are not using the current version of the SPASA contract in your business, members can log into the Member Portal on our website – www.spasa.com.au. For assistance with logging into the Member Portal please contact [email protected].
Changes are happening extremely quickly making it difficult to predict exactly when price rises may peak and hopefully revert to more normal levels. While SPASA will continue to keep up to date with decisions by the Australian, state or territory governments that may impact businesses, in particular construction businesses, members should also remain vigilant.
You will be receiving information from your suppliers regularly and each notice should be reviewed and factored into your current and future contracts. SPASA’s guidance note is intended to assist members to manage the changes, but the reality is that many adjustments may not be permitted under the contract, given applicable state laws.
Members with contract questions can contact Ben Makepeace [email protected]